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Modern slavery risks have risen in nearly three quarters of the 28 member states of the European Union over the last year. The migrant crisis has increased the risk of slavery incidents appearing in company supply chains across Europe. Greece is host to significant number of migrants and remains a key destination for human trafficking. It is no longer just the traditional sourcing hotspots in emerging economies that businesses should pay attention to when risk assessing their suppliers and the commodities they source.
Turkish textile factories have been associated with high profile incidents of child labor and slavery. Asian manufacturing hubs, Bangladesh, China, Indonesia, Malaysia, Myanmar, the Philippines and Thailand, all feature in the extreme or high risk categories. China, the top exporter of garments, is categorised ‘extreme risk’ in the index and is ranked 21st worst in the world. It has registered a slight increase in risk, driven by inadequate enforcement and reports of severe forms of modern slavery.
Bangladesh and China have recorded incidents of forced labor, servitude, trafficking, prison labor and generational debt bondage. Trying to eradicate slavery in garment exporting countries is a big challenge, given the prevalence of exploitation, but there are signs of improvement.
China’s textile industry has turned to water conservation measures. There is a cap on water use and tough new controls on polluting industries. The textile dyeing and finishing industry is taking action in key areas, including adoption of upgraded technologies and a requirement for advanced water efficiency and wastewater reuse.
Progressive, innovative textile mills are embracing regulatory changes – using it as a means to separate their business from less reputable operators. As a first step, they are halving water and energy use by adopting dye innovations and process improvements. Promising innovations and developments are helping mills make dramatic savings without requiring investment in new plant or equipment. They are using eco-friendly dyes which compared to commodity dyes help mills reduce water consumption by up to 50 per cent.
Other simple changes like fixing leaks, installing sensors and water meters, and collecting the monsoon rains, can also pay big dividends. Stricter regulatory enforcement and growing consumer concerns mean that pollution will no longer pay in China and factories that are unable or unwilling to invest to meet the stringent new standards will no longer be viable. Environmental issues are now global, and few brands can afford to compromise their standards in the face of calls for greater supply chain transparency.
In the first half of 2017 Cambodia’s garment exports grew four per cent compared to last year’s nine per cent. One reason for dip was stiff competition from Myanmar and Vietnam. Another reason was a rise in minimum wages for textile and allied sectors. This resulted in higher production costs, thereby cutting into manufacturers’ margins.
Some other factors are affecting Cambodia’s trade balance. For one, it has lost its preferential trade access to EU countries owing to an upgrade of its economy by the World Bank. The Bank accorded Cambodia lower middle income country status. The non-availability of preferential rates will last for next three years. Also FDI inflow into the garment sector took a sharp 30 per cent dip in initial quarter of this year. This compares unfavorably with a five per cent dip that took place in 2016.
Despite the slowdown, the garment industry has proved to be a robust force in expanding Cambodian economy. The dent in Cambodia’s poverty rate in recent years has been largely due to the contribution from the textile and footwear industries. These industries together engender revenue to the tune of $6 billion annually and employ nearly 6,00,000 people, many of whom are from an impoverished rural background.
Cambodian exports to the US from January through June rose by 4.5 per cent compared to the same period in 2016. The vast majority of Cambodia’s exports to the US are garment and footwear products. Cambodian travel goods can enter the US duty-free. The US is one of the world’s largest markets for travel goods. In July 2016 the US removed customs tariffs on Cambodian-made travel products such as luggage, backpacks, handbags and wallets. The items, which previously faced tariffs of between 4.5 and 20 per cent, now enter the US duty-free.
This provision has effectively doubled the size of Cambodia’s travel goods exports in just over a year. Right now, the value of Cambodia’s exports of travel goods is over a $100 million, with the majority exported to the US. However, it could take years before the country sees full benefits of the duty-free privilege. New investors have to be attracted to establish production in Cambodia. Once that happen the country’s exports of travel goods to the US may see a significant increase and contribute a larger export value.
Cambodia plans to submit a GSP duty-free exemption application for its footwear industry. If it’s accepted, it would reduce trade-weighted average for footwear export duties that sits at 10.8 per cent globally.
