Transcript www.aladi.org

T&C Trade Challenges
for Latin America
The ATC Ended
Is T&C a Normal Sector?
Presentation by
Mr. Matthias KNAPPE
ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005
T&C is not (yet) a Normal Sector for
Business
• Purely rules-related: T&C is a normal sector
But:
• Non-optimal preparation for competition
despite 10 years anticipation
• Industry is swimming and a new competition
wave is expected with DDA
• Present concerns distract from DDA
• No special treatment anymore (1 classroom)
Structure
T&C Trade
in Latin
America
7 Challenges
For LA
Finding
Responses
Characteristics of T&C industry in South
America
• Poor market diversification: mainly to US
• Poor product diversification: underwear,
knit-shirts, trousers & nightwear
• Mainly CMT/maquila: « full-package » to be
developed; only few countries are vertically
integrated
• Poor linkage between foreign investors &
local industry
• Insufficient use of regional opportunities
US Imports 1st Quarter 2005
• Jan & Feb strong, March lower growth
• China: up 107%* for apparel but strong
increase in key cotton products (338/9):
1257%; 347/8: 1521%; 352: 308%
• But: strong growth from preferential
suppliers (CAFTA:knit; Andean: knit &
woven; focus is on duties; rather shifts within
than between regions
• But: how reliable is the data: e.g. EU
confusion
* For Jan/Feb 2005; Source OTEXA
T&C Exports from ALADI Countries in 2003
T&C Exports of ALADI Countries in 2003
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Argentina
Bolivia
Brazil
Chile
Colombia
% textile
Ecuador
Mexico
% clothing
Paraguay
Peru
Uruguay
Venzuela
US Imports from ALADI 3 year comparison
US - ALADI Apparel Imports 2003/2004
100'000
10'000
US$ millions
1'000
100
10
1
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Uruguay Venezuela
0
2003
2004
year-end March 2005
China
US Import changes from ALADI 2004- 2005
US - ALADI Apparel Imports: 2004 / 2005 data change in %
600%
January
504%
February
March
500%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
400%
273%
300%
200%
88%
79%
41%
131%
China
100%
24%
15%11% 9%
2%
28%25%30%
1%
10%
0%
-100%
-200%
-34%
-57%-48%
Argentina
-10% -17%-9% -3%
-14% -16% -4% -5% -8%
-4%
-23%
-4%-13%
-84%
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Uruguay
Venezuela
US Imports from ALADI in 2004
Rest
25%
347
M/B trousers
20%
639 W/G knit
blouses
2%
348
W/G slacks etc.
18%
647
Trousers
4%
638
M/B knit shirts
4%
659
Other MMF apparel
339
5%
W/G knit blouses
10%
338
M/B knit shirts
11%
Structure
T&C Trade
in Latin
America
7 Challenges
For LA
Finding
Responses
World Garment Exports: Declining
Growth Rates
Global Garment Trade
220
14%
12%
Value in $ Billions
10%
180
8%
6%
160
4%
140
2%
0%
120
-2%
100
-4%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Value
Source: WTO; idea: D. Birnbaum
Year
Change
Poly. (Change)
Year on Year Change
200
1. Prices will fall further
More supply and quota rents are gone
Trends in US T&C import prices, 1983-2003
US$/sm e
2.7
2.5
2.31
2.2
2.3
2.1
1.9
2.4 2.41
2.35 2.33
2.23 2.18
2.14
1.89
1.83
1.65
1.7
1.5
1983 1989 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Robin Anson, Director Textiles Intelligence; ITMF, Dresden October 2003; www.textilesintelligence.com and
Textile Outlook International No. 110 March-April 2004
US Apparel Imports Unit Value Jan 05 to Jan 04
China prices down: 9% on average but up to 50% in key
products in US (35% in EU)
US Apparel Imports per Category in January 2005
0
-2.09
Kn
i
ts
-10
Kn
i
hi
rt
s
-5.3
M
/B
(3
3
ts
Sk
i
hi
rt
8)
-4.78
s
W
/G
(3
rts
(3
42
T
-2.22 rou
se
)
-2.5
rs
38
)
M
/B
(3
47
Tr
ou
se
rs
)
Co
tto
W
/G
(3
4
-9.27
n
un
de
8)
Change in %
-20
-30
-37.35
-40
-46.56
-50
-48.43
-50.96
-53.86
-54.9
-60
World unit value change
Source: OTEXA
China unit value change
rw
ea
r(
35
2
)
2. Country & Enterprise
