Aladi May2 2005

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Transcript of Aladi May2 2005

  • 1.T&C Trade Challenges for Latin America The ATC Ended Is T&C a Normal Sector? Presentation byMr. Matthias KNAPPE ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005

2. T&C is not (yet) a Normal Sector for Business

  • Purely rules-related: T&C is a normal sector
  • But :
  • Non-optimal preparation for competition despite 10 years anticipation
  • Industry is swimming and a new competition wave is expected with DDA
  • Present concerns distract from DDA
  • No special treatment anymore (1 classroom)

3. Structure

  • T&C Trad e
  • in Latin
  • America

7 Challenges For LA Finding Responses 4. Characteristics of T&C industry in South America

  • Poor market diversification: mainly to US
  • Poor product diversification: underwear, knit-shirts, trousers & nightwear
  • Mainly CMT/maquila: full-package to be developed; only few countries are vertically integrated
  • Poor linkage between foreign investors & local industry
  • Insufficient use of regional opportunities

5. US Imports 1 stQuarter 2005

  • Jan & Feb strong, March lower growth
  • China: up 107%* for apparel but strong increase in key cotton products (338/9): 1257%; 347/8: 1521%; 352: 308%
  • But: strong growth from preferential suppliers (CAFTA:knit; Andean: knit & woven; focus is on duties; rather shifts within than between regions
  • But: how reliable is the data: e.g. EU confusion

* For Jan/Feb 2005; Source OTEXA 6. T&C Exports from ALADI Countries in 2003 7. US Imports from ALADI 3 year comparison 8. US Import changes from ALADI 2004- 2005 9. US Imports fromALADIin2004 10. US Apparel Imports by Region Source: OTEXA and emergingtextiles.com 11. US Apparel Imports by Region Source: OTEXA and emergingtextiles.com 12. Structure

  • T&C Trad e
  • in Latin
  • America

7 Challenges For LA Finding Responses 13. World Garment Exports: Declining Growth Rates Source: WTO; idea: D. Birnbaum 14. 1. Prices will fall further More supply and quota rents are gone Source: Robin Anson, Director Textiles Intelligence; ITMF, Dresden October 2003;www.textilesintelligence.comand Textile Outlook International No. 110 March-April 2004 15. US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA China prices down: 9% on average but up to 50% in key products in US (35% in EU) 16. US Apparel Imports Unit Value Jan 05 to Jan 04 Source: OTEXA 17. 2. C ountry & Enterprise Consolidation Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administrations efforts on textile issues; Washington, September 2002 18. Changing Enterprise Requirements

  • Mega companies or smaller flexible firms >
  • Supplier has more responsibility
  • Speed to market counts (standard apparel: timely replenishment; fashion apparel: quick response)
  • Trade policy and foreign investor response were key for apparel export development in many LDCs

19. Mega Companies: Global Process for a Dress Shirt Selected by fabric mill & quality is fine Good relationship & good in piece dye Vertical setup by fabric mill Major shirt factory in TAL Cotton Yarn Fabric Garment Retailer Pakistan HK China OPA Malaysia US Button Label Thread China US China Cheaper & close to factory Supplier nominated by Customer Malaysia Inter- lining Malaysia Or Japan 20. 3. China as a WTO Member & Major Player

  • US clothing imports from China: 2002: +60%; 2003: +46%; 2004: + 32%; Jan-Apr 2005: +67%
  • Japan: 85% of all clothing imports from China
  • Australia: 69% of clothing and 21% of all textile imports from China
  • January 2005 exports to EU: Knit apparel up 163%; woven apparel up 80%
  • January 2005 exports to US: Knit apparel up 111%; woven apparel 79%

21. Source: China Customs, 02/05 Chinas T-Shirt Exports to the EU in Jan 05 22. US Imports of Cotton T-Shirts Jan 05 Jan 04 Source: OTEXA 23. 4. Use of Trade Remedies

  • Safeguards (fairly traded imports)
  • Antidumping duties (unfairly traded imports): mainlyyarns, fabrics & made ups; trade chilling effect
  • Countervailing duties: Unfair trade practices
  • T&C products as targets for retaliation in dispute settlement cases.
  • Possibility of new quotas against China
  • 1) Special T&C Safeguards until 31/12/2008
  • 2) Product Specific Safeguards until 10/12/2013 (all products, not only T&C)
  • To be discussed in detail tomorrow

