Business For Development

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  • Business For Development

    1. 1. Business for Development Trade in Textiles and Clothing Eastern Europe and Developing County Clothing Manufacturers and Competitiveness after 2005 Presentation by Mr. Matthias KNAPPE International Trade Centre UNCTAD/WTO Chapel Hill, North Carolina, 14 October 2004
    2. 2. ITC has 5 Organisational Goals <ul><li>Facilitate integration into the world trading system. </li></ul><ul><li>Support national efforts to design & implement trade development strategies. </li></ul><ul><li>Strengthen key trade support services. </li></ul><ul><li>Improve export performance in priority sectors. </li></ul><ul><li>Foster international competitiveness within the small and medium-sized enterprise (SME) </li></ul>
    3. 3. The importance of the product sector of T&C for Developing Countries <ul><li>World trade in T&C 353 billion US$ (clothing 201 billion US$) </li></ul><ul><li>Accounts For 7% of Global Merchandise Trade & 14% of Employment. Share of clothing in total merchandise trade: LA 10%, Africa 21%; Asia 9% </li></ul><ul><li>Many DCs (extremely) dependent on clothing exports </li></ul>
    4. 4. Structure <ul><li>Selected </li></ul><ul><li>regions’ </li></ul><ul><li>trade in T&C </li></ul>Competitiveness Challenges at the trade policy level Competitiveness Challenges at the micro level
    5. 5. Dependence of the EU market (% of total T&C exports Source: EU
    6. 6. EU Imports: 1995 to 2003 Source: EU
    7. 7. Close linkages with EU due to OPT business Source: EC)
    8. 8. US Imports from SSA 2001 - 2003 Source: OTEXA
    9. 9. Who is using AGOA Preferences? Source: OTEXA
    10. 10. US Apparel Imports from Africa by Product Source: OTEXA
    11. 11. US Imports from CBI by Product in 2003 Source: OTEXA
    12. 12. US Imports from Andean Countries by Product in 2003 Source: OTEXA
    13. 13. Summary <ul><li>Since early 1990s exports to EU have been growing </li></ul><ul><li>Almost 50% of exports is in knit or woven garments </li></ul><ul><li>Highly constraint categories with high quota utilisation rates </li></ul><ul><li>In DCs this product dependence is even higher </li></ul><ul><li>High dependence on European and North American market </li></ul>
    14. 14. Structure <ul><li>Selected </li></ul><ul><li>regions’ </li></ul><ul><li>trade in T&C </li></ul>Competitiveness Challenges at the macro level Competitiveness Challenges at the micro level
    15. 15. 1. Challenge: Removal of the Quota System <ul><li>1 January 2005: Integration of T&C into the normal WTO rules after 30 years of restrictions </li></ul><ul><li>Artificial advantages will disappear and existing trade patterns will “blow up” </li></ul><ul><li>Companies will gain market share based on competitiveness rather than quotas </li></ul><ul><li>But: What after loss of quota-free benefits? </li></ul>
    16. 16. And with it prices will fall further More supply and quota rents disappear Source: Robin Anson, Director Textiles Intelligence; ITMF, Dresden October 2003; www.textilesintelligence.com and Textile Outlook International No. 110 March-April 2004
    17. 17. China: Unit Value Change in EU after product integration in 2001 Underwear Parkas Pile Farbrics Art. Fabrics Track Suits
    18. 18. Post-2004 Sourcing Pattern Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002
    19. 19. Quota Removal: Norway experience <ul><li>Quoatas were removed in 1998 </li></ul>
    20. 20. 2. Challenge: Erosion of Preferential Duty-free Market Access: DDA <ul><li>What remains: Duty advantage </li></ul><ul><li>EU: 4% Yarns; 8% Fabrics; 12% Clothing </li></ul><ul><li>US: 12-17% Cotton Apparel; 25-32% MMF Apparel </li></ul><ul><li>DDA aims at reducing high tariffs, tariff peaks and tariff escalation </li></ul>Source: OTEXA & EC
    21. 21. Erosion of Benefits: EU FTAs & RTAs <ul><li>« If not multilateral then bilateral »! </li></ul><ul><li>EU envisaged a Euro-Mediterranean Zone </li></ul><ul><li>Diagonal cumulation: Use fabrics from Egypt, trims from Turkey, assemble in Morocco and export duty-free to EU </li></ul><ul><li>But: all countries need to have FTAs among them in place with identical rules of origin requirements </li></ul>
    22. 22. 3. Challenge: EU Enlargement <ul><li>Adaptation of EU lower tariffs (except Czech Rep., Slovakia, Hungary) i.e. more competition </li></ul><ul><li>New EU members to apply quotas for 8 months </li></ul><ul><li>DCs: « This violates WTO rules: Article 2.4 ATC & DSP following EU-Turkey customs union </li></ul><ul><li>EU quota increase pro rata for new EU 10: China & HGK quota increase extensive (old trade links) </li></ul><ul><li>category 6 (trousers):+50%; </li></ul><ul><li>category 4 (knit shirts): +41% </li></ul>
