future apparel industry in perspective

7/27/2019 Future Apparel Industry in Perspective

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Future

SourcesKSA

Dupont

Textile Intelligence

Textile OutlookVarious


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Trade and Development Act of 2000


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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


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


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


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


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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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


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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future apparel industry in perspective

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