Future Apparel Industry in Perspective
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Transcript of Future Apparel Industry in Perspective
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7/29/2013 LEL/S&V 1
Future
SourcesKSA
Dupont
Textile Intelligence
Textile OutlookVarious
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Trade and Development Act of 2000
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7/29/2013 LEL/S&V 3
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INTRODUCTION
Apparel producers face a period
of great uncertainty.However
good their business decisions, they
will be affected by events beyond
their control.
Robin Anson
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Economic uncertainty, Asian crisis, exchange rate
volatility
Political uncertainty, instability
Decisions made by politicians
Formation of regional trade blocs
Negotiation of free or preferential trade agreements
Chinas membership of the WTO
End of quota restrictions after 50 years of managed
trade
Unforeseen events: September 11 and its aftermath
KEY ISSUES
The Global Environment
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GLOBAL ENVIRONMENT
The end of quotas after 50 years
Progress towards the elimination
has been slow
Importing countries have to
eliminate quotas over a period of
ten years but are free to choose
the products affected
In general most apparel quotas
are the last to be phased-out
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GLOBAL ENVIRONMENT
The end of quotas after 50 years
Q: Do quotas matter any more?
A: I f quotas did not matter, developing countr ies
would not be so keen to get r id of themBut feelings in many developing countries are mixed
The MFA has provided stability and predictability
and has helped to prevent competitors from swamping
markets
Many emerging economies fear the might of China and
its ability to flood markets.
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GLOBAL ENVIRONMENT
The end of quotas after 50 years
Impact?
The phase-out will have a major impact on:
where textiles and clothing are produced
where textiles and clothing are sourced from
existing trade patterns, many of which have
been almost frozen for 25 years, andthe prospects for production in all economies
advanced, newly industrialising and
developing.
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GLOBAL ENVIRONMENT
The end of quotas after 50 yearsMajor changes in global textile and clothing industry.
unfreeze production and market shares quota holdings no longer a passport to Western
Markets
market shares will be gained more throughinternational competitiveness
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GLOBAL ENVIRONMENT
The end of quotas after 50 years
New suppliers will enter the market
Existing suppliers will go for products and markets
from which they were previously excluded becausethey did not have quota
The free for all will remove scarcity and put
downward pressure on prices Industries in the greatest danger are those built on
the strength of preferential access but with no
locational advantages (eg Mauritius).
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APPAREL INDUSTRY TRENDS
International prices are falling
Margins are being squeezed!
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Indianexportsof ready-madegarments:
differenceinpricebetweenrestrainedandnon-restraineditems, 1991/92-199
Source: TextileOutlookInternational
1991/921992/931993/941994/951995/961996/971997/981998/990
1
2
3
4
5
6
7
US$per piece
Restraineditems
Non-restraineditems
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Trends in US textile and clothing import prices, 1983-2000
NB: sme = square metres equivalent
Source: Textile Outlook International
1983 1989 1994 1995 1996 1997 1998 1999 2000
1.6
1.8
2
2.2
2.4
2.6
2.8
3
1.65
2.20
2.31
2.40 2.412.36 2.33
2.23
2.18
US$/sme
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APPAREL INDUSTRY TRENDS
Why are international prices falling?
Barriers to entry in the industry are relatively low ... and
will become even lower when quotas are eliminated...
. so new suppliers (companies and countries) are
continually entering the marketthere is always someone cheaper
Depreciation of Asian currencies - especially after the
Asian crisis, and the strength of the US dollar
Retailers and import buyers in consuming countries have
sophisticated sourcing systems and drive down prices when
they negotiate with suppliers
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SOURCES OF MARKET
GROWTH
What are the sources of market growth?
population increases
rising incomes
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Consumption of textiles and clothing
by selected region, 1980-2005
Note: self-sufficiency = mill fibre consumption
as a percentage of final consumption
Source: Textile Outlook International
USA China European Union Japan0
2
4
6
8
10
12
4.8
3.9
5.5
2.0
7.9
6.87.1
2.8
9.6
8.78.3
3.4
mn tons
1980 1995 2005
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7/29/2013 LEL/S&V 18
World Man-Made Fibres Production
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000Year
Production in
1000 tonnes
Raw cotton
Raw wool
Synthetic yarn
Synthetic stapleCellulosique yarn
Cellulosique staple
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SOURCES OF MARKET
GROWTH
Income growth
When people earn extra dollars, theyspend a certain proportion of those
extra dollars on clothing.
