Regional Supply Chain Remains an Import Feature of World Textile and Apparel Trade

The full article is available HERE

Key findings:

The deepening of the regional production and trade network(RPTN) is a critical factor behind the increasing concentration of world textile and apparel exports. RPTN refers to the phenomenon that geographically proximate countries form a regional supply chain.

In general, three primary textile and apparel regional supply chains are operating in the world today:

Asia: within this regional supply chain, more economically advanced Asian countries (such asJapan, South Korea, and China) supply textile raw material to the less economically developed countries in the region (such as Bangladesh, Cambodia, and Vietnam). Based on relatively lower wages, the less developed countries typically undertake the most labor-intensive processes of apparel manufacturing and then export finished apparel to major consumption markets around the world.

Europe: within this regional supply chain, developed countries in Southern and Western Europe such as Italy, France, and Germany, serve as the primary textile suppliers. Regarding apparel manufacturing in EU, products for the mass markets are typically produced by developing countries in Southern and Eastern Europe such as Poland and Romania, whereas high-end luxury products are mostly produced by Southern and Western European countries such as Italy and France. Furthermore, a high portion of finished apparel is shipped to developed EU members such as UK, Germany, France, and Italy for consumption.

Western-Hemisphere(WH): within this regional supply chain, the United States serves as the leading textile supplier, whereas developing countries in North, Central andSouth America (such as Mexico and countries in the Caribbean region) assemble imported textiles from the United States or elsewhere into apparel. The majority of clothing produced in the area is eventually exported to the UnitedStates or Canada for consumption.

Associated with these regional production and trade networks, three particular trade flows are important to watch:

First, Asian countries are increasingly sourcing textile inputs from within the region. In2017, close to 80 percent of Asian countries’ textile imports came from other Asian countries, up from around 70 percent in the 2000s.

Second, the pattern of EU intra-region trade for textile and apparel stays strong and stable. Intra-region trade refers to trade flows between EU members. In 2017, 55 percent of EU countries’ textile imports and 47 percent of EU countries’ apparel imports came from within the EU region. Over the same period, 68 percent of EU countries’ textile exports and 75 percent of their apparel exports also went to other EU countries.

Third, trade flows under the Western-Hemisphere textile and apparel supply chain are becoming more unbalanced. On the one hand, textile and apparel exporters in the Western-Hemisphere still rely heavily on the region. In 2017, respectively as much as 80 percent of textiles and 89 percent of apparel exports from countries in the Western Hemisphere went to the same region.  However, on the other hand, the operation of the Western-Hemisphere supply chain is facing growing competition from Asian suppliers. For example,  in 2017, only 24.8 percent of North, South and Central American countries’ textile imports and 15.7 percent of their apparel imports came from within the region, a record low in the past ten years.

Look ahead, it will be interesting to see how will the reaching and implementation of several new free trade agreements, such as CPTPP, RCEP, EU-Vietnam FTA, and the potential US-EU and US-Japan FTAs,  affect the regional pattern of world textile and apparel trade.

Recommended citation: Lu,S. (2018). How regional supply chains are shaping world textile and apparel trade. Just-Style. Retrieved from https://www.just-style.com/analysis/how-regional-supply-chains-are-shaping-world-textile-and-apparel-trade_id135021.aspx

Author: Sheng Lu

Professor @ University of Delaware

7 thoughts on “Regional Supply Chain Remains an Import Feature of World Textile and Apparel Trade”

  1. I think it will be interesting to see how both the Western and European supply chains will survive with the continued growth of the Asian supply chain. Their growing dominance in both the apparel and textile markets will serve a threat to the markets that exist in the WH and European supply chains. Despite attempts to keep production in the WH, such as NAFTA, only 15.7 percent of imports come from within these regions. If countries in the WH continue to import textiles from the Asian Hemisphere, the U.S. textile industry will deteriorate. Similarly, if the U.S. continues to import apparel from Asia, then countries such as Canada and Mexico will lose business. It’s interesting to see how even though countries in the same hemisphere, such as the U.S. and Mexico, have different economies and are in some way competing with one another, they still depend on each other for business and become a team when it comes to trade because they lie in the same hemisphere, and want to create strength in their own hemisphere in order to compete with the Asian supply chain.

  2. Despite increased competition from Asian markets, I do not believe the U.S.’s textile production market will ever disappear completely. Not only is the U.S. very capital intensive, but is also rather technologically advanced compared to many other countries and regions around the world. Our access to and continuous utilization of new technology allows us stay competitive with other textile manufacturers. Companies that are especially “safe” from competition are those such as GoreTex who primarily serve a niche market.

  3. I am predicting that Asian countries will become a stronger powerhouse when it comes to sourcing just within their region. This will keep traveling and other costs down. By supporting the countries within the region, they support their partners and help their economies. It seems like the rest of the world must simply sit and watch, and negotiate for bilateral agreements. When it comes to the US-Japan FTAs, White House spokeswoman, Sarah Sanders said that Trump, the Indian Prime Minister, and Japanese Prime Minister plan to deepen trilateral communication and acknowledge the importance of the free and open Indo-Pacific vision. India has been known to not be involved in alliances with partners, so I am interested to see how they might cope with this idea.

  4. The Western and European supply chains will definitely see a change with the massive growth of the Asian supply chain. Their power in both the apparel and textile industries seems as it could be a potential issue to the Western and EU markets. The Western hemisphere needs to continue to use the best of each of its abilities to keep up with Asia. The U.S. has to keep producing textiles and Central and South America needs to focus on apparel manufacturing. NAFTA and the free trade within the hemisphere has to continue, or Asia will destroy the U.S. economy little by little. It is a war within itself. We want to grow as a country but in order to do so we must compete with the Asian market in a way that opens up new trade and policy.

    1. you mentioned “The Western and European supply chains will definitely see a change with the massive growth of the Asian supply chain” what kind of changes do you refer to? what has caused the changes in your view?

  5. With the Asian supply chain growing there will for sure be more change. Perhaps they grow strong enough that they create their own “yarn forward” but with their resources and the perhaps strong industry, it will be more successful than what we have here. With their locations closer together and access to resouces, it could have the potential to become a success. From there it would be interesting to see how it would impact U.S. textiles and apparel companies and how we source our materials.

  6. I think regional supply chain benefits the development of certain regions but not to all regions. It is benefiting for Asian counties because Asia is a large region with countries capable of producing raw materials in bulk amount and then countries with relatively cheaper labor cost to manufacture, the supply chain of material and finished product in Asia is adequate enough for a wholesome economic entity. But for NAFTA region, while US and Canada is able to product raw materials in huge amount, manufacturing capacity in surrounding countries are not able to digest all materials with current scale of labor forces.

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