The Clothing and Textiles Industries. The Relevant Production Chain.
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Transcript of The Clothing and Textiles Industries. The Relevant Production Chain.
The Clothing and Textiles IndustriesThe Clothing and
Textiles Industries
The Relevant Production Chain
The World’s leading textile exporting countries, 1995
Country Share of Worl d Exports (percent)1980 1995
Germany 11. 4 9. 3Chi na 4. 6 9. 1I tal y 7. 6 8. 3Korea 4. 0 8. 1Tai wan 3. 2 7. 8Bel gi um- Lux. 6. 5 5. 1France 6. 2 4. 9USA 6. 8 4. 8J apan 9. 3 4. 7
43%
Trade balances in textiles, 1995
Devel opedeconomi es
$ mi l l i ons Devel opi ngeconomi es
$ mi l l i ons
I tal y +6, 356 Tai wan +10, 116Bel gi um- Lux. +3, 672 Paki stan +4, 134Germany +2, 036 I ndi a +3, 504
Chi na +3, 004USA - 3, 069UK - 2, 536 Hong Kong - 3, 044Canada - 1, 831J apan - 1, 193
World’s leading clothing exporters,
1995Country Share of Worl d Exports (percent)
1980 1995Chi na 4. 0 15. 2Hong Kong 11. 5 6. 0I tal y 11. 3 8. 9Germany 7. 1 4. 7USA 3. 1 4. 2Turkey 0. 3 3. 9France 5. 7 3. 6Korea 7. 3 3. 1Thai l and 0. 7 2. 9
Trade balances in clothing, 1995
Devel oped $ mi l l i ons Devel opi ng $ mi l l i onsI tal y +9, 438 Chi na +24, 049
( l ess i mports)Hong Kong +8, 634
USA - 34, 716 Portugal +2, 827J apan - 18, 228 Tai wan +2, 374Germany - 16, 845 Mal aysi a +2, 118France - 4, 664UK - 3, 695
Shares of textiles and clothing in a country’s
total merchandise exports, 1995
Country Texti l es Cl othi ng Combi nedBangl adesh 13. 6 54. 8 68. 4Paki stan 53. 3 20. 2 73. 5Sri Lanka 4. 1 46. 0 50. 1Turkey 11. 7 28. 3 40. 0
I ndi a 15. 3 14. 8 30. 1Chi na 9. 4 16. 2 25. 6Portugal 7. 0 16. 0 23. 0
Explanatory Framework
Textiles Clothing Semi-conductors
Consumerelectronics
Demand
Productioncosts/technology
Gov’tpolicy
Corporatestrategy
Demand• Demand for clothing is the key• clothing demand is roughly
proportional to personal income• elasticity of demand < 1• increasingly dominated by
purchasing policies of major multiple retailing chains
Production costs/technology
•Labor costs.– labor intensive industries– substantial geog. variability
•even if we control for productivity of labor
Labor costs per standard minute in the clothing
industry, 1995Cost per std. Mi nute (DM) Countri es0. 10 t o 0. 15 Mexi co, J amai ca, Hondur as,
Guat emal a, Domi ni can r ep. , Chi na0. 15 t o 0. 20 Vi et nam, Russi a, Sr i Lanka0. 20- 0. 25 Bul gar i a, Romani a, Sl ovaki a,
Mal aysi a, Czech r ep. , Est oni a,Pol and, I ndonesi a, Phi l i ppi nes,Paki st an, I ndi a, Tuni si a
0. 25 t o 0. 30 Hungar y, Sl oveni a, Uni t ed St at es0. 30 t o 0. 35 Hong Kong, UK. Tai wan0. 35 t o 0. 40 Gr eeceO. 40 t o 0. 50 I t al y0. 50 t o 0. 60 Fr ance, East er n Ger many> 0. 60 West er n Ger many, Denmar k
Sensitivity to labor costs depends on:
• Kind of item being produced• possibility of substituting
capital for labor
Production
Characteristics
Fibers
(synthetic)
Textiles Clothing
Capital Intensity
Labor Intensity
Material Costs
Av. Size of Production Unit
Technology
High
Low
High
Large
Sophisticated
Low
High
Low
Small
Simple
Implications re. sensitivity to labor???
Government policies
• Policies pursued by DEVELOPING countries to stimulate development
• Policies pursued by DEVELOPED countries in response to competition
Policies of DEVELOPED countries
• Encouragement of restructuring and rationalization
• protection from external competition– Multifiber Arrangement
• reactions to protection– item switching– country hopping (Triangle
Manufacturing)
Recent Trends
• MFA to be phased out over 1995-2004 period
• but the integration is heavily backloaded– U.S. integration of 70% of imports by
value is left to end of the transition period
Corporate Strategies
Textiles• World textile oligopoly of about 30 firms• implementation of Fordist methods to achieve
scale economies• offshoring was pioneered by Japanese textile
firms and general trading companies– to avoid U.S. quotas on imports from Japan
• U.S. & European firms are less internationalized. Depend more on merger
• exception is U.K. firms
Clothing
• Production is more fragmented• Retail chains and buying
groups have enormous leverage over producers
• Japanese general trading companies pioneered international subcontracting
Response of U.S. producers
• Concentrated on high fashion products
• made investments to cut costs and improve worker productivity
• increased own offshore processing via subcontracting
• FDI in overseas subsidiaries directed at local markets
Western Europe: the Italian Exception
• Industrial district solution.– Large network of independent
Italian subcontractors– strategy of product specialization
and fashion orientation
Jobs in the textiles and clothing industries
1963-1987
U.K. 780,000
Germany 564.000
France 520,000
U.S. 470,000
Employment losses in textiles and clothing
Adjusted U.S. Penetration Ratios, Value Basis
0
5
1015
20
25
30
351961-65
1966-70
1971-75
1976-1979
1980
1982
1984
1986
Textiles
Apparel
Percent
Components of Employment Change---
Textiles1972-77 1977-82 1982-85
Consumption 1.44 -0.56 3.03
Exports 0.28 0.09 -0.51
Imports 0.21 -0.17 -0.65
Productivity -3.19 -2.70 -4.27
Total -1.25 -3.34 -2.40
Percentage growth rates
Components of Employment Change---
Clothing1972-77 1977-82 1982-85
Consumption 3.31 1.86 5.99
Exports 0.20 0.15 -0.44
Imports -0.95 -0.98 -3.25
Productivity -3.05 -2.22 -3.79
Total -0.50 -1.20 -1.49
Percentage growth rates