Transcript STUDY ON THE IMPLICATIONS OF THE 2005 TRADE LIBERALISATION

STUDY ON THE IMPLICATIONS
OF THE 2005 TRADE LIBERALISATION
IN THE TEXTILE AND CLOTHING SECTOR
INSTITUT FRANCAIS DE LA MODE
33 rue Jean Goujon
75008 Paris – France
Tel : 33 1 56 59 22 22
Fax : 33 1 56 59 22 00
URL : ifm-paris.org
CENTRE D’ETUDES PROSPECTIVES ET
D’INFORMATIONS INTERNATIONALES
9 rue Georges Pitard
75015 Paris – France
EUROPEAN PUBLIC POLICY ADVISERS
2 place du Luxembourg
1050 Brussels – Belgium
PÔLE EUROPE CONSEIL
Avenue Milcamps 165
1030 Brussels - Belgium
MAIA
132 rue Berkendael
1050 Brussels - Belgium
PRESENTATION
Methodology
Major results
1 - The present EU position and competitiveness
2 - How the industry works : district analysis
3 - Analysis of selected third countries
4 - Analysis of existing research and liberalisation cases
5 – Retail and brands strategies
6 – Modellisation results
Recommendations
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
•Methodology
•Statistical analysis : especially Eurostat, Euratex, other EU databases
•Field interviews : districts, third countries, retailers and brands, major
stakeholders
•Analysis of former research : 10 studies
•Modellisation : Mirage model and GTAP database
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
•Major results
1 - The present EU position and competitiveness
An evaluation of EU’s competitiveness
as per trade balance evolution 1995-2002
Textile
– Overall extra-EU trade balance :
• 1995 : + 792 Million €
• 2002 : + 3,213 Million €
–
Improved competitiveness for :
• apparel fabrics
• technical textiles
–
Deterioration for :
• home textiles
• yarns, threads and filaments
04 / 2004
Apparel
–
Overall extra-EU trade
balance :
• 1995 : - 17,436 Million €
• 2002 : - 33,045 Million
–
Deterioration for :
• woven garments
• knitwear
IFM
CEPII – EPPA – PEC – MAIA
An evaluation of EU’s competitiveness
per activity
High competitiveness : specialisation or differentiation + globalisation
-- Cotton chain is highly dynamic but increasingly
down chain (weaving, dyeing and finishing)
-- Wool system (and carpets) reduce impact of
liberalisation on the system but are demand sensitive
-- Spinning industry and synthetic system are most
vulnerable
-- Clothing is delocalised but as yet with little adverse
impact on textile production in the EU
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
An evaluation of EU’s competitiveness
per Member State
•The degree of reaction within the EU is very different.
•Liberalisation has been more largely anticipated in trading countries
(opposed to industrial) like Scandinavia, the Netherlands, but to a lesser
extent also Germany and Belgium
•UK is a major cause of EU decline (postponed apparel restructuring)
•Southern countries (Greece, Portugal) do less anticipate and have even
specialised in more vulnerable products
•Other causes:
Stagnating demand (wool system)
Delocalisation to EuroMed (but may be an answer to
Asian competition )
•Particular concern : Spain, Portugal, CEEC’s
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
2 – How the industry works : district analysis
More and more integrated in the Union – districts become
concepts rather than economic realities
Industry dependence is increasingly within and across
countries – industry works as a system
District competitive position = MS position
Success factors :
- Capacity to redeploy assets (flexibility)
- Capacity to innovate
- Export orientation
- Capacity to generate financial returns
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Adaptation to change
Strong anticipation :
Nord Rhein Westfalen, Flanders, Ranstad :
specialisation, delocalisation and shift to technical
textiles
Lombardy : upgrading and delocalisation
Macedonia, Cholet area : reconversion and
reduction of vulnerability
Concern :
Central and Eastern European districts are not
prepared and suffer from multiple
handicaps.
Catalonia, North West UK, Porto area : incomplete
adaptation and little specialisation
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
3 - Analysis of selected third countries
Labour
Industrial
•Labour costs
•Cost per minute
•Raw material supply
•Labour availability
•Efficient machinery
and equipment
•Labour operating skills
•Quality of
management
Key competitive factors
•Specific know-how
•Reliable deliveries
•Quality
General
•Conformity
•Access to financing
•Flexibility
•Cost of energy
•Design / fashion
•Transaction costs
•Geographic proximity
•Infrastructure
04 / 2004
Commercial
IFM
CEPII – EPPA – PEC – MAIA
•Cultural proximity
Third countries' competitiveness……………. in view of 2005 liberalisation
CHINA
Immense oversupply of labour
Young educated low cost workforce
Integrated textile and apparel supply chain
Upstream textile : state priority
INDIA
Lower costs but lower efficiency and productivity (vs.
China)
Integrated cotton supply chain
Efforts towards quality improvements
Flexibility
PAKISTAN
Major inefficiencies
Lack of skilled labour
Low price production
Narrow cotton base
???
