Tariff increase on Chinese imports to escalate prices, hinder growth
"The apparel industry is waiting with bated breath for the much-anticipated meeting between President Trump and Chinese President Xi Jinping that will decide the future of US tariffs on Chinese exports. Trump is expected to slap tariffs on another $267 billion worth of Chinese goods, which also includes apparel and footwear. This would push up tariffs from 10 to 25 per cent in January 2019. China already faces $50 billion worth of tariffs."
The apparel industry is waiting with bated breath for the much-anticipated meeting between President Trump and Chinese President Xi Jinping that will decide the future of US tariffs on Chinese exports. Trump is expected to slap tariffs on another $267 billion worth of Chinese goods, which also includes apparel and footwear. This would push up tariffs from 10 to 25 per cent in January 2019. China already faces $50 billion worth of tariffs.
Escalating tariffs to reverse economic progress
Currently, goods originating in China, including some apparel products and leather, nearly all raw materials used to make textiles, from cotton to cellulosic, polyester and even vegetable fibers, woven and nonwoven fabrics, certain textile machinery, hats and handbags, are subject to 10 per cent tariffs, and escalating the tariff threat could see some of those products facing a higher 25 percent tariffs.
For US companies importing manufacturing inputs or finished products, these additional significant costs will result in higher prices, fewer jobs, slower wage growth and reduced investment. The cost of the trade war can reverse this year’s economic progress.
Negative impact on brands
Julia K Hughes, President, United States Fashion Industry Association believes that more penalty tariffs will
have a negative impact on fashion brands/retailers and customers as prices will rise across the board. The company believes there is a time lag before companies increase prices and it impacts customers. Increasing tariff on clothing and footwear would hurt both the economy and brands/retailers.
To deal with this, most companies have developed a contingency plan which includes shipping some products earlier than usual and shifting some production outside China. However, these actions will also have ripple effect on prices which is expected to rise in many countries and very little unused capacity at the most sophisticated production facilities.
According to Hughes, companies can adopt certain strategies in the short-term to minimise the price pressure. However, she warns if the duties increase to 25 per cent, there might be a substantial price increase by mid-2019.
Reshore jobs, bolster production
Auggie Tantillo, President and CEO, National Council of Textile Organizations (NCTO) supports the US president’s decision to address China’s unfair trade practices. However, he believes imposing tariffs on apparel and other textile end items would reshore jobs throughout the domestic supply chain. Further, it would bolster production throughout the western hemisphere where there is ample supply from multiple countries. Shifting sourcing away from China to suppliers in the USMCA/CAFTA region would also alleviate any impact to consumers, since producers in this hemisphere enjoy duty-free access to the United States.
Negative effects of non-China sourcing strategy
Rick Helfenbein, President and CEO, AAFA terms 25 per cent tariff as a non-starter. He believes American business operating on tight margins cannot absorb such an increase leading to a rise in prices for American consumers. He also feels an abrupt shift to a non-China sourcing strategy would have a catastrophic effect on its already fragile sourcing eco-system.
Levi’s denim customisation offers creative freedom to customers
To what consumers’ appetites for perfectly damaged jeans, Levi’s has been selling denim customised by Aldridge, rapper Snoop Dogg, actress Sasha Lane, surfer Kelly Slater, tattoo artist Dr. Woo, basketball star Blake Griffin and others.
Model Lily Aldridge, Vice President of technical innovation for Levi's, designs a pair of jeans on an iPad alongside Bart Sights. So does her husband, Kings of Leon singer Caleb Followill, A pair of Levi's designed by Lily Aldridge go through the laser process.
Technology to create personalized experiences
Levi’s plans to expand its customisation program next year where consumers can follow Aldridge’s lead and get their denims customised. The brand will install a laser machine, developed by Spanish company Jeanologia, in one of its stores in the U.S. Online and in stores, consumers will use a similar app to personalise their jeans. Levi’s is yet to finalise the cost for customisation of their jeans.
Lily Aldridge places a tear on a pair of jeans she personalises at Levi's temporary downtown L.A. studio. She has customised so far two pairs of jeans and drew cheetah spots on a back pocket with the laser machine. These jeans are displayed by Bart Sights, Vice President-Technical Innovation for Levi's.
Besides beating fast fashion at their own game, customisation delivers what people need when they want it, and giving them the freedom to express their creativity.
Uniqlo profits up 38 per cent, continues retail expansion globally
Uniqlo’s operating profits have steadily increased each year, with a reported growth in August this year of 38.1 per cent. The Japanese retailer is attempting to take over the European market. This Fall, it opened stores in Stockholm and Amsterdam and has announced more European stores next year, including Copenhagen and Milan.