24. Discriminatory Trade Policy Decision Influence Sourcing Decisions Source: USA-ITA 25. 5. Doha Trade Negotiations and T&C

  • NAMA Negotiations: reduction of high tariffs, tariff peaks and escalations; specific formula; sector approach?; additional provisions for LDCs & newly acceded countries (less than full reciprocity)
  • Adjustment related issues impact NAMA
  • Rules negotiations (e.g. ITCB request on AD)
  • Identification, categorisation, examination & treatment of NTBs
  • South-South trade under NAMA or GSTP?
  • ITCB and its future role for South America
  • Market access & development aspects of cotton

26. 6. Multilateral vs. Complex System of FTAs

  • CAFTA/Andean RTA negotiations distracts from NAMA (short vs. long term)
  • RTAs need to provide new benefits, incl. regional cumulation
  • But NAMA can erode these preferences
  • Other countries also receive preferences:
  • AGOA and Canada with easy RofO
  • QIZ in Jordan and Egypt
  • EU: New GSP scheme, incl. cumulation

27. But Preferential & Differential Treatment is Equally Important Source: USA-ITA 28. 7. New Rules (e.g. FTAs, RTAs, Security)

  • Preferential treatment: continued USCBP intervention
  • Codes of Conduct - Ethical Sourcing
  • ECO Labelling: Remain voluntary but can reduce market access
  • Security: US Customs-Trade Partnership Against

29. Summary: / Challenges

  • 1. Price reduction
  • 2. Consolidation
  • 3. China? Or rather ImprovingCompetitiveness
  • 4. Use of trade remedies
  • 5. DDA and T&C Trade
  • 6. Multilateral approach vs. FTAs/RTAs
  • 7. Imposition of new (buyers) rules

30. Structure

  • T&C Trad e
  • in Latin
  • America

7 Challenges For LA Finding Responses 31. Closer Regional Cooperation

  • Small countries will not be able to develop a vertically integrated industry
  • A regional (or inter-regional) vertical approach is needed
  • RTAs need to integrate closer regional cooperation, incl. Regional sourcing, CAFTA example
  • RTAs could lead to product & market diversification
  • AFTEX: developing regional complementarities & exploiting synergies: and in Latin America

32. 3 Areas of South-South Trade Development

  • a) DCs as a market;
  • QUAD market: 80% of world imports; post-ATC growth rate expected to be 1-5%
  • Large DC will grow much faster
  • GSTP could be a door-opener
  • b) S-S Trade of intermediaries to export to traditional markets (value chain cooperation)
  • c) Improve relationship with foreign investors
  • TCDC is key for all three areas
  • Cotton development needs to be seen in light of
  • S-S trade

33. Hubs & Spokes Changes to Hub & RegionalHubs USA CR DR ES G N K S N M L H CAFTA Sub Saharan Africa Mex & CAN What is in it for South America? 34. Diversifying into MMF Apparel Exports to US

  • The production skills set is not very different, but sourcing skills are needed
  • Improving buyer relationship as any diversification strategy needs cooperation with buyers (to expand & to support the product switch)
  • Partnership with national and/or regional suppliers
  • Joint marketing of regional apparel and textile companies

35. US Imports from SA: Fibre Composition 36. The Phenomenon: Most Duty-free Access Utilisation is for Cotton Apparel Andean AGOA Jordan CBI World 37. Tariff Peaks for Cotton & MMF Apparel Source: USAID and USITC 38. Summary

  • Closer Regional Cooperation (macro and meso level (AFTEX example)
  • South-South Trade at 3 levels
  • Diversification into MMF products coupled with south-south cooperation

39. THANK YOU ! For more information http://www.intracen.org/textilesandclothing Contact:Matthias Knappe , Senior Market Development Officer [email_address] 40. WTO Rules GoverningT&C Trade From 2005 Presentation byMr. Matthias KNAPPE ALADI Secretariat Montevideo, Uruguay, 25-26 May 2005 41. Rules prevailing from 1 January 2005

  • WTO principles of transparency & non-discrimination
  • Exceptions: regional trade agreements & special and prefe