Trade in textiles and clothing: challenges for Latin America...Business for Development Trade in...
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Business for DevelopmentBusiness for Development
Trade in Textiles and ClothingTrade in Textiles and ClothingChallenges for Latin AmericaChallenges for Latin America
Presentation by Presentation by Mr. Matthias KNAPPEMr. Matthias KNAPPE
Senior Market Development Officer Senior Market Development Officer International Trade Centre UNCTAD/WTOInternational Trade Centre UNCTAD/WTO
Rio de Janeiro, Brazil, 9 June 2004Rio de Janeiro, Brazil, 9 June 2004
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Structure
Latin AmericanTradein T&C
Latin AmericanTradein T&C
7 ChallengesFor LA
7 ChallengesFor LA
FindingResponses
FindingResponses
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US Imports from CBI by Product in 2003% of Share in Apparel Exports in Volume
Cot. MNghtwr/PJs 351 - 3%
W/G Slacks348 - 6%
Cot. M/B Trouser347 - 6%
W/G Knit Blouse 339 8%
Knit Shirts 33811%
Rest24%
MMF Underwear652 - 3%
Other MMF App.659 - 4%
MMF Knit Shirts638 - 5% Cotton Underwear
352 - 30%
Source: OTEXA
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US Imports from Andean Countries by Product in 2003
% of Share in Total Apparel Exports (ANDEAN)
Rest42%
Knit Shirts 338 12%
W/G Knit Blouse 339 - 16%
Cot. M/B Trouser 347 - 11%
W/G Slacks 3488%
Cotton Underwear 352 - 11%
Source: OTEXA
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US Imports: Unit Value selected categories 2002
Imports under Selected Quota Categories in Average Unit Value
10.3
7.9
4.423.96
4.87 5.023.47
1.161.52
4.45
10.32
2.1
4.494.73 5.89 5.26
1.641.94
3.78
11.15
2.21
13.94
7.09
3.32
5.12
7.03
3.24
5.99 6.47
5.21 4.8
1.31
2.723.36
9.39
2.84
02468
10121416
Categorie 338 Categorie 339 Categorie 347 Categorie 348 Categorie 352 Categorie 638 Categorie 647 Categorie 649 Others
Categories
Val
ue in
per
squ
are
met
er
CBTPA Mexico China World
Source: US-ITC
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Summary: LA Trade in T&C
• Exports to the US dominate but mixed performance since 2000
• Mainly assemply operations taking advantage of trade preferences
• Initial preference programme was vital to get started, but now it is a hindrance to grow
• Concentration on hot quota categories• Targeting the lower end of the market• Examples of categories 338/339 Knit Shirts (1/3
of total US imports comes from CBI)
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Structure
Latin AmericanTradein T&C
Latin AmericanTradein T&C
7 ChallengesFor LA
7 ChallengesFor LA
FindingResponses
FindingResponses
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1. Challenge: Removal of the Quota System
• 1 January 2005: Integration of T&C into the normal WTO rules after 30 years of restrictions
• Artificial advantages will disappear and existing trade patterns will “blow up”
• Companies will gain market share based on competitiveness rather than quotas
• Quota-free & duty-free preferences attracted Asian investment operating in isolation
• But: What after loss of quota-free benefits?
