WTO Reports World Textile and Apparel Trade in 2016

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According to the newly released World Trade Statistical Review 2017 by the World Trade Organization (WTO), the current dollar value of world textiles (SITC 65) and apparel (SITC 84) exports totaled $284 billion and $443 billion respectively in 2016, marginally decreased by 2.3 percent and 0.4 percent respectively from a year earlier. This is the second year in a roll since 2015 that the value of world textiles and apparel exports grew negatively.

However, textiles and apparel are not alone. The current dollar value of world merchandise exports also declined by 3 percent in 2015, to $11.2 trillion, mostly caused by the strong decline in exports of fuels and mining products (-14 percent). On the other hand, as noted by the WTO, the steep drop in commodity prices recorded in 2015 mostly halted in 2016, except energy prices.

Textile and apparel exports

Measured in value, China, European Union, and India remained the top three exporters of textiles in 2016. Altogether, these top three accounted for 65.9 percent of world exports in 2016, slightly down from 66.5 percent in 2015, which is mostly due to India’s shrinking market shares.

The United States remained the fourth top textile exporter in 2016, accounting for 4.6 percent of the shares (down from 4.8 percent in 2015). Over half of the top ten exporters experienced a decline in the value of their exports in 2016, with the highest declines seen in Hong Kong (-13 percent), Taiwan (-8 percent), South Korea (-6 percent) and the United States (-6 percent). Notably, Vietnam entered the world’s top ten textile exporters for the first time (2 percent market shares, 9 percent growth rate from 2015).

Top three exporters of apparel include China, the European Union, and Bangladesh. Altogether, they accounted for 69.1 percent of world exports, close to 70.3 percent in 2015. Among the top ten exporters of apparel, increases in export values were recorded by Cambodia (+6 percent), Bangladesh (+6 percent), Vietnam (+5 percent), and European Union (+4 percent). Other leading exporters saw stagnation in their export values (such as Turkey) or recorded a decline (such as China, India, and Indonesia).

Could be negatively affected by the rising labor and production cost, China’s shares in the world textile exports dropped from 37.4 percent in 2015 to 37.2 percent in 2016, and the shares in the world apparel exports fell from 39.2 percent in 2015 to 36.4 percent in 2016—a record low since 2010.

Textile and apparel imports

Measured in value, the European Union, the United States, and China were the top three importers of textiles in 2016. These top three altogether accounted for 38 percent of world textile imports, slightly up from 37 percent in 2015, but remains much lower than over 53 percent back in 2000. Notably, over the past decade, apparel manufacturing continues to shift from developed to developing countries and many developing countries heavily rely on imported textile inputs due to the lack of local manufacturing capacity. This explains why more textile exports now go to the developing nations.

On the other hand, affected by consumers’ purchasing power (often measured by GDP per capita) and size of the population, the European Union, the United States, and Japan remained the top three importers of apparel in 2016. Altogether, these top three accounted for 62.9 percent of world apparel imports in 2016, up from 59 percent in 2015. Notably, China is quickly becoming one of the world’s top apparel importers. From 2010 to 2016, China’s apparel imports enjoyed an annual 17 percent growth, much higher than most other countries.

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Trade Issues Facing the U.S. Apparel and Retail Industry

Panel:

  • Steve Lamar, Executive VP at the American and Apparel Footwear Association (AAFA)
  • Jon Gold, VP of Supply Chain and Customs Policy at the National Retail Federation (NRF)
  • Robert Antoshak (Host), Managing Director at Olah Inc.

Topic discussed

  • Renegotiation of the North American Free Trade Agreement (NAFTA)
  • Trump’s trade policy agenda
  • What’s going on in the retail market?
  • Technology and the future of apparel supply chain
  • US labeling requirements and a return of Made-in-USA

What Do You Take Away from FASH455?

I encourage everyone to watch the above two short videos, which provide a great wrap-up for FASH455 and remind us the meaning and significance of our course.

