Dave turned me on to Emerging Textiles. It’s a for-pay newsletter covering big picture news in imports, fibers and textile products across the globe. You can get a free two week trial or you can buy some reports for a surprisingly reasonable price (>$5). To be sure some reports are a redux of US Dept of Commerce data but who wants to wade through those? Other than some of the sick twisted puppies I know are out there.
Here’s two separate pieces I’ve tied together for an idea of what we can look forward to with regard to apparel imports and production sourcing. Consider Mexico, I’d bet most people think they’re getting US production dollars. Rather, what emerges is what some could describe as a compelling picture of a race to the bottom. In spite of an increase in full package sourcing (that does seem to be up across the board, no?), Mexico has lost 50% of its apparel related jobs.
Mexico’s apparel and fiber industries significantly declined over the past years, in line with lower exports to the US market. Apparel production capacities were partly relocated to Central America and the Caribbean while fiber industry lost 50% of its jobs, our special envoy to Mexico reports. Apparel producers continue shifting to full package production, but face a threatening 2009 deadline with the end of US quotas on Chinese products while also confronted with surging illegal imports.
The two behemoths China and India are squaring off; their relationship is quite dynamic, pricing highly related to value and import restrictions imposed against one or the other. For example, for decades, US imports from India have largely benefited from quotas against Chinese goods. However, with quotas against Chinese goods set to expire in 2009, the situation could change quickly. In the interim, India has strategized by producing goods with higher margins, leaving China to fight amongst itself for commodity production. Once the quotas expire, it is very likely India will have some competition in the niche its carved out for itself.
China and India are increasingly heading towards direct confrontation on the US apparel market…China and India are both increasingly shifting to higher-valued segments on the US apparel market. Direct confrontation is progressively dominating the match between the two textile giants, as a result. India limits the rise in its prices in categories where quotas are maintained on Chinese products while more rapidly raising prices and quality in other categories,
Minimally, India has raised the bar. I have no doubts China will improve her competencies in higher end goods (once we can tear them away from pirating CDs). The way I see it is that rising costs abroad can only improve the relative position of US domestic producers.
Now, go on. Move along now. Don’t louse things up by hitting the comment button. Nobody ever does on posts like these.
Have you heard of the company FabIndia? It has a pretty interesting history and model. It was started as an export producer, but now has retail stores all over India catering to the middle class. The basic styles are the same (long kurta, short kurta, etc..) but the textiles and trim vary a lot.
I bought a few things at one of their stores in Mumbai when I was there in December. The quality fo the sewing is really nice (all french or faux french seams) I should have bought more since it’s really nice and good looking.
http://www.fabindia.com
Oh, a challenge!
My concern is the possible indirect effects of China ‘confronting’ India. I have to wonder if China’s goal of having one new coal power plant going on line every week plays a part in China’s strategy in dealing with competition from India.
Coal provides 80 percent of China’s electricity; India depends on coal for 70 percent of its electricity.
I hope that rising costs abroad improve the relative position of US domestic producers; I’m thinking the competition between China and India could have some really unhealthy side effects, both for the local population and for the rest of the world, since both countries seem to be more interested in raising their own standards of living than in complying with emissions control standards.
The problem is, what kind of standard of living can anyone have when the air is brown and chewy? Emissions control standards really weren’t invented by the West to keep third-world countries from enjoying the same standard of living that the West has by and large enjoyed. If you can’t breathe, there’s no amount of money to make up for that.
Rising prices and other factors in offshore production will change the relative positioning of the US manufacturers if Australia’s experience is anything to go by.
Outsourcing to China became v big for Aust manufacturers a decade or so ago. Then the US FTA with China came along. Aus is now too small a player to outsource in many cases. Previous minimums of 1000 are no longer accessible (that used to be realistic for Aus manufacturers) and significant premiums are attached for orders under 10,000 units – we’re talking premiums of 200%.
A lot of manufacturers were caught out by the changes. They tried to come back onshore but so many factories had closed that the remainder couldn’t absorb the volume. Also those that were left were the niche, higher quality outfits which had found it tough going. These onshore factories that had been struggling however, were now very well placed.
The designers that suffered most were the ones needing mid volume low price manufacture with little quality demands. They weren’t big enough to stick with China but they were too price sensitive to come back onshore. There was quite a shake out of things like small T shirt manufacturers.
Nevertheless, these kinds of changes are an opportunity for some.
Oh course I’ll comment on this one, it’s right up my alley! (hehehehehe, I must hang in strange places) The reports I’ve been reading since the beginning of the new year have said that the Chinese profit margin for exported textiles is much lower than the average profits shown in any other Chinese export category. So, the rush is on across the world to increase profitability and gain a foothold in the textile exports business. I think that the ball is in the air and will be played by the country whose government can underwrite their textile industries the most and produce the goods. Profitability, governmental underwriting, and retooling will combine to produce the scoring players. As energy expensive as textile mfg’g is the players will push the environmental envelope beyond good eco-standards to take the lead position.
If you can’t breathe, there’s no amount of money to make up for that.
Unfortunately, for most of the poor in the world, the choice is usually the opposite: if you can’t afford food, you generally don’t care how bad the air quality is since you aren’t going to live long enough for emphysema to become more important than malnutrition. As societies get wealthier, they generally choose to spend some of that money on higher standards of living, including better air quality. I suspect the same is going to be true of China and India (or, for BBC listeners, Chiner and Indier).
The article on emerging textiles is very interesting especially about Mexico loosing position in textiles and the spector of India and China squaring off to supply the world with textiles. I also thought the comment that the jockeying for position between China and India is going to raise prices and help the US textile sector. By the time 2009 rolls around there may not be much of a textile manufacturing base in the US to take advantage of the rising cost or for that matter help control the rising cost of imports as had been the case in the past. Our government has seen fit to not offer any protection to the American Textile Industry and is willing to let it die. This is evident in the closing of two major textile mills in 2006, $1 billion in sales between the two companies. One of the mills was a major supplier to the armed forces. The camo fabric used for uniforms and chemical warefare garments was made by one of these mills. It will be interesting when the brain trust in Washington realizes they might only be able to get military uniforms from foreign countries. What will happen if those countries don’t agree with our policies and refuse to make garments and fabric for our military? So much for there being a textile manufacturing base in this country to take advantage of higher prices. Our trade and government officials have taken care of this fact.
Actually, I am one of those optimists who thinksChina is heading for rock bottom when it comes to environmental standards…and thaat”s a good thing ’cause there’s only one place to go from there.
I think Japan is an excellent example of what I mean. “made in Japan” once had the same connotions “made in China” now carries, and in the 1970’s the irresponsible push for greater national wealth had the same negative environmental effects…peaking when several electronics manufaturing companies leaked heavy metals that killed I can’t remember how many people. Now, Japan is a fairly eco-conscious country.
Funny how sometimes disasters can change things for the better. If only the U.S. worked on that nmodel, and could learn from Katrina, etc.