Why is the used clothing trade such a hot-button issue?

Shannon Brady and Sheng Lu (2018). Why is the used clothing trade such a hot-button issueJust-Style

Key Findings:

First, the world used clothing trade has grown significantly over the past ten years. Statistics from the United Nations show that the value of world used clothing trade (HS code 630900) has quickly increased from $1.8bn in 2006 to $3.7bn in 2016, an increase of 106 percent. Between 2006 and 2016, the value of world used clothing trade enjoyed a 7.6 percent compound annual growth rate (CAGR), which was almost double the pace of 3.4 percent CAGR for new clothing trade (HS chapters 61 and 62) over the same period.

Second, the world used clothing trade flow is highly unbalanced. On the one hand, the developed economies are the dominant suppliers of used clothing to the world. In 2016, nearly 40 percent of the world’s used clothing exports came from three countries alone: the United States (15 percent), the United Kingdom (13 percent) and Germany (11 percent). Data also shows that the European Union and the United States together stably accounted for as much as 65 percent of the value of world clothing exports between 2006 and 2016. The other country worth mentioning is China, which is quickly becoming another leading used clothing exporter in the world. In 2016, China’s used clothing exports totaled US$218m from only US$0.32m in 2006, an increase of more than 684 percent!

On the other hand, most of the world used clothing exports end up sold in the developing countries, especially the least developed ones. For example, in 2016, Sub-Saharan Africa (SSA) as a whole imported approximately 20 percent of the world’s used clothing, far more than any other regions in the world. By value, the top three individual importers of used clothing in 2016 are all developing countries as well, namely Pakistan (6.0 percent), Malaysia (5.8 percent) and Ukraine (4.9 percent).

Third, trade policies regulating used clothing trade often raise controversies. While trade barriers on new clothing attract much of the public attention, the used clothing trade is facing even heavier and trickier restrictions of various kinds. The World Trade Organization (WTO) data shows that in 2016 the average applied tariff rate for used clothing imports was 19.3 percent, higher than 15.4 percent of new clothing (HS Chapters 61 and 62). Of the total 180 countries covered by the WTO tariff database, 115 (or 64 percent) set an equal or higher tariff rate for used clothing than the new one. Further, it is not rare to see extremely high import tariff rates and other quantitative restrictions applied to used clothing trade. For example, in 2016 the applied most-favored-nation (MFN) ad valorem equivalent tariff rate for used clothing was as high as 356.9 percent in Uzbekistan, 167.3 percent in Zimbabwe, 149.2 percent in South Africa, 116.8 percent in Rwanda and 100 percent in Vietnam.

After all, because of the complicated social, economic and political factors involved, how to regulate and manage used clothing trade remains a key challenge facing the world community.

Social and Economic Impacts of Apparel Trade–Questions from FASH455

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Debate on Used clothing trade and AGOA

#1 What evidence can support the arguments that cutting off secondhand clothing imports from Africa will allow African nations to build their own textile industry? Likewise, what evidence can support the arguments that African countries overall benefit from importing used clothing from countries like the United States?

#2 Given the debate on used clothing trade on African nations, will you continue to donate used clothing? Why or why not?

#3 China holds a dominant position in textile and apparel production and exports because of their vast amounts of technology, workers, and resources. How do you think least developing countries like Africa will be able to keep up with such steep competition? Why or why not it is a wise decision for the United States to threaten to take away East African countries’ benefits under AGOA?

Social and economic impact of apparel trade

#4 Is factory employment in India a step in the right direction for the country’s gender equality? What effects, positive or negative, could such employment have in regards to gender issues?

#5 We keep arguing that globalization is negative because we are taking jobs away from U.S. workers. But by sending more work to factories in India, we’ve created jobs for these Indian women who, before working in the factories, were sheltered and only sent off into the world for arranged marriage. In this sense, is globalization still negative if we’re creating a sense of freedom and purpose for these women?

#6 As detailed in the article, the working conditions and treatment of workers is extremely unethical in some garment factories.  Can globalization help this issue or hurt it more? 

#7 How do you compare your life to the Indian girls in the article? And please just imagine: ten years later, what will the life of these Indian girls look like? How about yours?

Welcome to our online discussion! Please mention the question # in your comment.

Tariff Remains a Critical Trade Barrier for the Textile and Apparel Sector (Updated December 2017)

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According to latest statistics from the World Trade Organization (WTO), in 2016, the average applied tariff rate remained at 10.5% for textiles and 17.5% for apparel worldwide. Compared with the average tariff rate for all sectors, the tariff rate for textile and apparel is 1.4 percentage points and 8.4 percentage points higher respectively. The result suggests that while tariff may no longer be a critical trade barrier for some sectors, it still significantly matters for the textile and apparel industry.

Least developed countries (LDC) overall set a higher tariff rate for textiles and apparel than other more advanced economies. For many poorest countries in the world, tariff remains the single largest source of tax revenue for the local government. However, it is also true that should these LDCs lower their tariff rate for textile inputs such as yarns and fabrics, it may help apparel manufacturers in these countries lower production cost and improve the price competitiveness of their finished apparel products in the world marketplace.

At the country level, countries with the highest tariff rate for textiles include Bahamas (37.1%), Ethiopia (28.0%), Uzbekistan (24.5%), Algeria (24.0%), Argentina (23.3%), and Brazil (23.3%). Whereas countries with the highest tariff rate for apparel include South Africa (41.0%), Namibia (41.0%), Swaziland (41.0%), Botswana (41.0%), Lesotho (41.0%), Bolivia (40.0%), Egypt (38.4%), Argentina (35.0%), Ethiopia (35.0%) and Brazil (35.0%).

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Data also shows that the import tariff rates of the US, EU(28) and Japan, the top three largest textile and apparel importers in the world, stay unchanged over the past three years.

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TIC

Additionally, there seems to be a positive relationship between a country’s import tariff rate for new clothing (HS 61 & 62) and used clothing (HS 6309). Of the total 180 countries covered by the International Trade Center (ITC) database, about 62.7% set an equal or higher tariff rate for new clothing than used clothing. Some African nations place a particularly high tariff rate for used clothing, including Zimbabwe (167%), South Africa (149%), Rwanda (117%), Namibia (80%), Tanzania (56%), and Uganda (41%).

Detailed tariff rates in Excel can be downloaded from HERE