Uniqlo wants to be known as an important and influential player in the fashion industry. It wants to be Japan’s answer to Zara or H&M. Meanwhile Uniqlo plans to double the number of stores in Southeast Asia and Oceania to about 400 by 2022. The emphasis is on standalone suburban stores meant to extend the brand's reach beyond shopping malls. Standalone suburban locations were key to the chain’s growth in Japan.
The Japanese retailer aims to triple revenue generated in the region in the year ending August 2022. That would mark a faster rate of growth than for Uniqlo overall, which expects revenue to double over the same period.
Besides Thailand, Uniqlo’s presence in the Asean region covers Australia, Indonesia, Malaysia, Singapore and the Philippines. For Uniqlo, the Indian market has the potential to become the next China -- Uniqlo's biggest market outside of Japan.
UK apparel retailers under pressure to comply
There are concerns over the sustainability of the UK fashion industry and the vast amount of associated waste that is channeled to landfills. In the UK, some 235 million items of clothing are sent to landfills a year and 1.3 billion tons of carbon emissions are produced by the global fashion industry.
As consumer awareness increases, this year has seen an unprecedented war on single-use plastic with most companies ditching plastic straws and plans announced by many to reduce waste, the fashion industry might have to change its tune of denial. Rock-bottom prices by UK fast fashion retailers are leading to a throwaway culture.
Fast fashion retailer Primark is planning to launch a take-back scheme next year, where clothes can be returned once they are no longer wanted and used by overseas charities. While this scheme is a step in the right direction, it is not enough and presents the industry with the problem of what to do with all the garments returned as the UK lacks an industry that deals with these materials. With UK high-street already struggling, retailers may have to consider being drivers of change rather than risk being branded as unethical by consumers down the line.
Pakistan: PCGA opposes import of raw cotton
Pakistan Cotton Ginners Association (PCGA) has opposed the import of raw cotton through Torkham and Wagah borders, terming it against the law and detrimental to local cotton growers as well as the national interests. They argue granting permission to cotton import through Torkham or Wagah border was unlawful as cotton can only be imported through the seaport. They suggested the government to impose regulatory duty and sales tax on the imported cotton to save the local market.
They feared granting import permission would not only depress the local cotton prices to the disadvantage of growers but may also hurt the indigenous crop because the country had no fumigation facilities at the borders to make the import pest free.
Quoting import law, the PCGA office-bearers said the import was also illegal for raw cotton as it could only be imported with prior permission of the DPP and adopting phytosanitary measures complying with the Plant Protection Quarantine Act 1967, which also disallows cotton import other than Karachi seaport, where quarantine and fumigation facilities are available. Around 1,947,544 bales were lying unsold in ginneries and another two million bales would be received from the field in near future. In the presence of four million bales in the country, it is an unwise decision to allow the import of cotton from neighboring countries.
Textiles sector a success story India
The textile industry is the second largest industry in India. India is the largest jute producer in the world and the second producer of cotton and silk worldwide. The evolution of the textile industry has been phenomenal. From being a country that produced to take care of domestic requirements, the sector has grown manifold to become the second largest producer in the world.
Textile structures in technical applications are creating new market potential. The growth and success of Indian textile industries lie in the vertical integration of policies and framework which have helped manufacturers in domestically subjugating the entire process which also bears an impact on the overall cost like raw material treatment, captive power generation etc. This has also led to in-house production of cotton, jute etc.
Natural fibers like cotton, wool, which are currently exempt from tax, are taxed under GST. For example, it is levied at five per cent for cotton and 18 per cent for synthetics, while silk and jute are exempt. Despite this, the textile industry as a whole would benefit from GST. With the advent of GST, various fringe taxes like octroi, entry tax, luxury tax etc, are subsumed. This helps reduce costs for manufacturers.
Istanbul Yarn Fair in February
Istanbul will host its version of the yarn fair from February 28 to March 2, 2019. This event will showcases products like knitted fabrics, cotton yarns, cotton blended yarns etc. in the textile, fabrics and yarns industry. Leading yarn manufacturers from Turkey and other countries will display their innovative and advanced technology products. The trade fair will see 308 companies and company representatives from 15 countries.
The fair hosted 12,498 visitors from 84 different countries in 2018. In the first half of the year, Turkey’s exports increased 7.3 per cent compared to the previous year. The textile and raw materials industry is getting ready to break its record in the history of Turkey given the export rates.