"At a recent discussion on cotton, majority of WTO members affirmed their support for a meaningful and specific outcome on cotton domestic support, the chair of the agricultural negotiations, Ambassador Stephen Ndung’u Karau of Kenya, highlighted. Ambassador Eloi Laourou of Benin, speaking on behalf of the four West African cotton-producing countries, Benin, Burkina Faso, Mali and Chad (Cotton-4), stressed domestic support remains the cornerstone of cotton trade problem."
At a recent discussion on cotton, majority of WTO members affirmed their support for a meaningful and specific outcome on cotton domestic support, the chair of the agricultural negotiations, Ambassador Stephen Ndung’u Karau of Kenya, highlighted. Ambassador Eloi Laourou of Benin, speaking on behalf of the four West African cotton-producing countries, Benin, Burkina Faso, Mali and Chad (Cotton-4), stressed domestic support remains the cornerstone of cotton trade problem. Laourou said the Cotton-4 countries reflected on their priorities for cotton negotiations when they gathered at the 5th ministerial meeting of the Cotton-4 that took place in April 2017 in Cotonou, Benin. He reminded members that these priorities are to follow-up on the effective implementation of all WTO ministerial decisions on cotton and the progressive phase-out of all forms of trade-distorting domestic support for cotton and its by-products. The Cotton-4 countries have been attempting to derive an outcome on domestic support for cotton at the WTO’s 11th Ministerial Conference to take place in Buenos Aires in December 2017.
Cotton trade policies
Karau informed members these negotiations must be based on recent and up-to-date data on members’ policies and support levels, especially in terms of domestic support. A background paper prepared by the WTO Secretariat was also discussed. The paper provides updated information on cotton based on new notifications, and includes new tables showing export volumes and share of world exports for major cotton exporters.
The WTO Secretariat and International Trade Centre (ITC) deliberated on the market analysis tools that can help members better understand trade trends and policies in the cotton sector and presented a project, ‘cotton portal’ that would provide a single-entry point containing all the information available in the various WTO and ITC databases on market access, trade statistics, notified requirements, country-specific business contacts, etc.
Global cotton market
An International Cotton Advisory Committee (ICAC) presentation highlighted global cotton market is still characterised by a high level of cotton stocks while production has remained stagnant in recent years. India is now the largest cotton producer in the world, followed by China and the US, and the yields for many African cotton producers are still low with some potential to catch up in the coming years. The US is the main cotton exporting country, followed by West Africa and India. Bangladesh is now the largest importer, followed by Viet Nam and China.
Cotton-4 also highlighted the importance of diversifying cotton products for export. Ambassador Sékou Cissé of Mali highlighted African leaders’ commitment to develop cotton value chains in Africa, upgrade skills and create more jobs in the sector. He noted that African cotton value chains are rich in knowhow and traditional craft, and are especially beneficial for women. To achieve tangible results, donors, governments and the private sector must work together to ensure the inclusive and sustainable development of cotton value chains.
US apparel imports dropped 3.4 per cent in June. On a 12-month smoothed basis, apparel imports fell by 2.9 per cent, their smallest drop in 13 months. Stagnant consumer demand for apparel and persistent price deflation at troubled brick-and-mortar retailers weighed heavily on demand. Continued declines in store traffic and seemingly weekly new store closure announcements are causing many stores to rein in inventory. US buyers are placing smaller, more frequent orders with shorter lead times requested.
Total apparel imports declined by 1.9 per cent in the first six months of 2017 compared to the same period in 2016. China lost the most share in US apparel imports in the period, down 0.6 percentage points to 30.9 per cent. Bangladesh lost share, with apparel shipments to the US down by 5.5 per cent in the first six months of 2017.
Among the top ten US apparel trading partners, only Vietnam, Nicaragua and Mexico registered an increase in apparel shipments. Continuing to make headway despite failure of TPP, Vietnam’s apparel shipments to the US grew by 5.5 per cent in the period. On a square meter equivalent basis, imports edged up 1.7 per cent this year, continuing the overall tendency towards cheaper goods, despite upward pressure on labor and raw material costs.
