REGIONAL WORKSHOP ON TRADE CAPACITY BUILDING & PRIVATE SECTOR DEVELOPMENT   PHNOM PENH CAMBODIA 2 nd . DECEMBER 2003
THE GARMENT INDUSTRY <ul><li>THE CHALLENGES IN THE GARMENT INDUSTRY FOLLOWING THE PHASE OUT OF THE QUOTA SYSTEM </li></ul>...
Effects of the MFA <ul><li>MFA INTRODUCED IN 1974 TO REGULATE THE TRADE IN TEXTILES & CLOTHING </li></ul><ul><li>Asia beca...
SUCCESS OF ASIAN COUNTRIES <ul><li>SRI LANKA  – Garment exports account for over 52% of exports. Over 1 million employed o...
New Rules of Trade <ul><li>The  Uruguay Round  starting in 1986 finally came into effect in 1995 in Geneva. </li></ul><ul>...
Agreement on Textiles and Clothing <ul><li>ATC lays down the modality of phasing out the MFA over a period of 10 years. </...
4-Stage Phase out of MFA
Assumptions on ATC <ul><li>The movement of industry from the developed to the developing countries will continue </li></ul...
Assumptions on ATC  (cont’d) <ul><li>Without MFA there will be a concentration of the industry in countries with inherent ...
The Question is not…. Whether there will be change, the Question is whether the change will be : A Sudden Collapse or Slow...
THE US MARKET
REGIONAL TRADING BLOCKS (USA) <ul><li>NAFTA - The North American Free Trade Agreement - Result a growth in Textiles & Clot...
1980 <ul><li>Continuation of MFA </li></ul><ul><li>Signing of NAFTA </li></ul><ul><li>Signing of CBI </li></ul>2000
1980 Apparel Imports into USA Far East 82% Mexico 3% 2000 Apparel Imports into USA
EUROPEAN UNION <ul><li>Trade Agreements </li></ul>
TARIFFS <ul><li>Most tariffs on Garments to the Developed Countries are high. </li></ul><ul><li>EU has a tariff of 12.5% <...
FREE TRADE AGREEMENTS <ul><li>Many countries are negotiating FTA’s with the USA. </li></ul><ul><li>The Tariff advantage co...
GLOBAL SOURCING PRINCIPLES  <ul><li>WORKER ISSUES  – Linking Trade to Labour rights </li></ul><ul><li>Child Labour, Forced...
THE CHINA FACTOR
The Agreement of T&C <ul><li>The 3 rd  Phase of integration resulted in the following categories becoming ‘ quota free’  f...
Exports to the USA by UNITS   World Vs China/SL – Jan-Aug 01/ Jan-Aug 02
Exports to the USA by FOB World Vs China/SL – Jan-Aug 01/Jan-Aug 02
LESSONS FROM SRI LANKA <ul><li>Category 670 bags  were made by a few foreign firms in Sri Lanka because of quota. In 2002 ...
 
REGIONAL CORPORATION & PROSPECTS <ul><li>Can the Asian Countries that do not have a fabric base secure their requirements ...
PRIVATE-PUBLIC PARTNERSHIP <ul><li>Prepare a strategy- where you want to be in 5 yrs </li></ul><ul><li>80/20 rule. 20% acc...
PRIVATE – PUBLIC PARTNERSHIP <ul><li>Supply Chain Management  –Sourcing 60% or more consists of fabrics & another 10-15% o...
Apparel Products Value Chain By Lyn Fernando  Product Development Selling & Distribution (Agents) Outbound logistics Manuf...
FIRM LEVEL STRATEGIES <ul><li>From Family Business to Professionally Managed Business </li></ul><ul><li>Product Specializa...
THE FUTURE <ul><li>Unpredictable- an uncertain world </li></ul><ul><li>How will China perform as a member of the WTO ? </l...
THANK YOU
Upcoming SlideShare
Loading in …5
×

Regional Workshop On Trade Capacity Building & Private Sector Development

567 views
520 views

Published on

Published in: Business, Lifestyle
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
567
On SlideShare
0
From Embeds
0
Number of Embeds
7
Actions
Shares
0
Downloads
6
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Regional Workshop On Trade Capacity Building & Private Sector Development

