Regional Supply Chain Remains a Key Feature of World Textile and Apparel Trade

While textile and apparel is well-known as a global sector, the latest statistics show that world textile and apparel trade patterns remain largely regional-based. Three particular regional textile and apparel trade flows are critical to watch:

First, Asian countries are increasingly sourcing textile raw material from within the region. As much as 85% of Asian countries’ textile imports came from other Asian countries in 2019, a substantial increase from only 70% in the 2000s. This result reflects the formation of an ever more integrated regional textile and apparel supply chain in Asia. However, as Asian countries become more economically integrated, textile and apparel producers in other parts of the world could find it more challenging to get involved in the region. With the recent reaching of several mega free trade agreements among countries in the Asia-Pacific region, such as the Regional Comprehensive Economic Partnership (RCEP), the pattern of “Made in Asia for Asia” is likely to strengthen further.

Second, the EU intra-region trade pattern for textile and apparel stays relatively strong and stable. Intra-region trade refers to trade flows between EU members. Statistics show that 54.6% of EU(27) members’ textile imports and 37.4% of their apparel imports came from within the EU(27) region in 2019. This pattern only slightly changed over the past decade. In other words, despite the reported increasing competition from Asian suppliers, many of which even enjoy duty-free market access to the EU market (such as through the EU Everything But Arms program), a substantial share of apparel sold in the EU markets are still locally made.

EU consumers’ preferences for “slow fashion” (i.e., purchasing less but for more durable products with higher quality) may contribute to the stable EU intra-region trade pattern. Many EU consumers also see textile and apparel as cultural products and do NOT shop simply for the price. This explains why Western EU countries such as Italy, Germany, and France rank the top apparel producers and exporters in the EU region despite their high wage and production costs.

Third, the Western Hemisphere (WH) supply chain faces significant challenges despite the seemingly growing popularity of “near-sourcing.” On the one hand, textile and apparel exporters in the Western-Hemisphere still rely heavily on the regional market. In 2019, respectively, as much as 79% of textiles and 86% of apparel exports from countries in the Western Hemisphere went to the same region. 

However, on the other hand, the Western-Hemisphere supply chain is facing increasing competition from Asian suppliers. For example, in 2019, only 22% of North, South, and Central American countries’ textile imports and 15% of their apparel imports came from within the Western Hemisphere, a new record low in ten years. Similarly, in the first eleven months of 2020, only 15.7% of US apparel imports came from the Western Hemisphere, down from 17.1% in 2019 before the pandemic. The limited local textile production capacity and the high production cost are the two notable factors that discourage US fashion brands and retailers from committing to more “near-sourcing” from the Western Hemisphere.

In comparison, Asian countries supplied a new record high of 62.2% of textiles and 75% apparel to countries in the Western Hemisphere in 2019, up from 49.1% and 71.1% ten years ago. This trend suggests that as the competitiveness of “Factory Asia” continues to improve, even regional trade agreements (such as USMCA and CAFTA-DR) and their restrictive “yarn-forward” rules of origin have limits to protect the Western Hemisphere supply chain.

In comparison, Asian countries supplied a new record high of 62.2% of textiles and 75% apparel to countries in the Western Hemisphere in 2019, up from 49.1% and 71.1% ten years ago. This trend suggests that as the competitiveness of “Factory Asia” continues to improve, even regional trade agreements (such as USMCA and CAFTA-DR) and their restrictive “yarn-forward” rules of origin have limits to protect the Western Hemisphere supply chain.

