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T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
T&C Trade Challenges
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T&C Trade Challenges
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T&C Trade Challenges
T&C Trade Challenges
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T&C Trade Challenges

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    • 1. T&C Trade Challenges for Latin America The ATC Ended Is T&C a Normal Sector? Presentation by Mr. Matthias KNAPPE ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005
    • 2. T&C is not (yet) a Normal Sector for Business
      • Purely rules-related: T&C is a normal sector
      • But :
      • Non-optimal preparation for competition despite 10 years anticipation
      • Industry is swimming and a new competition wave is expected with DDA
      • Present concerns distract from DDA
      • No special treatment anymore (1 classroom)
    • 3. Structure
      • T&C Trad e
      • in Latin
      • America
      7 Challenges For LA Finding Responses
    • 4. Characteristics of T&C industry in South America
      • Poor market diversification: mainly to US
      • Poor product diversification: underwear, knit-shirts, trousers & nightwear
      • Mainly CMT/maquila: « full-package » to be developed; only few countries are vertically integrated
      • Poor linkage between foreign investors & local industry
      • Insufficient use of regional opportunities
    • 5. US Imports 1 st Quarter 2005
      • Jan & Feb strong, March lower growth
      • China: up 107%* for apparel but strong increase in key cotton products (338/9): 1257%; 347/8: 1521%; 352: 308%
      • But: strong growth from preferential suppliers (CAFTA:knit; Andean: knit & woven; focus is on duties; rather shifts within than between regions
      • But: how reliable is the data: e.g. EU confusion
      * For Jan/Feb 2005; Source OTEXA
    • 6. T&C Exports from ALADI Countries in 2003
    • 7. US Imports from ALADI 3 year comparison
    • 8. US Import changes from ALADI 2004- 2005
    • 9. US Imports from ALADI in 2004
    • 10. US Apparel Imports by Region Source: OTEXA and emergingtextiles.com
    • 11. US Apparel Imports by Region Source: OTEXA and emergingtextiles.com
    • 12. Structure
      • T&C Trad e
      • in Latin
      • America
      7 Challenges For LA Finding Responses
    • 13. World Garment Exports: Declining Growth Rates Source: WTO; idea: D. Birnbaum
    • 14. 1. Prices will fall further More supply and quota rents are gone Source: Robin Anson, Director Textiles Intelligence; ITMF, Dresden October 2003; www.textilesintelligence.com and Textile Outlook International No. 110 March-April 2004
    • 15. US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA China prices down: 9% on average but up to 50% in key products in US (35% in EU)
    • 16. US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA
    • 17. 2. C ountry & Enterprise Consolidation Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002
    • 18. Changing Enterprise Requirements
      • Mega companies or smaller flexible firms >
      • Supplier has more responsibility
      • Speed to market counts (standard apparel: timely replenishment; fashion apparel: quick response)
      • Trade policy and foreign investor response were key for apparel export development in many LDCs
    • 19. Mega Companies: Global Process for a Dress Shirt Selected by fabric mill & quality is fine Good relationship & good in piece dye Vertical setup by fabric mill Major shirt factory in TAL Cotton Yarn Fabric Garment Retailer Pakistan HK – China OPA Malaysia US Button Label Thread China US China Cheaper & close to factory Supplier nominated by Customer Malaysia Inter- lining Malaysia Or Japan
    • 20. 3. China as a WTO Member & Major Player
      • US clothing imports from China: 2002: +60%; 2003: +46%; 2004: + 32%; Jan-Apr 2005: +67%
      • Japan: 85% of all clothing imports from China
      • Australia: 69% of clothing and 21% of all textile imports from China
      • January 2005 exports to EU: Knit apparel up 163%; woven apparel up 80%
      • January 2005 exports to US: Knit apparel up 111%; woven apparel 79%
    • 21. Source: China Customs, 02/05 China’s T-Shirt Exports to the EU in Jan 05
    • 22. US Imports of Cotton T-Shirts Jan 05 – Jan 04 Source: OTEXA
    • 23. 4. Use of Trade Remedies
      • Safeguards (fairly traded imports)
      • Antidumping duties (unfairly traded imports): mainly yarns, fabrics & made ups; trade chilling effect
      • Countervailing duties: Unfair trade practices
      • T&C products as targets for retaliation in dispute settlement cases.