Consolidation
Number of Countries
Likely Post 2004 Sourcing Pattern
70
60
50
40
30
20
10
0
Under Quota
Year 2005/6
Year 2010
Year
Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on textile issues; Washington, September 2002
Changing Enterprise Requirements
• Mega companies or smaller flexible firms >
• Supplier has more responsibility
• Speed to market counts (standard apparel:
timely replenishment; fashion apparel: quick
response)
• Trade policy and foreign investor response
were key for apparel export development in
many LDCs
Mega Companies:
Global Process for a Dress Shirt
Cheaper &
close to factory
Supplier
nominated by
Customer
China
China
US
Thread
Label
Button
Cotton
Pakistan
Yarn
Malaysia
Fabric
Garment
Interlining
Malaysia
Retailer
Vertical setup
by fabric mill
Good
relationship &
good in piece
dye
HK – China
OPA
Malaysia
Or Japan
Selected by
fabric mill &
quality is fine
US
Major shirt
factory in
TAL
3. China as a WTO Member & Major Player
• US clothing imports from China: 2002: +60%;
2003: +46%; 2004: + 32%; Jan-Apr 2005:
+67%
• Japan: 85% of all clothing imports from China
• Australia: 69% of clothing and 21% of all textile
imports from China
• January 2005 exports to EU: Knit apparel up
163%; woven apparel up 80%
• January 2005 exports to US: Knit apparel up
111%; woven apparel 79%
China’s T-Shirt Exports to the EU in Jan 05
China's T-Shirt Exports in January 2005
883.05
881.41
21'000
Change in %
900
679.96
700
Change in %
571.98
18'566.12
17'000
13'000
9'000
5'864.20
5'000
502.58
1'000
500
Hungary
328.85
324.79
Poland
299.35
300
206.86
Germany
Spain
US
Italy
France
Ukraine
100
Czech
Republic
Denmark
England
162.25
Canada
27.93
-100
-51.83
-46.26
-57.67
-49.75
-39.15
Volume change
Source: China Customs, 02/05
-30.41
-35.24
Unit value change
-14.77
Hungary
Poland
1.17
-45.99
4. Use of Trade Remedies
• Safeguards (fairly traded imports)
• Antidumping duties (unfairly traded imports): mainly
yarns, fabrics & made ups; trade chilling effect
• Countervailing duties: Unfair trade practices
• T&C products as targets for retaliation in dispute
settlement cases.
• Possibility of new quotas against China
• 1) Special T&C Safeguards until 31/12/2008
• 2) Product Specific Safeguards until 10/12/2013 (all
products, not only T&C)
• To be discussed in detail tomorrow
Discriminatory Trade Policy Decision
Influence Sourcing Decisions
After 2005, who do you think will have the most impact on
international sourcing decisions?
International manufacturers
Buying agents
4%
2%
International World Trade Organization
50%
Sourcing executives from retailers and
importers
U.S. and European government officials
Source: USA-ITA
29%
15%
5. Doha Trade Negotiations and T&C
• NAMA Negotiations: reduction of high tariffs, tariff
peaks and escalations; specific formula; sector
approach?; additional provisions for LDCs & newly
acceded countries (less than full reciprocity)
• Adjustment related issues impact NAMA
• Rules negotiations (e.g. ITCB request on AD)
• Identification, categorisation, examination &
treatment of NTBs
• South-South trade under NAMA or GSTP?
• ITCB and its future role for South America
• Market access & development aspects of cotton
6. Multilateral vs. Complex System of FTAs
• CAFTA/Andean RTA negotiations distracts
from NAMA (short vs. long term)
• RTAs need to provide new benefits, incl.
regional cumulation
• But NAMA can erode these preferences
• Other countries also receive preferences:
• AGOA and Canada with easy RofO
• QIZ in Jordan and Egypt
• EU: New GSP scheme, incl. cumulation
But Preferential & Differential Treatment is
Equally Important
Beginning in 2005, how important will free trade / preferential
trade agreements be?
They will be useless against competition from
China
Not important unless they are renegotiated and
simplified.
