The Future of the Asia-Pacific Region as a Textile and Apparel Sourcing Destination: Discussion Questions Proposed by FASH455

asia-pacific-economy-v7

#1 How have US importers/retailers/fashion brands which source from China reacted to China’s rising labor cost in recent years? Any specific examples of companies’ practices and strategies?

#2 It is widely reported that China’s labor cost has been rising quickly in recent years (around 14% annually between 2010 and 2014). But trade data didn’t show a significant drop of China’s textile and apparel exports to the US. Why is that?

#3 Why do you think people have a conception of China being a “highly reliable” sourcing destination for textile and apparel? What is China’s unique competitiveness?

#4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?

#5 In the class we discussed the “flying geese model” and the phenomenon of “Factory Asia”. Particularly, Asian countries are forming an ever more integrated textile and apparel supply chain—for example, apparel manufacturers in Asia are gradually using more textile inputs made in Asia rather than made outside the region. Does it mean that the United States has no role to play in Asia-based textile and apparel supply chain? Will the TPP make a difference?

#6 Should US allow China to join the TPP? Why or why not? If China joins the TPP, what will be the implications for the pattern of textile and apparel trade in the Asia-Pacific region?

 #7 What is the relationship between the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP)? Alternatives? Competitors? Friends? Foes? Why are there so many different free trade agreements (FTA) in the same region?

Please feel free to share your thoughts and recommend any additional articles/readings/resources relevant to the discussion. Please mention the question # in your reply.

 

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Author: Sheng Lu

Professor @ University of Delaware

28 thoughts on “The Future of the Asia-Pacific Region as a Textile and Apparel Sourcing Destination: Discussion Questions Proposed by FASH455”

  1. #1 How have US importers/retailers/fashion brands which source from China reacted to China’s rising labor cost in recent years? Any specific examples of companies’ practices and strategies?

    US importers, retailers and fashion brands react negatively to China’s rising labor costs. Because china’s labor costs are rising that means that either US brands need to raise their retail prices or they need to source from other countries. For example, some countries have been sourcing in Vietnam because of their low labor costs.

  2. #4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?

    I believe it would be in the U.S. best interest to invest in Vietnam because they seem to be the growing country for T&A. Maureen Gray even reiterated in class how Vietnam is the rising country to look out for in the industry. They have low wages and low levels of capital, so will be beneficiary in the apparel making industry.

  3. #4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?

    I believe it would be in the U.S. best interest to invest in Vietnam because they seem to be the growing country for T&A. Maureen Gray even reiterated in class how Vietnam is the rising country to look out for in the industry. They have low wages and low levels of capital, so will be beneficiary in the apparel making industry.

  4. #4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?

    I think it is in the United States’ best interest to invest in the textile industry in Vietnam. I think that this is the most beneficial way for both the US and Vietnam to succeed. Vietnam does not have a lot of capital to start their own textile mills and importing textiles from the US would be too costly and drive Vietnam to source textiles from other regions closer to them. So having US owned textile mills in Vietnam would allow for the US to continue to essentially “export” their textiles to Vietnam and keep trade open between the two.

  5. #2 It is widely reported that China’s labor cost has been rising quickly in recent years (around 14% annually between 2010 and 2014). But trade data didn’t show a significant drop of China’s textile and apparel exports to the US. Why is that?

    China has long been the top apparel supplier to the U.S. market. It exported $30,540.90 worth of apparel in 2015 alone. Other countries are almost no match for China with the runner up being Vietnam at $10,563.80 during that same year. A rising labor cost in China hasn’t shown a significant impact on its apparel exports to the U.S. In fact, the amount of apparel imported from China has been increasing every year. It is to be noted that in recent years, that number has sort of plateaued off to a slow increase, but it is increasing nonetheless. With an immersive population with a vast range of factories, resources, and laborers, China is ideal for manufacturing. The more fabric-forward apparel industry takes the comparative advantage here because the Chinese can produce so much more at a faster rate and cheaper cost than the Americans can. With fast fashion being a big source of millennial consumer demand, China will be hard to compete with, even with a rising labor cost in the present.

    1. Do you mean the growing popularity of the “Fast fashion” business model will bring advantages to China as a sourcing destination? This is an interesting point, but why is that?

      1. It is true that fast fashion has become very popular amongst the millennial generation. China is a dominate source for fast fashion production being as the country has a vast number of factories and laborers to keep output up to speed with the demand.