      • Possibility of new quotas against China
      • 1) Special T&C Safeguards until 31/12/2008
      • 2) Product Specific Safeguards until 10/12/2013 (all products, not only T&C)
      • To be discussed in detail tomorrow
    • 24. Discriminatory Trade Policy Decision Influence Sourcing Decisions Source: USA-ITA
    • 25. 5. Doha Trade Negotiations and T&C
      • NAMA Negotiations: reduction of high tariffs, tariff peaks and escalations; specific formula; sector approach?; additional provisions for LDCs & newly acceded countries (less than full reciprocity)
      • Adjustment related issues impact NAMA
      • Rules negotiations (e.g. ITCB request on AD)
      • Identification, categorisation, examination & treatment of NTBs
      • South-South trade under NAMA or GSTP?
      • ITCB and its future role for South America
      • Market access & development aspects of cotton
    • 26. 6. Multilateral vs. Complex System of FTAs
      • CAFTA/Andean RTA negotiations distracts from NAMA (short vs. long term)
      • RTAs need to provide new benefits, incl. regional cumulation
      • But NAMA can erode these preferences
      • Other countries also receive preferences:
      • AGOA and Canada with easy RofO
      • QIZ in Jordan and Egypt
      • EU: New GSP scheme, incl. cumulation
    • 27. But Preferential & Differential Treatment is Equally Important Source: USA-ITA
    • 28. 7. New Rules (e.g. FTAs, RTAs, Security)
      • Preferential treatment: continued USCBP intervention
      • Codes of Conduct - Ethical Sourcing
      • ECO Labelling: Remain voluntary but can reduce market access
      • Security: US Customs-Trade Partnership Against
    • 29. Summary: / Challenges
      • 1. Price reduction
      • 2. Consolidation
      • 3. China? Or rather Improving Competitiveness
      • 4. Use of trade remedies
      • 5. DDA and T&C Trade
      • 6. Multilateral approach vs. FTAs/RTAs
      • 7. Imposition of new (buyers’) rules
    • 30. Structure
      • T&C Trad e
      • in Latin
      • America
      7 Challenges For LA Finding Responses
    • 31. Closer Regional Cooperation
      • Small countries will not be able to develop a vertically integrated industry
      • A regional (or inter-regional) vertical approach is needed
      • RTAs need to integrate closer regional cooperation, incl. Regional sourcing, CAFTA example
      • RTAs could lead to product & market diversification
      • AFTEX: developing regional complementarities & exploiting synergies: and in Latin America
    • 32. 3 Areas of South-South Trade Development
      • a) DCs as a market;
      • QUAD market: 80% of world imports; post-ATC growth rate expected to be 1-5%
      • Large DC will grow much faster
      • GSTP could be a door-opener
      • b) S-S Trade of intermediaries to export to traditional markets (value chain cooperation)
      • c) Improve relationship with foreign investors
      • TCDC is key for all three areas
      • Cotton development needs to be seen in light of
      • S-S trade
    • 33. Hubs & Spokes Changes to Hub & Regional Hubs USA CR DR ES G N K S N M L H CAFTA Sub Saharan Africa Mex & CAN What is in it for South America?
    • 34. Diversifying into MMF Apparel Exports to US
      • The production skills set is not very different, but sourcing skills are needed
      • Improving buyer relationship as any diversification strategy needs cooperation with buyers (to expand & to support the product switch)
      • Partnership with national and/or regional suppliers
      • Joint marketing of regional apparel and textile companies
    • 35. US Imports from SA: Fibre Composition
    • 36. The Phenomenon: Most Duty-free Access Utilisation is for Cotton Apparel Andean AGOA Jordan CBI World
    • 37. Tariff Peaks for Cotton & MMF Apparel Source: USAID and USITC
    • 38. Summary
      • Closer Regional Cooperation (macro and meso level (AFTEX example)
      • South-South Trade at 3 levels
      • Diversification into MMF products coupled with south-south cooperation
    • 39. THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact: Matthias Knappe , Senior Market Development Officer [email_address]
    • 40. WTO Rules Governing T&C Trade From 2005 Presentation by Mr. Matthias KNAPPE ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005
    • 41. Rules prevailing from 1 January 2005
      • WTO principles of transparency & non-discrimination
      • Exceptions: regional trade agreements & special and prefential treatment
      • Antidumping rules prevent unfair trading practices
      • Safeguards prevent injury from trade flow
      • Dispute settlement mechanism to resolve disputes that might arise.
    • 42. Trade Remedies
      • Safeguards (fairly traded imports)
      • Antidumping duties (unfairly traded imports): mainly yarns, fabrics & made ups; trade chilling effect
      • Countervailing duties: Unfair trade practices
      • T&C products as targets for retaliation in dispute settlement cases.
