sunnuntai 26. syyskuuta 2010

Textile and clothing industry: China the big winner, Africa big looser

1.1 China is the winner of the WTO rules in textile and clothing

In 1974-1994, up to the end of the GATT, textile and clothing quotas in international trade were negotiated bilaterally and governed by the MFA (Multifibre Arrangement that was a departure from the GATT rules of non-discrimination. The MFA allowed developing countries as the group to increase their low-cost exports to the OECD countries and forced them to modernize their textiles and clothing production. The MFA quota itself was not a guarantee for sales, but provides an opportunity to enter the OECD markets[1]. Ssome producers utilized transshipments through third countries in order to avoid quotas or use falsified documents. [2] China became a member of the MFA in the 1980’s, when its exports were marginal. In 1995, in the end of the MFA, China’s clothing exports were $24 billion (the total world trade that was $158 billion) and textile exports $13 billion (the total world trade that was $152 billion)[3].Finland[4] and Sweden[5] were the big losers in employment in Textile, Clothing, Leather and Footwear industries and Mauritius the biggest single winner in the years 1980-1993.

In 1995, when the WTO Agreement on Textiles and Clothing (ATC) took effect, a large share of exports from developing countries to the OECD markets was subject to quotas. Under the ATC covering yarns, fabrics, made-up textiles and clothing, the WTO members committed themselves to remove the quotas and, thus, integrate their imports into the WTO. Most of the WTO members left the integration of “sensitive” products (49% of quotas) to the last moment (31.12.2004). The integration took place over one night leading turbulence in markets. Industry associations of the U.S. and Turkey signed the Istanbul Declaration in order to extend remaining 49 % of quotas for 3 years and over 50 WTO member countries joined to that[7]. China argued against saying that such moves would undermine the credibility of the rules-based global trading system under the WTO. An emergency meeting of the WTO Goods Council in October 2004 remained the ATC liberalization framework unchanged.

In 2001-2005, the annual growth rate was high and the number of textile and clothing exporters in global markets grew from 21.000 to 65.000[8]. Chinese firms invested in new production capacity in anticipation of the elimination of quotas. In January-June 2005, China’s growth rate in the U.S. market in one category was 1,765%[9]. In 2005, China’s exports to the U.S. increased primarily in volume, revealing a steep cut in prices, the price war, including knit shirts, trousers, underwear and so forth. The pattern was the same in the EU markets. During 2005, when the quotas were eliminated, China’s exports increased 21%. In the end of 2005, China’s share of exports was 24%[10]. The EU implemented bilateral consultations with China. The Memorandum of Understanding (MoU) between the EU and China set 10-12.5 % to the upper level to China’s export growth to the EU in 10 categories for next years[11].

Under the ATC, a safeguard mechanism was available (2005-2008) to deal with serious damages of domestic producers. The active state to use this was the U.S.[12]. The U.S. used the China WTO Accession Agreement rather than the WTO measures. These clauses permit growth in import to be confined to 7.5% per annum until the end of 2008. The US authorities announced the re-imposition of quotas in three categories in May 2005. The US retailers filed an injunction against the use of safeguard measures that was reversed in June 2005. The new quotas introduced allowed China to further strengthen its position in the US[13] and other markets[14]. In 2008 China sold abroad $185.1 billion worth of textiles and clothing (including yarn, fabrics, textile products, garments and accessories), a growth of 8.2% on the previous year[15]. China and Chinese diaspora (about 40 million) are active in the ownership of textile and clothing factories all over the world. African countries, notably Lesotho, Madagascar and Kenya, have seen a revival of their sectors owing to FDI from Chinese and Taiwanese industrialists[16].

The fact often repeated is that the textile and clothing sector accounts for over 50 % of merchandise exports of developing countries. This statistics mask the fact is that China alone has the lion’s share of the markets. Other industries, such as consumer electronics, are dominated by multinational enterprises that prefer to invest in China and in other newly industrialized countries. China has not a location advantage in the OECD markets as e.g. Mexico has in the US markets and Turkey in the EU markets. The major advantage is the internationalization advantage[17]. China has a huge concentration (cluster) of design[18]. The collaboration between the Chinese government and its textile and clothing sector provides Chinese exporters a supportive infrastructure and liberal labor laws and, thereby the opportunity to keep export prices competitive[19]. Textile factories are importing modern machinery and high-tech knowhow while the government supports local development initiatives and promotes domestic brands. The goal is to make the trademark 'Made in China' become synonymous with 'quality.'

