Since 1974, the Multi-Fiber Arrangement (MFA) has been managing the international trade in textiles and clothing. The MFA allowed the development of import quotas from developing countries, notably the USA, the European Union and Canada.
The textiles and clothing agreement (ATC) on the abolition of MFA quotas has shown significant turnover in global textiles trade. The ATC has ordered the gradual abolition of import tariff quotas established under the MFA and the integration of textiles and clothing products into the multilateral trading system before January 2005.
Textile and Apparel Agreement
The ATC Transitional System is the integration of MFA and textile and clothing trade into the multilateral trading system. The ATC foresees a phased, complicated integration process completed in a ten-year period (1995-2004), divided into four phases, which began in 1995 with the implementation of the agreement. Product groups from which all stages of integration include products i. upper and yarns; ii. fabrics; iii. textile products; and (iv) clothing
The ATC has obliged importing countries to integrate, in 1990, at the beginning of each phase of integration, a minimum set of integrated textiles and clothing exports. In the first phase, each country had to build 16 percent of the total import volume in 1990, followed by an additional 17 percent at the end of the first three years and another 18 percent at the end of the third. The fourth stage would see the final integration of the remaining 49% of trade
Global trade in textiles and clothing
World trade in textiles and clothing totaled US $ 385 billion in 2003, of which textiles accounted for 43% ($ 169 billion) the remaining 57 percent ($ 226 billion) for clothing. The developed countries accounted for nearly one-third of the world's textile and textile exports. The proportion of developed countries in textiles and clothing trades was 47 percent ($ 79 billion) and 29 percent ($ 61 billion).
Imported trends in the USA
Detained in 1990 or MFA for 87% of US textile and clothing imports ($ 29.3 billion), Caribbean Basin Initiative (CBI) North American Free Trade Area (NAFTA), Africa's Growth and Equal Opportunities Act (AGOA) and ANDEAN countries contributed 13 percent ($ 4.4 billion). Subsequently, the drop in holdings declined; the share of preferential regions more than doubled to reach 30 percent of US imports (US $ 26.9 billion).
The composition of imports of clothing and textiles in the US in 2003 was 80% (71 billion US dollars) and 20 percent (18 billion dollars). Asia was the most important purchasing region for textile and apparel imports in the United States. The second situation in the Latin American region was 12 percent ($ 2.2 billion) and 26 percent ($ 18.5 billion) for textiles and clothing imports in the United States. In most of the US-imported quota products, India was one of the US's most important finished product suppliers. Although China's largest competitor in China, most of these product groups in China were high unit prices and thus provided Indian business opportunities.
Import trends in the EU
The EU is the world's largest textile and clothing market. 40% (40 billion USD) of intra-EU trade accounted for total apparel imports and 62% (USD 32.5 billion) in total textiles imports into the EU. Asia dominates the EU market in clothing and textiles, 30 percent ($ 30 billion) and 17 percent ($ 8 billion). Central and Eastern European countries have 11% market share (11.3 billion US dollars) and 7.5% ($ 4 billion) in EU textile imports.
Increasing trade between the EU and the EU with regard to preferential suppliers The Mediterranean countries, especially Egypt and Turkey, were the highest in 2003. For each country, China imported almost 5% of the textile imports ($ 2.8 billion) and 12% ($ 12.4 billion).
In the EU market, India is one of the leading suppliers of many means of transport. It is estimated that Turkey will be the largest competitor for India and China. However, in the case of unit prices, India is lower in many categories than Turkey and China.
Import Trends in Canada
In Canada, textile and apparel suppliers were the largest in the US over 31 percent ($ 8.4 billion), followed by China (21 percent to $ 1.8 billion) and the EU 8% to $ 0.6 billion). India stood fourth and was in front of other exporters, such as Mexico, Bangladesh and Turkey, with a market share of 5.2 percent ($ 0.45 billion).
with a higher profit than the textile sector after the MFA system. Countries such as Mexico, the CBI countries, came from many African countries as exporters of ready-made garments without the use of large quantities of textiles under the quota system as a preferential tariff arrangement. In addition, the countries of Bangladesh, Sri Lanka and Cambodia have emerged as clothing exporters, due to cost factors, in addition to the quota benefits.
