1. As suggested by numerous studies, the U.S. manufacturing sector as a whole demonstrated a robust V-shaped recovery from the 2008 financial crisis in terms of industry output. Growth rate of the industry output from 2010-2011 was also among the highest in the past 10 years.
2. There is no sign yet that textile and apparel (T&A) manufacturing is coming back to the U.S, despite suggested popularity of “insourcing” as result of rising labor cost in China. However, the decline rate of apparel manufacturing in the U.S. seemed to be slowing down.
3. Jobless recovery happened both in the U.S. manufacturing sector as a whole and in the T&A manufacturing sectors. Particularly, the U.S. T&A industry respectively lost 21.0% and 25.6% of its manufacturing jobs from 2008-2012 compared with only 10.8% decline of employment in the manufacturing sector over the same period. Based on the current data, it can be concluded that a sizable return of manufacturing jobs in the U.S. T&A industry would hardly occur at least in the near future.
Faced by rising labor cost, China has started thinking about “going globle” for its T&A sector: not product, but capital.
“According to William Gumede, a senior research fellow at the University of Witwatersrand’s school of public and development management in South Africa, Chinese domination of Africa’s textile markets and its industry has promoted significant job losses.
“For instance in South Africa, employment in the textile industry dropped from 300,000 workers in 1996 to 120,000 in 2010,” says Gumede when reached for comment by just-style.
And the situation is worse in Nigeria where the country has seen its once burgeoning US$1.3bn spinning industry in disarray, with Chinese cheap fabrics being highlighted as the culprit.
“Since 1995, over 175 textile manufacturing factories have shut down, leaving more than 250,000 workers jobless,” says Jaiyeola Olanrewaju, the director-general of the Nigerian Textiles Manufacturers Association.
And there is concern that some Chinese producers are not playing fair – being accused of mimicking African textile trade marks and unique designs.
“In order to compete favourably, African governments must stop [the] influx of counterfeit and smuggled textiles,” says Dr Walid Jibrin, the chairman of the Northern States Chapter of the Nigerian Textiles Manufacturers Association.
He identifies African prints, shirts, fine wax print textiles, unique Guinea brocades and lace embroideries as examples of African designs and textile trade marks being copied on cheap Asian fabrics and dumped in West Africa.
“The counterfeits have destroyed the handmade traditional textile industry in Nigeria, Ghana, Ivory Coast and Guinea,” says Dele Hunsu, the president of the National Union of Textile Garment and Tailoring Workers of Nigeria.
AGOA’s preferential access
But probably the most devastating effect of the Chinese textile industry on sub-Saharan Africa’s economic growth is its ability to piggy-back on the US’s year 2000 African Growth and Opportunity Act (AGOA).
Chinese firms have benefited from the region’s preferential access to the US by establishing Chinese-owned subsidiaries in the region. AGOA of course creates a trading advantage for sub-Saharan Africa’s textile industries to access the United States market.
According to Ms Ciliaka Millicent Gitau, a lecturer at the University of Nairobi’s School of Economics, its success was rapid but short-lived. By 2005, many Chinese companies had established subsidiaries in countries including Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Namibia, Nigeria, Tanzania and South Africa.
“The issue is that AGOA did not have rules of origin that would have curbed transhipment of the Chinese textile commodities,” said Gitau who is an expert on the emerging Sino-Africa geo-politics and trade relations.
The result has been local African clothing and textile companies closing, unable to compete with Chinese firms’ aggressive export-oriented tradition, low production costs and technological superiority.
And while AGOA has been extended to 2015, Chinese clothing makers in sub-Saharan Africa will continue exporting more textiles to the US at the expense of African companies.
“In essence, in the last two decades, China has placed itself in a strategic position to reap benefits from sub-Saharan Africa, not only in the textile industry but in other sectors as well,” says Gitau.
New sales opportunities
And Chinese manufacturers are in no mood to pull back. With weakening demand in Europe and the US since the financial crisis, plus continuing disputes at the World Trade Organization (WTO) with key mature market trading partners, China’s clothing and textile industry wants to diversify its sales.
