Exporting Textiles & Clothing: What's the Cost for LDCs?

Article excerpt

The end of quotas in the textiles and clothing industry benefits large Asian producers. Yet other countries also have a stake in the business. The sector plays a major economic role in many least developed countries, especially in Africa, and in other small, vulnerable countries. To avoid losing important business, their firms need to exploit duty-free advantages to the full, diversify products and expand their supply chains.

WTO members abolished quotas on trade in textiles and clothing on 1 January 2005. As a result, prices are falling and major Western buyers are narrowing their sources. On a global scale, large Asian countries with vertically integrated industries are becoming the world's leading suppliers. China in particular can produce virtually any textile or clothing item at any quality and cost.

Within supplier countries, there are signs of industry consolidation. Larger companies are increasing production capacity, often on the advice of their major customers. Small and medium-sized firms (SMEs), on the other hand, face a shortage of orders and some have already closed down.

It is not clear what will happen in many least developed countries (LDCs) and small, vulnerable countries, with their low-value products, fragmented industries resulting from past reliance on quota protection and little regional cooperation. Since textiles and clothing account for a high proportion of merchandise exports and jobs - for example, 82% of merchandise exports in Cambodia and 83% in Haiti and Lesotho - it means changing their strategies to prevent serious economic consequences.

A changing market

Competition is sharper, with successful textiles and clothing producers setting new standards of service.

* Mega companies or smaller, flexible firms. Major retailers in the European Union (EU) and the United States foresee mainly two types of suppliers from developing countries. The first can be described as "mega companies", with management headquarters in Asia and production networks around the world. They use economies of scale to produce mostly basic articles - such as t-shirts, sweaters, cotton trousers, underwear and woven shirts - at low cost and in large quantities. The other type are highly skilled and flexible companies located near buyers, which could also benefit from preferential market access. These firms can supply smaller quantities of higher-value products at short notice.

However, most firms in LDCs and small vulnerable countries do not fit into either category.

* Supplier has more responsibility. Much of what the buyer arranged in the past, the supplier needs to do today, offering a complete package from design to sourcing of raw materials and delivery of finished garments. …