Woven and knitted fabric manufacturing suppliers aimed at meeting the requirements of the market and competing in both domestic and foreign markets, have embarked on a quest for product range in yarn. In this context, fairs meet the needs of woven and knitted fabric manufacturing suppliers so that they can access yarn resources and fulfill renewed and increasing demands quickly.
With robotic technologies being utilised more and more in ready-to-wear clothing worldwide, home textile and ready-to-wear clothing being diversified each year, and the continued search for design and distinctiveness in ready-to-wear clothing, the yarn used in woven and knitted fabric manufacturing has gradually become very important.
VITAS, WWF launch water risk report for textile and garment industry
The Vietnam Textile and Apparel Association (VITAS) and the World Wildlife Fund (WWF) launched a water risk report for Vietnam’s textile and garment industry and a tool for assessing water risks in the Mekong region in Ho Chi Minh City. The report “Textile and Garment Sector in Vietnam: Water Risks and Solutions” features 12 recommendations of the WWF to boost links among relevant agencies of the sector while promoting the management and improvement of water resources and sustainable energy use.
According to VITAS, Vietnam ranks fourth among textile exporting countries in the world, after China, India and Bangladesh. In the first half of 2018, total export turnover of Vietnam’s textile and garment industry reached $16.5 billion, up 17 per cent over the same period last year. Foreign direct investment (FDI) into the sector hit U$2.8 billion, lifting the accumulated FDI in the industry to $17.5 billion, with the Republic of Korea; Japan, and China being the biggest investors.
According to Van Ngoc Thinh, Country Director of WWF, as Vietnam’s textile and garment industry depends significantly on water and energy for production, it needs the initiatives to promote its sustainable development, thus contributing to the national economy and ensuring goals on environment.
India leads market for adaptive clothing
The global adaptive clothing market is expected to grow at a CAGR of 4.1 per cent over 2018 to 2026. Demand for adaptive clothing from an aging population and rising disabilities in adults and children worldwide is fuelling growth in this sector.
The increasing percentage of people with disabilities in the US is expected to propel growth of the adaptive clothing market. The percentage of people with disabilities in the US increased to 12.8 per cent in 2016 from 11.9 per cent in 2010.
Asia Pacific is expected to witness high growth, owing to the significant amount of population with various disabilities, particularly in economies such as India. Around 2.21 per cent of the population in India has some type of disability. Although the low presence of adaptive clothing retailers in the country is hindering market growth, it is also providing growth opportunities for new companies to enter the adaptive clothing market.
Demand for stylish adaptive clothing is rising as such clothing, apart from providing solutions to disabled people, also provides a stylish look. Brands such as Runway of Dreams and Tommy Hilfiger are offering a wide range of stylish adaptive clothes for disabled children and adults.
China to overtake US in world fashion market in 2019
According to the Third annual State of Fashion Report, co-published by McKinsey & Company and Business of Fashion, US will cede its position as the world’s largest fashion market to China in 2019. The McKinsey Global Fashion Index forecasts growth of 3.5 to 4.5 percent next year, which will come in slightly below the predicted 4 percent to 5 percent growth for 2018.
The report emphasises in the coming year, companies need to take an active stance on social issues, satisfy consumer demands for ultra-transparency and sustainability, and, most importantly, have the courage to ‘self-disrupt’ their own identity and the sources of their old success in order to realise these changes and win new generations of customers. They also need to invest in enhancing their productivity and resilience, as the outlook is increasingly uncertain. External shocks to the system continue to lurk around the corner, and growth cannot be taken for granted.
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Pakistan gets duty relaxation on exports from Indonesia
Indonesia has abolished import duties of up to 30 per cent on 20 some Pakistani products. The aim is to secure the future of more than $1 billion of palm oil exports to the South Asian economy that is shifting to a new supplier.
In January, Indonesia and Pakistan finalised the review process for the preferential trade agreement. Indonesia has agreed to grant tariff concessions on major exports from Pakistan, including zero per cent tariff on tobacco, textile fabric, rice, ethanol, citrus, woven fabric, T-shirts, apparel and mangoes.
On an annualised basis relaxation of tariffs will enhance exports from Pakistan to Indonesia by 133 per cent and reduce the deficit by 15 per cent. Indonesia has long been mulling import duty concessions for 20 tariff lines, including rice, mangoes and value-added textiles, under the revised preferential trade agreement originally signed with Pakistan in February 2012.
Global jeans market to be worth $60 bn by 2023: Study
As per a new report ‘Global Market Review of Denim and Jeanswear’ by apparel sourcing publisher just-style, the global jeans market will be worth $60 billion by 2023. The report predicts a growth of 4.9 per cent over the next five years from $57 billion in 2018, with the US set to remain the largest jeans market, with China the second largest.