From January to August 2012, China Customs figures show textile and apparel exports to the European Union (EU) dropped 14.4% year-on-year to US$32.02bn, while they rose 12.2% to US$9.82bn to Africa.
“We have got lots of inquiries from clients in Africa recently. They are less demanding, and some of them are happy to accept our private brands,” says a director at a Shanghai clothing manufacturer who so far has been supplying the EU, US and Japanese markets.
“There are many economic communities in Africa, which allows us to enter other African countries easily once we are in one of the community countries. We would like to look into the African market,” she adds.
Other Chinese manufacturers are using Africa as a hassle-free, alternative way to access the US and EU markets.
“In Ethiopia, we rent a plant and hire local workers make clothing for clients in the US and EU,” says a business manager at a Shandong province-based textile firm, who stresses that the African Growth and Opportunity Act offers companies such as his legal opportunities to access the US market.
And Chinese companies continue to see Africa not only as a huge market for export, but also a possible place for massive investment.
For example, in August, China Garments, a Beijing-based former state-run manufacturer, announced it will invest about US$29.7m in Zimbabwe to form a joint venture with the Cotton Company of Zimbabwe. The JV is expected to be a major cotton supplier of China Garments.”
1. Is corporate social responsibility a problem ONLY in developing countries?
How ethical is clothing “made in UK” or “made in USA”? Suggested reading:
2. As a consumer, shall we be responsible for something too?
Isn’t that we always want better quality products at lower price and delivered at faster speed? Because clothing retail is such a highly competitive buyer-driven business, in order to meet our “demand”, isn’t companies have to find a way to increase product quality, shorten production time, frequently change design patterns but stick to the old delivery schedule and lower sourcing cost? Can we say the “race to the bottom” CRS practice in clothing factories has nothing to do with us as consumers?
3. Some people suggest: since there are so many ethical problems in developing countries, why not we just move apparel manufacturing back to the US or EU?
If you ask these garment workers in Bangladesh, they would tell you that despite the horrible working conditions, they still feel “happy” to work there. Before working for the garment factory, their life was even worse—because of poverty and limited opportunity available to them. For example, for many young females in the least developing countries, if they do not work for garment factories, the other place for them to go is prostitution. We need to think about this question: if the Bangladesh factory was forced to close (Western brands no longer give them the order), what would happen to its workers?
4. Why internationally we still have no official labor standard, despite we have international organizations such as ILO, WTO, World Bank and United Nations out there as well as many international rules in other areas?
The nature of the problem is very similar as the ongoing global climate change negotiation. Countries are at different stages of development and what seems “ethical” may not necessarily fit for another country’s national conditions.
But still, everyone has a role to play to improve the status quo and create a better world, no matter as a consumer, professional working in the T&A industry, scholar or policy maker.
Recently, WSJ wrote a story about apparel “made in USA”. Although apparel manufacturing will never disappear in the U.S. (as the case elsewhere in the world), neither is it likely that those lost labor-intensive manufacturing jobs in the apparel sector will come back in the future. Why? Just ask yourself: Am I willing to spend $1,300 for a blazer, $170 for a dress shirt, $80 for a tie and $390 for a pair of jeans? These are the price tags associated with “Made in USA” for apparel.
Apparel is not a single case. If you’d like to enjoy your iPhone “Made in USA”, please add two “00” to the current price tag. Like it or not?
Similar questions can also be raised to the Europeans, Chinese, Koreans and everyone else in the world. For example, what will happen if China does not import U.S. cotton but totally relies on its domestic supply? What will happen if each country tries to produce their own air plane instead of using Boeing’s aircraft? How about European retailers only accept credit card issued by an European financial service provider and reject Visa or America Express? And how long will it take to deliver a package to Asia if FedEx and UPS are not allowed to operate in these regions? Will these “changes” improve or worsen people’s daily life? The answer is obvious.