  1. 1. REGIONAL WORKSHOP ON TRADE CAPACITY BUILDING & PRIVATE SECTOR DEVELOPMENT PHNOM PENH CAMBODIA 2 nd . DECEMBER 2003
  2. 2. THE GARMENT INDUSTRY <ul><li>THE CHALLENGES IN THE GARMENT INDUSTRY FOLLOWING THE PHASE OUT OF THE QUOTA SYSTEM </li></ul><ul><li>PRIVATE – PUBLIC PARTNERSHIP TO OVERCOME THE CHALLENGES </li></ul>
  3. 3. Effects of the MFA <ul><li>MFA INTRODUCED IN 1974 TO REGULATE THE TRADE IN TEXTILES & CLOTHING </li></ul><ul><li>Asia became the world’s foremost exporter of apparel. </li></ul><ul><li>Many developing countries embarked on the garment industry using quota as an instrument for market access . </li></ul><ul><li>Buyers were compelled to move from country to country in search of quotas </li></ul>
  4. 4. SUCCESS OF ASIAN COUNTRIES <ul><li>SRI LANKA – Garment exports account for over 52% of exports. Over 1 million employed out of 6.5 Million. Only 20% knit fabrics but fair quantity of Accessories made locally </li></ul><ul><li>CAMBODIA – Garment exports account for 85% of exports. All fabrics & large quantity of accessories imported. </li></ul><ul><li>BANGLADESH – Garment exports represent 75% of exports. 80% Knit & 20% woven fabrics now produced locally </li></ul><ul><li>PAKISTAN - Garment exports represents over 67% of total exports but similar to INDIA – Have invested large sums in modern fabric mills – Have the capacity to specialize in cotton based fabrics & garments </li></ul>
  5. 5. New Rules of Trade <ul><li>The Uruguay Round starting in 1986 finally came into effect in 1995 in Geneva. </li></ul><ul><li>It was decided that Textile and Apparel have to be integrated into the mainstream by removal of all quotas over a 10 year phase out. </li></ul>
  6. 6. Agreement on Textiles and Clothing <ul><li>ATC lays down the modality of phasing out the MFA over a period of 10 years. </li></ul><ul><li>Total elimination of quotas would be done in four stages </li></ul><ul><li>Three stages have been already completed. </li></ul><ul><li>The fourth stage is due on Dec. 31, 2004 where all the popular or ‘hot’ categories will be phased out. </li></ul>
  7. 7. 4-Stage Phase out of MFA
  8. 8. Assumptions on ATC <ul><li>The movement of industry from the developed to the developing countries will continue </li></ul><ul><li>The greatest relocation would be from one developing country to another </li></ul><ul><li>The MFA guaranteed a market for a wide range of poorer countries even though they were not competitive </li></ul>
  9. 9. Assumptions on ATC (cont’d) <ul><li>Without MFA there will be a concentration of the industry in countries with inherent advantages: </li></ul><ul><li>Availability of fabric </li></ul><ul><li>Infrastructure for Marketing and Transport </li></ul><ul><li>Low Wages </li></ul><ul><li>Favorable Trading Terms </li></ul><ul><li>Proximity to the Market </li></ul><ul><ul><ul><li>Marginal countries will be squeezed out </li></ul></ul></ul>
  10. 10. The Question is not…. Whether there will be change, the Question is whether the change will be : A Sudden Collapse or Slow and Somewhat Predictable
  11. 11. THE US MARKET
  12. 12. REGIONAL TRADING BLOCKS (USA) <ul><li>NAFTA - The North American Free Trade Agreement - Result a growth in Textiles & Clothing in Mexico at the expense of Asia </li></ul><ul><li>CBI - The Caribbean Basin Initiative - Result growth of Garment trade in the Caribbean at the expense of Asia </li></ul><ul><li>AGOA - The African Growth and Opportunities Act - Result Movement & Relocation of Factories to Africa </li></ul>
  13. 13. 1980 <ul><li>Continuation of MFA </li></ul><ul><li>Signing of NAFTA </li></ul><ul><li>Signing of CBI </li></ul>2000
  14. 14. 1980 Apparel Imports into USA Far East 82% Mexico 3% 2000 Apparel Imports into USA
  15. 15. EUROPEAN UNION <ul><li>Trade Agreements </li></ul>
  16. 16. TARIFFS <ul><li>Most tariffs on Garments to the Developed Countries are high. </li></ul><ul><li>EU has a tariff of 12.5% </li></ul><ul><li>USA varies between 0 - 30% </li></ul><ul><li>With increased competition a 1% tariff difference can loose a large order </li></ul><ul><li>Tariff concessions can be obtained bilaterally or multilaterally </li></ul><ul><li>Tariffs are on the basis of reciprocity </li></ul>
  17. 17. FREE TRADE AGREEMENTS <ul><li>Many countries are negotiating FTA’s with the USA. </li></ul><ul><li>The Tariff advantage could be relatively short term as many others strive to obtain better market access. </li></ul><ul><li>The USA has indicated total duty free by 2015 </li></ul><ul><li>The EU pursue the implementation of the Doha Agenda but have many agreements providing duty free access </li></ul><ul><li>New members States of the EU and their close proximity could also be a challenge </li></ul>
