Regional Workshop On Trade Capacity Building & Private Sector Development
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Regional Workshop On Trade Capacity Building & Private Sector Development

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Regional Workshop On Trade Capacity Building & Private Sector Development Regional Workshop On Trade Capacity Building & Private Sector Development Presentation Transcript

  • REGIONAL WORKSHOP ON TRADE CAPACITY BUILDING & PRIVATE SECTOR DEVELOPMENT PHNOM PENH CAMBODIA 2 nd . DECEMBER 2003
  • THE GARMENT INDUSTRY
    • THE CHALLENGES IN THE GARMENT INDUSTRY FOLLOWING THE PHASE OUT OF THE QUOTA SYSTEM
    • PRIVATE – PUBLIC PARTNERSHIP TO OVERCOME THE CHALLENGES
  • Effects of the MFA
    • MFA INTRODUCED IN 1974 TO REGULATE THE TRADE IN TEXTILES & CLOTHING
    • Asia became the world’s foremost exporter of apparel.
    • Many developing countries embarked on the garment industry using quota as an instrument for market access .
    • Buyers were compelled to move from country to country in search of quotas
  • SUCCESS OF ASIAN COUNTRIES
    • 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
    • CAMBODIA – Garment exports account for 85% of exports. All fabrics & large quantity of accessories imported.
    • BANGLADESH – Garment exports represent 75% of exports. 80% Knit & 20% woven fabrics now produced locally
    • 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
  • New Rules of Trade
    • The Uruguay Round starting in 1986 finally came into effect in 1995 in Geneva.
    • 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.
  • Agreement on Textiles and Clothing
    • ATC lays down the modality of phasing out the MFA over a period of 10 years.
    • Total elimination of quotas would be done in four stages
    • Three stages have been already completed.
    • The fourth stage is due on Dec. 31, 2004 where all the popular or ‘hot’ categories will be phased out.
  • 4-Stage Phase out of MFA
  • Assumptions on ATC
    • The movement of industry from the developed to the developing countries will continue
    • The greatest relocation would be from one developing country to another
    • The MFA guaranteed a market for a wide range of poorer countries even though they were not competitive
  • Assumptions on ATC (cont’d)
    • Without MFA there will be a concentration of the industry in countries with inherent advantages:
    • Availability of fabric
    • Infrastructure for Marketing and Transport
    • Low Wages
    • Favorable Trading Terms
    • Proximity to the Market
        • Marginal countries will be squeezed out
  • 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
  • THE US MARKET
  • REGIONAL TRADING BLOCKS (USA)
    • NAFTA - The North American Free Trade Agreement - Result a growth in Textiles & Clothing in Mexico at the expense of Asia
    • CBI - The Caribbean Basin Initiative - Result growth of Garment trade in the Caribbean at the expense of Asia
    • AGOA - The African Growth and Opportunities Act - Result Movement & Relocation of Factories to Africa
  • 1980
    • Continuation of MFA
    • Signing of NAFTA
    • Signing of CBI
    2000
  • 1980 Apparel Imports into USA Far East 82% Mexico 3% 2000 Apparel Imports into USA
  • EUROPEAN UNION
    • Trade Agreements
  • TARIFFS
    • Most tariffs on Garments to the Developed Countries are high.
    • EU has a tariff of 12.5%
    • USA varies between 0 - 30%
    • With increased competition a 1% tariff difference can loose a large order
    • Tariff concessions can be obtained bilaterally or multilaterally
    • Tariffs are on the basis of reciprocity
  • FREE TRADE AGREEMENTS
    • Many countries are negotiating FTA’s with the USA.
    • The Tariff advantage could be relatively short term as many others strive to obtain better market access.
    • The USA has indicated total duty free by 2015
    • The EU pursue the implementation of the Doha Agenda but have many agreements providing duty free access
    • New members States of the EU and their close proximity could also be a challenge
  • GLOBAL SOURCING PRINCIPLES
    • WORKER ISSUES – Linking Trade to Labour rights
    • Child Labour, Forced Labour, Health & Safety, Freedom of Association, Disciplinary Procedures, Working hours, Wages
    • FACTORY STANDARDS -Modern Factories, Latest Equipment & Technology, Proper Storage Facilities for Fabrics & Accessories
    • FACTORY AUDITS
    • NON TARIFF BARRIERS -ENVIRONMENTAL ISSUES, INTERLECTUAL PROPERTY & ANTI DUMPING
  • THE CHINA FACTOR
  • The Agreement of T&C
    • The 3 rd Phase of integration resulted in the following categories becoming ‘ quota free’ for the whole world from 01 Jan 2002 :
    • 239 – Infant and young children’s wear
    • 350 – Cotton Robes/Man-made fibre Robes
    • 349/649 – Cotton Bras/Man-made fiber Brassieres and other Foundation Garments
    • 670 – Luggage
    • 331/631 – Gloves & Mittens
  • 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
    • 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
    • Categories 350/650 & 349/649 Intimate apparel – Robes & Bras . Sri Lanka supplies the high end of the market – branded goods and exports increased
  •  
  • REGIONAL CORPORATION & PROSPECTS
    • Can the Asian Countries that do not have a fabric base secure their requirements in future?
    • Why should China supply fabrics when they can add value domestically?
    • The SAARC countries – India & Pakistan have large cotton cultivation's & modern textile mills.
    • ASEAN countries produce competitively priced textile. Can they be used regionally?
    • Should countries specialize in products?
  • PRIVATE-PUBLIC PARTNERSHIP
    • Prepare a strategy- where you want to be in 5 yrs
    • 80/20 rule. 20% account for 80% of exports.
    • Large firms – 20% should take the lead as the critical mass is important
    • Improve the Enabling Environment-
    • Cost of Utilities, Transaction Costs, Regional Corporation, Market Access, Image Building,
    • Labour Laws
  • PRIVATE – PUBLIC PARTNERSHIP
    • Supply Chain Management –Sourcing 60% or more consists of fabrics & another 10-15% on Accessories
    • Benchmarking – at firm level. The FIT- an ITC tool to benchmark domestically, Internationally or with Buyers requirements
    • Human Resource Development – Skills development at all levels
    • Forward Integration & Marketing - A more focused approach to harness the resources of the public & private sectors in Marketing
  • 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
    • High Cost Structure ( Labour, Utility) Wastage use of CAD/CAM
    • Labor Laws, Invest in Human Resources
    • Lack of Skilled Management
    • Low productivity,
    • Proximity to Suppliers
    • High energy cost
    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
  • FIRM LEVEL STRATEGIES
    • From Family Business to Professionally Managed Business
    • Product Specialization and Finding niche markets
    • Closer links with Buyers & Markets
    • Continuous Improvement & Investment
    • * At Factory Level
    • * Staff Training
    • * New Machinery & Technology
  • THE FUTURE
    • Unpredictable- an uncertain world
    • How will China perform as a member of the WTO ?
    • What will happen to China’s domestic market ?
    • Growth potential of India & China with huge internal markets
    • Post 2005 could be an opportunity not a problem. A challenge requiring action
  • THANK YOU