Globalization does not mean “Made in China”nor “Made in USA”. Rather, it means “Made in the World” based on each country’s comparative advantage, it means getting access to the world resources and using them more wisely and more efficiently. Why not everyone engages in doing something they are good at doing and then exchange? This is why we go grocery instead of growing vegetables nor raising cows by ourselves today.
Globalization also means a product now can reach the world market beyond the limited domestic market. But a country can only successfully export when another country is willing to import. This is why we need to support trade liberalization so that every country can export more of those products they are competitive in making. And definitely more jobs will be created domestically. I mean every country that engages in such global “exchange”.
We no longer live in the 15th century when the Mercantilism was born. In the 21st century, export is good and import is equally good for the economy. Embrace globalization and enjoy better life~
Data source: American Apparel and Footwear Association (2012)
Data source: U.S.-China Business Council
The Congressional Research Service just released its most recent study on the U.S. textile manufacturing industry and the Trans-Pacific Partnership (TPP) Negotiation. This is also one of the limited reference available so far that specifically addresses the sectoral impacts of TPP.
Overall, this report did a good job of compiling latest statistics showing the operation of the regional trade & production network between the United States and those developing countries in central and south America. It also discusses why the U.S. textile industry appears to be very nervous about Vietnam.
However, the study wasn’t able to quantify the impact of TPP, which leaves potential for future studies. On the other hand, although debates over TPP centers upon the rules of origin, we shall not forget about foreign investment–especially when geographically Vietnam is very close to China, Japan and South Korea. Even yarn-forward is adopted, why cannot Chinese factories move their factories to Vietnam? It shall be noted that China’s economy is undergoing structural change and it’s the time for some Chinese factories to “go offshore”.
Full text of the report can be found here.
The Office of Textiles and Apparel (OTEXA) recently released its 2012 Going Global Report, which identifies 15 top export markets for U.S. made textiles and apparel. The report also includes statistical profile of these 15 countries, including their GDP per capita, GDP growth and bilateral trade with the United States in recent years.
It is interesting to note that the top export markets for textile and for apparel are very different. Wonder why? Please think about the “stages of development theory” we discussed in class.
HS code refers to the “Harmonized tariff schedule” (HS), a classification system for commodities. Textile and apparel are covered by HS code chapter 50-63. Detailed list can be found at http://www.usitc.gov/tata/hts/bychapter/index.htm
The report can be downloaded from here
For your reference. Many issues are relevant to textile and apparel sectors (for example: global value chain, trade and job, trade facilitation, competition policy, intelletrual property right protection, green economy, pluralism/regionalism as well as trade and development).
This year’s WTO Public Forum will debate:
- formulating new approaches to multilateral trade opening in areas such as trade facilitation;
- addressing 21st-century issues and identifying areas in need of new regulations;
- looking at the role of non-state actors in strengthening the multilateral trading system
The session will cover the following sessions
- Global value chain: implications for trade policy
- Trade and job
- The multilateral trading system in the 21st century: interaction between trade and competition policy
- Plurilaterals and Bilaterals: Guardians or Gravediggers of the WTO?
This year’s Ideas Workshops will cover:
- How to ensure green economy policies are implemented in a co-ordinated manner rather than at cross-purposes?
- The future of the WTO dispute settlement system.
- Rethinking trade-related aspects of intellectual property in today’s global economy.
WTO’s first ever Youth Ambassadors, selected by separate video and essay contests, will discuss the topic “How can trade promote development?”
A row has flared up again over the yarn-forward rule of origin in US free trade agreements after The Hosiery Association (THA) called for a knit-to-shape, assembly-only exception for socks and hosiery in the Trans-Pacific Partnership (TPP).
Three textile trade associations have now written to US Trade Representative Ron Kirk expressing their “strong opposition” to the proposal.
The American Manufacturing Trade Action Coalition (AMTAC), National Council of Textile (NCTO) Organizations, and American Fiber Manufacturers Association (AFMA) say any such move “conflicts with the US textile industry’s longstanding support” of a yarn-forward rule of origin for textiles and apparel.
The yarn-forward rule requires all stages of production – from yarn spinning to fabric formation and final garment assembly – to be done either in the United States or in an FTA partner country to qualify for duty-free treatment.