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SOURCES OF MARKET GROWTH
Income growth
But how many of those extra dollars of
Income go on clothing?
In fact the elasticity of demand varies with
income
People in developing countr iesspend agreater portion oftheir extra dollarson
clothing than people in industrialised
economies
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Final consumption of textile fibres per head
1992-2005
Source: Textile Outlook International1992 1995 2000 2005
0
5
10
15
20
25
30
21.6 21.923.2
24.9
10.5
6.7
9.0
14.4
4.2 4.5 4.75.2
7.6 7.5 7.98.8
(kg)
Developedcountries
EasternEurope
Developingcountries
World
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LOCATIONAL SHIFTS
The world market is growing
In 2005 the world will consume about 15 mn
tons more apparel fibres than it did in 1995 This will require an extra 15 mn tons of
output
Almost all the extra output will be producedin developing countries
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Location of extra production and consumption
in 2005, compared with 1995
Source: Textile Outlook International
Extra output Extra demand0
5,000
10,000
15,000
20,000
15,69714,660
(mn tons)
Developedcountries
EasternEurope
Developingcountries
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LOCATIONAL SHIFTS
Driving forcesWhat are the driving forces behind thisshift?
differences in levels of skills andentrepreneurship
differences in the availability of capital
differences in natural resources - cotton,climate, water etc oil,
differences in labour costs
Labour cost comparisons in the textile industry
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Labour cost comparisons in the textile industry
2000
Source: World Markets for Spun Yarns: Forecasts to 2010, from Werner data
JapanDenmark
SwitzerlandBelgium
NetherlandsGermany
NorwaySweden
Austria
ItalyCanadaUSA
FinlandFrance
UKAustralia
IrelandSpainIsrael
New ZealandGreeceTaiwan
MaltaHong Kong
ArgentinaSouth Korea
PortugalUruguay
BrazilVenezuela
TurkeyHungary
PolandMexico
Czech RepublicColombia
MoroccoSouth Africa
PeruTunisia
SlovakiaEstonia
MauritiusThailandMalaysia
PhilippinesNigeria
EgyptChina
IndiaSri Lanka
BangladeshVietnamPakistan
MadagascarIndonesia
0 5 10 15 20 25 30
26.122.3
22.219.619.5
18.118.0
17.015.8
14.714.314.2
14.113.9
12.710.9
10.38.3
7.47.37.27.2
6.66.1
5.95.3
4.33.6
3.22.82.72.6
2.42.2
2.01.91.91.81.71.71.61.5
1.51.21.11.11.01.0
0.70.60.50.40.40.40.40.3
US$/hour
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INTERNATIONALIZATION
THROUGH REGIONALISATION
Political motivations:
effectively protectionismby the importing
countries
encouraged by growth ofpreferential
agreements such as those between the EU and
countries on the Euro-periphery, regional trade
blocs such as NAFTA
gain sphere of influence - the Caribbean
Basin Initiative (CBI) was established to thwart
former Soviet Union and inhibit the spread ofcommunism in the re ion
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INTERNATIONALIZATION
THROUGH REGIONALISATIONFor manufacturers, offshore manufacturing, outward
processing ordelocalisation to nearby countries :
provides a way ofdefending market shares against
Asian low cost competition
provides security and reliability - security and
reliability of delivery, political stability, currency
stability
facilitates manufacturing closer to market: production
control, quality control, quick response
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EU apparel imports: biggest ten suppliers, 2000
NB: leading ten suppliers by valueSource: Textile Outlook International from Euratex data
China
Turkey
Hong Kong
Tunisia
Romania
Bangladesh
Morocco
India
Indonesia
Poland
0
2
4
6
8
10
7.8
5.3
3.12.5 2.5 2.5 2.4
2.0 1.8 1.8
Euro bn
Thousands
Value (Euro bn)
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EU apparel imports:
fastest growing major suppliers, 1998-2000
