WTO Reports World Textile and Apparel Trade in 2018

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According to the World Trade Statistical Review 2019 newly released by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $315 billion and $505 billion in 2018 respectively, increased by 6.4% and 11.1% from a year earlier. This has been the fastest growth of world textile and apparel trade since 2012. Specifically: 

I. Textile export

China, European Union (EU28), and India remained the world’s top three exporters of textiles in 2018. Altogether, these top three accounted for 66.9% of world textile exports in 2018, a new record high since 2011. Notably, China and EU (28) also enjoyed a faster-than-world-average export growth in 2018, up 7.9% and 6.9% respectively. The United States remained the world’s fourth top textile exporter in 2018, accounting for 4.4% of the shares, down slightly from 4.6% in 2017.

II. Apparel export

China, the European Union (EU28), Bangladesh, and Vietnam unshakably remained the world’s top four largest exporters in 2018. Altogether, these top four accounted for as much as 72.3% of world market shares in 2018, which, however, was lower than 75.8% in 2017 and 74.3% in 2016—primarily due to China’s declining market shares. Notably, even though apparel exports from Vietnam (up 13.4%) and Bangladesh (up 11.1%) enjoyed a fast growth in absolute terms in 2018, their gains in market shares were quite limited (up 0.3 percentage point from 5.9% to 6.2% for Vietnam and up 0.1 percentage point from 6.4% to 6.5% for Bangladesh). This result once again suggests that due to capacity limits, no single country has emerged to become the “Next China.” Instead, China’s lost market shares in apparel exports were fulfilled by a group of countries, a phenomenon which can be linked with fashion brands and retailers’ sourcing diversification strategy.

III. Textile import

The European Union (EU28), the United States, and China were the top three largest importers of textiles in 2018, accounting for 37.5% of the world’s total textile imports that year. Although the market shares of the top three in 2018 were close to 37.7% a year earlier, it nevertheless was much lower than over 50% back in the 2000s. The increasing diversification of textile import market is associated with the shifting pattern of world apparel manufacturing and export closely.

IV. Apparel import

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 world’s top three importers of apparel in 2018. Altogether, these top three absorbed 61.5% of world apparel in 2018, which, however, was lower than 62.3% in 2017 and a significant drop from 84% back in 2005. Behind the result, it is not the case that consumers in the EU, U.S., and Japan are importing less clothing. Instead, several emerging economies (such as China) are becoming fast-growing apparel consumption markets and starting to import more. As consumers’ purchasing power in these emerging economies continues to improve, we could expect a more diversified world apparel import market in the years ahead.

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Additional reading: Latest trends in world textile and apparel trade

WTO Reports World Textile and Apparel Trade in 2017

Statistical review of world textile and apparel trade in 2018 is now available

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According to the newly released World Trade Statistical Review 2018 by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $296.1bn and $454.5bn respectively in 2017, increased by 4.2% and 2.8% from a year earlier. This is the first time since 2015 that the value of world textile and apparel exports enjoyed a growth.

Textiles and apparel are not alone. Driven by rising demand for imports globally, the current dollar value of world merchandise exports also grew by 4.7% in 2017–its most robust growth in six years, to reach $17.43 trillion. Particularly, the ratio of trade growth to GDP growth finally returned to its historic average of 1.5, compared to the much lower 1.0 ratio recorded in the years following the 2008 financial crisis.

China, European Union (EU28), and India remained the world’s top three exporters of textiles in 2017. Altogether, these top three accounted for 66.3% of world textile exports in 2017, up from 65.9% in 2016. All the top three also enjoyed a faster-than-average export growth in 2017, including 5.0% of China, 5.8% of EU(28) and 5.9% of India. The United States remained the world’s fourth top textile exporter in 2017, accounting for 4.6 percent of the shares, the same as a year earlier.

Regarding apparel, China, the European Union (EU28), Bangladesh and Vietnam unshakably remained the world’s top four largest exporters in 2017. Altogether, these top four accounted for as much as 75.8% of world market shares in 2017, which was higher than 74.3% a year earlier and a substantial increase from 68.3% back in 2007.