US textile groups say the rule is “long-established” and “logical” because the value of a finished item comes from its components, rather than from its final assembly.
But American retailers, apparel brands, manufacturers and importers argue it is too restrictive, hinders new trade and investment in the sector, and renders most existing trade ineligible for preferential tariff treatment.
The Hosiery Association wants the TPP pact – currently being negotiated by the US, Vietnam, Brunei, Chile, New Zealand, Singapore, Australia, Malaysia and Peru – to allow hosiery producers to source yarns for man-made fibre socks and hosiery outside the TPP region in all instances except in the case of 100% cotton and polyester products.
But “this proposal would be a massive blow to US and other TPP producers who manufacture acrylic, nylon and various other types of man-made fibre yarns,” the textile groups say.
“In short, the THA proposal allows yarns currently made in large quantities in the United States to be sourced from third parties, notably China,” the letter says.
A latest comment made by the Economist on Peter Marsh’s book The New Industrial Revolution.
As metioned in our class, globalization does not mean “made in China” or “off-shore production”, but rather a much freeer movement of goods, services, capital and labor around the world, thanks to the economic growth, lowered trade & investment barriers and advancement of technologies.
In today’s global economy, “any firm, anywhere, can hook up to a global supply chain. A product may be designed in one country and assembled in another, using components from dozens more. Even a small local manufacturer can use the best suppliers the world has to offer.”
This concept is associated with the “new international division of labor” concept, which we will discuss this coming Tuesday.
In the class, we just mentioned that the conditions under which our clothing were made significantly vary from country to country. Compared with the vidoes we watched yesterday, the story covered by the news is such a sharp contrast.
However, we may also want to think: despite the far-from pleasant working environment, why pepole in Pakistan are still willing to work there? As a consumer or professional in the US fashion apparel industry, what we can do to help improve the working conditions as shown in the picture? and what role can international trade play in helping developing countries like Pakistan to achieve economic development?
As reported by the New York Times article :
“Textiles are a major source of foreign currency for Pakistan, accounting for 7.4 percent of its gross domestic product in 2011 and employing 38 percent of the manufacturing work force. Pakistani cotton products are highly sought in neighboring India and form the backbone of a burgeoning fashion industry that caters to the elite. President Asif Ali Zardari’s government has often called on the United States to drop tariff barriers to Pakistani textile imports, which it says would be preferable to traditional aid.”
We will gradually touch these critical issues in the later part of the course. Stay tuned.
An article from the Textile World. Highlights:
- The global apparel retail industry grew by 3.4% in 2011 to reach a value of $1,175,353.1 million. In 2016, the global apparel retail industry is forecast to have a value of $1,348,098.8 million, an increase of 14.7% since 2011. Americas accounts for 36% of the global apparel retail industry value.
- Technlogy is changing consumers’ shopping behavior as well as preferences (such as redefining value of products). The internet, smartphones and social networking are driving the apparel industry to a greater extent than ever before.
- “Made in USA” is attracting consumers, however, to be more accurate, it means “source in the Western Hemisphere” rather than moving manufacturing totally back in the U.S.. However, in order to have “near sourcing” happen, addtional trade liberalization is required to remove the so much constraints.
- Supply chain transparancy and cooridnation is with growing significance to the success of business in the apparel companies.
- The only constant in the apparel industry is change (enviorment, business model, product innovation, technology…).
This recent comment from Just-style argues that re-shoring U.S. apparel manufacturing may become likely given China’s quickly rising labor cost. However, another two points mentioned by the article deserve more attention: one is that in order to make “made-in-USA” apparel competitive, industry leaders believe that tariffs and trade barriers on imported yarns and fabrics need to be much lowered. The question is, how realistic this “goodwill” can become true, considering the attitude of the US textile sector on the matter and their political influences. Second, although there might be some demands for sewing jobs in the U.S., these occupations are very low paid. The article admits that except immigrant, propably few Americans today (even those unemployeed) would like to take them (and have the qualified skills). Then, does re-shoring really matter for college graduates in the fashion apparel program?
