Month: February 2014

Export Growth Expected from Turkey in 2014

MDGF Textiles_0

According to just-style, Turkey is aiming for increased export growth in 2014, mainly to EU markets. Although the cost of sourcing apparel from Turkey averages 30-40% higher than countries such as China and India, quicker lead times as well as Turkey’s ability to offer shorter runs are proving to be beneficial for European retailers. Despite increasing pressure on price from European retailers, Turkey’s clothing industry is still expected to grow during the upcoming year. Another factor Turkish apparel manufacturers benefit from is the depreciation of the country’s currency, the Lira. Depreciation of the Lira could potentially act as an advantage for Turkish apparel manufacturers, making apparel sourcing from Turkey more price competitive for European retailers.

By MacKenzie Cahoone

Source:Dyson, Jonathan. “Turkey looks to strong clothing export growth in 2014.” just-style Global News. 15 February 2014. http://0-www.lexisnexis.com.helin.uri.edu/hottopics/lnacademic/?verb=sr&csi=343994.

Outlook for the US Textile Industry in 2014

In its latest industry analysis report, the Textile World (TW) presents a fairly optimistic outlook for the US textile industry in year 2014. According to the report:

  • Output of the US textile mills may increase 2 percent for basic products like fibers, yarns and fabrics; more highly fabricated items like industrial textiles could achieve an even higher growth rate.
  • US Imports of textiles may continue the pattern of flatness (i.e. limited growth) over the next 12 months whereas exports of US-made textiles will remain modest growth. As results, the US textile industry may see some fractional decline in trade deficit in the year ahead.
  • US textile mills may avoid meaningful upward fiber cost pressure, which includes cotton, rayon staple, acrylic staple, textured nylon and polyester.  High cotton stock level worldwide and the weak demand for natural gas and petroleum are cited as the two major reasons for the minimum price change.   
  • As another encouraging sign, the operating rate (production as a percentage of capacity) in the US textile industry has rebounded to above 70% which is accompanied with a robust growth of capital investment. As quoted in the report “US textile mills spent more than $1 billion each year to replace obsolete facilities and to take advantage of new, state of the art technology aimed at turning out new products and increasing overall efficiency”.
  • In terms of the job market, the picture seems to be mixed. Productivity growth as results of capitalization both reduces the real production cost as well as the overall demand for labor. According to the report, labor had only accounted for 19% of textile mills revenue dollars in 2013, implying the highly capital-intensive nature of the industry.
  • Additionally, the rising demand for product innovation and improvement create brightening growth opportunities for the US textile industry. According to the TW report, US consumers seem willing to pay a premium for “pluses functions” of the fabrics. Some 50 percent said they’d pay extra for wrinkle resistance, 51 percent for stain protection, 50 percent for easy care, 46 percent for fade resistance, and 45 percent for stretch. A number of US firms are further weaving sophisticated electronic extras into the fabric of garment sensors that can monitor a variety of personal vital signs.

Other highlighted issues to watch in 2014 include: made-in-USA factor, improved supply chain management, energy cost advantage and government policy support.

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3D Printing and the Future of the Fashion Industry

How do you think 3D printing might shape the future landscape of the fashion industry (eg: impact on consumers’ shopping behavior, structure of the supply chain, demand for talents and fashion companies’ business models?)

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Global Textile and Apparel Trade Patterns (2002 vs 2012)

Based on our lectures, can you explain the pattern of global textile and trade as shown below? Please feel free to respond to any questions and share with your thoughts.

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Study Compares Shopping Habits of Luxury Consumers in New York and Shanghai

An interesting study was recently conducted by ContactLab, a UK based consulting agency, which compared shopping habits of luxury consumers (clothing, shoes and fashion accessories) in New York and Shanghai, the fashion hub of the United States and China respectively.

The study was conducted based on a survey of 922 respondents in New York and 975 respondents in Shanghai aged between 25 and 54 years old. According to the study:

  • the Chinese market, seen from Shanghai, confirms its standing as a market offering enormous opportunities to companies that produce high-end products
  • in the last 12 months four out of five individuals in Shanghai have bought at least one luxury item, spending on average around $1,000 (in New York around $500) on their last purchase
  • one out of three users in New York (35%) as well as in Shanghai (31%) chooses to be kept informed through email communications sent by brands
  • two different consumption profiles emerge: fashion buying in China is closely linked to the display of one’s own spending capacity, while the New York consumers show greater affection for brand

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A separate study released by the Fung Group in late 2013 suggests that foreign players largely dominate China’s luxury apparel market.

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Bangladesh Apparel Industry: An Update

Note: The following update can be used as additional reference material for our case study 1 on the Bangladesh fire accident.