Continuing with the emerging trend in recent years, China is exporting less apparel and more textiles to the world. Notably, China’s market shares in world apparel exports fell from its peak—38.8% in 2014 to a record low of 34.9% in 2017. Meanwhile, China accounted for 37.1% of world textile exports in 2017, which was a new record high. It is important to recognize that China is playing an increasingly critical role as a textile supplier for many apparel-exporting countries in Asia. Measured by value, 47% of Bangladesh’s textile imports came from China in 2017, up from 39% in 2005. We observe similar trends in Cambodia (up from 30% to 65 %), Vietnam (up from 23 % to 50 %), Pakistan (up from 32 % to 71 %), Malaysia (up from 25 % to 54 %), Indonesia (up from 28 % to 46 %), Philippines (up from 19 % to 41 %) and Sri Lanka (up from 15 % to 39 %) over the same period.

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Additional readings: 
Lu, S. (2018). Changing trends in world textile and apparel trade. Just-Style.
Lu, S. (2018). How regional supply chains are shaping world textile and apparel trade. Just-Style.

Outlook 2018: Apparel Industry Issues in the Year Ahead

Outlook 2019: Apparel Industry Issues in the Year Ahead is available 

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In January 2018, Just-Style consulted a panel of industry leaders and scholars in its Outlook 2018–Apparel Industry Issues in the Year Ahead management briefing. Below is my contribution to the report. All suggestions and comments are most welcome!

1. What do you see as the biggest challenges – and opportunities – facing the apparel industry in 2018, and why?

One of the biggest opportunities facing the apparel industry in 2018 could be the faster growth of the world economy. According to the International Monetary Fund (IMF), the global growth forecast for 2018 is expected to reach 3.7 percent, about 0.1 percent points higher than 2017 and 0.6 percent points higher than 2016. Notably, the upward economic growth will be broad-based, including the United States, the Euro area, Japan, China, emerging Europe and Russia. Hopefully, the improved growth of the world economy will translate into increased consumer demand for clothing in 2018.

Nevertheless, from the macroeconomic perspective, oversupply will remain a significant challenge facing the apparel industry in 2018. Data from the World Bank and the World Trade Organization (WTO) shows that, while the world population increased by 21.6 percent between 2000 and 2016, the value of clothing exports (inflation-adjusted) surged by 123.5 percent over the same period. Similarly, between 2000 and 2016, the total U.S. population increased by 14.5 percent and the GDP per capita increased by 22.2 percent, but the supply of apparel to the U.S. retail market surged by over 67.8 percent during the same time frame. The problem of oversupply is the root of many challenges faced by apparel companies today, from the intense market competition, pressure of controlling production and sourcing cost, struggling with excessive inventory and deep discounts to balancing sustainability and business growth.

2: What’s happening with sourcing? How is the sourcing landscape likely to shift in 2018, and what can apparel firms and their suppliers do to stay ahead?

The 2017 US Fashion Industry Benchmarking Study, which I conducted in collaboration with the US Fashion Industry Association (USFIA) earlier this year, provides some interesting insights into companies’ latest sourcing strategies and trends. Based on a survey of 34 executives at the leading U.S. fashion companies, we find that:

First, most surveyed companies continue to maintain a relatively diversified sourcing base, with 57.6 percent currently sourcing from 10+ different countries or regions, up from 51.8 percent last year. Larger companies, in general, continue to have a more diversified sourcing base than smaller companies. Further, around 54 percent of respondents expect their sourcing base will become more diversified in the next two years, up from 44 percent in 2016; over 60 percent of those expecting to diversify currently source from more than 10 different countries or regions already. Given the uncertainties in the market and the regulatory environment (such as the Trump Administration’s trade policy agenda), companies may use diversification to mitigate potential market risks and supply chain disruptions due to protectionism.

Second, although U.S. fashion companies continue to seek alternatives to “Made in China” actively, China’s position as top sourcing destination remains unshakable. Many respondents attribute China’s competitiveness to its enormous manufacturing capacity and overall supply chain efficiency. Meanwhile, it is interesting to note that the most common sourcing model is shifting from “China Plus Many” to “China Plus Vietnam Plus Many” (i.e. China typically accounts for 30-50 percent of total sourcing value or volume, 11-30 percent for Vietnam and less than 10 percent for other sourcing destinations). I think this sourcing model will likely to continue in 2018.