To read the full article, click here
“These four million U.S. workers – seen and unseen – help you get dressed every day. They design shoes and clothes, perform research and development, cut and sew, supervise production, handle customs and logistics, ensure product safety compliance, market and merchandise product, outfit our troops and work on the sales floor. In addition to these four million workers, there are countless U.S. transportation, distribution, warehousing, and logistics workers who depend on our industry for their jobs.”
“about 75 percent of the retail value of most clothing and footwear comes from non-manufacturing activities that happen entirely inside the United States.”
“Supply chain jobs and manufacturing jobs are equally valuable to the overall health of the U.S. economy. It is wrong to foster a public policy agenda that forces these two groups to compete against each other. ”
Written by Kevin Burke. president and chief executive officer of the American Apparel & Footwear Association.
Published in Clothing and Textile Research Journal, Vol 30, No. 2, p119-133
The Relationship Between Import Penetration and Operation of the U.S. Textile and Apparel Industries From 2002 to 2008
Sheng Lu and Kitty Dickerson
The U.S. textile and apparel (T&A) industries have respectively adopted various restructuring strategies in recent years which fundamentally changed the way the two industries operate and the shifting relationship of each sector with imports. This study empirically tests the relationship between import penetration and the operation of the U.S. T&A industries based on data at 4-digit North American Industry Classification System (NAICS) code level from 2002-2008. Results from the panel data model show that overall the U.S. textile industry formed a weak cooperative relationship with import penetration level in the U.S. market and a neutral relationship was suggested for the U.S. apparel industry with imports. These findings contribute to understanding the global nature of today’s U.S. T&A industries and suggest useful perspectives for the U.S. textile trade policies.
To read the full paper, click here
Below, on the right is a textile dyeing mill in Zhejiang Provience, China
A recent study of the United States International Trade Commission reaffirms the special roles played by free trade agreements in supporting the regional trade-production network (RTN) for textile and apparel products in America and promoting the export of U.S.-made textile to developing countries in the region in particular. However, also as mentioned in the report, the influence of such RTN has sustantially declined since the full elimination of quota system in 2005. The implementation of the new FTAs established between US and countries in Asia-Pacific pose new uncertanties to the RTN in America, given the trade diversion effect commonly seen in FTAs.
A great commentary article on a recent study on trade protectionist measures by Chad Bown, a former professor from Brandeis university and a guru on trade remedy measures. It is interesting to note that the using of trade protectionist measures is much less frequent today than in the past. I agree with the reasons proposed by the article, such as the establishment of the WTO as a monitoring body, global production and emerging markets instead of developed countries becoming leading importers. On the other hand, trade protectionist measures are taking more diversified forms today and the scope has gone far beyond the traditional AD, CVD and safeguard measures. In particuar, measures that intend to promote export potentially could raise new trade disputes among leading exporters.
The full report can be downloaded from here
This article from the Economist echoes some recent arguments that with China’s rising wages, manufacturing jobs could move back to the developed countries. The article says that: “for some manufacturers low wage costs are becoming less important because labor represents only a small part of the overall cost of making and selling their products.”
However, such view is questionable. If labor cost only accounted for a minimum proportion of the total production cost, why would firms care about the rising labor cost? Also, more and more products made in China are sold locally today rather than shipped back to the US or other developed markets. Therefore, for many sectors (such as softgoods) despite the rising labor cost, leaving China is not always a workable option.
The report is prepared by Li & Fung and includes the following parts:
- Market overview
- Competitive landscape
- Latest developments
- Snapshots of sub-sector performance
To read the full report, click here
Is “fast fashion” business model compatible with “sustainability” ? It seems fashion company never inspire consumers to lower their consumtion, post-purchase unsustainability practices is commonly see and we have flood of fashion brands claimed themselves as “eco-friendly” (Niessen, 2011).
One interesting article from the Observers about H&M’s green strategy.