Another success story in Asia is Bangladesh, which in the early years of the MFA had practically no garment production or exports. In early 80’s, some Korean export agents were busily looking for new suppliers (with no quota restrictions) for American buyers and contacted some parties in Bangladesh. This is not at all unusual since agents in the sector were actively traveling in most of the developing countries provided their contacts in the target markets. This is the beginning of a new export industry, mainly clothing that today exports over $10 billion the Western markets that account for roughly 90 % of Bangladesh’s total exports. The creation of the clothing industry in Bangladesh may largely be attributed to the existence of the MFA quotas that attracted developing countries to develop their production and exports of clothing under the MFA. Since the quotas that applied by number of products, not by the unit price restricted clothing exports it made sense to try to upgrade the products in order to increase the unit value of the export items. This is exactly what foreign investors have made in Bangladesh[20] and in large extent in China mainland and in Hong Kong.

1.2 The EU is still a strong player in textile and clothing

Europe has for centuries been the leading continent of the fashion culture and business. Textiles and clothing are among the most traded goods in the global economy. After China, the EU is the world's second largest exporter of textile products with 31% including intra-EU trade. In the EU, the fashion industries have gone through a difficult adjustment process. The focus of the European Commission's work in the textile and clothing sector is embedded in the framework of the renewed Market Access Strategy and aims to remove barriers to European textile and clothing exports in growing markets abroad, which is highly damaging for EU textile and clothing producers.

Traditionally, the textile and clothing technology was tailored for the use of cheap labor. The modern production technology makes it possible to combine reasonable costs and high quality products[21]. China’s competition has led to the accelerating erosion of jobs. The EU approach to dealing with China is different from the one taken by the US. The EU Commission will base its decisions on the consensus of EU members. European countries have divergent interests. Countries like Italy that have significant domestic manufacturing of design prefer an orderly development of imports that would not undermine domestic producers. Countries like Sweden[22] or Finland[23] have lost their manufacturing and have strong retail sectors prefer to have unrestricted imports. Today, Sweden has strong retail chains like H&M in the industry. The EU is still a major player having about 100.000 firms and employing over 2 million people. “Made in Italy” is a strong argument. There are about 500,000 people working at 68,000 firms[24], most of them small family-owned. Italy has about 1/4 of the sector's total in the EU-25. The sector has been a major exporter, and the generator of a positive contribution to Italy's trading account[25]. Italy has lost its position in the commodity production, but succeeded to be the main technology supplier.

The textiles and clothing industry in the EU countries has succeeded relatively well. The textile sector has stagnated but the clothing sector kept is position during the last years before crisis. The success story in clothing is still Italy. Referring to my own field research in Italian design industries, it is possible to notice that China seems to repeat 'Made in Italy' success story. The huge growth has created a "labor shortage" in the core regions of design cluster[26]. Like the Italian design firms 2-3 decades earlier, Chinese firms are looking for opportunities for subcontracting. The major difference is that Chinese are operating at the global level when 'Made in Italy' meant collaboration inside Italy[27]. The case Benetton is an example of the challenges that Chinese businessmen in design markets will meet[28]. The complexity of design business is huge. Chinese cannot copy Benetton’s success model. They have to and they will create their own business models.

The impact of Chinese competition is becoming clearer and the gradual erosion of jobs has accelerated historically important coutries of clothing. For instance Germany and France have their strength in the wholesaling of clothes in the EU. The UK that has a long tradition as the leading country of gentleman stile has even succeeded to increase its clothing volyme. Romania is the biggest looser in the textiles and clothing industry in the EU countries. This is very much dependent on the low productivity in Romania where 263 014 people have been employed by the sector producing only 4 100 €million turnover. In Italy the labor productivity is about five times higher.

Excluding intra-EU trade, in 2009 the EU exported about $50 billion (€30.4billion) worth of textiles and clothing products in 2009[29] and continues to dominate global markets for upmarket and high quality textiles and clothing. The textiles and clothing sector was severely affected by the economic crisis. Production as well as consumption levels have experienced a sharp decrease from June 2008 to June 2009. For the entire year 2009 a general decrease of -11% of imports took place in comparison to the previous year. China has been big winner in textile imports to the EU (growth 2005/2008 37.5%) and clothing imports (growth 2005/2008 49%). Asia is dominating the lists of top 10 suppliers.

Italy’s textile and clothing machinery industry’s exports in 2006 were about $2 billion, 78% of totality. China, India and Turkey are the major markets for Italy. In 2006 it was a recovery of investments in Italy’s manufacturing by 4% growth that signals industry’s efforts to remain competitive globally[30]. The growth of standardized technology in textile and clothing has shifted towards Asia, but still Italy believe in collaboration with Europe’s textile sector in order to overcome the global market’s innovative challenge[31]. The rapid pace of technological innovations in the machinery markets has resulted in production of more efficient machines at low prices. The traditional textile and clothing technology relies on cheap labor. The product quality has not been so important. Modern production technology makes it possible to combine reasonable costs and high quality products[32]. China’s firms are investing in the modern technology like shuttle-less looms, circular knitting machines and electronic flat knitting machineries. When the leading countries in textile and clothing manufacturing like Italy have lost their position in the commodity production, they have succeeded well as technology suppliers and in related services. This signals the specialization in the world trade.