The export-oriented apparel sector has been the main source of growth in exports and formal employment for the past three decades in Bangladesh. The industry directly employs 3.1 million people, comprising 40 percent of manufacturing employment; indirectly more than 10 million people are dependent on the apparel sector.

According to the World Trade Organization (WTO, 2013), in 2012, Bangladesh’s apparel exports to the world reached $19.9 billion (4.7%), among which $10.6 billion (or 53.3%) went to the European Union (27) and $4.6 billion (or 22.4%) went to the United States. Cotton trousers, cotton shirts, cotton sweaters and cotton T-shirt [HS 620342, HS620462, HS620520, HS611010 and HS610910]account for around 75% of Bangladesh’s total apparel exports in 2009 (World Bank, 2012).

The unit prices of Bangladesh’s main apparel exports are much lower than the world average and even lower than the unit values of apparel exports from China, India and Sri Lanka. From 2004 to 2007, the average price of Bangladesh’s apparel exports to the world fell from $2.60 to $2.31 per unit, representing a decline of 11 percent over three years. More specifically, average unit prices for woven  apparel fell from $3.26 to $2.92 (10% drop in price) and for knit apparel from $1.95 to $1.90 (3% drop in price) over the same period.

Bangladesh’s Local sources are able to meet about 80 percent of the domestic apparel industry’s demand for apparel accessories such as thread, buttons, labels, bags, tapes, shirt board, and cartons. But Bangladesh’s apparel sector relies on imported fabric and yarn inputs because the local textile industry is unable to supply its requirement in terms of quality, quantity, and variety.

Bangladesh’s main competitive advantage is low labor costs, one of the lowest among main apparel exporter countries in the world. Average apparel labor costs per hour in 2008 were $0.22; in comparison, rates in India were more than twice as high and four times higher in China. However, low wages are accompanied by relatively low levels of labor productivity. Average annual value addition per worker in Bangladesh was estimated at $2,500 compared to nearly $7,000 for a group of similar Chinese factories in 2005, according to a World Bank study.

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Reference: Sewing Success? Employment, Wages and Poverty following the End of the Multi-Fiber Arrangement (World Bank, 2012). International Trade Statistics (World Trade Organization, 2013).

Exclusive Interview with Kim Glas, Deputy Assistant Secretary for Textiles and Apparel, US Department of Commerce

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(source of photo: WWD)

Kim  Glas is the Deputy Assistant Secretary for Textiles, Consumer Goods, and  Materials at the U.S. Department of Commerce. She oversees programs and strategies to improve the domestic and  international competitiveness of the broad product range of U.S. textiles,  apparel, consumer goods, metals and mining forest products, and chemicals and  plastics manufacturing sectors and industries.   Ms. Glas also serves as Chairman of the Committee for the Implementation  of Textile Agreements (CITA), which supervises the negotiation and  implementation of textile and apparel agreements.

Prior  to joining the Department of Commerce, Kim Glas served more than 10 years as a  professional staff member in the U.S. House of Representatives.  As Deputy Chief of Staff and Legislative  Director for Representative Michael Michaud of Maine for over seven years, Ms.  Glas managed the Congressman’s legislative agenda and was the key advisor on  international trade and labor issues.  In  addition, Ms. Glas worked for Representative John LaFalce of New York during  her tenure on Capitol Hill, advising on trade and labor issues.

Interview Part

Sheng Lu: Because almost all clothing consumed in the United States nowadays is imported, some people wonder if there is still a textile and apparel industry in this country.  What is the reality? What does the general public should know about the US textile and apparel industry today?

Kim Glas: While imports still dominate U.S. consumption of textiles and apparel, we can expect to see a new trend going forward.  Currently, the textiles and apparel industry in the country is experiencing a different manufacturing paradigm than 10 years ago.  In 2012, textiles and apparel exports were $22.7 billion, up 37% from just 3 years earlier. This is indicative of a reassessment by American companies about manufacturing in the United States. Cost, time benefits, and international economic challenges have closed the international manufacturing gap making it more attractive to source at home. More and more U.S. companies are considering and many have moved production or part of their production back to the U.S.  This return of manufacturing to the U.S. is expected to continue into the future. This means consumers can expect to find more quality and more affordable Made in USA textiles and apparel in the market in the years to come.

The United States has a strong and diverse textile industry, manufacturing a range of high quality products including fibers, yarn, fabric, and apparel.  It is the fourth largest single country exporter of yarns and fabrics, with $13.6 billion in exports in 2012.  The United States is also home to one of the largest providers of spun yarn in the world, Parkdale, Inc., with 29 manufacturing plants in the United States, Central America, Mexico, and South America.