To read the fulltext, click here
Can fast fashion go global? Does the business model which heavily rely on local supply fit for global operation? As mentioned in the article, 70% of Zara’s sale in 2001 came from the EU, although it has opened 179 new stores in Asia in 2011, 156 of them in China.
To do business in emerging markets may incur many unique barriers and challenges. For example, the article reported that China’s consumer watchdog attacked Zara for poor quality in 2011. Often time we see much heavier invovlement of government in economic activities. And many emerging markets are very segmented (due to regional economic development gap) than in the US/west. Europe.
To read the fulltext, click here
An annual report prepared by the Textile World on the outlook of the U.S. textile industry in the year ahead. The report covers topics ranging from the industry output, market evaluation, price, international trade, job market and policy enviorment.
As noted by the report “Despite declines in employment, job prospects for skilled workers, engineers and merchandisers should be tolerably good as the industry evolves into one that primarily requires people with good communication skills, creativity, and who are skilled enough to operate today’s high-technology, computer-operated machines.”
To read the fulltext of the report, click here
One recent work of Dr. Gary Gereffi, a well-known expert on value chain studies, on the impacts of the financial crisis on the global apparel industry. It is suggested that the developing countries will gradually move up in the value chain and undertake more value-added functions such as design and product development. This is a two-edge sword to T&A industries in the developed countries. It could mean more resources to take advantage of and more intensified compeitition at the same time. Although Dr. Gary uses the concepts of OEM, ODM and OBM to describe evolution of the apparel chain, the major conlusions are compatable with the famous stages of development theory suggested by Toney (1986).
To read the fulltext, click here
The Sixth Anniversary of Post-quota Era:
New Patterns of World Textile and Clothing Trade and Critical Trade Policy Issues
By Sheng Lu
Keywords: Post-quota era, world textile and clothing trade, trade policy
Impact of the elimination of the 40-year textile and clothing (T&C) quota system on January 1, 2005 has always been a research interest to scholars in the field. Shifting from a highly-distorted trading environment to a much more market-based competition, reshuffle of the world T&C trade in the post-quota era is widely believed to be unavoidable and will have ripple effects on the future landscape of the global T&C industry (Dickerson, 1999; Nordas, 2004).
After six years of transition, medium and long-term effects of quota elimination have begun to display, attributed to adjustment of business practices of T&A firms in response to the new “rules of the game” (UNIDO, 2009). By taking advantage of such great timing, this study scrutinizes patterns of world T&C trade that have been newly emerged so far in the post-quota era. Capturing these new trends of development at the macro-industry level can both deepen understanding about the 40-year quota system itself and raise awareness of emerging research agendas for world T&C trade.
Three specific post-quota patterns of world T&C trade are discussed in the study:
First, non-dominant position of China in world T&C export. At first glance, China increased its market share in world T&C export by roughly 10 percentage points from 2005 to 2008, suggesting China was one of the biggest winners of quota elimination (WTO, 2010). However, a closer look will find: (1) China gained its market share at a decelerating rate over that period, implying China’s export surge at the very beginning of quota elimination was mainly due to the temporary transition effect; (2) At the disaggregated 6-digit HS code level, China’s export performance varied greatly from product to product, implying other exporters was still able to compete with China in the post-quota era by focusing on certain T&C product categories; (3) A number of Asian and European countries other than China also enjoyed robust growth in T&C export since 2005, suggesting China was one of the beneficiaries rather than the only winner of the post-quota era. Last but not least, the emergence of the “China+1” sourcing strategy indicated that T&C importers already started selecting other possible substitution sourcing destination as China’s back-up. In particular, importers were cautions about China’s rising manufacturing cost and the business risks associated with placing “too many eggs in one basket”.
