T&C Trade Challenges for Latin America The ATC Ended Is T&C a Normal Sector? Presentation by  Mr. Matthias KNAPPE ALADI Se...
T&C is not (yet) a Normal Sector for Business <ul><li>Purely rules-related: T&C is a normal sector </li></ul><ul><li>But :...
Structure <ul><li>T&C   Trad e </li></ul><ul><li>in Latin </li></ul><ul><li>America </li></ul>7 Challenges For LA Finding ...
Characteristics of T&C industry in South America <ul><li>Poor market diversification: mainly to US </li></ul><ul><li>Poor ...
US Imports 1 st  Quarter 2005 <ul><li>Jan & Feb strong, March lower growth </li></ul><ul><li>China: up 107%* for apparel b...
T&C Exports from ALADI Countries in 2003
US Imports from ALADI 3 year comparison
US Import changes from ALADI 2004- 2005
US Imports from  ALADI  in  2004
US Apparel Imports by Region Source: OTEXA and emergingtextiles.com
US Apparel Imports by Region Source: OTEXA and emergingtextiles.com
Structure <ul><li>T&C   Trad e </li></ul><ul><li>in Latin </li></ul><ul><li>America </li></ul>7 Challenges For LA Finding ...
World Garment Exports: Declining Growth Rates   Source: WTO; idea: D. Birnbaum
1. Prices will fall further More supply and quota rents are gone Source: Robin Anson, Director Textiles Intelligence; ITMF...
US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA China prices down: 9% on average but up to 50% in key product...
US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA
2. C ountry & Enterprise Consolidation Source: US Department of Commerce: Report to the Congressional Textile Caucus on th...
Changing Enterprise Requirements <ul><li>Mega companies or smaller flexible firms > </li></ul><ul><li>Supplier has more re...
Mega Companies: Global Process for a Dress Shirt Selected by fabric mill & quality is fine Good relationship & good in pie...
3. China as a WTO Member & Major Player <ul><li>US clothing imports from China: 2002: +60%; 2003: +46%; 2004: + 32%; Jan-A...
Source: China Customs, 02/05 China’s T-Shirt Exports to the EU in Jan 05
US Imports of Cotton T-Shirts Jan 05 – Jan 04 Source: OTEXA
4. Use of Trade Remedies   <ul><li>Safeguards (fairly traded imports) </li></ul><ul><li>Antidumping duties (unfairly trade...
Discriminatory Trade Policy Decision Influence Sourcing Decisions Source: USA-ITA
5. Doha Trade Negotiations and T&C <ul><li>NAMA Negotiations: reduction of high tariffs, tariff peaks and escalations; spe...
6. Multilateral vs. Complex System of FTAs <ul><li>CAFTA/Andean RTA negotiations distracts from NAMA (short vs. long term)...
But Preferential & Differential Treatment is Equally Important Source: USA-ITA
7. New Rules (e.g. FTAs, RTAs, Security) <ul><li>Preferential treatment: continued USCBP intervention </li></ul><ul><li>Co...
Summary: / Challenges <ul><li>1. Price reduction </li></ul><ul><li>2. Consolidation </li></ul><ul><li>3. China? Or rather ...
Structure <ul><li>T&C   Trad e </li></ul><ul><li>in Latin </li></ul><ul><li>America </li></ul>7 Challenges For LA Finding ...
Closer Regional Cooperation <ul><li>Small countries will not be able to develop a vertically integrated industry </li></ul...
3 Areas of South-South Trade Development <ul><li>a) DCs as a market;  </li></ul><ul><li>QUAD market: 80% of world imports;...
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 i...
Diversifying into MMF Apparel Exports to US <ul><li>The production skills set is not very different, but sourcing skills a...
US Imports from SA: Fibre Composition
The Phenomenon: Most Duty-free Access Utilisation is for Cotton Apparel Andean AGOA Jordan CBI World
Tariff Peaks for Cotton & MMF Apparel Source: USAID and USITC
Summary <ul><li>Closer Regional Cooperation (macro and meso level (AFTEX example) </li></ul><ul><li>South-South Trade at 3...
THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact:  Matthias Knappe , Senior Market Dev...
WTO Rules Governing  T&C Trade From 2005 Presentation by  Mr. Matthias KNAPPE ALADI Secretariat Montevideo, Uruguay, 25-26...
Rules prevailing from 1 January 2005 <ul><li>WTO principles of transparency & non-discrimination </li></ul><ul><li>Excepti...
Trade Remedies   <ul><li>Safeguards (fairly traded imports) </li></ul><ul><li>Antidumping duties (unfairly traded imports)...
Possibility for China special T&C Safeguards <ul><li>Until 31/12/2008 for ATC products only </li></ul><ul><li>Invoked by a...
China Textile Safeguard implementation <ul><li>Has been invoked by the US </li></ul><ul><ul><li>on knitted fabrics, cotton...
Can « China safeguards » protect US – South America trade? <ul><li>CBI apparel companies are top customers of US yarn and ...
China’s Response: T&C Export Taxes <ul><li>148 products of HS chapters 61 & 62 in 6 categories: outerwear, dresses, knit a...
WTO: Post ATC Adjustment-related Issues <ul><li>Proposal by Mauritius: i) WTO study to identify winners & losers and recom...
Doha Trade Negotiations and T&C <ul><li>NAMA Negotiations: reduction of high tariffs, tariff peaks and escalations; specif...
The Cotton Issue in WTO: Market Access <ul><li>Market Distortion by Subsidies </li></ul><ul><li>Appellate Body confirmed W...
Cotton Implications for T&C Trade <ul><li>Long-term reduction of subsidies tends to increase price </li></ul><ul><li>End o...
4.- Understanding  changing markets 1.- Sector Strategy  Development 2.- Understanding its’  own and competitors’  perform...
THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact:  Matthias Knappe , Senior Market Dev...
 
 
 
 
 
 
 
 
 
 
 
 
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Aladi May2 2005

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Fashion, apparel, textile, merchandising, garments

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  • Aladi May2 2005

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