Additionally, many say that the reaching of RCEP creates new pressure for the new Biden administration to consider joining the CPTPP and strengthening economic ties with countries in the Asia-Pacific region. Notably, several USMCA and CAFTA-DR members, such as Mexico, also have RCEP or CPTPP membership. Apparel producers in these Western Hemisphere countries may find it more rewarding to access the cheaper textile raw material from Asia through CPTPP or RCEP rather than claiming the duty-saving benefits for finished garments under USMCA or CAFTA-DR. Like it or not, the Biden administration’s inaction will also have consequences. 

by Sheng Lu

Further reading: Lu, Sheng. (2021). Regional supply chains still shape textile and apparel trade. Just-Style

Author: Sheng Lu

Professor @ University of Delaware

30 thoughts on “Regional Supply Chain Remains a Key Feature of World Textile and Apparel Trade”

  1. I found this post very interesting! I was unaware of how much intra-country trading took place, I was specifically surprised by how Asian countries trade with each other and the value of their imports. We see this number growing as over the past 20 years it has increased by 15%. This can cause an issue for other countries (including the US) that are looking to penetrate that market. For the US, we have a close relationship with Asia and it is important to maintain a strong relationship with them. When it comes to intra-EU trade I think that there is one main reason behind it. Europe tends to make luxury items that many people in the European market are looking to purchase. European producers, as well as people, also look to purchase well-made products regardless of the price that they need to pay. Where the Western Hemisphere may be seeing some issues many concerns may be raised. The US relies on trade from other countries when it comes to both the apparel and textile industry.

  2. I think this blog post is very interesting and highlights a lot of important aspects of the different regional supply chains. I think it’s really interesting that Asia is increasingly sourcing materials from within their region. This is important to look out for, as we can expect to see other regions having a more difficult time trying to get involved with Asia and their supply chain. However, this shows that we are probably going to start witnessing more regions making products for themselves, as opposed to for other regions. As stated in the blog post, it is predicted that the pattern of “Made in Asia for Asia” is going to continue on more. Other regions may actually start to follow this pattern, as well. EU markets are also said to have a decent amount of products made within their own region. This is good to note while learning about the different supply chains and being able to compare these differences to the Western Hemisphere supply chain. While there’s a demand for products from Asia, the restrictive rules of the Western Hemisphere supply chain do not fully allow for the sourcing of textile materials from Asia. Moving forward with this knowledge, we can wonder if the US would actually join the CPTPP after weighing out the benefits of the CPTPP, compared to the road blocks that come along with USMCA and CAFTA-DR?

    1. I hope our lectures and this blog post help students understand why sourcing strategy, supply chain and trade agreements are all closely connected.

  3. From a sourcing perspective the answer why supply chains are regional is easy: it is too expensive and -even more important- it takes too much to ship raw materials and semi-finished products around the world.
    For finished products Situation is not that regional.

    1. Always great to hear from you and learn from your insights, Bernd!

      I kind of both agree and disagree with you regarding the pattern of regional supply chains. Like you mentioned, apparel produced in Asia are sold globally. However, as of 2019, still, over 90% of Mexico’s apparel exports and 88% of CAFTA-DR members’ apparel exports went to the United States, a clear sign of regional patterns.
      That being said, I am not very optimistic about the long-term prosperity of the western hemisphere supply chain—it faces the most significant challenges. It’s time to shift from relying on trade policy to improve genuine export competitiveness.

  4. I think I’m noticing, as a result of this article, that recent trends in the fashion industry reveal that the notorious capital-intensive regions are increasing their exposure with near-sourcing by keeping supply chains on a short leash. For Asia and the EU, this method is working, but the US is held back by the yarn-forward rules of origin that they’ve been so adamant about upholding. For this reason, USMCA countries face more competition as Asia makes headway in the industry with its accelerated growth in exports. I think the US should try to work with Asia instead of against this region, but it’s tempting to assume that the tariff war between the US and China might be holding them back. Further, it’s interesting to observe Asia’s progress in the industry as of late because it seems this region is the most abundant with both capital and labor, thus making it easier for all members to practice near-sourcing and even enjoy the benefits of free trade agreements “local” to them.

    Additionally, it appears that the EU region is favoring slow-fashion these days which bodes well for the future of the fashion industry if more businesses and brands in other regions can get on board with this too. Fast-fashion, in my opinion, is becoming ever more outdated as sustainability trends rise in popularity and social responsibility rises to the spotlight with customers seeking ethical supply chains. Moreover, I find slow-fashion refreshing because it gives the consumer a better chance to appreciate the garments currently available and practice longevity of use with these garments rather than hopping onto the next fad immediately.