The textile sector in Pakistan wants the four per cent incentive (duty drawback of taxes) on yarn exports to be withdrawn immediately. The textile community says this is necessary since global competition has become tougher and competitors like China and Bangladesh are getting Pakistani yarn at four per cent less cost.
It says manufacturing (stitching) units should be allowed to import yarn, their prime raw material, easily at international prices without any bottlenecks. As of now they are not allowed to import yarn. The value added textile sector in Pakistan contributes 53 per cent of total exports and 89 per cent of total textile exports and generates 42 per cent of total employment.
Globally, there is no duty on import of raw material and duty is always on exports. China and Bangladesh discourage export of raw material and encourage value addition, which is their key to success. However, in Pakistan the situation is the opposite and exporters want this rectified.
Exports of value-added textile sector in Pakistan rose in the first seven months of the fiscal year 2016-17. An incentive package worth Rs 180 billion is being offered to export-oriented sectors, mainly textiles, which accounts for more than half of the annual exports from the country. The package comprises withdrawal and concessions on customs duty and sales tax on import of cotton and machinery.
Ralph Lauren’s inventory levels fell 31 per cent in the first quarter. Adjusted gross margins rose 210 basis points to 63.2 per cent as costs fell. Sales fell 13.2 per cent in the quarter. The company has been trying to reduce the time taken to get its low-end Polo and Lauren products to shelves in nine months from 15. The company has been keeping a razor-like focus on its inventory in an industry battered by sluggish spending and competition from online and fast fashion retailers. It will pull back inventory from 20 to 25 per cent of US department stores during the second half of the year.
Ralph Lauren is looking to partner the right online pure-play retailers. It expects full-year revenue to decline by about eight to nine per cent. The luxury retailer is moving its e-commerce business to a cheaper and more efficient cloud platform. It plans to integrate its products from Fifth Avenue store into the Ralph Lauren men’s and women’s flagship stores on Madison Avenue and its downtown locations.
Ralph Lauren, like other luxury brands, has been struggling as Americans spend less on apparel and accessories, resulting in falling sales in the last seven quarters.
One in three women’s pajamas bought in the United Kingdom is from Primark. Cotton is the biggest fiber used in Primark’s products. For Primark sustainable cotton is about reducing environmental impact of cotton production while improving livelihoods of farmers and doing so in a way that delivers great value to customers.
Last year, Primark undertook a program to pull cotton from the program through its supply chain and into its products. Cotton Connect has played an integral role in this process. It has used its Reel cotton code, independently verified by Flocert, the organisation that provides Fairtrade International certification, to ensure that the cotton produced through the program is sustainable.
Primark’s buying and ethical trade teams have worked hand in hand with Cotton Connect and its suppliers to track the cotton through its supply chain in India. Last week in India, Primark brought together over 80 people from different parts of supply chain -- the Cotton Connect team who are working with the farmers, the ginners, spinners, mills and also garment suppliers. The aim was to see how the program could be scaled further. Only 12 per cent of cotton produced around the world is classed as sustainable.
Michael Kors’ profits dropped 15 per cent in the quarter ended July 1. Same store sales fell 5.9 per cent. Total revenue dropped 3.6 per cent. Michael Kors is known for the popular Mercer and Hamilton handbags.
To reverse an eight-quarter slump in same-store sales, Kors is pursuing a multi-brand strategy for growth and diversifying into new products. Last month, it announced a deal to buy high-end shoemaker Jimmy Choo. The company expects the deal to add about $275 million to sales in the second half of the year ending March 2018, assuming the deal closes by the third quarter.
Kors is also adding more menswear and dresses to its shelves, shrinking the number of stores it owns and yanking a chunk of its products from department stores such as Macy's, where steep discounts to attract customers are the norm.
The efforts yielded a higher average selling price per unit, implying the company sold more goods at full price. That helped operating margins at Kors stores increase for the first time in more than eight quarters.
Once the best known names in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online. Over-distribution of its products and a reliance on promotions to boost sales also eroded some of Kors’ brand value and its appeal.
