The full interview is available HERE
Selected interview questions
The virus is here to stay. What steps the companies must take to mitigate its impact?
Sheng: Earlier this year, I, together with the US Fashion Industry Association, surveyed about 30 leading US fashion brands and retailers to understand COVID-19’s impact on their sourcing practices. Respondents emphasized two major strategies they adopted in response to the current market environment. One is to strengthen the relationship with key vendors, and the other is to improve flexibility and agility in sourcing. These two strategies are also highly connected. As one respondent told us “We’re adjusting our sourcing model mix (direct vs. indirect) & establishing stronger strategic supplier relationships across entire matrix continue to build flexibility and dual sourcing options.” Many respondents, especially those large-scale fashion brands and retailers, also say they plan to reduce the number of vendors in the next few years to improve operational efficiency and obtain greater leverage in sourcing.
Which are the countries benefitting out of the US-China tariff war and why?
Sheng: The trade war benefits nobody, period. Today, textiles and apparel are produced through a highly integrated supply chain, meaning the US-China tariff war could increase everyone’s production and sourcing costs. Back in 2018, when the tariff war initially started, the unit price of US apparel imports from Vietnam, Bangladesh, and India all experienced a notable increase. Whereas companies tried to switch their sourcing orders, the production capacity was limited outside China. Meanwhile, China plays an increasingly significant role as a leading textile supplier for many apparel exporting countries in Asia. Despite the trade war, removing China from the textile and apparel supply chain is impossible and unrealistic.
How do you compare the African and Asian markets when it comes to sourcing and manufacturing? Which are the advantages both offer?
Sheng: Asia as a whole remains the world’s dominant textile and apparel sourcing base. According to statistics from the United Nations (i.e., UNComtrade), Asian countries as a whole contributed about 65% of the world’s total textile and apparel exports in 2020. In the same year, Asian countries altogether imported around 31% of the world’s textiles and 19% of apparel. Asian countries have also established a highly efficient and integrated regional supply chain by leveraging regional free trade agreements or arrangements. For example, 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. 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.
In comparison, only about 1% of the world’s apparel imports come from Africa today. And this percentage has barely changed over the past decades. Many western fashion brands and retailers have expressed interest in expanding more apparel sourcing from Africa. However, the tricky part is that these fashion companies are hesitant to invest directly in Africa, without which it is highly challenging to expand African countries’ production and export capacity. Political instability is another primary concern that discourages more investment and sourcing from Africa. For example, because of the recent political turmoil, Ethiopia, one of Africa’s leading apparel sourcing bases, could be suspended for its eligibility for the African Growth and Opportunity Act (AGOA). Without AGOA’s critical support, Ethiopia’s apparel exports to the US market could see a detrimental decline. On the other hand, while these trade preference programs are crucial in supporting Africa’s apparel exports, they haven’t effectively solved the structural issues hindering the long-term development of the textile and apparel industry in the region. More work needs to be done to help African apparel producers improve their genuine export competitiveness.
Another issue is Brexit. Is that having any significant impact on the sourcing scenario of the world or is it just limited to the European nations?
Sheng: Despite Brexit, the trade and business ties between the UK and the rest of the EU for textile and apparel products continue to strengthen. Thanks to the regional supply chain, EU countries remain a critical source of apparel imports for UK fashion brands and apparel retailers. Nearly 35% of the UK’s apparel imports came from the EU region in 2019, a record high since 2010. Meanwhile, the EU region also is the single largest export market for UK fashion companies—about 79% of the UK’s apparel exports went to the EU region in 2019 before the pandemic.
However, trade statistics in the short run may not fully illustrate the impacts of Brexit. For example, some recent studies suggest that Brexit has increased fashion companies’ logistics costs, delayed customs clearance, and made talent-hiring more inconvenient. Meanwhile, Brexit provides more freedom and flexibility for the UK to reach trade deals based on its national interests. For example, the UK recently submitted its application to join the Comprehensive Progressive Agreement of the Trans-Pacific Partnership (CPTPP). The UK is also negotiating a bilateral trade agreement with the United States. The reaching of these new trade agreements, particularly with non-EU countries, could significantly promote the UK’s luxury apparel exports and help the UK diversity its source of imports.
How do you think the power shortages happening across Europe, China, and other nations, are going to impact the apparel supply chains?
Sheng: One of my primary concerns is that the new power shortage could exacerbate inflation further and result in a more severe price hike throughout the entire textile and apparel supply chain. When Chinese factories are forced to cease production because of power shortage, the impact could be far worse than recent COVID-related lockdowns in Vietnam and Bangladesh. As mentioned earlier, more than half of many leading Asian apparel exporting countries’ textile supplies come from China today. Also, no country can still compete with China in terms of the variety of apparel products to offer. In other words, for many western fashion brands and retailers, their stores and shelves could look more empty (i.e., having less variety of products to sell) because of China’s power shortage problem.
5 thoughts on “Exclusive Interview with FIBRE2FASHION about the Latest World Textile and Apparel Trade Patterns (October 2021)”
This interview was interesting to give a more global and current perspective on the textile and apparel sourcing market of how the pandemic is affecting sourcing, Africa vs. Asia markets and analyzing different countries supply chain to give a deeper insight to any hopes or changes for the future of sourcing and supply chains for fashion.
I agree increasing the tariff between the US and China can become very risky. China plays a huge part in many countries’ supply chains. Get rid of China will be very difficult. The US should try to help other countries to become more developed so that if China does have a power shortage that will not affect the supply chain too much. The US should try to start with African countries. This way the world has a backup for sourcing products and it can help many African economies. If the US will start with African countries, then the US will have to keep a close eye on those countries so they are not doing any forced labor.
While reading the interview with FIBRE2FASHION about the latest world textile and apparel trade patterns, I was intrigued to analyze both the responses and questions. It was interesting to see how heavily reliant countries are on China. For example, we learn from the interview that more than half of many leading Asian apparel exporting countries’ textile supplies come from China today and eliminating it would be very difficult. In addition to this, Sheng also states that Asian countries have established a highly efficient and integrated regional supply chain by leveraging regional free trade agreements or arrangements. Although it would be hard to get rid of China as a whole, I believe solely relying on China is still risky especially when we saw how the China power shortage impacted the supply chain. The US should try to start with African countries and help them become more developed so they do not just have to depend on China. Overall, I believe the questions that were asked did a great job of having a large range of topics yet also staying relevant.
I find it interesting that the world depends on one country to do most of the sourcing when the supply chain is a global strategy.
I found this interview very interesting and found it opened my eyes to the current textile and apparel trade patterns. One major thing that I took away from this was a new understanding of how reliant the US and other countries are on China. This did not come to a surprise to me. The increasing tariffs are tricky due to how heavily to US relies on China. I agree that the US should start with African countries in helping them grow. I believe this would be a better strategy for the US.