Indeed, I hope students can take away essential knowledge about textile and apparel (T&A) trade & sourcing from FASH455. So far in the course we’ve discussed various trade theories, evolution pattern of the global T&A industry, three major T&A supply chains in the world (namely the “Western-Hemisphere” supply chain, “Factory Asia” supply chain based on the flying geese model and the phenomenon of intra-region T&A trade in Europe) as well as T&A trade policy. Understanding how trade and sourcing work will be highly relevant and beneficial to your future career in the fashion industry no matter as a fashion designer, buyer, merchandiser, sourcing specialist or marketing analyst.

However, more importantly, I hope FASH helps students shape a big picture vision of the T&A industry in today’s global economy and provides students a fresh new way (perspective) of looking at the world. Throughout the semester, we’ve examined many critical, timely and pressing global agendas that are highly relevant to the T&A industry, from apparel companies’ social responsibility practices, the debate on the impact of free trade agreements (FTAs) to the controversy of Trumps’ trade policy agendas. It is important to keep in mind that we wear more than just clothes: We also wear the global economy, international business, public policy and trade politics that make affordable, fashionable, and safe clothes possible and available for hardworking families.

Likewise, I hope FASH455 puts students into thinking the meaning of being a FASH major (as well as a college graduate) and how to contribute to the world we are living today positively. A popular misconception is that T&A is just about “sewing,” “fashion magazine,” “shopping” and “Project Runway.” In fact, as one of the largest and most economically influential sectors in the world today, T&A industry plays a critical and unique role in creating jobs, promoting economic development, enhancing human development and reducing poverty. For example, globally over 120 million people remain directly employed in the T&A industry, a good proportion of whom are females living in poor rural areas. For most developing countries, T&A usually accounts for 70%–90% of their total merchandise exports and provide one of the very few opportunities for these countries to participate in globalization. We are as important as any other major on the campus!

Last but not last, I hope from taking FASH455, students can take away meaningful questions that can inspire their future study and even life’s pursuit. For example:

  • How to make the growth of global textile and apparel trade more inclusive?
  • How to distribute the benefits & cost of globalization among different countries and groups of people more equally?
  • How to make sure that tragedies like the Rana Plaza building collapse will never happen again?
  • How to make international trade work better and lead to economic growth and human development more effectively?
  • How to use trade policy as a tool to solve some tough global issues such as labor practices and environmental standard?

These questions have no real answer yet. But they are waiting for you, the young professional and the new generation of leaders, to write the history, based on your knowledge, wisdom, responsibility, courage and creativity!

So what do you take away from FASH455? Please feel free to share your thoughts and comments.

WTO Forecasts World Trade to Grow 2.4% in 2017

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In its latest trade statistics and outlook report, the World Trade Organization (WTO) forecasts the world merchandise trade volume to grow within a range of 1.8-3.6% in 2017 (on average 2.4%). This growth rate is slightly up from a very weak growth of 1.3% in 2016. WTO expects trade growth to further pick up to 2.1-4% in 2018.

On the positive side, the global GDP growth is expected to rebound to 2.7% in 2017 from 2.3% in 2016, which will contribute to the expansion of world trade. Notably, WTO expects emerging economies to return to modest economic growth in 2017. However, WTO sees policy uncertainty, including the imposition of restrictive trade measures and monetary tightening, a main risk factor to world trade this year.

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WTO also noted that since the financial crisis, the ratio of trade growth to GDP growth has fallen to around 1:1. And 2016 marked the first time since 2001 that this ratio has dropped below 1, to a ratio of 0.6:1. Historically, the volume of world merchandise trade has tended to grow about 1.5 times faster than world output. WTO is cautiously optimistic that the ratio will partly recover in 2017, but the ratio will remain a cause for concern.

At the press conference, Trump Administration’s trade policy receives significant attention. But according to  Roberto Azevêdo, Director-General of WTO, “just an overall statement of the intention to go one particular way or another, does not tell us what the trade policy is and does not tell us what the impact of that trade policy will be. Instead, the devil is in the details”. Roberto said he is waiting to see Trump’s new trade team in place (for example, the new US Trade Representative) and he looks forward to the meaningful dialogues with the team to know more details and clarity of U.S. trade policy. Until then, any comments on the impact of Trump Administration’s trade policy would be just speculations.

