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| Issue date:16/04/2009 |
| ATA Journal for Asia on Textile & Apparel - Apr 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
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Today trade protection is often carried out in the form of restricting market access or import & export quantity. China’s textile industry is facing the risk of trade barriers as the Memorandum of Understanding signed with the US expired on January 1 this year.
The global textile industry has been reshaped after global trading and industrial restructuring facilitated the division of labor between different countries. Western Europe, North America and Japan have been key consumer markets for textiles and garments while developing countries became manufacturing centers for global supply.
China's textile industry has been in fast growth since 1998. In 2003, before the lifting of the worldwide textile quota, Chinese textile accounted for 17% of the world market. According to WTO's latest projection, China's market share in the world's textile market is expected to exceed 50%. Fast growth in China's textile trade is mainly attributed to the increasing textile consumption in the US and EU.
Trade barriers feared
The US is the largest textile importing country in the world, 80% of the garment and textiles are imported. China is one of the key textile exporters to the US market. In 2007, based on China Customs' statistics, China exported US$18.81 billion of garment and accessories to the US, up 15.53% YOY while based on the US Customs' statistics, the US imported US$22.745 billion of garment from China, up 22.83% YOY. Generally, among China's textile and garment export to the US, garment accounts for 70% while textile accounts for 30%.
Top 10 cotton apparel suppliers to the US in 2007 (Source: US Department of Commerce and Cotton Inc) |
China's entry to the WTO has paved the way for the country's greater presence in the international trading market. However, there are protective measures such as antidumping, anti-subsidy and so on implemented by the importing countries. China's textile export is increasingly involved in trade conflicts.
From 1995 to 2005, the WTO received 2,840 trade protection cases from its member countries and 469 of them were antidumping-related involving Chinese enterprises. There is also a rising trend in these cases.
Responding to trade conflicts
The government and business associations in China have been urged to support and help textile enterprises in dealing with anti-dumping and anti-subsidy measures in international market.
Up to now, the impact from overseas antidumping investigations against the Chinese textile and garment enterprises is yet to be significant in terms of the number of enterprises, value and products involved.
It is expected that antidumping and anti-subsidy measures will be much discussed issues in the next five to 10 years. Therefore, government and business associations should take measures to support and help enterprises to deal with these challenges. The state government was urged to establish special funds to deal with antidumping and anti-subsidy measures, in order to support Chinese enterprises involved in trade conflicts. On the other hand, business associations were asked to give instruction and advice to enterprises, based on their knowledge and experience, offering training on understanding antidumping and anti-subsidy.
As many Chinese textile and garment export are restricted by different quota systems in different countries, some enterprises take high risk by transferring their goods via an entrepot, in an attempt to escape from the quota restriction. However, these decisions may go against the interest of the textile industry and even China.
As specified in the trade agreements China made with the EU and the US, confirmed illegitimate transit trade can result in reduction in total quota for the entire country. This means violation of this regulation by one enterprise will lead to penalty for the entire industry. The penalty is more severe in the US – the reduction of quota could be tripled. Therefore, enterprises are urged to follow relevant regulations and should not seek private gains at the expense of the entire industry.
US and China divided on protectionism
When Hillary Clinton Rodham, the newly appointed US' Secretary of State, paid her visit to Beijing in February, many considered the gesture extended by the new Obama administration could help joining the two giant economies together against the global economic downturn. However, the trade relationship between the US and China does not seem to improve after all these talks, with both parties throwing accusations about the issues of trade protectionism.
After Timothy F. Geithner, the US' Treasury Secretary, alledged China of "manipulating" its currency, as well as offering subsidies to exporters, Wen Jiabao (溫家寶), China's Premier, hit back by referring to the "buy America" program in the US' stimulus package.
Industry groups from the US are calling for sanctions against the Chinese traders, accusing the latter for dumping cheap products abroad. The latest figure shows that trade deficit with China reached an all-time high of US$266.3 million.
Beijing government's policy of value-added tax rebates further upset the US manufacturers, who found their competitiveness marginalized. They are not happy about the continuous state intervention, especially at time of the economic crisis.
Based on recent information provided by Cotton Incorporated, an US agency promoting cotton trade, the price for 10 categories of textile and garment exported from China to the US dropped by 2% on average or even 6% for some categories. In addition, the prices for eight categories are below the global average.
China's export industry is having a hard time. Raw material price and processing cost are hiking. In addition to Renminbi appreciation and the lack of other export markets, the best solution is to speed up export product restructuring and leverage on quality improvement.
US and European countries usually restrict export by limiting the increase of product quantity but not unit price. If the textile industry improves quality and increase unit price for export textiles, the enterprises can increase export earnings while cutting down export quantity, making it more cost-effective.
In recent years, the US textile and garment market has developed higher technical content products. The garments with crease resistance, contaminant repellant, permanent color, per shrunk and non-deformable features are especially popular among US customers.
Chinese textile exporters should acquire better understanding on trade barriers |
In the US market, a plain round-neck T-shirt sells not higher than US$3-5, but after the addition of coating or foam printing, it can sell US$ 8-10. If it is produced with combed cotton yarn in combination with handcraft processing such as embroidery, it can even sell US$15-20 in medium or high-end market. A cotton, short-sleeved reverse-collar T-shirt is usually priced at US$10-12 in a US supermarket, but for similar T-shirt dye-woven with India-made 9.7 tex combed yarn, it can sell at US$40 in medium or high-end market. The price could be four times higher.
Currently, many export enterprises in China have been paying special attention to processing technologies that will increase the product's technical contents. Ordinary and conventional export products are unable to satisfy the US market’s needs, Chinese enterprises have to improve the processing quality and the design of the products.
Building China-made garment brands
In recent years, China has fostered some garment brands such as Youngor and Shanshan. However, Chinese garments famous in China are hardly found in the US market. Therefore, Chinese enterprises need to employ suitable strategies to open up overseas markets.
China's swimwear, like other textile and garment products, is exported worldwide |
In the US market, different grading of garments is sold in different stores. Most of the supermarkets, for instance, Wal-Mart, sell ordinary garment and accessories and target customers with modest income with the price set at a low level. Garment and accessories sold in department stores are usually medium-end brands, and only high-end stores or franchised brand stores sell high-end garment and accessories. For example, the price for POLO's cotton color-woven shirts and Dock's cotton trousers is generally 3 to 4 times that for ordinary products. Different garment grades represent different consumer levels. Higher price is accompanied by higher technical contents. Medium and high-end consumers in the US are willing to pay higher price to buy high-end garment and accessories. It is a future trend to improve technical contents and create brands for garment and accessories.
Background information was provided by Lanxi Municipal Textile Industry Association.
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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