  6. In response to question #4, I think it is in the best interests of the United States to become one of the investors in Vietnam. Vietnam is the future of the textile industry. As we talked about in class, Vietnam is only 10 years away from being able to produce textiles. Therefore I think the United States should invest resources in Vietnam so that Vietnam can become one of their partners rather than one of their competitors. I wonder what will happen to the United States textile industry once Vietnam can successfully produce textiles. Do you think that the United States will lose its ranking as one of the textile producing leaders when Vietnam is able to produce textiles? Do you think other countries will prefer to use Vietnam based textiles over US based textiles?

    1. Great question and excellent questions! In my personal view, the US textile industry has a very bright future. The industry may not be growing in size, but definitely it is changing in nature–becoming more innovative, high-tech driven and higher-value added. Industrial and technical textiles are the future of the US textile industry and I don’t think developing countries such as Vietnam can easily catch up in these areas. here is a great article you can read: http://www.textileworld.com/textile-world/features/2016/05/2016-state-of-the-u-s-textile-industry/

  7. #7 What is the relationship between the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP)? Alternatives? Competitors? Friends? Foes? Why are there so many different free trade agreements (FTA) in the same region?
    The RECP is seen as the alternative to the TPP trad agreement which excludes China and India. Because China was excluded from the countries negotiating the TPP they responded by promoting the RECP which excludes the U.S. The RCEP includes a vast array of rules about investment, economic and technical cooperation, intellectual property, competition, dispute settlement and government regulation. I would classify the two trade agreements as alternative concepts. The RCEP is an exercise in harmonizing and integrating existing FTAs between ASEAN and its individual partners, while the TPP is an attempt by the United States and others to create a new, more ambitious 21st century trade agreement with much higher standards. There are so many different trade agreements because not all countries have been included in agreements that have been made and because of the many different view points around the world.

  8. In response to question two, I believe their exports have not dropped because of their complete supply chain. China has developed greatly in recent years, which is the reason for their higher labor costs, but it also means they can produce more products efficiently. Textiles can be produced in China, as well as apparel, which gives them a competitive advantage over many developing countries who must import the textiles to produce the apparel. Transportation costs are lower in China’s production because of this, and that fact could help balance out the rising labor costs.

  9. I think that the United States should invest in the textile industry in Vietnam, this seems to be something that would be in their best interest. Vietnam is the future of the textile industry and it would be important for the United States to create a friendship with them and work together with them in this industry. By working together, it could be very beneficial for both countries.

    1. Since Trump has announced to withdraw from TPP on day once, do you think those investments already made in the Vietnamese textile industry will “feel regretted”?

  10. #2 It is widely reported that China’s labor cost has been rising quickly in recent years (around 14% annually between 2010 and 2014). But trade data didn’t show a significant drop of China’s textile and apparel exports to the US. Why is that?

    Although China’s labor costs has been rising quickly in recent years the exports to the US have not dropped. I think this is because China has the ideal environment for manufacturing with many factories and many skilled workers. The US has no where near as skilled and experienced workers as does China. Because of the increase in fast fashion the US cannot stop sourcing from china because they need the clothing to be made extremely quickly. They are taking the risk of spending a higher price on the labor rather then stopping the sourcing and losing money because they won’t be able to keep up. I don’t see a decrease in the textile and apparel exports from China to the US any time soon.

    1. on the other hand, I think the industry is still actively looking for China’s alternative. But after a careful search, they couldn’t find any ideal replacement…

  11. Responding to Question #2, I think China’s textile and apparel exports to the U.S. haven’t dropped because despite increased labor costs, China is in the fourth stage of the textile complex noted as “Golden Age Stage”, becoming highly efficient compared to other countries in apparel manufacturing. Countries like Bangladesh cannot compete with China’s fast and more reliable production (except perhaps by having lower labor costs–but even then Bangladesh still has issues remedying factory floor production/conditions as we discussed in the Rana Plaza case study).

  12. In response to Question #3, people have a conception of China being a “highly reliable” sourcing destination for textile and apparel because it is in the “Golden Age” stage of apparel manufacturing. This is the fourth stage of the textile complex in which countries become more efficient in capital intensive manufacturing.

  13. #1 How have US importers/retailers/fashion brands which source from China reacted to China’s rising labor cost in recent years? Any specific examples of companies’ practices and strategies?

    The reaction from the US about the rising cost of labor in China has been negative in recent years and has caused many importers, retailers, and fashion brands to look elsewhere for sourcing. In order for the many US fashion brands that rely fast fashion to drive business, they need sourcing to be inexpensive. Many companies have looked towards Bangladesh and Indonesia for cheaper labor but have not been able to find the quality that they are able to receive when sourcing from China. Chinas exports to the US have not declined because although companies are searching for cheaper alternatives they can not find any that compare to China.

  14. #4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?