[Discussion for this post is closed]

Outlook 2017: Apparel Industry Issues in the Year Ahead

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In January 2017, Just-Style consulted a panel of industry leaders and scholars in its Outlook 2017–Apparel Industry Issues in the Year Ahead management briefing. Below is my contribution to the report. Welcome for any suggestions and comments.

1: What do you see as the biggest challenges – and opportunities – facing the apparel industry in 2017, and why?

I see the uncertainty in the global economy will pose one of the biggest challenges facing the apparel industry in 2017. Apparel business is buyer-driven. A great number of studies have suggested that economic growth is by far the most effective and reliable predictive factor for apparel consumption. Unfortunately, it seems apparel companies have to deal with another year of economic volatility and weak demand in 2017. For example, according to the latest International Monetary Fund (IMF) forecast released in October 2016, global economic growth in 2017 is projected to only recover to 3.4 percent from 3.1 percent in 2016. There is no particular excitement among major apparel consumption markets either: outlook of the U.S. economy in 2017 is complicated by the strong U.S dollar, the Federal Reserve’s monetary policy as well as the uncertain trade and tax policy to be adopted by the new Trump administration; Economic growth in the EU region next year will continue to be hindered by the unknown fallout from UK’s referendum on leaving the EU, pervasive geopolitical uncertainties, high unemployment rates and the rising protectionist tendencies; Japan’s economic growth is projected to be as low as 1.0 percent in 2017 according to the Organization for Economic Co-operation and Development (OECD); And China’s economic growth in 2017 could slow again to 6.5 percent, which would be the slowest pace in more than 25 years. Reflecting the trend, we might see a stagnant growth or even a decline of global textile and apparel trade in 2017 as well.

Nevertheless, companies’ continuous investments on technology and innovation will create exciting new opportunities for the apparel industry. Particularly, growing areas in the apparel industry such as 3D printing, wearable technology, digital prototyping and e-commerce have made many “non-traditional” players now interested in fashion, including technology giants like Google and Apple. I think we can expect the apparel industry to become even more modern and high-tech driven in the years to come. The changing nature of the apparel industry will also increase demand for talents from an ever more diversified educational background, such as engineering, physical therapy and business analytics.

2: What’s happening with sourcing? How is the sourcing landscape likely to shift in 2017, and what strategies can help apparel firms and their suppliers to stay ahead?

One observation from me is that textile and apparel (T&A) supply chain is becoming more regional-based. For example, data from the World Trade Organization (WTO) shows that 91.4 percent of textiles imported by Asian countries in 2015 came from other Asian countries, up from 86.6 percent in 2008. This suggests that Asian countries togetherare building a more integrated T&A supply chain. Likewise, in 2015 close to 90 percent of apparel exported by North, South and Central American countries went to the United States and Canada and 81 percent of apparel exported by EU countries went to other EU countries too. To be noted, all of these three major T&A supply chains are facilitated by respective free trade agreements in the region such as the North American Free Trade Agreement (NAFTA), ASEAN–China Free Trade Area (ACFTA) and of course the common market enjoyed by the EU members. On the other hand, fashion brands and apparel retailers often use the Western-Hemisphere supply chain and EU-based supply chain as a supplement to the Asia-based supply chain for more fashion-oriented or time-sensitive items. I think such a dual-track sourcing strategy will continue in 2017.

Related, I think supply chain management will play a growing important role helping apparel companies control sourcing cost, improve speed to market and better meet consumers’ demand in 2017. An interesting phenomenon revealed by the 2016 U.S. Fashion Industry Benchmarking Study released by the U.S. Fashion Industry Association is that around 30 percent of respondents say they plan to consolidate rather than diversify their sourcing base in the next 2 years. As one respondent commented, “(Our) focus right now is really finding efficiencies and maximizing productivity in the supply chain. While we won’t necessarily move out of any countries, we are consolidating the base within regions.”

