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African countries posted solid growth in apparel exports to the US during the first five months of 2018. Kenya remained the largest exporter from the continent followed by Lesotho, Madagascar, Mauritius, Morocco, Ethiopia and Tanzania.
Kenya’s apparel exports to the US grew 11.57 per cent year on year. Lesotho’s apparel exports to the US noted a decent growth of 9.27 per cent. Madagascar too showed impressive growth of 28.16 per cent on a year on year basis. Mauritius and Morocco were also up by 5.64 per cent and 9.96 per cent in their respective exports. Ethiopia’s exports to the US grew 106.55 per cent.
One major reason for booming garment exports from African nations to the US is investments by giant Bangladeshi garment groups to avail of duty privileges under AGOA. African countries enjoy duty-free and quota-free access for certain goods, including garments, to the US.
As China transitions towards higher value-addition in manufacturing and services, the African textile industry has a chance to take a share. Fashion products from Africa benefit from a tariff free access to the UK market as part of the EU trade policy, which makes them significantly cheaper than products imported from Asia.
"Amid retaliatory tariff measures, tension between the US and China seem to be increasing and the substantial impact would be on cotton imports and exports. As highlighted by Jon Devine, Senior Economist, Cotton Incorporated, China’s cotton imports have been on the rise and are expected to continue climbing over the next several years now that its government-controlled cotton stockpile has dwindled and because it can’t meet demand with its domestic cotton supply. Devine says, China traditionally has a production deficit between 10-15 million bales. That deficit had been filled by reserves in recent years, but with reserves now lower, that gap should be increasingly filled by imports."
Amid retaliatory tariff measures, tension between the US and China seem to be increasing and the substantial impact would be on cotton imports and exports. As highlighted by Jon Devine, Senior Economist, Cotton Incorporated, China’s cotton imports have been on the rise and are expected to continue climbing over the next several years now that its government-controlled cotton stockpile has dwindled and because it can’t meet demand with its domestic cotton supply. Devine says, China traditionally has a production deficit between 10-15 million bales. That deficit had been filled by reserves in recent years, but with reserves now lower, that gap should be increasingly filled by imports.
Cotton faces tariff barriers
With growing tension between the two economies, it remains to be seen how China will satiate its supply of
cotton. In the 2017-18 crop year, the US should export 16.2 million bales. In comparison, the next largest exporter is India at 5.0 million bales. It would take the sum of India, plus the next six largest shippers to equal the volume that the US ships.
In that regard, if China increases its imports by 5-10 million bales over the next several years, it is hard to see how that would not benefit the US because the pool of exportable supply is limited once you move beyond the US. If the US does prove to be unaffordable for Chinese mills with the tariffs, the cotton that is redirected to China from other sources (e.g., India, Brazil) should open up demand for US cotton in other import markets (e.g., Vietnam, Bangladesh) where cotton from non-US exports could have otherwise gone, stated Devine.
As per figures, over the 2012-13 to 2017-18 period, China’s share of US exports dropped from roughly 40 per cent to between 10 per cent and 15 per cent. The implied tightness in exportable supply suggests upward pressure on prices. Collective stocks for the world outside the US are forecast to reach a record this summer, and collective volume will serve as a buffer against a rising tide of Chinese import demand. In terms of supply chain reactions, if the tariffs do remain in place, the flow of cotton through Vietnam could be expected to continue to be profitable.
Considerable gains
Vietnam has seen significant growth in cotton mill use of late. Devine points out, Chinese government controls on cotton fibre imports has fuelled much of that growth. Because there are no quantitative limits on cotton yarn imports (there are limits on the tonnage of cotton fibre) and because duties are either low (5 per cent for India and Pakistan, countries without FTAs with China) or non-existent (countries with FTAs with China, like Vietnam), it was cheaper for Chinese fabric mills to import yarn. A lot of that yarn came from Vietnam, and over half of all the fibre spun into yarn has gone to China for the past several years.