SOUTH
KOREA
Competitive technical textiles
Competitive synthetic yarns and fabrics
Design, fashion and branding strategies
Development of dyeing and finishing activities
Apparel investments in China
TURKEY
Integrated supply chain
High flexibility and service level
Focus on basic items
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
??????
Exporting countries with major volume / price pressures
Volume pressure as
However 95-02 quota
Price pressure : import
per number of
increases strongly
price as a ratio of EU
“binding quotas”
differ
average import price
•China : 21
from
China : - 15 %
•Hong Kong : 6
+8%
Hong Kong : + 30 %
•Macao : 7
to
•Taiwan : 4
+ 25 %
•Vietnam : 20
X 2 to 3
•India : 10
X 2 to 3
India : =
•Pakistan : 9
X 1.5 to 2.5
Pakistan : - 40 %
+ 20 %
South Korea : + 30 %
•Belarus : 7
•Indonesia : 6
•South Korea : 4
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
4 – Analysis of existing research …
•
No satisfactory way to measure the cost of protection in T/C has been
used yet
•
Regional preferences have played a major role during the nineties
•
Consumers in developed countries win more than the producers lose
•
Gains are very uneven between developing countries :
– big countries such as China and India reap almost all the benefits of
ATC
– small, former preferred, countries lose
•
The proximity and the quality advantages are real but compared to the
global trends they can have only secondary effects .
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
… and liberalisation cases
USA (2002/2001)
• Major surge in imports
• China strong increase in export values (+ 51 % for Greater China) and
drop in prices (- 28 %) on liberalised categories
• Stagnation from other sources and decreased market share
EU (2002/2001)
• Major surge in imports
• China strong increase in export values (+ 37 % for Greater China) and
drop in prices (- 1 to - 54 %) on liberalised categories
• Stagnation from other sources and decreased market share
Australia (since early 90s)
• Major increase (continuing) in imports esp. apparel
• China strong increase in exports and market share
• Also benefits to India and Pakistan
• Increase in consumption and retail margins
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
6 – Retail and brand strategies after 2005
SOURCING TRENDS
GENERAL TRENDS
•Concentration of purchases but
more fragmented production runs
•High concentration // few
European chains
•Apparel and home textile
consumption and industry driven
by retailers
•Growing concentration of retail :
higher imports
•International organisation sales /
purchases
•More efficient purchase tools for /
instead of buyers
•Close locations for textile supplies
and clothing factories
2005
•Major strategic issues :
•Differentiation
•Increased price competition
•Low stocks
•No drastic change considered after
2005 : shifting volumes within
geographic areas
•Delivery times
•Increased sourcing from China but
no over reliance
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
7 – Results of the modelling phase
Year T +15
China
Developed countries
•Absolute winner
• Import prices decrease
•Chinese export prices
•Export volumes decrease
•Intra-EU trade declines
•Production declines
•Main loser : EU
drop
•India : moderate T/C
gains and overall loss
•Important losses for
•Textile exports : + 22 %
other developing
(to Nafta +++)
countries
•Clothing exports : + 75 %
•Important losses for
(to EU +++)
Turkey and North
•Real appreciation of
Africa (T/C and
Yuan
macroeconomic)
•Non textile
competitiveness drops
04 / 2004
Other countries
IFM
CEPII – EPPA – PEC – MAIA
Imports by EU 25 countries from the rest of the world as per simulation : %
change in addition to existing trends due to 2005 shock
16
14
12
10
textile
8
clothing
6
4
2
0
-2
-4
EU25
04 / 2004
France Germany
UK
Greece
Italy
Portugal
Spain
IFM
CEPII – EPPA – PEC – MAIA
Belgium Rest of New EU
EU (15) members
Exports by non-EU countries to the world as per simulation : % change in
addition to existing trends due to 2005 shock
L ib e ra lis a tio n im p a c t o n e x p o rts b y n o n E U 2 5 c o u n trie s o f th e w o rld
100
80
60
40
textile
20
clothing
0
-20
-40
-60
R est of E urope
NAFTA
C hina
O ther
India
T urkey
industrialised
countries
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
N orth A frica
R est of W orld
Impact on production
due to shock, in addition to existing trends
Due to shock :
•Clothing
•Textile
•T + 15 : - 8%
•T +15 : -3%
•T 0 / T + 5 : - 1.5 % / year
•T 0 / T + 5 : - 0.5 % / year
•Negative impact much stronger on
clothing than on textiles
•Positive impact only for Belgium,
Scandinavia, Netherlands
•Most affected : apparel textiles,
yarns
•No benefit from cheaper inputs due
to deindustrialisation
•OPT most affected except when EU
fabrics needed
Most affected : items least differentiated, under quotas
most binding, with lowest industrial performance
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Impact on production
due to shock, in addition to existing trends
Natural trend :
•Textile
•Clothing
•Actual 95 / 03 : - 3% /year
•Actual 95 / 03 : - 7%
•Natural T +15 : - 37%
•T + 15 : - 66%
+ shock :
•With shock : - 39%
04 / 2004
•With shock : - 69%
IFM
CEPII – EPPA – PEC – MAIA