17%
21%
Important as one element in a sourcing strategy
Impossible to source competitive products
without them
Source: USA-ITA
59%
3%
7. New Rules (e.g. FTAs, RTAs, Security)
• Preferential treatment: continued USCBP
intervention
• Codes of Conduct - Ethical Sourcing
• ECO Labelling: Remain voluntary but can
reduce market access
• Security: US Customs-Trade Partnership
Against
Summary: / Challenges
1. Price reduction
2. Consolidation
3. China? Or rather Improving
Competitiveness
4. Use of trade remedies
5. DDA and T&C Trade
6. Multilateral approach vs. FTAs/RTAs
7. Imposition of new (buyers’) rules
Structure
T&C Trade
in Latin
America
7 Challenges
For LA
Finding
Responses
Closer Regional Cooperation
• Small countries will not be able to develop a
vertically integrated industry
• A regional (or inter-regional) vertical approach is
needed
• RTAs need to integrate closer regional
cooperation, incl. Regional sourcing, CAFTA
example
• RTAs could lead to product & market
diversification
• AFTEX: developing regional complementarities
& exploiting synergies: and in Latin America
3 Areas of South-South Trade Development
a) DCs as a market;
• QUAD market: 80% of world imports; post-ATC
growth rate expected to be 1-5%
• Large DC will grow much faster
• GSTP could be a door-opener
b) S-S Trade of intermediaries to export to
traditional markets (value chain cooperation)
c) Improve relationship with foreign investors
TCDC is key for all three areas
Cotton development needs to be seen in light of
S-S trade
Hubs & Spokes Changes to Hub & Regional Hubs
H
N
ES
CR
CAFTA
G
DR & CAN
Mex
USA
L
SubMSaharan Africa
N
K
S
What is in it for South America?
Diversifying into MMF Apparel Exports to US
• The production skills set is not very different, but
sourcing skills are needed
• Improving buyer relationship as any diversification
strategy needs cooperation with buyers (to
expand & to support the product switch)
• Partnership with national and/or regional suppliers
• Joint marketing of regional apparel and textile
companies
US Imports from SA: Fibre Composition
US - ALADI Apparel Imports 2004
100%
80%
60%
40%
20%
0%
Argentina
Bolivia
Brazil
Chile
Cotton Apparel
Colombia
Ecuador
MMF Apparel
Mexico
Peru
Wool Apparel
Uruguay Venezuela
The Phenomenon: Most Duty-free Access
Utilisation is for Cotton Apparel
US Apparel Imports Cotton Apparel/MMF Apparel
8.00
Andean
6.88
7.00
6.34
Ratio Cotton/MMF Apparel
6.00
6.39
5.34
AGOA
5.68
5.00
5.29
4.00
Jordan
2.90
2.80
3.29
2.39
2.69
2.56
World 1.79
1.88
3.00
CBI
2.00
1.80
1.00
0.00
2002
2003
2004
Tariff Peaks for Cotton & MMF Apparel
Cotton
MMF
Product MFN Rate MFN Rate
Average
13.2
23.4
Trousers, Breeches, Shorts
Knit
15.5
28.2
Woven
16.6
28.3
Shirts & Blouses
Knit
20
32
Woven
17.6
26.4
Source: USAID and USITC
Summary
• Closer Regional Cooperation (macro and
meso level (AFTEX example)
• South-South Trade at 3 levels
• Diversification into MMF products coupled
with south-south cooperation
THANK YOU !
For more information
http://www.intracen.org/textilesandclothing
Contact:
Matthias Knappe, Senior Market Development Officer
[email protected]
WTO Rules Governing
T&C Trade
From 2005
Presentation by
Mr. Matthias KNAPPE
ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005
Rules prevailing from 1 January 2005
• WTO principles of transparency & nondiscrimination
• Exceptions: regional trade agreements &
special and prefential treatment
• Antidumping rules prevent unfair trading
practices
• Safeguards prevent injury from trade flow
• Dispute settlement mechanism to resolve
disputes that might arise.
Trade Remedies
• Safeguards (fairly traded imports)
• Antidumping duties (unfairly traded imports): mainly
yarns, fabrics & made ups; trade chilling effect
• Countervailing duties: Unfair trade practices
• T&C products as targets for retaliation in dispute
settlement cases.
• Possibility of new quotas against China
• 1) Special T&C Safeguards until 31/12/2008
• 2) Product Specific Safeguards until 10/12/2013 (all
products, not only T&C)
Can « China safeguards » protect US – South
America trade?
• CBI apparel companies are top customers of US yarn
and fabrics; CITA considers OPT as an extension of
US production; but South America?
• CITA self-initiated investigations on 347/8, 338/9,
352/652; US textile industry filed 7/14 new petitions
• New quotas could be in place by May/June; these will
be low!
• AAFA: « US import & production follow a consistent
pattern regardless of whether China is restrained »
• Safeguards on brassieres slowed imports from China
& helped reverse a decline of imports from CBI
China’s Response: T&C Export Taxes
• 148 products of HS chapters 61 & 62 in 6
categories: outerwear, dresses, knit and non-knit
blouses, sleepwear and underwear.
• Tax either 0.2 yuan/piece or 0.3 yuan/piece i.e.
