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

By Knappe, Matthias | International Trade Forum, January 2005 | Go to article overview
Save to active project

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


Knappe, Matthias, International Trade Forum


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.

However, most LDCs concentrate on the end of the supply chain--offering only garment-making facilities--and rely on buyers to provide yarn, fabric and accessories.

* Speed to market counts. The time and cost of delivering a product to the store are becoming more important. Labour and production costs are minor up to the retail point. This is true for both supplier types. While the commodity-type supplier will have to focus on regular and timely replenishment, the fashion-oriented supplier will have to emphasize quick response to changing fashion trends.

Trade policy helped LDC exports

In the past, quota protection and duty-free access to rich markets encouraged many LDCs to develop textiles and clothing exports. Trade policy will continue to influence their export prospects. Most importantly, LDCs will continue to benefit from preferential treatment from WTO member countries. Sub-Saharan Africa's share of the United States apparel market rose from almost zero to 2.2% in 2004. The reason was duty-free market access under the United States' African Growth and Opportunity Act (AGOA), combined with relaxed rules of origin requirements that allowed countries to use cheaper fabric from Asia for their garment exports.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

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

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?