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MFA The dragon of spindles
WITH the end of the Multi-Fibre Agreement (MFA) on January 1, 2004, China now looks set to dominate the $500-billion global garment trade. This time, however, it jordan 11 bred is creating a controversy not with the US, but with fellow developing countries such as Bangladesh, Cambodia, Indonesia and those in the Caribbean. The MFA, which allowed the US and Europe to negotiate bilateral quantitative restrictions with developing countries, was a discriminatory trade practice; hence the poor countries pressed for the end of the quota regime as a pre-condition to the formation of the WTO, so as to allow free competition in the international trade of garments and clothing. Developing countries such as Turkey, Ghana adidas jeremy scott and Sri Lanka were eagerly waiting for the quota regime to end, thinking that their trade will boom. That, however, was before China and Vietnam entered the party. It now appears that quotas instead guaranteed market access to many developing nations and secured employment for their people.
Chinese and Vietnamese exports in textiles have, of late, been booming. This is at the cost of all other developing countries such as Bangladesh, Indonesia and the Philippines. Seventy per cent of all growth in apparel exports to the US adidas jeremy scott in 2002 came from China and Vietnam. Chinese export growth is overtaking Mexico's which has had the best trade deal with the US with virtually no quotas and no tariffs. Vietnam, which had almost no textile trade with the US until 2001, has become the No. 2 supplier, behind Mexico.
According to a WTO estimate, China's share of clothing and textile exports is set to jump from 19 per cent in 2002 to nearly 50 per cent by 2010. China has already become the leading supplier of both textiles and apparels, according to the US Commerce Department. It has registered huge increases in exports of `off-quota' items such as handbags and curtains. Chinese exports to the US of babies' clothes and soft-luggage (off-quota items), zoomed by over 800 per cent last year, hitting other exporters such as Mexico and the Philippines. Safeguard duties had to be invoked by the US against surging imports of knitwear and and bathrobes.
China possesses unbeatable competitive advantages over its rivals. With modern factories, vast economies of scale, A-grade infrastructure, vast pool of cheap labour (wages are as low as $70 per month) and a fully integrated cotton, textile and garment industries, China is now set to dominate the whole range of the garment and the clothing industry. China also possesses the advantage of logistics. With distributing companies in Hong Kong, it can move goods much faster, feeding thousands of stores worldwide.
China is now emerging as a major threat to other low-wage countries such as Cambodia and Indonesia. Prospects for countries in the Caribbean Basin and African manufacturers are not any better. Investments already made in these countries by apparel manufacturers are facing liquidation. Mexico wages at $4 a day is far higher and, therefore, the country has been consistently jordan 11 losing market share. Indonesia already registered a decline in clothing exports air max shoes by 13 per cent in 2002 and many factories have since closed, on account of their inefficiency and uncertain supplies. There is going to be a huge unemployment problem in these countries, from Dominican Republic to Bangladesh, where some 30 million jobs are at risk.
Just look at Bangladesh, which cannot compete with China, though its wages are half those in China.
Bangladesh's garment industry contributes 80 per cent of the hard-currency earnings and employs 1.8 million workers, 85 per cent of whom are women. Up to one million workers are likely to lose their jobs. Further, 15 million workers employed in related industries, in button-making, and transportation, will also be affected. This situation is particularly worrisome for women who have acquired a new social status, with jobs in the textile industry. Now free trade will bring disaster for them. There is no safety net for the unemployed and hence isabel marant sneaker sale radical Islam may strike deep roots, as the unemployed become frustrated.
Vietnam, which currently has an assured market under the US jeremy scott adidas treaty, may also face the music in the long run. Vietnam's wages at $1.60 a day is competitive, but its factories are only 60 per cent efficient compared to those in China. Thus, the advantage of a special trade mulberry york outlet deal with US is partially offset.
Apart from China, India and Pakistan are also expected to gain, post-MFA. India is isabel marant sale already being scouted for by some of the major buyers for outsourcing agreements in items such as towels. Pakistan too would gain, thanks to its cotton production and high quality of its garments.
What can the poor countries do, to compete against the Chinese dragon? Well, competitive advantages are never permanent. A new course of action as suggested below might help the countries that stand celine bag online to lose.
The first option is the merger of small factories and their modernisation by way of installation of new machinery and equipment to produce better quality clothing.
Second, establishing close ties with the retailers in the West would create a better understanding of burberry handbags their requirements. Buyers such as Wal-Mart and Levi Strauss may not like to put all their eggs in one basket and instead diversify their sources; hence, opportunities for these countries as well. Getting feedback from buyers, on real-time basis through the use of information technology and creating an advantage through an ``integrated supply-chain'' could produce better results burberry handbags for both sides. Manufacturers outside China should also concentrate on the latest trends in fashion, invest in research and development and restructure their industry to suit the demands of the market forces. Some jeremy scott wings of them can become niche players, by creating advantage jeremy scott wings in one or two categories of garments and clothing, thus gaining over the Chinese.
Consumers in the West are sensitive to the labour and mulberry alexa environmental issues. Therefore, textile manufacturers should improve their records in labour and air jordans for sale environmental conditions to win the heart of their overseas customers. There is also a need to think `outside the box'. Some manufacturers can get out of manufacturing altogether and use their understanding and goodwill of the trade to enter the arbitrage business, acting as a bridge between the manufacturers and the retailers. Entering into a trade deal with the US could be another option, which would lessen the impact of China's textile advantage. Lastly, countries which lose out must develop alternative sources of employment in new industries or expand the employment opportunities in other existing industries. For example, Bangladesh can develop the gas industry and sell gas to India.
A single strategy may not work, but a combination of different strategies may create a competitive advantage for countries, which are likely to lose out in a free-trade regime.
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