European countries have divergent interests in the textile and clothing sector. South states, especially Spain and Italy have the well-established domestic manufacturing of design, central/ north states have strong retail sectors. Retailers favour unrestricted imports, while the countries with domestic manufacturing favour a more orderly development of imports that would not undermine domestic producers. Referring to the substantial growth in imports from China, the EU Commission started bilateral consultations with China in the most sensitive categories Memorandum of Understanding (MoU) between the EU Commission and the Ministry of Commerce of the people’s republic of China set 10-12.5 % to the upper level to China’s textiles export growth to the EU in 10 categories for the years 2005, 2006 and 2007 [33]. The EU used bilateral consultation method resulting to the MoU with China to specify quantitative limits for the years 2005-2008 to the most sensitive categories.

1.3 Africa - From the MFA to the ATC – China challenges Africa!

The fact often repeated is that the textiles and clothing sector accounts for a major part of merchandise exports of developing countries that as a group accounted for over 50 % of world exports. This statistics mask the fact is that China alone absorbs almost one half of this share. The quota-free world trade in textiles and clothing is much different from the world trade regulated by the MFA and the ATC. What matters is the economies of scale. In the early 2005, China’s huge economies of scale made it possible to win markets in “most sensitive” articles by the price war. The undervaluation of China’s currency is a facilitator in that. China was the only winner and Africa the big looser. In the categories that are “most sensitive” to LDCs, China’s growth rates to the US markets were (january-june 2005) 1,765 % in one category[34]. In 2005, China’s exports to the US increased rapidly. Clothing imports from China increased primarily in volume, revealing a steep cut in prices, the price war. The surge in textile and clothing imports of Chinese origin into the US included cotton knit shirts, cotton trousers, cotton and manmade fibre underwear, cotton and manmade fibre shirts, manmade fibre trousers and so forth. The same pattern was repeated in the EU markets as shown in table 18[35]. During 2005[36], when the quotas were eliminated, China’s exports increased 21 % after many years of growth. China’s share of global trade reached 24 %[37] of about $500 billion. China won shares in the US/EU markets in the categories “sensitive”/ “most sensitive” by the price war in 2005. LDC Africa had no opportunities to integrate into the WTO.

Intermediate textile products include yarns and fabrics used in the manufacture of clothing are important products in two ways:

1. These products are the basic element of efficient value chain in the textile and clothing industry as a whole, signaled by the term “intermediates”.

2. Because the rules of origin are strict, a country has difficulties to exports under the ATC if it has not its “own” and at least local production of intermediate textile products.

If some country monopolizes the major part of intermediate textiles, the country could have a lot of monopoly power over the quotas and other preferences that still remain. In 2005, 2 big Asian suppliers increased their imports of intermediate textiles to the US: China: 83 % in volume and 56 % in value and India: 79% in volume and 22 % in value.[38] The growth rates can be alarming, since the huge economies of scale of two big countries can been used in intermediate textiles. African countries have had difficulties to maintain their own production in intermediate textiles that because of the strict rules of origin make it difficult to the Africa to export. Mexico has many advantages in the US markets: location nearby, the major US ownership, preferences, etc. Mexico could not increase its market share in the US, only maintain it. The China/India dominance is the main reason why the US has demonstrated some flexibility in designing rules of origin in preferential agreements with CAFTA countries[39] as far as intermediate textile products are concerned[40]. The CAFTA countries have flexible rules of origin in their preferential agreements with the US in intermediate textile products, why not African countries with the EU.

The elimination of quotas led to a global turbulence. China strengthened its position as the world’s largest producer and exporter of textiles and clothing. The US was the first major WTO memeber that made use of the ‘China safeguards’, using its rights under the China WTO Accession Agreement rather than the more lengthy process of using WTO measures[41]. These clauses permit growth in import to be confined to 7.5 % per annum, and may be used until the end of 2008. The US authorities announced the re-imposition of quotas in three categories[42] in May 2005. Later, 4 other categories were added to this list, all important to the West-Africa[43]. As expected, the US retailers filed an injunction against the use of safeguard measures that was reversed in June 2005. The new quotas introduced in 2005 regulated the growth of Chinese textiles and clothing sales in the US markets in 2006 and 2007, further strengthening of China’s share of imports: 12.5-16 % in 2007 and 15-17 % in 2008[44].

The balance of international trade is difficult to maintain in textile and clothing markets, including leather and footwear. The ATC provided the framework to integrate trade into WTO disciplines. The US is willing to do is to favour the CAFTA countries that are nearby by allowing flexible rules of origin in preferential agreements with the US. The EU will favour its potential member countries. Turkey did well between 2002 and 2004 and firmed up its place as the second-largest developing country supplier after China in the EU. Preferential suppliers in North Africa, such as Tunisia and Morocco have had difficulties to compete against China. In 2005, the EU introduced a system to monitor imports from Asian economies[45] in 15 categories of clothing following the US action and 6 categories of "sensitive" intermediate textile products[46]. Under the WTO, the EU favours imports from geographically proximate major preferential trading partners like Tunisia and Morocco in Africa.