NB: fastest growing suppliers among leading ten by value in 2000Source: Textile Outlook International from Euratex data
Bangladesh
China
Indonesia
Romania
India
Turkey
Kong
Morocco
Tunisia
Poland
0
10
20
30
40
50
44
40
28
22 21
16
12 12
7
1
% growth
% growth
Asian countries recover ground
lost to Eastern Europe
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US apparel imports:
trends in imports from biggest ten suppliers, 1997-2000
NB: leading ten suppliers in 2000 by volumeSource: Textile Outlook International from US Dep of Commerce data
Mexico
Honduras
Bangladesh
China
Hong Kong
Dom Rep
El Salvador
Taiwan
South Korea
Indonesia
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1.6
0.70.7
0.9
0.70.8
0.4
0.6
0.30.4
2.0
0.80.7
0.90.9 0.8
0.5
0.6
0.5 0.4
2.3
0.9
0.8
0.90.8 0.9
0.6 0.60.5
0.4
2.5
1.01.0 0.9 0.9
0.8
0.70.7
0.60.5
bn sme
billion square metres equivalent
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US apparel imports:
fastest growing major suppliers, 1997-2000
NB: fastest growing suppliers among leading ten by volume in 2000Source: Textile Outlook International from US Dep of Commerce data
South Korea
El Salvador
Mexico
Bangladesh
Honduras
Indonesia
Hong Kong
Taiwan
Dom Rep
China
0
20
40
60
80
100
83
6662
44 42
33
24
14
5
-2
% change
% growth
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SOURCES OF U.S. APPAREL SUPPLY CHANGES RAPIDLY
0%
20%
40%
60%
80%
100%
US Production
MEXICO
CBI
ASIA
ROW
Source: KSA
1992 1993 1994 1995 1996 1997 1998 1999
TRADE BLOCS AND
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TRADE BLOCS AND
PREFERENTIAL TRADE
AGREEMENTSEU:
Nearby countries:
Eastern Europe
Middle East
Mediterranean
rim, including
Turkey
(customs union)
EU:
More distant
regions:
ACPs (African,
Caribbean and
Pacific)
Lom countries
South Africa
Mexico
TRADE BLOCS AND
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TRADE BLOCS AND
PREFERENTIAL TRADE
AGREEMENTSUSA:
Nearby countries
Mexico
Caribbean
Andean Pact
USA:
More distant regions:
Sub-Saharan Africa
(AGOA)
Middle East
(Israel)
TRADE BLOCS AND
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TRADE BLOCS AND
PREFERENTIAL TRADE
AGREEMENTSThe result:
stimulate trade within the trade bloc orbetween members of the free
agreement...
usually at the expense of countriesoutside - especially Asian countries in
the case of Western developed nations
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APEC - FREE TRADE IN 2010/2020
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Free Trade Area of the Americas
Unites Western Hemisphere - 2006
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TDA Act of 2000
Trade & Development Act of 2000,
effective October 1, provides Duty and quota free treatment of woven garments
made with US formed fabrics
Duty free imports of knit garments made from CBI
fabrics with U.S. yarns
Annual quota of 250M SMEs, growing 16% per year(knit fabrics)
Annual quota of 4.2M doz. T-shirts
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Flexibility
Cost
Verticalization Product development
Cutting and finishing
Network of materials suppliers
Compatibility Product uniformity
e-links
Define manufacturing approaches
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0%
100%
80 85 90 95 99
Percent of Apparel Imports
FREE TRADE RAPIDLY ALTERED SOURCING
Mexico & CBI Overtake Far East for U.S. Imports
Excludes Indian Subcontinent
FAR EAST
MEXICO & CBI
CBINAFTA
CHINAS ACCESSION TO THE WORLD
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CHINA S ACCESSION TO THE WORLD
TRADE ORGANISATION Chinese quotas will be eliminated at the end of 2004, the
same as other WTO members
This means a five year phase-out, rather than the ten
years for other WTO members
Many industrialists quake at the thought of unrestrictedChinese imports:
low wages, and even then prices do not always
reflect the cost of production
Chinas ability to swamp markets,
China also obliged to open its market, but how quickly?