Third, social responsibility and sustainability continue to grow in importance in sourcing decisions. In the study, we find that nearly 90 percent of respondents give more weight to sustainability when choosing where to source now than in the past. Around 90 percent of respondents also say they map their supply chains, i.e., keeping records of name, location, and function of suppliers. Notably, more than half of respondents track not only Tier 1 suppliers, suppliers they contract with directly, but also Tier 2 suppliers, i.e., supplier’s suppliers. However, the result also suggests that a more diversified sourcing base makes it more difficult to monitor supply chains closely. Making the apparel supply chain more socially responsible, sustainable and transparent will continue to be a hot topic in 2018.

3: What should apparel firms and their suppliers be doing now if they want to remain competitive further into the future? What will separate the winners from the losers?

I assume many experts will suggest what apparel firms should change to stay competitive into the future. However, the question in my mind is what should companies keep doing regardless of the external business environment? First, I think companies should always strive to understand and impress consumers and control their supply chains. Despite the growing popularity of e-commerce and the adoption of transformative new technologies, the fundamental nature of apparel as a buyer-driven business will remain the same. Second, companies should always leverage their resources and stay “unique,” no matter it means offering differentiated products or value-added services, maintaining exclusive distribution channels or keeping the leadership position in a particular niche market. Third, apparel firms should always follow the principle of “comparative advantage” and smartly define the scope of their core business functions instead of trying to do everything. Additionally, winners will always be those companies that can take advantage of the mega-development trends of the industry and be willing to make long-term and visionary investments, both physical and intangible (such as human talents).

4: What keeps you awake at night? Is there anything else you think the apparel industry should be keeping a close eye on in the year ahead? Do you expect 2018 to be better than 2017, and why?

I think the apparel industry should keep a close eye on the following issues in 2018:

  • The destiny of the North American Free Trade Agreement (NAFTA): The potential policy change to NAFTA means so much to the U.S. textile and apparel industry as well as suppliers in other parts of the world. Notably, through a regional textile and apparel supply chain facilitated by the agreement over the past 23 years, the NAFTA region has grown into the single largest export market for U.S. textile and apparel products as well as a major apparel sourcing base for U.S. fashion brands and retailers. In 2016, as much as half of U.S. textile and apparel exports went to the NAFTA region, totaling US$11billion, and U.S. apparel imports from Mexico and Canada exceeded US$3.9billion. Understandably, if NAFTA no longer exists, sweeping changes in the trade rules, such as import duties, could significantly affect the sourcing and manufacturing behaviors of U.S. textile and apparel companies and consequentially alter the current textile and apparel trade patterns in the NAFTA region. For example, Mexico’s focus on basic apparel items suggests that U.S. importers could quickly source from elsewhere if duty savings under NAFTA are eliminated.
  • The possible reaching of the Regional Comprehensive Economic Partnership (RCEP): Even though RCEP is less well-known than the Trans-Pacific Partnership (TPP), we should not ignore the potential impact of the agreement on the future landscape of textile and apparel supply chain in the Asia-Pacific region. One recent study of mine shows that the RCEP will lead to a more integrated textile and apparel supply chain among its members but make it even harder for non-RCEP members to get involved in the regional T&A supply chain in the Asia-Pacific. This conclusion is backed by the latest data from the World Trade Organization (WTO): In 2016, around 91 percent of Asian countries’ textile imports came from other Asian countries, up from 86 percent in 2006. The more efficient regional supply chain as a result of RCEP will further help improve the price competitiveness of apparel made by “factory Asia” in the world marketplace. Particularly in the past few years, textile and apparel exports from Asia have already posted substantial pressures on the operation of the textile and apparel regional supply chain in the Western Hemisphere.
  • Automation of apparel manufacturing and its impact on the job market: Recall my observations at the MAGIC this August, several vendors showcased their latest technologies which have the potential to automate the cut and sew process entirely or substantially reduce the labor inputs in garment making. The impact of automation on the future of jobs is not a new topic, but the apparel industry presents a unique situation. Globally, over 120 million people remain directly employed in the textile and apparel industries today, a good proportion of whom are females living in poor rural areas. According to the World Trade Organization (WTO), for quite a few low-income and lower-middle income countries such as Bangladesh, Gambia, Pakistan, Madagascar, Sri Lanka, and Cambodia, as much as over 70 percent of their total merchandise exports were textile and apparel products in 2016. Should these labor-intensive garment sewing jobs in the developing countries were replaced by machines, the social and economic impacts will be consequential. I think it is the time to start thinking about the possible scenarios and the appropriate policy responses.