The Sub-Saharan Africa lacks the proximate. In 2005, the Sub-Saharan countries in Africa lost their exports share by 11 % to $2.3 billion, according to the WTO, making it less than 1 % of world trade[47]. The high growth in cotton clothing exports by Asian suppliers has been the reason for a weak performance of African countries. Cheap textiles and clothing imports from China have resulted to closures of in factories that had benefited from preferential market access through quotas. Africa’s production stagnated and 250 000 jobs were lost in countries like Lesotho, South Africa, Swaziland, Nigeria, Ghana, Mauritius, Zambia, Madagascar, Tanzania, Malawi, Namibia and Kenya[48]. African countries did not invoke the special safeguard mechanism to temporarily restrict Chinese exports. This is paradox, since the ATC’s anti-dumping measure that is available until 2008 could provide time for African textile and clothing producers to improve competitiveness and add more value to their exports[49]. African countries reacted too late, although the damages to domestic producers were serious in Africa. They did not expect the quota system to end so soon.

African countries had difficulties to manage the increased complexity of the Multilateral Trade Negotiations under the WTO. In 1993 when the ATC was introduced, the producers/ exporters of textiles and clothing in developing countries were confused and concerned about the future of international trade in textile and clothing[50]. A reason to that is that the internal logic of the MFA and the ATC are different. During the MFA, international trade was open to small firms in Africa, since the governments were responsible to allocate quotas. The ATC moved the decision-making power to purchase managers of retail chains in export countries. When markets opened in 2005, the only argument that mattered was the huge economies of scale of China. Cheap textiles and clothing imports from China were not to stop because market-driven actors look at economic arguments. Cheap textiles and clothing imports from China started to fill both to the markets of Africa’s producers / exporters. The problem is not only competition in exports. In pan-African markets, Africans buy new cheap textile and clothing from China and second-hand cheap clothes from Europe.

Under current trade preferences, Africa has failed to significantly develop production along the value chain, by using cotton, wool and other raw material production, through spinning, weaving, knitting and design into finished goods production processes[51]. While no Sub-Saharan African countries are counted among the world’s leading textile and clothing exporters, this is in no way a true reflection on the sector’s economic importance in Africa. The Shahel countries in the West Africa have a long tradition in cotton production, but the local, cotton-based textile industry is now at a standstill. The price of cotton in the world market has sunk drastically as a result of the US’s new farm bill that provides subsidies to the US cotton producers. Mali, the largest producer of cotton in Africa, processes its cotton in Germany and Austria because investments in textile machines are not profitable. African markets were flooded with cheap cotton garments from Asia. The Man-Made-Fibre (MMF) is not an option, since they are included in the MFA. Changes in the global dynamics of textile and clothing production and trade can better Africa’s position. Cotton exports are not possible, although the Shahel in West Africa could be the right location globally for cotton farming when the biocapacity is to be the most scare resource.

The industrial production of textiles and clothing has never been as extensive in Africa as in Asia and Latin America. The MFA could have been of importance in Africa’s integration into the world economy. The MFA was also meant to further the socio-economic growth in developing countries by securing a substantial increase in export incomes and shares in world trade in textiles and clothing products. The trade preferences are likely to be eroded within next few years due to the WTO negotiations on market access of non-agricultural products (NAMA) including negotiations on textiles and clothing with the aim is zero tariffs. The basic strategic selection of African entrepreneurs in textile and clothing is to invest in differentiated products in international trade.

Supermarkets (MID LOW) and discount stores (LOW LOW)

Africa’s supply of massproducts for the growing supermarket (MID LOW) and discount store (LOW LOW) segments into the OECD countries is possible through FDIs in Africa’s factories. China is the dominating actor in the massproduction of textile and clothing because of economies of scale. In order to succeed in the global competition, investments in the modern technology and management are needed. Quotas against Chinese producers have been restrictive since the 70s, forcing Chinese and Taiwanese businessmen to internationalize their production through partnerships in sourcing and production investments. Indian businessmen have a long tradition as owners of African factories in the sector. African countries, notably Lesotho, Madagascar and Kenya, have seen a revival of their sectors owing to investments from Chinese and Taiwanese industrialists. Textile factories in the South Africa and in some of the countries of the East Africa are foreign owned and produce for exports.[52] In global economy, the clothing and textile diaspora and its ethnic networks is more and more important in the reallocation of production from Asia to Africa.