Conséquences sur l’emploi français du textile-habillement
•Gains probables
•Ile de France
•Rhône Alpes
•Pertes probables
•Troyes (maille)
•Nord et Est (tissus d’habillement)
•Déplacements des emplois : pertes non compensées par les gains
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Import categories with major volume / price pressures
Product
groups
Categories with
binding quotas
Industrial
performance
Global filling
rate
Ratio Ex / Import
price 2002
Consolidated
vulnerability
Yarns,
threads
and
filaments
1 Cotton yarn
99
51
1.0
+++
23 Artificial yarn
na
76
1.4
++
41 Synth. fil. yarn
93
94
1.2
+++
Apparel
fabrics
2 Cotton fabrics
104
62
2.1
+
2A Not bleach,not
unbl
na
60
1.6
++
3 Synth. fabrics
100
71
2.6
+
3A Not bleach,not
unbl
na
30
1.6
+
35 Synth wovens
104
70
2.7
+
117 Flax fabrics
na
93
2.4
++
76 Workwear
102
82
1.7
++
97Nets
na
44
1.0
++
163 Gauze
na
99
1.7
++
9 Terry towel
101
79
1.5
+++
20 Bed & flax linen
104
76
1.6
++
39 Oth house linen
na
60
1.7
+
Technical
fabrics and
items
Home
textiles
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Product
groups
Woven
garments
Knitted
garments
Categories with
binding quotas
Industrial
performance
Global filling
rate
Ratio Exp/Import
price 2002
Consolidated
vulnerability
6 Trousers
101
91
1.6
++
7 Blouses
95
66
1.3
+++
8 Shirts
151
63
1.8
+
15 Women's coats
97
47
1.9
+
16 Men's suits
102
69
2.7
+
26 Dresses
94
70
2.1
++
29 Women's suits
97
46
2.9
+
31 Brassières
101
76
1.9
+
78 Other wov garmts
na
61
1.7
++
161 Other woven
garments
na
58
6.4
+
4 T-shirts
103
80
1.3
++
5 Jerseys
99
56
3.7
+
12 Stockings, socks
100
91
0.5
+++
13 Underwear
100
86
2.2
++
28 Knitted trousers
Na
46
3.5
+
70 Tights
99
75
0.4
+++
83 Knitted jackets
na
91
2.1
++
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Expected impact on production (in addition to existing trends)
Impact on
textile production
clothing production
NAFTA
-5%
-8%
China
+ 12 %
+ 31 %
India
+1%
+5%
Turkey
- 23 %
- 33 %
North Africa
-9%
- 16 %
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
•Recommendations
the industry today
•Concentration of trade partners + better quality competition = loss of
industry’s proactive power
unsustainable price strategies
distanciation from consumers
•SMEs lack strategic vision and have defensive attitude
no hope, no passion, little motivation for
change
•Further severe restructuring to come
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
trade issues
Quota fall out will negatively impact on Mediterranean and Eastern
European countries as Chinese and Indian T/C exports surge
T/C industries in peripheral countries need more time to adapt
There is a need for maintaining a tariff preference for the
PanEuroMed countries
There is also a need for putting pressure on China to let the currency
gradually appreciate
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
winning strategies
In the hands of companies themselves
But need for a « positive » environment
Necessity of
Pre-requisites
04 / 2004
renewing customer / consumer orientation :
low price competition is over
promoting strategic vision : tools exist
restoring hope : no more victimisation
redeveloping motivation and passion :
key to T/C management
building consumer value
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
helping industry face the challenges of 2005
1 - Accommodate the social impact
•
Regional level
•
Long term involvement
•
Structural funds // fair competition
•
New Member States
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
helping industry face the challenges of 2005
2 – Improving strategic vision
•
T/C Excellence Round table
•
Adequate management training programmes
•
External T/C consultancy
•
Networking
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
helping industry face the challenges of 2005
3 – Fostering hope : create and monitor a business conducive environment
•
Socio-economic assessment while considering regulations
•
Ensure WTO rules are respected
•
PanEuroMed T/C chain / review rules of origin
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Recommendations
helping industry face the challenges of 2005
4 – Re-developing motivation and passion
•
Fashion and design :
•
–
promote and harmonise education
–
European space for education and
–
Spirit of conquest
–
China is a challenge and an
opportunity
research
–
monitor Asia’s development
foster interactions education –
–
go for the global market
industry
•
•
Innovation :
–
need for ambitious projects
–
broad networking in Europe
–
opportunity of 6th Framework
Programme
Ethics and care
–
expectations increase
–
research into consumers'
sensitivity and communicate
–
concerted approach within
chain : a means to renew
dialogue and overcome
confrontation
04 / 2004
IFM
CEPII – EPPA – PEC – MAIA
Strategic
vision
Listen to the
consumer
--------------------------Market research
+
Create and innovate
---------------------------Fashion design, R&D
CONSUMER /
CUSTOMER
VALUE
Hope
+
Motivation
04 / 2004
Build lasting
relationships
---------------------------Communication,
branding, personal
commitment, HR
development
IFM
CEPII – EPPA – PEC – MAIA
Keep connected
with market
---------------------------Partnerships with
retail/ industrial
customers