Explore the Competitiveness of China’s Textile and Apparel Exports to the U.S.

This study intends to explore how the U.S.-China trade tension since 2017 has affected the competitiveness of China’s textile and apparel (T&A) exports to the U.S. market. Findings of the study will shed new lights on the mega-trend of T&A sourcing from China in the medium term, and support T&A companies’ sourcing decision making in the current uncertain business environment.

Data for the analysis were collected from the Office of Textiles and Apparel (OTEXA) under the U.S. Department of Commerce, including the value of U.S. imports from China between 2016 (i.e., the year before the U.S. launched the section 301 investigation against China) and March 2019 (the latest data available) for a total of 167 categories of T&A products.

Specifically, based on the constant market share (CMS) model, a commonly adopted international trade analysis tool, this study decomposed the value of U.S. T&A imports from China into the following four factors:

  • Market growth effect: changes in China’s T&A exports to the U.S. due to the growth of total U.S. import demand for T&A
  • Commodity structural effect: changes in China’s T&A exports to the U.S. due to the shifting product structure of China’s T&A exports
  • General competitive effect: changes in China’s T&A exports to the U.S. due to the shifting competitiveness of Chinese T&A products in the U.S. market (measured by China’s market shares)
  • Product competitive effect: changes in China’s T&A exports to the U.S. due to the joint effect of the product structure of China’s T&A exports and the shifting competitiveness of Chinese T&A products in the U.S. market (measured by China’s market shares)

Four findings are of note:

First, the U.S.-China trade tension has affected China’s T&A exports to the U.S. negatively. Even though the majority of T&A products have not been subject to the U.S. Section 301 punitive tariff yet, China’s T&A exports to the U.S. suffered a significant drop, particularly since 2019. This result, however, was at odds with the overall trend of China’s T&A exports to the U.S. in recent years. Notably, except apparel, China’s yarns, fabrics and made-up textile exports to the U.S. all enjoyed a steady and positive growth between 2016 and 2018. Overall, it seems U.S. T&A importers are shifting sourcing orders away from China mainly because of concerns over trade tensions rather than their usual business considerations.

Second, the increased U.S. import demand has partially mitigated the negative impact of trade tension on China’s T&A exports to the U.S. market. Results of the CMS model indicate that expanded total U.S. import demand for T&A driven by the booming U.S. economy had avoided an even worse decline of U.S. T&A imports from China. In other words, without such a market growth, China’s T&A exports to the U.S. would have been $2,065 million less in 2018 (including $528 million for apparel) and $388 million less (including $368 million for apparel) in the first quarter of 2019 than their current level.

Third, China’s export competitiveness is shifting from apparel to textiles. Results of the CMS model show that even before the tariff war, the competitiveness of China’s apparel exports has been weakening, which was the most significant contributing factor to the decline of $530 million U.S. apparel imports from China between 2016 and 2018. In comparison, China is exporting more yarns and fabrics to the U.S. in recent years. Data from OTEXA shows that between 2016 and 2018, China’s yarn and fabric exports to the U.S. enjoyed a 13.1% and 2.6% compound annual growth respectively, compared with a 0.6% decline of apparel. The CMS model further suggests that China’s improved export competitiveness can explain the majority of these increased exports.

Fourth, the results show that the changing product structure of China’s T&A exports to the U.S. also has an impact on trade flows. For example, as estimated, China lost around $20.4 million apparel exports to the U.S. in the first quarter of 2019 because the sourcing orders shifted towards those product categories with relatively lower market growth. In comparison, the commodity structural effect has favored China’s made-up textile exports to the U.S. market, resulting in $21.9 million more exports in the first quarter of 2019 than otherwise.

by Sheng Lu

WTO Reports World Textile and Apparel Trade in 2016

[The 2017 statistics are available, see WTO Reports World Textile and Apparel Trade in 2017

textile

clothing.jpg

According to the newly released World Trade Statistical Review 2017 by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $284 billion and $443 billion respectively in 2016, marginally decreased by 2.3 percent and 0.4 percent respectively from a year earlier. This is the second year in a roll since 2015 that the value of world textiles and apparel exports grew negatively.

However, textiles and apparel are not alone. The current dollar value of world merchandise exports also declined by 3 percent in 2015, to $11.2 trillion, mostly caused by the strong decline in exports of fuels and mining products (-14 percent). On the other hand, as noted by the WTO, the steep drop in commodity prices recorded in 2015 mostly halted in 2016, except energy prices.

Textile and apparel exports

Measured in value, China, European Union, and India remained the top three exporters of textiles in 2016. Altogether, these top three accounted for 65.9 percent of world exports in 2016, slightly down from 66.5 percent in 2015, which is mostly due to India’s shrinking market shares.

The United States remained the fourth top textile exporter in 2016, accounting for 4.6 percent of the shares (down from 4.8 percent in 2015). Over half of the top ten exporters experienced a decline in the value of their exports in 2016, with the highest declines seen in Hong Kong (-13 percent), Taiwan (-8 percent), South Korea (-6 percent) and the United States (-6 percent). Notably, Vietnam entered the world’s top ten textile exporters for the first time (2 percent market shares, 9 percent growth rate from 2015).

Top three exporters of apparel include China, the European Union, and Bangladesh. Altogether, they accounted for 69.1 percent of world exports, close to 70.3 percent in 2015. Among the top ten exporters of apparel, increases in export values were recorded by Cambodia (+6 percent), Bangladesh (+6 percent), Vietnam (+5 percent), and European Union (+4 percent). Other leading exporters saw stagnation in their export values (such as Turkey) or recorded a decline (such as China, India, and Indonesia).

Could be negatively affected by the rising labor and production cost, China’s shares in the world textile exports dropped from 37.4 percent in 2015 to 37.2 percent in 2016, and the shares in the world apparel exports fell from 39.2 percent in 2015 to 36.4 percent in 2016—a record low since 2010.

Textile and apparel imports

Measured in value, the European Union, the United States, and China were the top three importers of textiles in 2016. These top three altogether accounted for 38 percent of world textile imports, slightly up from 37 percent in 2015, but remains much lower than over 53 percent back in 2000. Notably, over the past decade, apparel manufacturing continues to shift from developed to developing countries and many developing countries heavily rely on imported textile inputs due to the lack of local manufacturing capacity. This explains why more textile exports now go to the developing nations.

On the other hand, affected by consumers’ purchasing power (often measured by GDP per capita) and size of the population, the European Union, the United States, and Japan remained the top three importers of apparel in 2016. Altogether, these top three accounted for 62.9 percent of world apparel imports in 2016, up from 59 percent in 2015. Notably, China is quickly becoming one of the world’s top apparel importers. From 2010 to 2016, China’s apparel imports enjoyed an annual 17 percent growth, much higher than most other countries.

WTO_Chapter_09_tables_e_Page_1

WTO_Chapter_09_tables_e_Page_2.jpg