Clothing exports, seen as a proportion of total merchandise exports, have become the important driver of economic growth, particularly in Lesotho, Mauritius, Swaziland, Madagascar and Kenya. There is unused capacity in Africa. Asia has its capacity limits in the low-cost production of textiles and clothes. The revaluation of China’s currency is to be expected in the near future. While not uncompetitive per se, these economies are vulnerable to any shift in the global sourcing. In the short run, investments from China, Taiwan, India, etc is a good option for African countries like Lesotho, South Africa, Swaziland, Nigeria, Ghana, Mauritius, Zambia, Madagascar, Tanzania, Malawi, Namibia and Kenya to get access to global markets. Mauritius and Lesotho have openly signaled to rely on the diaspora in their industrial strategies. A diaspora strategy is realistic since global businessmen are opportunity-driven. If profitable, experience industrialists invest to take advantage of Africa’s’ quotas, preferences and unused capacity. The profit-making of foreign owners can be Africa’s opportunity in the supply of massproducts for supermarkets and discount stores.

The most important single factor as a catalyst of diaspora investments is the location advantage in terms of John Dunning. Export Processing Zones, EPZs is the concept adapted by many governments to attract investments and to increase exports. Removal or reduction of corporate taxes temporarily is an often used policy instrument. Tax policy is efficient if it encourages investments in modern equipments. Kenya's government has removed taxes on all cotton ginning and textile manufacturing machineries and dropped taxes on goods and services to cotton ginning factories to attract textile firms into its EPZs[53]. Because competition in the global markets is keen, a satisfactory proxy measure is the export success. Kenya has succeeded to increase its exports to the US from $44 to $226 million in 2000-2004 and is the second-largest exporter to the US from sub-Saharan Africa.

Relateing to the EPZ concept the ITGLWF[54] has been worried about bad working conditions, low wages, and long working hours. The political problem is African governments’ competition for foreign investments that can lead to socially-damaging policies violating labour rights. African governments should learn from the history of foreign investments. Even in a normal bidding with foreign businessmen have an opportunity to earn monopoly rents through incomplete contracting that is difficult to avoid. A country’s negotiation power is weak against investors that in some cases can threaten the host country of their factories by deinvestments overnight or by closeries of the factories without offering any retrenchment benefits[55]. Opportunism and profit-maximization characterize the investment behavior of businessmen and multinationals in Africa. African governments need the common pan-African policies with regard to the trade and investments in textiles and clothing.

In 2001, the United States’ African Growth and Opportunity Act (AGOA) substantially improved market access for items such as clothing when shipped from eligible African countries. The AGOA, stipulated by the US allow 37 Sub-Saharan countries preferential treatment for special conditions to export a wide range of products to the US markets. Out of these, 23 countries are eligible for duty and quota-free access to the US textile and clothing markets. Preferential treatment of African countries is justified. The AGOA’s quantitative limits are set above Africa’s current exports to the US and, therefore, do not currently act as de facto restrictions as the ones set to Asian exporters, especially to China, actually do. The countries with the geographic proximity like Mexico, Honduras and the Dominican Republic, benefit from preferential market access to the US markets and capture about 18% of the US imports. African suppliers together accounted for fewer imports than Asian countries in the 2-4% band. As a result of improved US market access under AGOA, the clothing sector once again rapidly grew in importance in various African developing countries. [56]

In Kenya AGOA combined with EPZs is and important element of industrial policies to increase jobs. In Lesotho is the clothing and textile industry is the single largest employer. Before the AGOA in 2000, Lesotho did not export clothes/ textiles under the WTO. In 2002, Lesotho overtook Mauritius as Africa's biggest exporter of textiles to the US. In 2003 Lesotho exported textiles worth $419-million. The AGOA provides a duty-free access to the lucrative US market that is of importance. What is most important is that all the factories that were closed have been reopened and the number of jobs is around 47,000. A factor is foreign ownership, mostly by Asian investors. Lesotho had welcomed foreign textile industry investors. In Lesotho, the clothing sector in particular had become the mainstay of formal economic activity. Also South African companies outsource certain production stages to Lesotho and Swaziland. The sensivity of the sector can be seen in Lesotho where the strengthening of currency led in 2007 to several factories closures and lost of 10,000 jobs. New investments from South Africa and China can decrease volatility. Lesotho relies heavily on America, which buys about 85% of its production, because Europe requires countries to source fabric locally in order to qualify for preferential access. [57]

Favourable rules of origin to source fabrics under the AGOA make it realistic to African countries to compete in the US markets. Certain African countries like Kenya, Lesotho and Mauritius that have a strong dependence on textiles and clothing industries’ exports in their development logic. This has been a lifeline for apparel made in Africa, $1.3 billion of which was sold to America in 2006[58]. The EU allows the same treatment for some African countries through the Cotonou treaty. Africa accounts for about 1% of EU clothing imports. The utilisation rate of Cotonou has been rather low in the case of the EU Generalised System of Preferences (GSP) due to the strict rules of origin that do no allow to source fabrics from the world markets like the rules agreed by the US. African countries cannot compete in fabrics and yarns with Asia, primarily from China. The North African countries like Marocco are exceptions. Asian controlled firms can export to the EU both directly and indirectly[59].