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Prices will fall further:More supply and quota rents disappear
1.65
2.22.31
2.4 2.412.35 2.33
2.232.18 2.14
1.89
1.5
1.7
1.9
2.1
2.3
2.5
2.7
US$/sme
1983 1994 1996 1998 2000 2002
Trends in US T&C import prices, 1983-2001
Source: Robin Anson, Director Textiles Intelligence; ITMF, Dresden October 2003; www.textilesintelligence.com
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Quota costs in $ per dozen: Cotton shirts (338/339)/MMF shirts (638/639) *
338/339 638/639Indonesia 7.5 5Sri Lanka 5.5 3Bangladesh 5 2Cambodia 5 1Philippines 10-12 -Thailand 10 5China 15**
* February 2004 Source: Own research ** in 2003; Source: IBERC Group
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US Imports from China: Expected Price Change due to quota removal
-45-40-35-30-25-20-15-10
-50
%
338 339 345 347 348 647 648
Quota-free Impact
Source: Emergingtextiles.com
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Quota Fill Rates Knit Shirts (338/339)22 countries under quota; LA: only Brazil
Source: OTEXA and Emergingtextiles.com
Quota Fill rates 338/339
Pakistan 88%Vietnam 91%Turkey 83%India 92%Philippines 100%Cambodia 81%Hong Kong 86%Macau 85%China 88%Bangladesh 87%Indonesia 98%Malaysia 98%Korea 89%U.A.E. 99%Taiwan (PofC) 83%Brazil 61%
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Post-2004 Sourcing Pattern
Likely Post 2004 Sourcing Pattern
010203040506070
Under Quota Year 2005/6 Year 2010
Year
Num
ber o
f Cou
ntrie
s
Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002
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NAFTA12%
CBI21%
EU1 %
TURKEY2%
MIDDLE EAST3%
ASIA42%
SOUTH ASIA13%
SSA2%SOUTH AMERICA
1,4%
US Clothing Imports by Region in 2003
Source: USAITA and OTEXA
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2. Challenge: Erosion of Preferential Duty-free Market Access: DDA
What remains: Duty advantageCotton MMF
Knit Shirts 15.7% 28.9%Sweaters 17.1% 32.5%Trousers 16.7% 28.1%
DDA aims at reducing high tariffs, tariff peaks and tariff escalation
Source: OTEXA
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Erosion of Benefits: US FTAs &RTAsCAFTA Example of US T&C Trade Policy• 23% of US Apparel Imports from LA (incl. Mexico
50% form CA for 338/339)CBI: $2.1 garment imports/ $1 yarn/fabric exportAsia:$14.74 garment imports/$1 yarn/fabric exportsLDCs: $234 garment imports/$1 yarn/fabric imports• 81% of US T&C exports go the CBI & NAFTA• Cafta Yarn-forward rule of origin with NAFTA
cumulation• Andean Countries: Negotiation of a RTA along
CAFTA lines
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3. Challenge: China as a WTO Member• US clothing imports from China: 2002: +60%;
2003: +46%• Japan: In 2001 85% of all clothing imports from
China• Australia: 69% of clothing and 21% of all textile
imports from China• EU: 3rd stage liberalisation: Imports from China
increased by 46% (value) and 192% (volume)• However, accession protocol introduces
possibility of new quotas against China
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4. Challenge: Use of Trade Remedies
• Antidumping & countervailing duties: mainly yarns, fabrics & made ups; trade chilling effect
• Safeguards: US Section 201• T&C products as targets for retaliation in
dispute settlement cases• Section 301: Unfair trade practices against
US companies• China: T&C- & product-specific safeguards
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5. Challenge: Imposition of New Rules (FTAs, RTAs, Security)• No quota but duties: no visa & no RofO;
preferential benefits:visa & RofO• US Customs Textile Production Verification Visits:
enterprise record keeping requirements (2003: El Salvador, Honduras, Dominican Rep.)
• US Customs-Trade Partnership Against Terrorism: Manufacturer monitoring to include security compliance
• Logistics: US Advance Manifest Rules: Vessel: 24 hours prior to port landing
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6. Challenge: Requirements Imposed by Buyers
• Codes of Conduct - Ethical Sourcing• Social sourcing as a criteria for trade.
• ECO Labelling: Remain voluntary but can reduce market access
1. No child labour2. Working conditions3. No forced labour4. Compensation
5. No discrimination6. Working hours7. Minimum wages8. Freedom of associations
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7. Development of Cotton & Value-added Products• Market Distortion by Subsidies (challenged
by West Africa)• Brazil vs US panel on cotton subsidies• Stable Demand & Growing Supply of Cotton• Price Volatility & Concentrated Mill demand• Is there a link between cotton & T&C?• Regional Cooperation along the Cotton VC
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Summary: / Challenges
1. Loss of Quota-free benefits2. Erosion of Duty-free benefits3. China as a WTO member 4. Use of trade remedies5. Imposition of new rules6. Changing buyers requirements7. Cotton issues in the WTO
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Structure
Latin AmericanTradein T&C
Latin AmericanTradein T&C
7 ChallengesFor LA
7 ChallengesFor LA
FindingResponses
FindingResponses
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What can Latin America do?
• Strategic Response:Critical country mass• Regional/Sub-regional Partnerships• Regionally integrated industry• Link foreign investors to local business• Short term: Analyse/ Improve the
logistical value chain• Medium term: capacity building in key
areas of clothing business: full package
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ITC’s TA to the Clothing Sector• Need 1: Sector Strategy Development
Value Chain Analysis• Need 2: Know your competitors
The « FiT »• Need 3: Sourcing Information and SCM skills
Supply information and skills building• Need 4: Understanding changing markets
Enhanced Garment-Maps• Need 5: E-Applications in T&C
A Business Guide• Need 6: Intra-regional trade along the value chain
South South Trade Development Approach