Trade rules, the international division of labour and the evolution of the the Italian TCI Mick Dunford University of Sussex

1.1 The cost of a shirt: TCI is springboard for industrialization yet protection altered map of competitive advantage due to interaction of manufacturers, commercial capitalists, retail concentration and consumers

1.2 Global governance, trade rules and the TCI Long-Term Agreement re cotton textiles – Multi Fibre Arrangement – dispersal of production to quota-unconstrained countries – Agreement on Textiles and Clothing to return to normal GATT-WTO non-discrimination rules – OPT – preferential arrangement Tariffs to be examined in Doha round

Long-Term Agreement re cotton textiles – Multi Fibre Arrangement – dispersal of production to quota-unconstrained countries – Agreement on Textiles and Clothing to return to normal GATT-WTO non-discrimination rules – OPT – preferential arrangement

Tariffs to be examined in Doha round

1.3 Impact of end of MFA quotas Importers increase imports – quota restricted exporters increase exports - import prices fall by 'tariff equivalent' of quotas In the 35 product categories liberalized in 2005 China's market share increase by 130% in volume and 82% in value, and was accompanied by steep falls in unit prices A substitution of imports from privileged trade partners (mainly Asia, also in North Africa and the African, Caribbean and Pacific Group of States) by imports from quota-restricted countries.

Importers increase imports – quota restricted exporters increase exports - import prices fall by 'tariff equivalent' of quotas

In the 35 product categories liberalized in 2005 China's market share increase by 130% in volume and 82% in value, and was accompanied by steep falls in unit prices

A substitution of imports from privileged trade partners (mainly Asia, also in North Africa and the African, Caribbean and Pacific Group of States) by imports from quota-restricted countries.

1.4 Can one generalize from these models and short-term trends? Neglect the industry structure and sourcing strategies of buyers Insufficient account of preference schemes and rules-of-origin that allow managed trade Mainland China’s medium and long-term development goals better served by move to skill-intensive activities clothing and larger rural/domestic market After quota removal diversion from middlemen and recorded as exports from Hong Kong, Taiwan, Macao China SAR (Mayer, 2005: 24).

Neglect the industry structure and sourcing strategies of buyers

Insufficient account of preference schemes and rules-of-origin that allow managed trade

Mainland China’s medium and long-term development goals better served by move to skill-intensive activities clothing and larger rural/domestic market

After quota removal diversion from middlemen and recorded as exports from Hong Kong, Taiwan, Macao China SAR (Mayer, 2005: 24).

2.1 Trade regimes and export growth

2.2 Comparative EU15 TCI trade evolutions, 1961-2004

2.3 TCI value added

2.4 Geography of Italian textile and knitwear imports, 1997-06

2.5 Geography of Italian clothing imports, 1997-06

2.6 Geography of Italian textile and knitwear exports, 1997-06

2.7 Geography of Italian clothing exports, 1997-06

2.8 Outer/innerwear unit values and trade balance, 1997-06

2.9 Outer/innerwear unit values and trade balance, 1997-06

2.10 Outer/innerwear unit values and trade balance, 1997-06

3.1 Aggregate trends Trade balance (current values) stable in second half of 1990s, increase at start of millennium, yet strong deterioration in some sectors (outer and inner wear). A very strong rise in imports from east Asia and especially China. Apparel exports rise to EU15 and to Russian Federation. Textile exports to EU15 decline Stagnation of some markets and direct competition in home market and in export markets for final and intermediate goods from East Asia and China in certain market segments Trade and domestic market trends = after 2001 real output declines, as do employment and number of enterprises = unprecedented crisis Although Italy exports high value and imports low value items, as well as top end system includes middle and low end CEEC import growth stabilises/falls, and in some clothing categories trade balance decline reversed. Adverse impacts on preferential nearby/directly controlled and delocalised TCI

Trade balance (current values) stable in second half of 1990s, increase at start of millennium, yet strong deterioration in some sectors (outer and inner wear). A very strong rise in imports from east Asia and especially China. Apparel exports rise to EU15 and to Russian Federation. Textile exports to EU15 decline

Stagnation of some markets and direct competition in home market and in export markets for final and intermediate goods from East Asia and China in certain market segments

Trade and domestic market trends = after 2001 real output declines, as do employment and number of enterprises = unprecedented crisis

Although Italy exports high value and imports low value items, as well as top end system includes middle and low end

CEEC import growth stabilises/falls, and in some clothing categories trade balance decline reversed. Adverse impacts on preferential nearby/directly controlled and delocalised TCI

3.2 Micro-foundations of regional dynamics: not the district but the profit-seeking enterprise and its environment

3.3 Clothing product chain

3.4 Impacts differ across different segments of Italian TCI: movement into higher market segments

3.5 Aided by structure of distribution system and system organization Independent retailers, specialised chains, department and variety stores, hypermarkets and supermarkets, mail order, street vendors Commercial assessment and selection of projects materialised in samples, prototypes and collections through trade fairs, show rooms and catwalks

Independent retailers, specialised chains, department and variety stores, hypermarkets and supermarkets, mail order, street vendors

Commercial assessment and selection of projects materialised in samples, prototypes and collections through trade fairs, show rooms and catwalks

3.6 With a domestic production system over-reliant on micro-enterprises a model centred on micro-enterprises that do little research (firm versus district approach) dependent on Italian model of corporate governance (role of craft enterprises, exclusion of SMEs from social protection legislation) dependent on falling exchange rates (until Italy adopted the Euro) involving a reliance on markets (sectors/countries) subject to slow growth and intense competition

a model centred on micro-enterprises that do little research (firm versus district approach)

dependent on Italian model of corporate governance (role of craft enterprises, exclusion of SMEs from social protection legislation)

dependent on falling exchange rates (until Italy adopted the Euro)

involving a reliance on markets (sectors/countries) subject to slow growth and intense competition

3.7 Evolution of provincial TCI jobs, 1971-2001

3.8 Changes in employment and number of enterprises, 1971-81

3.9 Size distribution of TCI enterprises

3.10 Comparative performance of ashion and luxury goods companies (Pambianco, 2006)

Geography of TCI jobs, 2001

Trade specialization

The textile and clothing chain

Evolution of TCI jobs, 1971-01

Aggregate regional and industrial trends and the territorial division of labour

Micro-foundations of regional dynamics: not the district but the profit-seeking enterprise and its environment Evolution of capitalist enterprises and their profit and upgrading strategies cost reduction commercially relevant products new markets different functional roles changing chains/disinvestment Their environment

Evolution of capitalist enterprises and their profit and upgrading strategies

cost reduction

commercially relevant products

new markets

different functional roles

changing chains/disinvestment

Their environment

Italian model of capitalism State interventionism: state holding companies, Ministry for PPSS to manage financial resources and circumvent Confindustria, political goals (oneri impropri funded via endowment fund transfers) privatized in 1990s Private sector (family capitalism) dominated by a few large family dynasties (FIAT, Falck, Pirelli), insider system of corporate control, high self-financing, pyramidal structure SMEs and craft enterprises (aided by generous regulation)

State interventionism: state holding companies, Ministry for PPSS to manage financial resources and circumvent Confindustria, political goals (oneri impropri funded via endowment fund transfers) privatized in 1990s

Private sector (family capitalism) dominated by

a few large family dynasties (FIAT, Falck, Pirelli), insider system of corporate control, high self-financing, pyramidal structure

SMEs and craft enterprises (aided by generous regulation)