Luxury (TOP HIGH) and trend (MID HIGH) products

The categories of luxury products (TOP HIGH) and trend (MID HIGH) products are possible to be revitalized in Africa. There are major differences between Asia and Africa in business cultures. In Kenya, the mass producing businessmen of clothing are Asian, while African are used to the custom tailoring. The start-ups or rationalizations of clothing factories are out of financial frames of African entrepreneurs, because the prices of modern machines have grown rapidly. The technology needed in massproduction of clothes and textile is today the high-tech. Africa needs foreign investments in the sector. In the first place, investors are coming from the Asian clothing and textile diaspora. In the EU, networking has long been a vital element of regional clustering in textile and clothing industries. The low-priced supply of commodities from Asia, especially from China seriously challenges the famous Italian business model of networking between big brand-owners like Benetton and small subcontactors, especially in clothing. Brand-owners in the EU are looking for new business models for their marketing and logistics and they are ready to shift production to wherever it makes sense.

Competition from China has splitted European clothing and textile firms into two blocks. Brand-owners perceive globalization as opportunity for buying and selling, when small manufacturers feel the threat that their domestic partners (brand-owners) abandon them[60]. Besides Asian producers, African producers can be the winner of the new partnership (contract manufacturing) of brand-owners. There are new movements of consumer consciousness that seems to create trends that favour Africa. A media for the trend making is music. The industry's revival in Lesotho can be attributable to the attention that Lesotho got by the POP music through singer Bono from U2 rock band[61]. Global brand-owners as Levis, GAP and Nike have made orders from Lesotho to include social responsibility as an element of their brand imago. Many large retailers and brands are back in Lesotho[62].

Africa is relatively the most land-locked continent, logistically far away from international markets. The transportation logistics inside Africa is the problem. Caravans cross the Sahara, as the problems with using cars in the desert are many and there are only a few major roads. In the Sahel countries, motorcycles and bicycles are often used for transport in rural areas, as they travel on gravel roads. The public bus and train transportation is available nearby coastlines. Walking is the mode of transportation used most often by people in Africa. Asian countries have succeeded to better their relative location by placing their export industry centers near-by the coastline. Asian countries have invested in transportation networks. Globalization set a kind of minimum standard to all elements of infrastructure, including logistics of people, goods, services and money. The Internet is a commodity that any entrepreneur or student in Africa should have an access to. African countries need to learn about Asian countries in their development logics.

Africa cannot compete with massproducts against Asia. Luxury (TOP HIGH) and trend (MID HIGH) products are not possible to sell without a good product quality. The standard is not impossible to reach, since the modern machine technology makes it easier to maintain a good product quality. Referring to my own work experiences[63] and studies[64], it is possible to claim that about 70% of the consumer value in luxury and trend clothes is based on design communication of brand-owners and wholesalers/ retailers. Africa needs its own original design and brand-content that can be communicated globally. Africa’s image among ordinary people is the green continent. Green is also Africa’s colour in the Olympic ring. Africa has good opportunities to strengthen its image as the producer of environmentally friendly products, including sustainable production methods and materials.

Niche shops and retail chains like Marks & Spencer in the UK and Wal-Mart in the US have eco-friendly images and are selling organic clothing. The Organic Exchange is a non-profit organization focused on facilitating the growth of a global organic cotton industry[65] by increasing consumer awareness of production circumstances of cotton. The consumer awareness is rising in the US, in the chemical-loving country. In the US even 80% of the cotton crop comes from GM seeds and the use of pesticides and synthetic fertilizers is huge. For the Sahel Africa, the organic cotton[66] is the way to reduce the soil depletion. Organic cotton could be the article where Africa has a comparative advantage, although organic conversion is labor-intensive and crop yields lower than regular cotton and it is difficult to distict organic cotton from the ordinary kind[67]. Selling organic cotton clothing is profitable to big farmers since the new Farm Bill maintain the area-based subsidies. The "Green Ribbon"[68] symbolizes the campaign in the US to bring hope to farm families who struggle with low farm prices, rising input costs and corporate-controlled markets. Eliminating the US cotton subsidies[69] and the dumping of cheap raw cotton are necessary to fulfill its WTO obligations and bring relief to the millions of struggling farmers in Sahel Africa[70].

The West African cotton-producing countries (Benin and Chad) appealed with Brazil and India to WTO dispute panel about the US cotton subsidies and export credits. The US had offered to reduce the farm subsidy to $17 billion a year, but Brazil and India did not accept it[71]. Africa’s countries need global partners like Brazil and India that are influential in the WTO. An increasing number of people world-wide and even in the US are waking up to environmental concerns. This will in time make a huge impact on the kind of textile fibres used for the clothing industry. Unsustainable fashion markets can at least partly be replaced by sustainable, environmental fashion markets. Africa needs its own brand that denotes environmental and social quality in communication of design. In all continents, consumers have seen TV-documents of uncontrollable use of chemicals for instance in India’s textile and clothing industry[72]. Therefore, natural dyes that are known till the early 19th century could be a part of Africa’s image. They are extracted mainly from roots, stems, leaves, flowers and fruits of various plants and could provide African designers an effective design tool.[73]