Second, geographic concentration of T&C trade and increasing dependence on textile manufacturing capacity for clothing export. This new pattern is closely associated with changes of buyers’ sourcing practices. Specifically: (1) Market concentration rate (Herfindahl index) in major T&C importing countries, such as the United States, Europe and Japan, quickly went up since 2005 because of buyers’ consolidation of their sourcing channels. Traditional trade patterns such as “triangle manufacturing” and “outward processing trade” which were artificially created by the quota system can no longer justify their rationality of existence when quota restriction were removed. (2) The traditional “Cut, Make and Trim” (CMT) sourcing practice was gradually replaced by full-package sourcing. This shift was largely caused by the upgrading of global T&C value chain, including the transition of branded manufacturers into marketers and retailers’ more active involvement in direct sourcing; (3) Compared to CMT, qualified destination for full package sourcing needs to have the capacity of locally manufacturing textiles. This requirement poses big challenges to many developing countries which haven’t established a sound textile industry yet due to their overall lagged behind economic development. Impacts of full package sourcing on many aspects of the global T&C industry can be further studied.
Third, widening gap of intra-region trade patterns between America and Europe. As one format of vertical division of labor formed by countries in the same region but at different development stages, intra-region trade was a special feature of the world T&C trade, especially in America and Europe (Dickerson, 1999). However, statistics showed that intra-region trade in America quickly dropped from 69% to 55.7% for textiles and 48.5% to 26.9% for clothing from 2004 to 2008 (WTO, 2010). The decline occurred despite the new passage of several free-trade agreements which deliberately include clauses encouraging the using of U.S.-made textile products by neighboring developing countries. Accompanied with lowering share of intra-region T&C trade, imports from Asia keep constant rising in America over the same period. In contrast, share of intra-region trade in Europe remained stable, stood at around 75% for textiles and 82% for clothing. More studies can be done to explore the causes of such widening gap between America and Europe in terms of intra-region trade patterns.
This study also calls for awareness of “unexpected” negative effects of some trade policies on developing countries’ T&C export in the post-quota era. These trade policies include although not limited to: (1) WTO Doha Development Agenda (DDA). The DDA negotiation set the goal to cut import tariff for T&C product worldwide. However, reduced tariff rate will also wear down the real benefits of preferential duty-free treatment enjoyed by some least developed countries when competing with T&C export giants such as China and India; (2) Rule of origin (ROO) provisions in free-trade agreements. ROO originally was developed to ensure preferential treatments be enjoyed only by eligible FTA members. However, as ROO is specific to each FTA, the complexity and inconsistency made many preferential treatments seldom be taken advantage of. ROO further reduces the incentives for developing countries to develop their own textile industry. This put developing countries at a special disadvantage position when buyers are shifting to full package sourcing as discussed above. (3) Generalized System of Preferences (GSP). Aimed at promoting economic growth in the developing world, developed countries allow preferential duty-free entry of imports from eligible developing countries through the GSP program. Ironically, although T&C account for 50%-90% of total exports for many developing countries (WTO, 2010), most T&C importers including the United States and the European Union still reject including T&C in their GSP programs due to opposition from political forceful domestic industries with concerns about import competition. It is a challenge for policy makers in the post-quota era to design a set of fair and rational trading rules under which developing countries can enjoy the benefits of quota elimination and have more opportunities participating in world T&C trade. Academia has its key role to play in this endeavor.
Dickerson, K. G. (1999). Textiles and apparel in the global economy. N.J.: Merrill
Nordas, H. K. (2004). The global textile and clothing industry post the agreement on textiles and clothing. WTO discussion papers, 5. Geneva: WTO Publications
United Nations Industrial Development Organization, UNIDO (2009). The Impact of Institutions on Structural Change in Manufacturing: the Case of International Trade Regime in Textiles and Clothing. Vienna: Austria
World Trade Organization, WTO. (2010). World Trade Statistics, Geneva: Switzerland
Edited by Gladys Lopez-Acevedo, Raymond Robertson
Directions in Development : DID – Poverty English; Paperback; 532 pages; 6×9 Published March 14, 2012 by World Bank ISBN: 978-0-8213-8778-8; SKU: 18778
Full report can be downloaded from here
Read the full article from the New York Times:
It is important to realize that the U.S. textile industry and the U.S. apparel industry today are no longer close parnters. Why? Because they choose different restructuring strategies in response to globalization and rising imports.