Sheng Lu: From your view, what role does the OTEXA play in enhancing the competitiveness of the US textile and apparel industry in the 21st century global competition?

Kim Glas: OTEXA administers and enforces agreements and preference programs concerning the textile, apparel, footwear and travel goods industries and works to ensure fair trade and a level playing field for these industries to enhance their competitiveness in international markets.  The office has an active Export Promotion Program that assists small- and medium-sized U.S. textile and apparel firms to develop and expand their export markets helping job retention and creation in this and related sectors.

Sheng Lu: There have been many discussions recently about manufacturing coming back to the United States given the rising labor cost in China. Yet, statistics from the US Bureau of Labor statistics show a continuous decline of employment in the manufacturing aspect of the US textile and apparel sector (i.e. NAICS 313, NAICS 314 and NAICS 315). What is your view on the future of textile and apparel “made in USA” as well as related job opportunities?

Kim Glas: The U.S. textiles and apparel industry employs over 380,000 people nationwide.  Declining employment in this sector has been an ongoing trend for the past four decades, a development related mainly to productivity improvements and international competition.  The adoption of new technologies has boosted productivity in this sector.

Advances in technology and manufacturing capabilities by capital-intensive U.S. textile and apparel firms have contributed towards competitiveness and productivity, increasing output and lowering labor costs.

The apparel industry has retained more skilled and higher-paying jobs in such areas as computer-aided design and manufacturing, marketing, and product development.  Lower-skilled apparel production jobs have moved offshore, in support of our production-sharing operations in Mexico, Central America, and the Caribbean Basin, as well as to other countries with lower labor costs.

The continued upswing of re-shoring sentiments and companies moving textiles and apparel production back to the U.S., combined with increasing consumer demands for Made in USA products will help foster more U.S. production hence increasing high-skilled job opportunities in these sectors for the foreseeable future.

Sheng Lu: This year marks the 20th anniversary of the North American Free Trade Agreement (NAFTA), which has been both lauded and attacked in the United States. In your view, does the US textile and apparel industry a beneficiary of the agreement? What critical changes has the NAFTA brought to the US textile and apparel industry over the past 20 years, if any?

Kim Glas:The United States exported a total of $22.7 billion in textiles and apparel in 2012, including $5.3 billion to Mexico and $5.2 billion to Canada.  Together, our NAFTA partners account for 46% of total U.S. exports of textiles and apparel.

The United States imported more than $113 billion in textile and apparel products in 2012, including $2.2 billion from Canada and $5.7 billion from Mexico.  U.S. imports from our NAFTA partners have a high U.S. content and therefore help to preserve U.S. jobs and increase sales opportunities for U.S. producers.

U.S. textile and apparel firms have benefited from NAFTA provisions including the “yarn forward” rule of origin and Mexican production-sharing arrangements.  This has allowed them to optimize production and manufacturing.  U.S. investment in Canada and Mexico has increased by 57% since NAFTA was implemented, reaching $592 million in 2012. The United States remains the largest single-country supplier of textiles and apparel to Mexico.

Sheng Lu: Both the ongoing Trans-Pacific Partnership (TPP) and the Trans-Atlantic Partnership (TTIP) negotiations include a chapter specifically dealing with textile and apparel. What makes textile and apparel always a unique and sensitive sector in the free trade agreement negotiation? And what does the US textile and apparel industry can expect from the TPP and TTIP?

Kim Glas: The U.S. approach to free trade agreements (FTAs) has been to provide for specific rules that apply only to the textile and apparel sectors in several areas, including rules of origin and related matters, safeguards and anti-circumvention Customs cooperation commitments.  Treating textiles and apparel in a separate chapter of an FTA provides more clarity and transparency, and therefore makes it easier for industries and traders in our FTA partner countries to make maximum use of the opportunities of the agreement while improving compliance.

As the largest market for imported textiles and apparel, and as one of the world’s largest markets for imported textiles and apparel, trade negotiations for this sector require experts with specialized knowledge.  Textile issues have been addressed in a textile negotiating group in all of our major FTAs, past and pending, with full coordination with other relevant negotiating groups.

Sheng Lu: looking ahead in 2014, what are the key industry development trends and trade policy issues we shall watch?

Kim Glas: The turnaround in U.S. manufacturing of textiles and apparel is expected to continue to reshape the manufacturing landscape of this industry with improved industry strategies and planning.   U.S. companies will be increasingly active in their efforts to innovate and improve to keep and stay viable in today’s highly competitive global market place.  In addition to keeping up with innovations, we can expect to see improvements in companies’ sourcing, supply chain management, and development of niche product and improved quality. Moving forward, we can expect to see U.S. companies to be to be more lean, efficient and flexible with consumer and market demands.