    23. 23. 4. Challenge: Erosion of OPT Benefits <ul><li>Quota system & trade liberalisation with EU has faclitated OPT </li></ul><ul><li>Based on competitive EU fabrics & low labour costs in OPT countries </li></ul><ul><li>OPT to survive where EU fabric is competitive (mainly wool) & where labour costs are low (CIS & Mediterranean) </li></ul><ul><li>Highly dependent on outside skills & decision making </li></ul>
    24. 24. 5. Challenge: Use of Trade Remedies <ul><li>Safeguards (fairly traded imports). </li></ul><ul><li>Antidumping & countervailing duties (unfairly traded imports). </li></ul><ul><li>T&C products as targets for retaliation in dispute settlement cases. </li></ul><ul><li>New EU members take over EU cases </li></ul>
    25. 25. 6. Challenge: New Requirements <ul><li>Social sourcing as a criteria for trade. </li></ul><ul><li>Corporate Social Responsibility project of FTA: EU platform for monitoring social standards </li></ul><ul><li>EU: New origin marking and social label initiatives </li></ul><ul><li>ECO Labelling: Remain voluntary but can reduce market access </li></ul>
    26. 26. 7. Challenge: China as a WTO Member <ul><li>US clothing imports from China: 2002: +60%; 2003: +46% </li></ul><ul><li>Japan: In 2001 85% of all clothing imports from China </li></ul><ul><li>Australia: 69% (clothing) & 21% (textile) imports from China </li></ul><ul><li>EU: 3 rd stage liberalisation: Imports from China increased by 46% (value) and 192% (volume) </li></ul><ul><li>However, accession protocol introduces possibility of new quotas against China </li></ul><ul><li>USA: 3 cases under transitional textile safeguards. </li></ul>
    27. 27. Summary: / Challenges <ul><li>1. Loss of Quota-free benefits </li></ul><ul><li>2. Erosion of Duty-free benefits </li></ul><ul><li>3. EU Enlargement </li></ul><ul><li>4. Change of OPT Business </li></ul><ul><li>5. Use of trade remedies </li></ul><ul><li>6. Changing Buyers’ Requirements </li></ul><ul><li>7. China as a WTO member </li></ul>
    28. 28. Structure <ul><li>Selected </li></ul><ul><li>regions’ </li></ul><ul><li>trade in T&C </li></ul>Competitiveness Challenges at the macro level Competitiveness Challenges at the micro level
    29. 29. Manufacturing Manufacturing & Sourcing Manufacturing & Sourcing & Product Development Full Service Value-Added Buyers’ requirements Time 2005 1970 Changing Trade Competitiveness
    30. 30. A Sector Strategy (Action Plan ) <ul><li>Develop overall country response </li></ul><ul><li>Build critical country mass </li></ul><ul><li>Build PPP based on strong sector associations </li></ul><ul><li>Do a sector value chain analysis </li></ul>
    31. 31. Knowledge about competitors <ul><li>Quotas stifle competition </li></ul><ul><li>Now competitors are everywhere </li></ul>
    32. 32. Information on Sourcing and Supply Chain Management Skills are key 75% of cost = sourcing Cost-structure of a woven shirt up to the FOB point
    33. 33. … Any reduction in purchasing and logistics costs has a direct and large impact on export competitiveness A 10 % reduction in the supply cost of fabric and trimmings = A 60 % increase in its Gross profits without increasing sales Input supplies & Logistics $0.75 Labour $0.07 Overheads $0.08 Profit now $0.16 $0.69 ! Woven shirt: For every 1 Dollar earned approximately 60cts is spent on inputs Action Plan: Sourcing (SCM) … to Increase Profit Fabrics: $0,59 Trimmings:$0.16 Labour $0.07 Overheads $0.08 Profit $0.10
    34. 34. Understand changing markets , adapt products & penetrate new markets <ul><li>Numerous competitors and complex trade structure; </li></ul><ul><li>Opportunities in higher-end and niche markets with value-added products; </li></ul><ul><li>Exploit market potential in other developing countries, especially in a regional context . </li></ul>
    35. 35. Forming Partnerships with Buyers/Retailers Today Producer Producer Conflicts Conflicts Conflicts Retailer Retailer Competition Competition Future Response Demand Response Retailer Producer Retailer Producer Demand Competition Customer Customer
    36. 36. 4.- Understanding changing markets 1.- Sector Strategy Development 2.- Understanding its own and competitors’ performance 3.- Developing fabric sourcing skills to become “ full-package”suppliers 5.- Applying e-applications in the T&C sector Implementing tailor- made market penetration approaches in line with buyer requirements New ITC T&C website Workshops Tailored Product & Market Development “ The SHAPE” “ The FiT” Sourcing Guide and database Business Guide in e-commerce for T&C ITC Tailored Consultation What can ITC do for you Sourcing Manufacturing Sales (+Marketing, and Services) Inbound Logistics Customs, Import Clearance Outbound Logistics Customs-GSP/Quota Export Clearance Sourcing Manufacturing Sales (+Marketing, and Services) Inbound Logistics Customs, Import Clearance Outbound Logistics Customs-GSP/Quota Export Clearance
    37. 37. <ul><li>THANK YOU ! </li></ul>
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