    Do you think COVID-19 has encouraged the prevalence of slow-fashion in the fashion industry, and do you think this is a permanent shift the industry can make as a whole?

    1. Excellent comment!
      I strongly encourage you to watch this short video: https://shenglufashion.com/2020/11/05/fash455-case-study-should-the-u-s-rejoin-the-trans-pacific-partnership-tpp/
      And I would love to hear your follow-up comments.

      You made a great point that “US should try to work with Asia…” However, the question in my mind is whether it is realistic to expect Asian countries to use US-made yarns and fabrics given their already sufficient local supply?

      Regarding “slow-fashion”, personally I think it will be a moving target. for example, it is encouraging to see more and more fashion brands and retailers start to sell products using recycled material. And of course, more can be done further.

  5. I’ve read this blog post twice now to disassociate some facts from what we’re learning and deem it insightful on many accounts, the first is Dr. Sheng Lu’s highlight of each regional supply chain within the operating countries. It is good knowledge to know which countries remain to be top notch in the T&A industry and which are having a harder time. The graphs indicate that more regions are beginning to produce independently which could potentially start a new trend and whirlwind of confusion within trading, nonetheless, it could be good for the economy and for the U.S. specifically to better brand themselves.
    An important trend to note while on this topic however is the long-term success of the western hemisphere supply chain if this falls into place. Examining the graphs Dr. Sheng Lu has posted, there is much intra-country trading that takes place- especially in Asia along with their value of their imports. We can see their successes and imitate their ways of producing and processing.

    1. So, what’s your outlook of the Western Hemisphere supply chain? Why or why not do you think the last paragraph of the blog post too pessimistic or overworried?

  6. I found this article to be very thought provoking, specifically in regards to Regional Comprehensive Economic Partnership. When reading about “Made in Asia for Asia” I automatically thought back to our lecture on the “Flying Geese Model”. This model shows a scale from capital intensive to labor intensive manufacturing, and the tiers or countries which fall on that scale. For example, tier 1 includes Japan, tier 2 includes South Korea, tier 3 includes China, and tier 4 includes Vietnam. When examining this model we looked into the future and what changes are project to happen. This model is predicted to have each tier shift left into more capital intensive manufacturing. I think a huge component in this shift will be credited to the RCEP. I think that Asia’s push to be self sufficient in all parts of the supply chain will help developing countries move to being developed, and slowly over time push labor intensive industries to other countries.

  7. I found this post very interesting and caused me to think about the effects of regional supply chains with regard to the textile and apparel world of trade. It’s interesting how EU supply chains work because of how strong they are. Even though there has been increased competition from Asian suppliers, they still manage to remain trading locally, not globally. One main reason for this is the usage of “slow fashion” instead of “fast fashion”. In the US fashion industry, fast fashion is extremely present, which is why they source mainly from other countries and not locally. In the EU fashion industry, consumers pride themselves on preferring products with higher quality and better durability, even if that means they will purchase less products overall. EU shoppers focus on the cultural aspect of the product as well, not simply because it is expensive. This accounts for countries like Italy, Germany, and France to be the top exporters and producers of apparel in the entire EU region.

    1. A quick follow-up question–you mentioned “In the US fashion industry, fast fashion is extremely present, which is why they source mainly from other countries and not locally.” why is that? isn’t sourcing locally can offer a faster speed to market?

  8. After reading this article, I feel like I have a better understanding of just how regional-based trade effects other major players in the global textile and apparel industry. When combining these two facts, that Asian countries are importing more textile inputs from other Asian countries and the recent signing of the RCEP, I am more worried than ever for the U.S. T&A industry. Not only is the “yarn-forward” rule restricting the US, but now they must compete with even more producers in Asia. This idea of “Made in Asia for Asia” is only going to make this region more powerful and exclusive to those countries that are not involved. In specific, China is considered a Tier 3 country in “Factory Asia,” so when will they move into making the most capital-intensive products, or will that even happen with the new RCEP? I am curious to see how the RCEP will affect the U.S.’s exports as well and if there is any sort of change in China and the U.S.’s relationship. I wouldn’t be surprised if Asian countries were to limit or cut off their sourcing with the US considering they pretty much have a total supply chain located in their region.