Last but not least, I think in 2017 apparel companies will continue to give more weight to sustainability and social responsibility in their sourcing decisions. Building a more transparent and sustainable supply chain is an irreversible trend in the apparel industry. 

3: What should apparel firms be doing now if they want to remain competitive into the future? What will separate the winners from the losers?

To remain competitive into the future, apparel companies need to be prepared to change and be willing to try something new. Indeed, revolution is coming for the apparel industry, including the way products are made and sourced (example: 3D printing and various digital manufacturing tools), how consumers shop (example: the see-now-buy-now trend) and where and how to sell (example: the booming e-commerce and omni-channel retailing). In the past, small and medium sized companies (SME) were regarded more vulnerable than big players in the apparel industry for business survival.  However, nowadays, without embracing the spirit of innovation and entrepreneurship, even large companies can quickly become “dinosaurs” and find their business struggling. 

4: What keeps you awake at night? Is there anything else you think the apparel industry should be keeping a close eye on in the year ahead? Do you expect 2017 to be better than 2016, and why?

One thing that keeps me awake at night as a professor is what needs to be changed or updated in our curriculum to better prepare our students for the needs of the apparel industry. Fashion programs like us directly prepare future professionals for the fashion apparel industry. This also means we are not immune to the big shift in the industry either. For example, our course offerings currently include textile science, product development, merchandising, branding and sourcing and trade. But in addition to these conventional topics, what else should be added to the curriculum? What new skill setsor knowledge points will be highly expected by the apparel industry for our students in the future? Personally I think talent training is a critical area that the apparel industry and our fashion educational programs can and should form closer partnership. And the outcomes will be mutual beneficial too.

Trade policy is another area that keeps me awake at night. Trade policy matters for the apparel industry because it affects the quantity, price and availability of products in the market. Specifically, in 2017 I will be watching closely about the following trade agendas: 1) the WTO Trade Facilitation Agreement (TFA), which is nearing entering into force. TFA aims to make customs and border procedures easier, speed up the passage of goods between countries and lower cost of trade.

2) negotiation of the Regional Comprehensive Economic Partnership (RCEP). In 2015, the sixteen RCEP members altogether exported $369 billion worth of textile and apparel (50% of world share) and imported $124 billion (34% of world share). Since the Trans-Pacific Partnership (TPP) won’t be implemented anytime soon, RCEP has the potential to influence and reshape the T&A supply chain in the Asia-Pacific region.

3) a possible revision of the North American Free Trade Agreement (NAFTA). NAFTA is a critical factor facilitating and maintaining the Western-Hemisphere textile and apparel supply chain. A recent study of mine shows that ending the NAFTA would significantly hurt apparel manufacturing in Mexico and textile manufacturing in the United States, largely because apparel “Made in Mexico” today often contains yarns and fabrics “Made in USA”.

4) Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP). Although many people think these two agreements are dead, I disagree. TPP and T-TIP are NOT conventional free trade agreements (FTAs) that deal with tariffs and non-tariff barriers only. Just like why we need traffic rules, TPP and T-TIP address our needs to update international trade regulations on 21st century trade agendas such as digital trade, state-owned enterprises, labor and environmental standards, small and medium sized enterprises and trade related investment. On the other hand, both TPP and T-TIP still have a solid and broad supporting base, which includes the fashion apparel industry. If trade politics is why TPP and T-TIP are in trouble, for the same reason, we should expect a reversal of the fate of these two agreements when time arrives. Plus, we should never underestimate the creativity and wisdom of trade policymakers.

Sheng Lu

The US Elections Explained: Trade Policy

This video is a great supplement to our discussion on the U.S. trade policy this week. To be noted, the next president’s trade policy will affect millions of Americans, as well as the health and competitiveness of the country’s economy. Done right, trade policy can also advance strategic interests like strengthening the economies of allies, deepening diplomatic ties, and promoting global cooperation that acts as a bulwark against conflict.

Please feel free to share your thoughts on the video, including any points you agree, disagree or find interesting. Additional resources that can facilitate the discussion are also welcome.