      • Possibility of new quotas against China
      • 1) Special T&C Safeguards until 31/12/2008
      • 2) Product Specific Safeguards until 10/12/2013 (all products, not only T&C)
    • 43. Possibility for China special T&C Safeguards
      • Until 31/12/2008 for ATC products only
      • Invoked by any member by asking for bilateral consultations if market disruption (threaten to impede the orderly development of T&C trade)
      • Request for consultations implies immediate limitation of exports at a pre-determined level: (7.5% (6%) above the amount imported during the last 12 months)
      • Does not necessarily require China's agreement
      • No WTO notification; no multilateral surveillance
      • Duration: max. 12 months
      • Not to remain in effect beyond one year , without reapplication , unless otherwise agreed
    • 44. China Textile Safeguard implementation
      • Has been invoked by the US
        • on knitted fabrics, cotton and mmf dressing gowns & bathrobes, cotton and mmf brassieres & ended 23-12-04;
        • Presently on socks exports (332, 632) (threat-based)
      • US Court of Int. Trade enjoined CITA from considering threat-based petitions (hearing is scheduled for May)
      • CITA to invoke safeguards on 338/339; 347/348; 352/652
      • CITA to invoke thread-based safeguards on 638/639; 647/648, 340/640
      • Quotas will be low: based on year ending Feb or Mar 2005 data plus 7.5% (for 338/9 almost filled)
      • EU: Will invoke against T-shirts & flax yarns by end May unless China restrains its exports
    • 45. Can « China safeguards » protect US – South America trade?
      • CBI apparel companies are top customers of US yarn and fabrics; CITA considers OPT as an extension of US production; but South America?
      • CITA self-initiated investigations on 347/8, 338/9, 352/652; US textile industry filed 7/14 new petitions
      • New quotas could be in place by May/June; these will be low!
      • AAFA: « US import & production follow a consistent pattern regardless of whether China is restrained »
      • Safeguards on brassieres slowed imports from China & helped reverse a decline of imports from CBI
    • 46. China’s Response: T&C Export Taxes
      • 148 products of HS chapters 61 & 62 in 6 categories: outerwear, dresses, knit and non-knit blouses, sleepwear and underwear.
      • Tax either 0.2 yuan/piece or 0.3 yuan/piece i.e. $0.024 and $ 0.06
      • From 1. June: tax will rise to 1-4 Y/p for 74 classes of T&C products; some will be lowered*
      • Major objective: to encourage manufacturers to switch to higher value-added products;
      • 50 major exporters agreed on 6 price coordinating panels to oversee export (price) developments and suggest floor prices
      * Announced by MOFCOM n 20 May 2005
    • 47. WTO: Post ATC Adjustment-related Issues
      • Proposal by Mauritius: i) WTO study to identify winners & losers and recommend measures and solutions; ii) CTG to establish a work programme on dealing with the findings and to help DCs
      • Broad support and understanding of painful adjustement process, but no consensus
      • Similar 20-10-04 request from Tanzania on behalf of LDCs.
      • 19-01-05: it was agreed that WTO Secretariat will prepare a paper to look into options for LDCs to improve their competitiveness, incl . TA & CB
      • 20 May: Tunisia (Turkey & Jordan) called CTG to discuss remedies to problems faced: agenda rejected
    • 48. Doha Trade Negotiations and T&C
      • NAMA Negotiations: reduction of high tariffs, tariff peaks and escalations; specific formula; sector approach?; additional provisions for LDCs & newly acceded countries (less than full reciprocity)
      • Adjustment related issues impact NAMA
      • Rules negotiations (e.g. ITCB request on AD)
      • Identification, categorisation, examination & treatment of NTBs
      • South-South trade under NAMA or GSTP?
      • ITCB and its future role for South America
      • Market access & development aspects of cotton
    • 49. The Cotton Issue in WTO: Market Access
      • Market Distortion by Subsidies
      • Appellate Body confirmed WTO interim ruling that US subsidies caused « serious prejudice » to Brazilian cotton producers
      • US direct payments to farmers are trade distorting
      • Payments to US mills and exporters to cover the difference of US and world prices to ensure US exports are not permissible
      • West Africa Initiative: Distinction between Market Access & Development Issues
    • 50. Cotton Implications for T&C Trade
      • Long-term reduction of subsidies tends to increase price
      • End of ATC increases demand for cotton & shifts it to Asia: price increase
      • Supply response in Asia, Australia & West Africa; but in US and EU?
      • Will possible end of US support for cotton have a negative impact on cotton fibre consumption?
      • Impact of cotton negotiations on T&C trade?
      • Development assistance for cotton in West Africa
    • 51. 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 we do together ? 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
    • 52. THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact: Matthias Knappe , Senior Market Development Officer [email_address]
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