    Along with this, will the decrease in fast fashion have a similar effect on Asian consumers and producers, as slow fashion does on EU apparel producers? I almost feel as though US consumers are moving towards a similar mentality, but Asian consumers are still focused on the price of their goods and apparel. With the United States going through a shift due to the rise in sustainability and local sourcing, how will this change their relationship with USMCA regions or even Asian suppliers? Is it really possible for the US to lower their imports and focus more on domestic production?

    1. Excellent comments! Three quick thoughts:
      –Some technology companies are actively exploring ways to automate garment manufacturing. When attending the industry sourcing shows, I notice buyers for these automation technologies are mostly from Asia. (BTW, this video might be of interest to you: https://www.wsj.com/articles/the-robots-are-coming-for-garment-workers-thats-good-for-the-u-s-bad-for-poor-countries-1518797631). In other words, “Factory Asia” will always prosper. In comparison, few US apparel companies seem interested in moving their business model from “design + marketing” back to manufacturing.
      –My concern for the US textile industry is that they seem to make too many political capitals on maintaining the status quo (eg: insisting the yarn-forward rules of origin in all US free trade agreement) rather than shape the future (eg: expand export markets through new supply chains).
      – The competition between states in the 21st century will increasingly be driven by a quest for markets rather than national resources.

  9. Up until taking FASH455 with Professor Sheng Lu, I honestly was still in the mindset of the sourcing strategies back in the 2000’s as I still thought we did the majority of our trading with countries outside of our own trade agreements. This class, and this blog post specifically is very intriguing because I wasn’t aware of how strong “intra-region” trade was in the 3 main regions (western-hemisphere, EU, and Asia). I feel like in the past, whenever we would look at a clothing label, the odds it would say “Made in China” were very high but that’s just not the case anymore. Over the years, the United States in particular has really concentrated it’s sourcing markets to countries closer to where we are or alternate Asian countries as opposed to China. The point made in this post about the increase of “Made in Asia for Asia” is something that’s very interesting but also comes as sort of a threat to us and our FTA. Asia has always been a strong player in the global textile and apparel industry and with the implementation of the new RCEP trade agreement, we’re only going to see that region continue to grow. It puts a lot of pressure on the United States as we’re still struggling with debates over our “yarn-forward” limitations, thus limiting our full opportunity to source at a much lower cost from some of these other Asian countries. It’s going to be interesting to see in the future how the United States approaches these Asian trade agreements with the hopeful ceasing of the trade war and if we decide to take part.

  10. I found this blog post to be very insightful as it contained information pertaining to the ways different regional supply chains work. The “flying geese model” that was explained in week 4 lectures is highlighted as we see how the Asian region tends to source material from within their region. This model is depicted through this blog post and the charts that bring Asia’s intra-region trade strengths to light. This model makes a region self-sufficient as they are able to supply and produce apparel and textiles for themselves. This model may persuade other regions to start to be self-sufficient as well. With this being said, I think that the varying economic status’ that make up the Asian region have an advantage over other regions that may follow this pattern.

  11. I must say that taking this module has been an eye opener about a lot of issues and what goes on in both domestic and international textile and apparel industries. Honestly, unless you have a relative working in the industry or aspire to work in related industry, i.e fashion industry, you would kno nothing about it. Gone are the days when every clothing had a tag written “Made in China”. The importance of “intra-regional trading” is the focus of every country, both from the Western Hemisphere and Eastern Hemisphere. Now that the western hemisphere is being exposed to importance of regional trading, my question to the Trade unions within this countries is “How are they going to make intra-trading conducive for both the manufacturers and consumers?”. The policies, high taxes, inadequate raw materials and high costs of manufacturing has been challenging to most manufactures in US. As it is apparent that apparel producers from Western Hemisphere prefer importing textile raw materials from Asia , it becomes a challenge to fully concentrate on production and supply of textile products on one region. However, this calls for strategies that are would help solve the problem and ensure that as we encourage regional trading, we make it rewarding for both the apparel producers and consumers.