Referring to the consumer’s awareness of the sustainability of our globe, the intrinsic value of Africa as a brand could be based on certified environmental and social quality of Africa’s textile and clothing production and on subsidity-free farming. Well-know brands have huge marketing potential and they can easily be transferred over borderlines and be modified according to consumer preferences. Considering also that the sector is highly market-driven, when compared with other production sectors, buyers (retailers) are reactive to the trends of season in their sourcing decisions. The WTO TRIPS has increased global royalty and licensing (r&lf) payments[74] to $130 billion in 2004. The US multinationals control about 80 %. This business accounts for 6 % of world commercial services trade in 2004 and the growth rate of global r&lf payments is estimated to have been 11 % in 2000-2004. For the EU-15, Japan and the US combined received annual r&lf payments from Africa is $600-$800 million, while their payments to Africa is $60-$180 million. Africa’s nature and culture are treasures for branding[75]. Africa as the global brand has all ingredients of success.

Africa needs a common organization to follow the internal registration of immaterial property rights. The risk is that multinationals patent the best ingredients of the Africa’s nature that make it impossible to Africa to compete globally in branding[76]. African entrepreneurs are skillful to use and to repair mechanical devices. The really top design is always at least partly hand-made. Hand-made quality with high pricing is a part of top high segment that in developed countries account totally about 10 % of volume. “Made in Italy” is still a strong argument and includes always a human touch. “Made in Africa” could be a strong argument for taylor-made suited and dresses. High-tech is the decisive production factor in high-design business. Global tailoring could be a big business opportunity.