WTO Reports World Textile and Apparel Trade in 2016

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

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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.

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WTO Forecasts World Trade to Grow 2.4% in 2017

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In its latest trade statistics and outlook report, the World Trade Organization (WTO) forecasts the world merchandise trade volume to grow within a range of 1.8-3.6% in 2017 (on average 2.4%). This growth rate is slightly up from a very weak growth of 1.3% in 2016. WTO expects trade growth to further pick up to 2.1-4% in 2018.

On the positive side, the global GDP growth is expected to rebound to 2.7% in 2017 from 2.3% in 2016, which will contribute to the expansion of world trade. Notably, WTO expects emerging economies to return to modest economic growth in 2017. However, WTO sees policy uncertainty, including the imposition of restrictive trade measures and monetary tightening, a main risk factor to world trade this year.

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WTO also noted that since the financial crisis, the ratio of trade growth to GDP growth has fallen to around 1:1. And 2016 marked the first time since 2001 that this ratio has dropped below 1, to a ratio of 0.6:1. Historically, the volume of world merchandise trade has tended to grow about 1.5 times faster than world output. WTO is cautiously optimistic that the ratio will partly recover in 2017, but the ratio will remain a cause for concern.

At the press conference, Trump Administration’s trade policy receives significant attention. But according to  Roberto Azevêdo, Director-General of WTO, “just an overall statement of the intention to go one particular way or another, does not tell us what the trade policy is and does not tell us what the impact of that trade policy will be. Instead, the devil is in the details”. Roberto said he is waiting to see Trump’s new trade team in place (for example, the new US Trade Representative) and he looks forward to the meaningful dialogues with the team to know more details and clarity of U.S. trade policy. Until then, any comments on the impact of Trump Administration’s trade policy would be just speculations.

[Discussion for this post is closed]

Towards a More Inclusive Trading System

A timely, informative and intellectual discussion with Roberto Azevêdo, Director General of the World Trade Organization on the state of global trade and its governance. Some important key points during Roberto’s presentation/discussion:

  • Trade has proved to be one of the most powerful pro-growth, anti-poverty tools in history: In recent decades it has helped to lift one billion people out of poverty in developing countries. The World Bank found that income grew more than three times faster for developing countries that lowered trade barriers than for those that did not. in the US, estimates show that the gains from globalization have raised real household incomes by up to $10,000 annually.
  • Trade means more choice, lower prices and real dollar in the pocket for consumers: A joint study by UCLA and Columbia found that people with high incomes could lose up to 28% of their purchasing power if borders were closed to trade. But the poorest consumers, they could lose up to 63% of their spending power
  • Trade is imperfect: Despite the obvious overall gains, trade can have negative effects in some parts of the economy. And those effects can have a big impact on some people’s lives. But we would be betraying those very same people, and many, many more, if we turned against trade and allowed the negative arguments to go unanswered.
  • Trade protectionism is an ineffective and very expensive way of protecting jobs: In the latter part of the 20th century, the EU protected various industries — including steel, agriculture and textiles. The French economist Patrick Messerlin analyzed this approach. He found that the average cost per job saved was several hundred thousand euros, or about 10 times the corresponding wage in each of those industries. The US applied tariffs on Chinese truck tires in 2009. Around 1,200 jobs were saved, but this came at a cost of $1.1 billion in higher prices for consumers. That works out as a cost of about $900,000 per job. The Petersen Institute estimates that these higher prices also resulted in around 2,500 job losses in the tire retail sector due to slumping sales.
  • Trade protectionist solutions do not reflect the nature of the modern economy and the international nature of production: Most goods aren’t made in one country. Most exports have components which have been imported. So by restricting imports, a country can restrict its own ability to export. Trade protectionism is also a two-way street. It leads to retaliation and the domino-effect.
  • Unemployment is not strictly or mainly a trade issue, trade measures will NOT address this disorder: trade is a relatively minor cause of job losses. The evidence shows that well over 80% of job losses in advanced economies are not due to trade, but to increased productivity through technology and innovation.
  • The real economic revolution that is happening today: Studies suggest that almost 50% of existing jobs in the US are at high risk of automation. An International Labor Organization (ILO) study on Cambodia, Indonesia, Vietnam, Philippines and Thailand found that 56% of jobs are at high risk of automation. And that’s just on average. In some sectors over 80% of jobs are at risk. In Japan, there are 315 robots per 10,000 workers. In China that number is only 36 — but it is rising fast. In the US, the number is 164, which is still relatively low. But it is set to go up!