The possibility that the tariffs could result in an economic downturn is a concern. Tariffs can lead to higher consumer prices which means the Federal Reserve may look to more increases in interest rates. Higher interest rates can slow economic growth, and there is a concern that overly aggressive increases in interest rates could be a factor contributing to the next US recession, cautioned Devine.
The governments of Vietnam and India have prioritised development in garment-textiles industry to enhance bilateral trade and build a supply chain for the sector in the future. Currently, India owns a strong fiber and yarn production industry that produces all kinds of fabric and supporting materials available in the market. India also produces and exports textile products from synthetic yarn, a material fabric that is being used widely in the world garment industry with high expansion prospects in the future.
Meanwhile, Vietnam is in the top five garment exporters in the world with export turnover reaching $ 31 billion in 2017. However, Vietnam has had to import a large volume of materials for the sector, with US$ 19 billion in import value in 2017. India and Vietnam can thus supplement each other in the supply chain of the garment sector, the two-way trade in the area remains modest. In order to promote cooperation and improve trade in the sector, India has set a target of exporting $1 billion in materials to Vietnam in the coming time.
This cooperation in the garment and textile sector between Vietnam and India will pave the way for enterprises of both sides to optimise their strengths and advantages. Vietnam will benefit from more materials, technology and equipment for production, while India can expand its markets.
A new United Nations initiative that aims to make forests more fashionable has proposed that textile production should be shifted from fossil fuel-based synthetic fibers to renewable, biodegradable textiles, made from wood.
The fashion industry is responsible for producing 20 per cent of global waste water and 10 per cent of the global carbon emissions – more than the emissions of all international flights and maritime shipping combined. In addition, the textiles industry has recently been identified as a major polluter, with estimates of around half a million tonnes of plastic microfibers ending up in the world’s oceans as polyester, nylon or acrylics are washed each year.
Although the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs) are an ambitious blueprint for governments, everyone must make a conscious choice to change habits and plan for the future. Moreover, forests can create productive ecosystems, to support local and rural communities. to the UNDP envoy forest.
Tirupur garment exporters are happy about the increase in basic customs duty from 10 to 20 per cent on specified garments. Duty hike on import of 23 knitted garment items and one knitted fabric is expected to help protect the domestic textile industry.
Knitwear exporters had been appealing for swift action in this regard as textile imports from countries such as China, Bangladesh, Vietnam and Cambodia have increased significantly. Textile imports grew at a CAGR of 17 per cent in the last five years and last year readymade garment imports increased by almost Rs 1,000 crores to Rs 4,983 crores in 2017-18 from Rs 3,994 crores in 2016-17.
Exporters say there is a need to restrict import of textile products. They have prepared a white paper detailing the threat from China, with Chinese companies setting up factories in countries bordering India to take advantage of labor, low wages and customs exemption available to these countries in EU and Canada.
Under the South Asian Free Trade Area (SAFTA) agreement, specified garment items imported into India from Bangladesh are also exempted. Exports of Tirupur in the last financial year have gone down by 5.6 per cent from the previous year.
Taiwan's leading textile brands are offering the latest trends in sustainable textile and performance fabrics. Taiwan's competitive advantage in functional, environmental and smart fabrics includes strong development and integration abilities for functional artificial fibers, and an excellent ability to provide a wide variety of differentiated and customized fabrics in small quantities. It also includes low pollution and energy consumption in the production process, innovative technologies in its semiconductor and biomedical industries, electronic components, and cross-industry integration.
The output value (including overseas production) of Taiwan’s functional fabrics accounts for roughly 50 per cent of the global output value of functional fabrics, making Taiwan the world’s largest functional fabric production base. Singtex provides eco-friendly functional textiles and is a sustainable supplier of eco-friendly textiles to international clothing brands. Evertex Fabrinology is dedicated to producing highly technical knit fabrics with heavy emphasis on durability, performance and comfort for the outdoor enthusiasts during extreme excursions.
Tex-Ray has integrated yarn dyeing, fabric and garment production. TexRay has developed innovative products to satisfy various climates, functions, and environmental protections. Toung Loong Textile has contributed to the global textile industry by developing and producing functional synthetic yarn dye, ATY, DTY and high-end sewing thread. By collaborating with international premium raw material and machine manufacturers and adopting advanced technologies, Toung Loong produces various functional yarns.