Safeguards until 2008, but dispute over reapplication
CONCLUSIONS 1
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CONCLUSIONS 1
Why do quotas have to go?
Lowering the barriers to world trade will
benefit everybody:
If people are left to focus on what they do
best, the world economy will grow faster
So successive Gatt rounds have aimed tolower tariffs
Textile and apparel quotas have got in the
way of this
CONCLUSIONS 2
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CONCLUSIONS 2
But will trade be truly free and fair when
quotas have gone?
Many developing countries have long
time frames for opening their markets
Tariff barriers remain higheven in
developed economies
The success of Nafta may encourage
me-tooism
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CONCLUSIONS 3
The success of Nafta may encourage me-tooism The following are not beyond the bounds of
possibility in the 21st century:
A Free Trade Area of the Americas?
An Indian subcontinent trade bloc: India, Pakistan,
Nepal, Bangladesh and Sri Lanka?
a revived Comecon - former Eastern bloc countriesleft out of the EU?
East Asian trade bloc - Japan, a reunified North and
South Korea, a reunified China and Taiwan?
CONCLUSIONS 4
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CONCLUSIONS 4
The conflict between regionalisation and
multilateralism
Regionalisation:
danger: large trade blocs with unreasonable
market power...
...in conflict with...
Multilateralism the WTO multilateral approach: generating wealth
for the very poor as well as the very rich
CONCLUSIONS 5
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CONCLUSIONS 5
A lesson from September 11?
The West lost interest in Afghanistan
after the Russians left.
If the worlds leaders continue to ignore
the problems of emerging marketeconomies, the impoverished and the
dispossessed, they do so at their peril!
CONCLUSIONS 6
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CONCLUSIONS 6
Time for a rethink?
Problem: quotas will end but protectionismwill continue in other ways
An opportunity anew round of
global trade talksstarts at Doha inQatar on under the WTO
Help developing countries to develop by
letting them do what they do best
Result?
All countries will become richer - the rich
and the not so rich
NEW Trends and Change
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Genetically
modifiedCotton
Eco-Cotton
Poly-
propylene
BrandedMMF
Commodity
MMF
FUTURE
WHAT &
HOW
Thematic e-commerce
companies
High St company
Contract buyers
Niche mail older
companies
Eco-companies
NEW Trends and ChangeAfter 200 Years
Purpose builds supply
chain
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New supply chain management concept: leading players at different levels of the
value chain work together to increase competitiveness and speed to market.
Elastification
efficiencies
Brand
value
Global
sourcing
Product
innovation
Fabric GarmentFiber Brand & Retailer
Quality, Competitiveness and speed under partnership
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Qatar, November 2001
Developing countries are asking for
Accelerated quota growth/removal
Reduction in Duties
NEXT WTO ROUND - EXPECT MORE
LIBERALIZATION
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Quality, Innovation and Product uniqueness
Cost competitiveness of entire supply chain
Cycle time and delivery (speed and flexibility)
Ability to move with/anticipate the trade flows
Speed and flexibility
What does it take to win?
Global
Alliance &
Partnership
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Should the War escalate??
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Possible scenarios USA market is nervous.
UK and EU will be in turmoil.
Shoppers will be reluctant to go to shopping
malls.
Shipping will be affected. War risk??
Customers will change priorities.
Orders may get cancelled or held back.
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There could be positives too
Some countries may stop dealing with US
and UK
Internal turmoil in countries likeBangladesh, Pakistan,India,Indonesia,
Turkey etc.
Those countries that does not support USand UK may be subjected to embargos.
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