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  • 1. The Changing Geography of Production and Upgrading Shifts in Apparel and Other Labor-Intensive Industries Gary Gereffi Duke University Durham, NC / USA [email_address] International Conference on “ Delocalisation of Labor Intensive Industries” April 12-14, 2007 Krakow, Poland
  • 2. Topics covered
    • The changing geography of the global apparel industry, pre- and post-2005
    • How North Carolina, USA is adapting to job loss in the traditional textile sector
    • Industrial upgrading trajectories across industries in Eastern & Central Europe, compared with Mexico, China and Turkey
    • The newest challenge: upgrading in knowledge-intensive industries
    • Implications for labor-intensive industries
  • 3. Source: UN Comtrade data. Table 1: Patterns of Entry to World Market and Apparel Concentration Ratios for World's non-EU Top Apparel Exporters, 1985-2005
  • 4. Table 2: National Income, Apparel Exports, and Hourly Wage Rates for World's Top Apparel Exporters, 2005
  • 5. Source: UN Comtrade data. Table 3: Position of Apparel Among Leading Export Items, 1985-2005
  • 6. In 2005, the Multi-Fiber Arrangement ended Jan. 1, 1995 16% Integration Jan. 1, 1998 Another 17% Integration Jan. 1, 2002 Another 18% Integration Jan. 1, 2005 100% Integration MFA (1974 – 1994) ATC (1995 – 2004) Quota Abolition from 2005 Source: World Trade Organization.
  • 7. The predictions and the surprises, post-MFA
    • The phasing out of the quota regime corresponds with major changes in the organization and practices of the global apparel industry over the past twenty years
    • These changes have enormous implications for employment and economic development in countries across the globe
  • 8. Chart 1 Source: Financial Times , July 19, 2004, p. 11.
  • 9. Chart 2 Source: Financial Times , July 19, 2004, p. 11.
  • 10. Table 4: Extensive outsourcing over the past 25 years and deep links between industrial and industrializing countries: 1980-2005 Source: Adapted from Table 1 (UN Comtrade data).
  • 11. Low wages were a spur to global dispersion…
  • 12.
    • Regulation and trade rules – e.g., the MFA
    • Fragmented, volatile markets – search for price, quality, design, variability and short cycles
    • Regionalization : regional trade agreements, proximity to major markets
    • New forms of governance - power of retailers in global value chains; consolidation
    • Technology, inventory risk and ‘lean retailing .’ stickiness of geography
    But low wages are only one of several factors that have shaped the international division of labor in textiles and apparel
  • 13. Table 5 Source: US International Trade Commission, Dataweb, 2007. Source (predicted): Financial Times , July 19, 2004, p. 11 na 3 2 2 2 Cambodia 2 3 2 3 3 Philippines 2 4 3 3 3 Bangladesh 2 5 4 3 3 Indonesia 3 3 3 3 3 Thailand na 3 4 4 4 Honduras na 4 4 4 3 Vietnam 3 7 8 10 11 Mexico 6 4 5 5 6 Hong Kong 15 4 4 3 3 India 50 29 26 19 17 China (2008) 2006 2005 2004 2003 Country Predicted Post-MFA Actual Import Market Share   Predicted and Actual Market Share Top Apparel Suppliers to the US
  • 14. Table 6: Changes in Apparel Imports into the US Market post-MFA Several smaller countries did surprisingly well
  • 15. Chart 3: Export markets reflect changing trade agreements
  • 16. Chart 3 (cont’d)
  • 17. North Carolina’s Textile and Apparel Industry Today Using a Value Chains Approach to Map the Changing Structure of Traditional and High-Tech Textiles
  • 18. Table 7: What’s happening to jobs?