The State Bank of Pakistan (SBP) has directed the Pakistani manufacturers to penetrate aggressively in the global synthetics products market which has long surpassed the cotton market. Though starting late, Pakistan’s exporters can still sail through if allowed to access essential raw materials at competitive prices.
According to the Central Bank, the local industry would benefit and tariff-based policy measures to enhance the use of man-made fibers in domestic textile industry will become effective, only if the influx of smuggled goods is contained.
Pakistan’s textile industry is advancing into synthetics at a snail’s pace. The fiber mix still stands at 80:20 in its garment exports with only 25 percent of Pakistan’s spinning machines currently using MMF to produce blended yarn. Moreover, the country’s share in MMF apparel market is almost negligible.
This implies that with adequate availability of raw materials in the country, Pakistan too could have excelled in global synthetic textiles market. However, domestic policies and market conditions have hindered the country’s foray into this emerging market.
The North Carolina textile sector has made a slow climb back from near extinction to a growing, vibrant center of the US textile industry. The state’s diverse textile workforce encompasses more than 42,000 skilled professionals, including some 28,000 workers that comprise the largest textile mill industry in the US. That represents more than ten per cent of the 2,22,000 working in the textile apparel and home goods sector across the country in May.
North Carolina also has a strong business environment. At three per cent, North Carolina has the lowest corporate income tax rate in the US, while its average industrial electricity rates run more than eight per cent less than the US average. Large apparel and textile companies, such as Gildan Activewear and Unifi and VF, have already established their headquarters in North Carolina.
RK Industries, a large apparel manufacturer based in India, opened its first US factory in the state last year. The company has had long-term relationships with US brands and saw a chance to better serve them by opening a facility in the US amid the increased demand for faster order turnarounds taking shape in recent years. The facility has been doing well, with capacity of 700 to 800 woven shirts a week and plans to grow to 1200 pieces a week.
Nepal has sought withdrawal of Bangladesh’s restriction on yarn imports through the Banglabandha land port in Bangladesh saying that the ban was causing financial losses to Nepalese manufacturers. Nepal also wants to yarn exports through the port in Tetulia of Panchagarh.
Nepal has repeatedly been seeking permission for export of yarn, particularly acrylic yarn, to Bangladesh. Nepal exports only acrylic yarn. Bangladesh imposed the restriction on yarn import through land ports back in 2002 to safeguard local cotton yarn industry. Bilateral trade between Nepal and Bangladesh takes place through Banglabandha and Fulbari (Shiliguri of West Bengal) land ports.
Bangladesh textile mills have expressed concern that there is a possibility of yarn coming from a third country if Bangladesh permits import of the product through Banglabandha from Nepal.
Bangladesh will decide depending on the physical infrastructure, manpower and other facilities including laboratory at the port, and the interests of the country. Other relevant factors are the number of spinning mills and the quantity of yarn exports of Nepal and the possibility of export of yarn from a third country that misuses the permission before taking any decision on the issue.
Japan and the European Union have signed a free trade agreement. This will create the world’s largest open economic area. The deal removes EU’s 10 per cent tariff on Japanese cars and three per cent on most car parts. It would also scrap Japanese duties of some 30 per cent or more on EU cheese and 15 per cent on wines, and secure access to large public tenders in Japan.
Europe’s food sector is one of the biggest winners from the deal, which should allow it to capitalize on Japanese demand for high-quality cheese, chocolates, meats and pasta. Japanese car and car parts makers are also expected to increase sales to Europe, where they have lagged behind European rivals.
However, Japan’s dairy industry is expected to lose market share to European products once tariffs of up to 40 per cent on some cheese imports start coming down. Japan and the EU account for about a third of global GDP and their trade relationship has room to grow. The agreement is expected to boost the EU economy by 0.8 per cent and Japan’s by 0.3 per cent over the long term.
The trade pact comes amid fears that a trade war between the United States and China will diminish the role of free trade in the global economic order.