Questions for thinking:

  • How do we ensure that trade can continue to promote growth and lift people out of poverty?
  • How to RESPOND to the rising anti-trade sentiment in public discourse? Is trade protectionism the right approach?
  • How to ensure that the benefits of trade reach further and wider– in other words, how to create a more inclusive global trading system? How to harness the power of e-commerce to support inclusiveness?
  • How do we help small and medium sized enterprises (SMEs) to leverage technology so that this marketplace doesn’t just become the preserve of the big players?
  • How can the trading system adjust to the shift from a world of few, large, known exporters to a world in which exporters are many, small and unknown? How can we ensure that this transition works for consumers?

WTO Reports World Textile and Apparel Trade in 2015

The World Textile and Apparel Trade in 2016 is now available

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According to the newly released World Trade Statistical Review 2016 by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $291 billion and $445 billion respectively in 2015, but decreased by 7.2 percent and 8.0 percent from a year earlier. This is the first time since the 2009 financial crisis 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 13 percent in 2015,to $16.0 trillion, as export prices fell by 15 percent. In comparison, the volume of world trade grew slowly at a rate of 2.7 percent, which was roughly in line with world GDP growth of 2.4 percent. WTO says that falling prices for oil and other primary commodities, economic slowdown in China, a severe recession in Brazil, strong fluctuations in exchange rates, and financial volatility driven by divergent monetary policies in developed countries are among the major factors that contributed to the weak performance in world trade.

Textile and apparel exports

China, the European Union and India remained the top three exporters of textiles in 2015. Altogether, they accounted for 66.4 percent of world exports. The United States remained the fourth top textile exporter in 2015. The top ten exporters all experienced a decline in the value of their exports in 2015, with the highest declines seen in the European Union (-14 percent) and Turkey (-13 percent). The smallest decline was recorded in China (-2 percent).

Top three exporters of apparel include China, the European Union and Bangladesh. Altogether, they accounted for 70.3 percent of world exports. Among the top ten exporters of apparel, increases in export values were recorded by Vietnam (+10 percent), Cambodia(+8 percent), Bangladesh (+6 percent) and India (+2 percent). The other major exporters saw stagnation in their export values (United States) or recorded a decline (all other top ten economies).

china's market share

Additionally, despite reported rising production cost, China’s market shares in world textile and apparel exports continued to rise in 2015 (see the figure above).

Textile and apparel imports

The European Union, China and the United States were the top three importers of textiles in 2015. However, altogether they accounted for only 37 percent of world imports, down from 52.8 percent in 2000. Because a good proportion of textiles made by developed countries (such as the United States) are exported to developing countries for apparel manufacturing purposes, the pattern reflects the changing dynamics of world apparel manufacturing and exports in recent years.

Because of 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 2015. Altogether, they accounted for 59 percent of world imports, but down from 78 percent in 2000. This indicates that import demand from other economies, especially some emerging markets, have been growing faster over the past decade.

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