  12. If one considers the trading zones of EU compared to Asia or North America, you can better appreciate the aspects of creating final products and the shipping of materials (raw and final) within the zone. The Asian region is a large bloc of Asian countries that naturally lend themselves to a logical supply chain. The differentiator being the economic status of each of the countries within the region.
    Comparing this to the EU zone as a large trading bloc. Even for more than just textile and apparel.
    Third, the North American region – Canada, US, Mexico and CR are another large bloc associated with trading.
    I see the main differentiator between the latter two regions (EU and North America) being that the EU zone seems to be able to supply and produce within the region, whereas the North America region is much more sensitive to the apparel design and manufacture and often has to look to Asia for the final product assemble.
    Asia itself is becoming a much more sustainable region for both textile and apparel and not necessarily having to go outside the trading zone to complete their product.

  13. In this class, we highlighted how sourcing is growing in regional supply chains, however this blog really opened my eyes to how prevalent this ideal remains. When reading about the growth of Asian sourcing market within the region, my first thought leads me back to the different tiers we learned about in the flying geese model. Since Asia has all the resources and different levels in their region, it makes sense they decide to source from each other. Especially with a free trade agreement amongst them. This also supports the idea of the Western Hemisphere near-coursing increasing because of their free trade agreements like NAFTA. With no tariffs, it is a no brainer to source with each other, as both sides benefit and grow. We also see this within the EU-region, which means overall, the entire world favors trade without tariffs. It would be so beneficial to the industry to model after the EU region where fashion is a bit slower and gives more opportunity for longevity of trends. This idea can grow the idea of sustainability and hopefully allow the whole industry to work together in a more ethical way.

  14. I found this post very interesting because it makes people aware of the Intra-region trade patterns between supply chains Asia, the Western Hemisphere and EU. The point that I would like to further touch upon is when the article discussed, “Apparel producers in these Western Hemisphere countries may find it more rewarding to access the cheaper textile raw material from Asia through CPTPP or RCEP rather than claiming the duty-saving benefits for the finished garments under USMCA or CAFTA-DR. “This is because of how restrictive CAFTA-DR and the USMCA are. The Western Hemisphere is always striving to find fabrics and textiles that are the most cost effective and efficient. The RCEP will help Southwest Asian apparel producers by giving them the opportunity to acquire duty free imports from China to Southeast Asia. Exporting textiles from countries within the RCEP region will be easier and less restrictive giving the Western Hemisphere more opportunities to economically prosper.

    Due to COVID-19 and other societal factors, a shift toward more “near-sourcing” has occurred. However, do you think that the Western Hemisphere’s supply chain could ever get to a place where it only produces strictly within that region?

  15. I find it interesting that in the EU, slow fashion is in higher demand than fast fashion, yet this is what creates strong intra-region trade patterns. As slow fashion slowly begins to takeover the current fast fashion trends, this could be a huge advantage for the EU in the future. Itll be interesting to see how Asia takes on slow fashion with their current intra-trade region patterns, which seem to rely more on fast fashion trends!

  16. Unlike the US, Asia on the other hand is still trying to follow the “flying geese model” which was exemplified in this article and charts. It is classified as a dynamic division of labor where countries work together to form a supply chain. The model follows the economic development in a specific region which begins with more advanced and capital intensive production. What this model proves is how much the industry is actually shifting. From gradually shifting away from Hong Kong, and Taiwan to China or Japan to South Korea and to members like Vietnam. Also, this all occurs when a country advances that causes GDP to increase while creating more advanced technology and products. Overall it will take a lot of time for Tier 4 countries to improve but there will be a shift in the industry once full automation happens.