    I do not think the U.S. has the interest to invest textile factories in Vietnam. Because of the yarn forward rules of origin in TPP, Vietnam has two options to find new sources of textiles, one is building own textile factories by domestic and foreign firms, another is using US-made textiles. The U.S. would be happy if Vietnam increasingly using their own textiles due to the yarn forward rules, so I think the U.S. would not be interested to become investors because they want Vietnam to use their own textiles even though it could build the friendly and close relationship.

  15. #3 Why do you think people have a conception of China being a “highly reliable” sourcing destination for textile and apparel? What is China’s unique competitiveness?
    I believe that many people, especially U.S. consumers have the idea that China is a highly reliable souring destination because so many of the goods we purchase are considered Made in China. Many of the fast fashion clothes have tags that do bare the label of Made in China, and even products such as pencils are made in china. I think that consumers have a high level of trust in China because so many of our goods are produced there and they realize the opportunity and benefits from our relationship with this country. China’s unique competitiveness is there versatility of products including apparel and textiles, and other forms of goods. I also believe that China has had so much experience in this kind of labor intensive environment and work force, so they are capable of being efficient while still have somewhat of a low pay wage.

  16. #4 Many domestic and foreign firms have started investing in textile/fiber factories in Vietnam because of the yarn forward rules of origin in TPP. Would it be in the United States’ best interest to become one of these investors? Why or why not?
    I do not think that Vietnam is the United States’ best interest to invest. Since Donald Trump become the president, one of his strategy is abolishing TPP. Thus, Vietnam would not be the good place for fashion companies to search for sourcing. The United States may require high tariffs to import Vietnam’ apparels. I predict that Cuba may be a place that American fashion companies search for sourcing. The important fact that America started to establish diplomatic relationship with Cuba in 2015. And Cuba is ver close to America and the labor force in Cuba is cheap. If TPP does not abolish by Donald Trump, I still do not think that the United States have the best interest to invest Vietnam. First, since Vietnam only has limit resource for producing textiles and Vietnam is far away from west hemisphere, it is hard for Vietnam to offer large exporting apparel volumes. Moreover, Vietnam is already the second largest apparel importing country of America.

  17. in regards to question 3 I feel the unique advantage China has on other nations is the size of the country. I think China gets the title of being reliable and cheap manufacturing because of the sheer number of factories there, and because there are so many it is easier to find a “good” factory among the bad ones than if you are in a small country that has far fewer factories. It might not seem like the smaller country is as reliable because they have a smaller room for error than a large country like china so in comparison china seems more reliable.

  18. All are very interesting and important questions. In response to Question #4 I think that the US should invest in Vietnam and it is the smartest choice given all the promise that Vietnam holds in regards to the future. We discussed this in class and Vietnam is not far off from being able to produce textiles and they also have different options for sourcing. However, I now am wondering if Trump withdraws the US from the TPP if this will remain true. It will all depend on the choices that he makes but the US would be silly to remove themselves from this trade agreement and neglect the possibility of opportunity in Vietnam.

  19. #3 Why do you think people have a conception of China being a “highly reliable” sourcing destination for textile and apparel? What is China’s unique competitiveness?

    China remains the top supplier of textiles and apparels to the U.S. market. Some reasons why China is considered “highly reliable” is that it has extensive factories and infrastructure in place, along with a large skilled labor force which optimizes production. Historically, factory workers in China have earned low wages, keeping costs down for manufacturers, who in turn offer competitive prices for retailers in the U.S. Given China’s well-developed factory infrastructure, Chinese manufacturers have the capacity to offer a wide array of goods, appealing to many different retailers in the U.S. This reaffirms China’s position as a powerhouse in the global supply chain. Moreover, according to “2016 August Sourcing at Magic Debriefing”, Chinese vendors are actively investing overseas, helping them to become “super vendors” that are irresistible to many U.S. retailers. In sum, China’s established infrastructure and continued investment activity reaffirm its position as a powerhouse supplier in the global T/A chain.

  20. In response to question two, I think that the United States has not been able to find another country that can replace China in terms of exporting and China is not the only country that the United States trades with that has seen increases in labor costs. Right now, the United States is very dependent on China for a majority of the goods that are imported into the country so replacing them as an exporter will take time and there may not be a country right now that exists to take this on. Cheap labor is not the only driving force behind why the United States practices in so much trade with China. China has very strong and notable technological development. It is is in the fourth stage of the textile complex which is referred to as the Golden Age Stage. What this means is that it is becoming highly efficient compared to other countries in apparel manufacturing. Other countries that produce apparel that have less technology, (like developing countries) do not have the infrastructure to compete with China. These countries may have the employees but that is only half of the mix, they are lacking the machinery, facilities, and technology that China has and to be on top you need to have both.

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