  • 19. Traditional Textile and Apparel Industry
    • Three major categories:
    • 313-Textile Mills (yarn and fabric)
    • 314-Textile Product Mills (home)
    • 315-Apparel (clothes)
    • NAICS codes (North American Industrial Classification System)
    Source: Department of Labor
  • 20. NAICS: 115111 325221 325222 325211 324191 NAICS: 313111 313113 314991 314992 NAICS: 313210 313221 326150 313230 313241 313249 NAICS : 313112 313311 313312 313320 323113 323119 314999 325132 325199 325998 NAICS: 314110 314121 314129 314911 314912 337121 337122 337910 333411 339113 all 315 NAICS: 115111325221325222 NAICS: 313111 313113 314991 314992 NAICS: 313210 313221 326150 313230 313241 313249 NAICS : 313112 313311 313312 313320 323113 323119 314999 325132 325199 325998 NAICS: 314110 314121 314129 314911 314912 337121 337122 337910 333411 339113 all 315
  • 21. Textile Value Chain w/ NAICS Fiber Yarn Fabric & Finishing Other Value Chains Apparel Home & Interiors Retail Wholesale Associations Packaging & Labeling Services & Finance Machinery Chemical Manufacturers Supporting Industries Design 313 314 313 315 115111 112410 111920 324110 423220 424320 424330 322291 339113 337121 448110 448120 448150 448130 448190 333292 325131 325132 Raw Material After-Sale 325221 325222 812331 336360 326211 Industrial Medical Furniture Automotive
  • 22. North Carolina Textile Complex From N.C. Dept. of Commerce
  • 23. Nonwovens: Performance Man-made fiber Nonwoven Home & Interior Knit Woven Yarn Medical & Hygiene Transport Industrial & Construction Apparel Retail Wholesale Natural fiber Ecological & Geotextiles Sports & Leisure Finishing Furniture Performance Aesthetic Component Total Product Source: Stacey Frederick, College of Textiles, North Carolina State University
  • 24. Wages per employee, 2005 Chart 4
  • 25. Comparing National and Regional Upgrading Trajectories
  • 26. Types of Upgrading
    • Product and Process Upgrading – focus on changes within specific value chains
    • Functional Upgrading – deals with the shifts in economic roles or capabilities in value chains (e.g., assembly to OEM to OBM to ODM)
    • Inter-Chain Upgrading – refers to the shift between different types of industries (e.g., resource-based, labor-, capital- and technology-intensive).
      • This can be measured using international trade data and national & regional export profiles.
  • 27. Graph 1: Composition of Mexico’s Exports to the World Market, 1986-2005 Source: UN Comtrade.
  • 28. Graph 2: Composition of China’s Exports to the World Market, 1987-2005 Source: UN Comtrade.
  • 29. Graph 3: Composition of Turkey’s Exports to the World Market, 1985-2005 Source: UN Comtrade.
  • 30. Source: UN Comtrade. Graph 4: Composition of Poland’s Exports to the World Market, 1995-2005
  • 31. Source: UN Comtrade. Graph 5: Composition of Hungary’s Exports to the World Market, 1995-2005
  • 32. Source: UN Comtrade. Graph 6: Composition of Czech Republic’s Exports to the World Market, 1995-2005
  • 33. Source: UN Comtrade. Graph 7: Composition of Bulgaria’s Exports to the World Market, 1996-2005
  • 34. Source: UN Comtrade. Graph 8: Composition of Romania’s Exports to the World Market, 1995-2005
  • 35. Table 8: Low-Tech Exports in Eastern/Central Europe, Turkey, Mexico and China in 2005 Source: UN Comtrade data.
  • 36. Source: UN Comtrade data. Table 9: Medium-Tech Exports in Eastern/Central Europe, Turkey, Mexico and China in 2005
  • 37. Source: UN Comtrade data. Table 10: High-Tech Exports in Eastern/Central Europe, Turkey, Mexico and China in 2005
  • 38. Table 11 Rankings of Top Export Industries in Mexico, China, and Turkey, 1990-2005
  • 39. Table 12 Rankings of Top Export Industries in Eastern & Central Europe, 1990-2005
  • 40. Newest Challenge: Knowledge-Intensive Upgrading
    • White-collar outsourcing (started with simple service jobs like call centers & tele-marketing)
    • Now includes more advanced business services, such as finance, accounting, software, medical services, engineering
    • Newest areas: offshoring of design and innovation (e.g., China has 800 R&D centers)
    • Requirements: high education; English language
  • 41. MNC R&D Centers in China & India: How are engineers being used?
    • What kinds of work are Chinese, Indian, and American engineers actually doing ?
      • Answer : Not just product adaptation, but cutting-edge research & commercialization
    • China: More than 800 MNC R&D Centers
      • GE’s China Technology Center : Advanced research in energy storage, environmental management
      • Microsoft Research Asia : Cutting-edge graphics & multimedia research
    • India: More than 150 of Fortune 500 firms have R&D centers
      • Oracle’s India Development Centre : Globally oriented research on database and application development tools
  • 42. Italy vs. China: The Hope of Design?
    • Italy versus China (Manzano versus Anji)
    • Italy is seeking new ways to build advantage, including utilizing a traditional strength: design .
      • Venice is seeking to marry manufacturing and design, bringing together Italian artists, businessmen, and furniture makers in an effort to help rethink the role of design.
      • Design is a higher link in the value chain than manufacturing – thus bringing higher value-added.
  • 43.
    • Labor-intensive industries are globally mobile
    • Low-wage countries can take advantage of proximity to major regional markets
    • The largest global producers (China and India) will supply standardized or commodity items and continue to improve quality & design
    • Traditional industries are being transformed by new technologies
    • High value niches (R&D, design, branding, logistics) are being decentralized, and will be filled by new knowledge workers worldwide
    Implications of Upgrading Shifts for Labor-Intensive Industries
  • 44. Thank you for your attention!