  17. It is undeniable that there is a lot happening with international trade in relation to fashion currently. A huge force that I think is important for the U.S. to acknowledge and tackle is the RCEP. As stated in Dr. Sheng Lu’s blog, this agreement encourages these Asian nations to source from other members in the agreement. This is giving even more power to the Asian countries fashion industries exports, which they almost practically dominate. The only glimmer of opportunity in the Western-Hemisphere is the EU’s grasp on their fashion industry. Like stated, while talk of “sourcing local” is becoming more and more popular, the EU’s customers actually are supporting this through their purchases. I think this idea of intra-trading is something that the Asian nations and the EU are finding success and the U.S. should take steps to mimic their success.

  18. After reading this article, I think the US textile and apparel industry seems to be facing huge challenges. It can be seen that in Asia, a very stable integrated regional clothing supply chain has been formed. We import textiles from each other and export each other. Looking at the EU sector, trade between the EU has remained relatively stable and strong. In the past ten years There have never been major changes in China. Benefiting from the different consumption concepts of EU consumers, although the textiles and clothing of western EU countries are relatively expensive, they are still the largest clothing manufacturer and exporter in the European and American markets. Finally, looking at the clothing supply chain in the Western Hemisphere, the export market is single, and all countries’ commodities are exported to the same region. I think this situation will lead to an over-saturation of the market, loss of elasticity of commodities, and profitability. In addition, although there are some agreements to protect textile exports in the Western Hemisphere, more and more American fashion brands and retailers are unwilling to pay high production costs are also the key to the problem, even under the protection of some agreements such as “yarn forward” It is impossible to avoid importing more textiles and clothing provided by Asian countries, which shows that the existing agreement no longer meets market demand.

  19. This post was so thought provoking and I think that it makes a lot of sense that regional supply chain is so prominent. First off, with FTAs such as RCEP and the EU they would prefer to keep their supply chain within their member countries. This just makes production time shorter, as well as not having to pay tariffs on goods. Covid has also made companies want to shift production closer to home to avoid production delays, however it is not to say that countries still aren’t having supply chain in other countries.

  20. This blog post was extremely interesting and related back to the “flying geese model” that we learned earlier in this course. Learning about how the EU supply chain operates was intriguing because they symbolize so much strength within in the industry. As sourcing from Asia continues to become more popular, EU supply chains are not changed their trade patterns; they are continuing to trade locally and not globally. Prior to this class, I was not aware of the relevance of intra-country trading. It was interesting to compare Asia trade with EU. Asian countries maintained trade together and placed high value on their imports. On the other hand, intra-EU trade operates in a different manner. Europe tends to focus their production on luxury items and they value the “slow fashion” approach. In most EU consumers minds, they value quality over quantity. As “slow fashion” and sustainability become more popularized, it will be a major opportunity for further growth for Europe. I am interested in seeing how the demand for fast fashion vs the demand of slow fashion changes in the future.

  21. I found this blog post extremely interesting. I was honestly surprised to see how much intra-region trade is happening around the world, especially in Asia. The intra-region trade trends look to be pretty steady, however it was stated that the pattern of “Made in Asia for Asia” is likely to strengthen even further. With the recent trade agreement, RCEP, we can expect to see an increase in intra-region trade from Asian countries. I wasn’t as shocked to see the EU intra-region trade pattern due to the fact that Europe is known to sell lots of high-end goods and apparel, meaning that they would most likely source from more local areas and put out more ethically made products. This article also mentions the term “slow fashion”, which I really enjoy learning about. The EU has a very stable intra-region trade pattern, which is likely related to the fact that European consumers have a greater demand for durable products with higher quality. In the US however, fast fashion is a huge concern. The talk of sustainability has definitely become more pronounced over the past few years or so, but I think we still have a long way to go. It would be really cool to see the United States focusing on a more “slow fashion” based industry, similar to the EU.

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