[1] The Changing Pattern of International Trade in Textiles and Clothing, Implications of the Introduction of the Agreement of Textiles and Clothing (ATC) on The Developing Countries Producing/ Exporting Textiles and Clothing by Antero Hyvärinen, Senior Market Development Officer, ITC, Geneve.
[2]The Changing Pattern of International Trade in Textiles and Clothing… [3] [4] Finland’s loss of employment in textile and clothing industries happened in the end of the 80s. The reason was the sudden collapse of the Soviet Union.
[5] Sweden had open imports of textiles and clothes in the beginning of the 90s.
[6]The Changing Pattern of International Trade in Textiles and Clothing…
[7] Report by Samuel Grumiau for the International Confederation of Free Trade Unions with assistance from Laurent Duvillier, Brussels, November 2004.
[9]The Multifibre Agreement – WTO, Agreement on Textiles and Clothing, by Eckart Naumann, tralac, Working Paper No 4/2006, April 2006
[10] if EU(25) intra-trade is included and 31 % if EU(25) intra-trade is excluded.
[12] In May 2005 the U.S. government imposed temporary restrictions on textiles and clothes imported from China, affecting about $2-bn worth of goods.
[15]General Administration of Customs
[16]T Naumann (2006).
[17] Dunning, John (1993) Multinational Enterprises and the Global Economy, Wokinghan England, Addison-Wesley.
[18]The theoretical foundations are presented by Marshall, Alfred (1920) Principles of Economics. an Introductory Volume, London, Macmillan and Krugman, Paul (1991) Geography and Trade, Cambridge, Cambridge University Press and Porter, Michael (1990) Competitive Advantages of Nations, Macmillan, New York.
[20]Two investors: one from Malaysia and one from Taiwan have made decision to invest $20 million into two export processing zones in Bangladesh. Source Textile Asia. 6.8.2007
[22] Sweden opened imports of textiles and clothes in the early years of the MFA.
[23] Finland’s loss of employment in textile and clothing industries happened in the end of the 80s. The reason was the sudden collapse of the Soviet Union.
[26]Pearl River Delta, Yangtze River Delta and Anhui
[27]Source: My own research on Benetton’s subcontractors in 1989.
[28]Aldo Palmeri (Managing Director of Benetton Group SpA, 1983-1990) created Benetton that achieved $1130 million in sales in 1988, 65% outside the Italian market. In 1988 Benetton had 7000 stores in the world, 7,500 items in its collection, 3 main factories around the headquarters in Treviso and 800 subcontractors having an average of 100 employees. Werner Ketelhöhn (1993) An interview with Aldo Palmeri of Benetton: The early growth years, European Management Journal, Volume 11, Issue 3, September 1993, Pages 321-331.
[29]European Commission : Trade : Textiles and footwear
[30]Positive 2006 for Italy`s textile machinery industry.
[34] Based on US import data by the US Department of Commerce International Trade Administration) covering comparative data January – June 2004/2005, the following category-specific growth rates can be computed: 340/640 (+343%), 341/641 (+451%), 342/642 (+866%), 347/348 (+1,765%), 351/651 (+633%), 647/648 (+369%), and 352/652 (+539%). The Multifibre Agreement – WTO, Agreement on Textiles and Clothing, by Eckart Naumann, tralac, Working Paper No 4/2006, April 2006
[36] The World Trade Report 2006.
[37] if EU(25) intra-trade is included and 31 % if EU(25) intra-trade is excluded.
[38] Asian Development Outlook 2006 - Developing Asia and the World
[39] Countries are: Andes, Bolivia, Central America, Colombia, Cuba, Ecuador, El Salvador, Guatemala, Haiti, Mexico, Nicaragua, Peru and Venezuela
[40]The US-CAFTA-agreement allows flexibility in the origin of textiles and clothing.
[41] WTO’s ‘safeguards’ clauses permit WTO-members to temporarily protect a specific industry through certain trade restricting measures, not limited to quotas. Eckart Naumann (2006).
[42] Cotton knit shirts and blouses (category 338/339), cotton and manmade fibre underwear (category 352/652) and cotton trousers (category 347/348)
[43] Combed cotton yarn (category 301), men’s and boys’ cotton and manmade fibre shirts (category 340/640), manmade fibre knit shirts and blouses (category 638/639) and manmade fibre trousers (category 647/648).
[44]Memorandum of Understanding (MoU) of the US and China
[45]Bangladesh, Cambodia, Hong Kong, China, India, Pakistan, Sri Lanka, Taipei, China and Thailand
[47]China, India, Indonesia, Pakistan, Bangladesh and Cambodia in Asia have expanded their exports.
[48] Loss of textile market costs African jobs by Bloomberg, Published 22 Aug 06
[49] Mills Soko, a researcher at the South African Institute of International Affairs in Johannesburg.
[50]The Changing Pattern of International Trade in Textiles and Clothing…
[52]T Naumann (2006).
[53] These are specially created industrial areas that offer investors incentives such as tax exemptions and the ability to move funds freely into and out of Kenya.
[54] International Textile, Garment and Leather Workers' Federation (ITGLWF)
[55]Trade Union Resolution on the Future of the African Textiles and Clothing Industries in: Herbert Jauch / Rudolf Traub-Merz (Eds.) The Future of the Textile and Clothing Industry in Sub-Saharan Africa Bonn: Friedrich-Ebert-Stiftung, 2006
[59]According to the EUROSTAT database (2005), key suppliers to the EU in 2004 are: Mali €42 million, Chad €27 million, Cameroon €26 million, Sudan €14 million and Zimbabwe €22 million, Ivory Coast €9 million and Mozambique € 9 million.
[61] U2 rock band singer Bono visited Lesotho's textile industry and launched a new label Product Red to generate durable funding from top commercial brands and consumers to fight HIV/AIDS in developing countries like Lesotho.
[62] Lesotho is a part of an ethical trade agreement through an MFA forum pilot program that aims to attract large brands and retailers to source in Lesotho.
[63] In 1970-1971: Job Researcher, Porin Puuvilla Oy
In 1971-1974 Factory rationalization; research and development, Friitala Oy
In 1985-1989 Board member, Nanso Oy
[64] About ten major studies of the sector, including field-research in Italy
See also: Annaflavia Bianchi: Industrial Reshaping and International Production: the Italian Garment Industry and its Linkages with Morocco, Romania and Turkey
[65] Members include Coop, Cutter & Buck, Hess Natur, Marks and Spencer, Mountain Equipment Cooperative, Nike, Norm Thompson, Otto Versand, Patagonia and Timberland.
[66] Organic cotton is fibre that does not come from genetically modified (GM) seed and has been grown without the use of man-made pesticides and fertilizers.
[69] In September 2004, a WTO dispute panel found that $3.2 billion in annual cotton subsidies and $1.6 billion in export credits paid by the US in cotton and other commodities were illegal under WTO rules. The case, brought by Brazil and supported by some West African cotton-producing countries (Benin and Chad), was appealed by the US in October. Today's appeal decision is final and the US has until July 1 this year to comply or face possible trade sanctions by Brazil.
[70] "The case against US cotton dumping is overwhelming and now confirmed yet again by the WTO," said Celine Charveriat, spokesperson for Oxfam's Make Trade Fair campaign.
[74]Balance of payments statistics provide information on the international flows of r&lf, defining them as “the exchange of payments and receipts between residents and non-residents for the authorized use of intangible, non-produced, non-financial assets and proprietary rights (such as patents, copyrights, trademarks, industrial processes, franchises, etc.) and with the use, through licensing agreements, of produced originals or prototypes (such as manuscripts and films)”. Sources: IMF, Balance of Payments Statistics; Eurostat, national statistics and WTO estimates.
[75]The Chinese textile sector still has some weaknesses, including weak innovation, insufficient investment in research and development, and a lack of internationally recognised Chinese brands. N de Villiers - First Agenda, 1999 -
[76] Rise and fall of African textile industry provides cautionary tale, March 15, 2005, by Sapa-AP, by Tom Maliti.

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