$0.024 and $ 0.06
• From 1. June: tax will rise to 1-4 Y/p for 74
classes of T&C products; some will be lowered*
• Major objective: to encourage manufacturers to
switch to higher value-added products;
• 50 major exporters agreed on 6 price coordinating
panels to oversee export (price) developments
and suggest floor prices
* Announced by MOFCOM n 20 May 2005
Doha Trade Negotiations and T&C
• NAMA Negotiations: reduction of high tariffs, tariff
peaks and escalations; specific formula; sector
approach?; additional provisions for LDCs & newly
acceded countries (less than full reciprocity)
• Adjustment related issues impact NAMA
• Rules negotiations (e.g. ITCB request on AD)
• Identification, categorisation, examination &
treatment of NTBs
• South-South trade under NAMA or GSTP?
• ITCB and its future role for South America
• Market access & development aspects of cotton
The Cotton Issue in WTO: Market Access
• Market Distortion by Subsidies
• Appellate Body confirmed WTO interim ruling that
US subsidies caused « serious prejudice » to
Brazilian cotton producers
• US direct payments to farmers are trade distorting
• Payments to US mills and exporters to cover the
difference of US and world prices to ensure US
exports are not permissible
• West Africa Initiative: Distinction between Market
Access & Development Issues
Cotton Implications for T&C Trade
• Long-term reduction of subsidies tends to
increase price
• End of ATC increases demand for cotton & shifts it
to Asia: price increase
• Supply response in Asia, Australia & West Africa;
but in US and EU?
• Will possible end of US support for cotton have a
negative impact on cotton fibre consumption?
• Impact of cotton negotiations on T&C trade?
• Development assistance for cotton in West Africa
What can we do together ?
1.- Sector Strategy
Development
2.- Understanding its’
own and competitors’
performance
Sales
(+Marketing,
and Services)
Sales
(+Marketing,
Outbound Logistics
and Services)
Customs-GSP/Quota
“The SHAPE”
“The FiT”
Export Clearance
3.- Developing fabric
sourcing skills to
become
“full-package”suppliers
4.- Understanding
changing markets
5.- Applying
Outbound Logistics
Customs-GSP/Quota
Export Clearance
Manufacturing
Inbound Logistics
Customs,
Import Clearance
Manufacturing
Inbound Logistics
Customs,
Import Clearance
Implementing tailormade market penetration
approaches in line with
buyer requirements
New ITC T&C website
Workshops
Tailored Product &
Market Development
Sourcing
e-applications in the
T&C sector
Sourcing Guide
and
database
Business Guide
in e-commerce for T&C
Sourcing
ITC
Tailored Consultation
THANK YOU !
For more information
http://www.intracen.org/textilesandclothing
Contact:
Matthias Knappe, Senior Market Development Officer
[email protected]
Bolivia Apparel Export 2004
Rest
15%
Knit shirts, blouses
0%
W/G wool sweater
2%
W/G slacks etc.
3%
Nightwear/Pyjama
6%
M/B knit shirts
56%
W/G knit blouses
18%
Brazil Apparel Export 2004
Rest
25%
W/G slacks etc.
37%
Dresses, gowns etc
3%
M/B trousers
6%
Cotton underwear
7%
W/G knit blouses
11%
M/B knit shirts
11%
Chile Apparel Export 2004
M/B trousers
17%
Rest
34%
M/B wool suits
17%
M/B suit-typ CT
16%
Wool trousers
16%
Colombia Apparel Export 2004
M/B trousers
21%
Rest
41%
W/G slacks etc.
15%
M/B knit shirts
7%
Other MMF apparel Cotton underwear M/B suit-typ CT
6%
4%
6%
Ecuador Apparel Export 2004
M/B knit shirts
17%
M/B trousers
7%
W/G wool sweater
3%
Nightwear/Pyjama
2%
Rest
69%
M/B wool sweater
2%
Mexico Apparel Export 2004
M/B trousers
22%
Rest
32%
W/G slacks etc.
20%
M/B knit shirts
5%
Other MMF apparel
5%
W/G knit blouses
8%
M/B knit shirts
8%
Peru Apparel Export 2004
Rest
13%
Cotton sweater
1%
M/B trousers
2%
W/G slacks etc.
2%
W/G knit blouses
2%
M/B knit shirts
37%
W/G knit blouses
43%
Uruguay Apparel Export 2004
Rest
14%
Knit shirts, blouses
5%
M/B suit-typ CT
31%
M/B wool sweater
16%
W/G wool sweater
16%
W/G coats
18%