The fastest growing markets are predicted to be South America, with 12.1 per cent growth, and the Rest of the World (all markets excluding North America, Europe, Turkey, Asia and South America), with 19.7 per cent growth. The report also identified a major shift in China’s market, with nearly half of the country’s jeans production now remaining in the country instead of being exported. The study estimates that around 22 per cent of manufactured jeans are now traded outside the traditional retail markets in exchange for goods or services rather than currency.
Textile industry takes steps to detox from harmful chemicals
"As per Chinese Textile Industry Association, the textile industry uses 25 per cent of global chemical output. Out of this 42 per cent is used by China reveals the United Nations Environment Program. Greenpeace published a report, Dirty Laundry in 2011 that urged consumers worldwide to demand change in the fashion industry. The report outlined the wastewater in textile industry zones of Guangdong and Zhejiang contained cancer causing chemicals harmful to reproduction. Supply chain investigations linked the products from those factories with global brands like Adidas, Nike, H&M and Zara."
As per Chinese Textile Industry Association, the textile industry uses 25 per cent of global chemical output. Out of this 42 per cent is used by China reveals the United Nations Environment Program. Greenpeace published a report, Dirty Laundry in 2011 that urged consumers worldwide to demand change in the fashion industry. The report outlined the wastewater in textile industry zones of Guangdong and Zhejiang contained cancer causing chemicals harmful to reproduction. Supply chain investigations linked the products from those factories with global brands like Adidas, Nike, H&M and Zara.
A few months later Chinese non-governmental organisations, including the Institute for Environmental and Public Affairs and Friends of Nature, published a report on fashion’s polluting practices, warning global mega-brands of severe breaches of regulation in their Chinese supply chains, with a grave impact on the country’s water environment”.
Leading manufacturers like Inditex (Zara’s owner) and H&M, along with Puma, Nike and Adidas, are committed to ending the release of harmful substances from their supply chains by 2020. The key elements of that commitment include management of chemicals used in the supply chain, information transparency and the replacement of harmful chemicals with alternatives.
Companies detox to rid off harmful chemicals
Before the report was published, the textile industry focused on the quality of products and use of chemicals in
them. As per the report, 80 fashion brands and suppliers, accounting for 15 per cent of the global clothing market, have agreed to “detox”. These companies are setting up a Manufacturing Restricted Substances List (MRSL), often described as a harmful substances blacklist that can guide the elimination of harmful chemicals from the manufacturing process.
In 2012, H&M published its MRSL along with a list of endorsed alternative chemicals. It then started training suppliers to understand the importance of these changes.
Managing and replacing harmful chemicals
Management of these chemicals involves the entire supply chain including the wet processing stage, where companies have to provide training and technical support to build these capacities from scratch. Supply chain transparency can help this process if companies publicise their progress and ensure that more suppliers make wastewater monitoring data public.
Ultimately, we need to replace the chemicals that cause harm but cost and availability of alternatives is the toughest part of the process. The role of industry consensus in this can be deciphered from the replacement of dimethly fumarate (DMF). A widely used solvent in the textile and leather industry, DMF was listed by the EU as a Substance of Very High Concern (SVHC) for being hazardous to health. On searching for an alternative, fashion brands found a solution of synthetic leather and so several major firms required the removal of DMF from their supply chains, with deadlines ranging from 2020 to 2025.
Policies for making chemical management easier
Spurred by the emergence of online shopping and e-commerce, the textile and clothing industry is dominated by small firms, which makes change more difficult. In China, many factories supply lesser-known brands, or produce cheap unbranded clothing. This means the bulk of the clothing supply chain is not subject to strict chemicals management.
H&M’s Veera Sinnemaki agrees government policy is needed for the industry to change. Policies holding chemical companies accountable will make chemical management much easier for both brands and suppliers. In April, a number of large Chinese suppliers of dyes, additives and chemicals to the clothing sector launched a voluntary initiative to produce a ‘Manufacturing Restricted Substances List’ and a positive list of preferred substances that apply to their own sector. This would integrate several existing industry standards.
KV Srinivasan appointed new chairman of TEXPROCIL
Texprocil has appointed KV Srinivasan, Managing Director, Sree Narasimha Textiles, Premier Mills and Premier Fine Linens as the new chairman. He is a Committee member of the Cotton Textiles Export Promotion Council from 1998.
A B.Tech in Textile Technology from PSG College of Technology and MSc in Textile Technology from the University of Manchester, Srinivasan is also the chairman of the South Indian Textile Research Association, Coimbatore.