  18. 18. GLOBAL SOURCING PRINCIPLES <ul><li>WORKER ISSUES – Linking Trade to Labour rights </li></ul><ul><li>Child Labour, Forced Labour, Health & Safety, Freedom of Association, Disciplinary Procedures, Working hours, Wages </li></ul><ul><li>FACTORY STANDARDS -Modern Factories, Latest Equipment & Technology, Proper Storage Facilities for Fabrics & Accessories </li></ul><ul><li>FACTORY AUDITS </li></ul><ul><li>NON TARIFF BARRIERS -ENVIRONMENTAL ISSUES, INTERLECTUAL PROPERTY & ANTI DUMPING </li></ul>
  19. 19. THE CHINA FACTOR
  20. 20. The Agreement of T&C <ul><li>The 3 rd Phase of integration resulted in the following categories becoming ‘ quota free’ for the whole world from 01 Jan 2002 : </li></ul><ul><li>239 – Infant and young children’s wear </li></ul><ul><li>350 – Cotton Robes/Man-made fibre Robes </li></ul><ul><li>349/649 – Cotton Bras/Man-made fiber Brassieres and other Foundation Garments </li></ul><ul><li>670 – Luggage </li></ul><ul><li>331/631 – Gloves & Mittens </li></ul>
  21. 21. Exports to the USA by UNITS World Vs China/SL – Jan-Aug 01/ Jan-Aug 02
  22. 22. Exports to the USA by FOB World Vs China/SL – Jan-Aug 01/Jan-Aug 02
  23. 23. LESSONS FROM SRI LANKA <ul><li>Category 670 bags were made by a few foreign firms in Sri Lanka because of quota. In 2002 with quota free they could not compete and closed down </li></ul><ul><li>Categories 350/650 & 349/649 Intimate apparel – Robes & Bras . Sri Lanka supplies the high end of the market – branded goods and exports increased </li></ul>
  24. 25. REGIONAL CORPORATION & PROSPECTS <ul><li>Can the Asian Countries that do not have a fabric base secure their requirements in future? </li></ul><ul><li>Why should China supply fabrics when they can add value domestically? </li></ul><ul><li>The SAARC countries – India & Pakistan have large cotton cultivation's & modern textile mills. </li></ul><ul><li>ASEAN countries produce competitively priced textile. Can they be used regionally? </li></ul><ul><li>Should countries specialize in products? </li></ul>
  25. 26. PRIVATE-PUBLIC PARTNERSHIP <ul><li>Prepare a strategy- where you want to be in 5 yrs </li></ul><ul><li>80/20 rule. 20% account for 80% of exports. </li></ul><ul><li>Large firms – 20% should take the lead as the critical mass is important </li></ul><ul><li>Improve the Enabling Environment- </li></ul><ul><li>Cost of Utilities, Transaction Costs, Regional Corporation, Market Access, Image Building, </li></ul><ul><li>Labour Laws </li></ul>
  26. 27. PRIVATE – PUBLIC PARTNERSHIP <ul><li>Supply Chain Management –Sourcing 60% or more consists of fabrics & another 10-15% on Accessories </li></ul><ul><li>Benchmarking – at firm level. The FIT- an ITC tool to benchmark domestically, Internationally or with Buyers requirements </li></ul><ul><li>Human Resource Development – Skills development at all levels </li></ul><ul><li>Forward Integration & Marketing - A more focused approach to harness the resources of the public & private sectors in Marketing </li></ul>
  27. 28. Apparel Products Value Chain By Lyn Fernando Product Development Selling & Distribution (Agents) Outbound logistics Manufacturing (cut, sew & finishing)FOB 10-25% of Retail Buyer (Retailer) Manufacturing Quality products Good on time Delivery Records Raw materials /Accessories –40-70% of FOB Availability of basic fabrics & accessories locally Educated & Trainable Workforce Design Non availability of advanced product development facilities Lack of Advanced Manufacturing Technology Lack of Specialty fabrics & Accessories -Lack of Direct contacts/ Access to Retailer. -Long lead time - Cost of Agents Proximity to market, regular sailings -sea & Air. Electronic Data Interchange for documentation <ul><li>High Cost Structure ( Labour, Utility) Wastage use of CAD/CAM </li></ul><ul><li>Labor Laws, Invest in Human Resources </li></ul><ul><li>Lack of Skilled Management </li></ul><ul><li>Low productivity, </li></ul><ul><li>Proximity to Suppliers </li></ul><ul><li>High energy cost </li></ul>Need to develop strong networks & lobby groups. Free Trade Agreements, concessionary tariffs Dependency on imported raw material, long lead times,delays at customs, documentation, EDI Lack of design capabilities Sourcing 100% Social Compliance Buyers /ETI Codes Labor Standards. Modern factories Lack of Facilities to design,make,stock,& supply on credit Proximity to market
  28. 29. FIRM LEVEL STRATEGIES <ul><li>From Family Business to Professionally Managed Business </li></ul><ul><li>Product Specialization and Finding niche markets </li></ul><ul><li>Closer links with Buyers & Markets </li></ul><ul><li>Continuous Improvement & Investment </li></ul><ul><li>* At Factory Level </li></ul><ul><li>* Staff Training </li></ul><ul><li>* New Machinery & Technology </li></ul>
  29. 30. THE FUTURE <ul><li>Unpredictable- an uncertain world </li></ul><ul><li>How will China perform as a member of the WTO ? </li></ul><ul><li>What will happen to China’s domestic market ? </li></ul><ul><li>Growth potential of India & China with huge internal markets </li></ul><ul><li>Post 2005 could be an opportunity not a problem. A challenge requiring action </li></ul>
  30. 31. THANK YOU

×