We can say that countries such as China, the USA, India, Pakistan, Uzbekistan and Turkey benefit from cotton; China, India, Vietnam and Brazil have resource-based benefits in silk; Australia, China, New Zealand and India have resource-based benefits in wool; China, India, Indonesia, Taiwan, Turkey, USA, Korea and some CIS countries enjoy resource-based benefits in man-made fibers. In addition, China, India, Pakistan, USA, and Indonesia have capacity-based advantages in textiles and weaving.
China is competitive with textured yarn, knit yarn fabric and fabricated fabric. Brazil is competitive in the manufacture of woven ring yarn. India is competitive with the production of ring yarn, O-E yarn, woven O-E yarn, knit ring yarn and knit O-E yarn fabric. According to Werner Management Consultants, the hourly wage cost of the textile industry is very high for many developed countries. Even in developing economies such as Argentina, Brazil, Mexico, Turkey and Mauritius, the hourly rate is higher compared to India, China, Pakistan and Indonesia.
From the above analysis, it can be stated that China, Taiwan, Hong Kong, Brazil, Indonesia, Turkey and Egypt are the winners of the post-quota system. Short-term (1-2 years) market losers would include CBI countries, Sub-Saharan African countries, Asian countries such as Bangladesh and Sri Lanka.
Long-term market losses (up to 2014) include high-cost producers such as the EU, the USA, Canada, Mexico, Japan and many East Asian countries. In the medium term, determining factors for the increase / decrease in market share may, however, depend on the cost, quality and timely review of the Indian textile and clothing industry. The textile and clothing industry is one of the largest and most significant sectors in the Indian economy, issuing, exchange rates and employment generating. The Indian textile industry is multi-threaded, delivered. In the long run, the decline in trade in textiles and clothing in the EU, the reduction in Turkey's market share in the EU, the market share of Mexico and Canada in the US, thus offers more opportunities for developing countries such as India.
It is estimated that in the short term both China and India will gain additional market share compared to their current market share. However, over the medium term, India and China have a cumulative market share of 50 percent, both in the textile and apparel imports in the USA. It is estimated that India has 13.5 percent market share in the textile industry and 8 percent in the US market. For the EU, the benefits are estimated to be mainly in the clothing sector, with a significant share of China accounting for 30% and India having an 8% market share. The potential gains of the textile sector are limited in the EU market due to the EU's further proposed enlargement. It is estimated that India has an 8 percent market share on the EU textile market, compared to China's market share of 12 percent.
Review of the Indian Textile and Clothing Industry
Textile and clothing industry is one of the largest and most important sectors in the Indian economy, the output, the exchange rate gains and the employment generation. The Indian textile industry is multi-threaded, using cotton, jute, wool, silk and mannequins and synthetic fibers. In the spinning segment, India has approximately 40 million spindles (23% of the world) and 0.5 million rotors (6% of the world). In the weaving segment, India has 1.80 million transfer looms (45% of the world), 0.02 million chips less looms (3% worldwide) and 3.90 million handwraps (85% of the world).
) has achieved significant growth over the last decade, with the number of spinning mills growing from 873 to 1564 by the end of March 2004. The organized sector produces almost all woven yarns, but it accounts for only about 4% of total fabric production. In other words, there are just over 200 composite mills in India, so you can leave the fabrics and processing for decentralized small-scale and processing firms. The Indian apparel sector is estimated to have more than 25,000 domestic manufacturers, 48,000 manufacturers and about 4,000 manufacturers and exporters. Export of textiles and clothing products from India
The share of exports of textiles and apparel exports to India's total exports for the 2003-2004 period is about 20 percent and USD 12.5 billion in the US dollar. The mainland countries, the USA, the EU and Canada accounted for nearly 70% of India's clothing exports and 44% of India's textile exports. Among the non-quota countries, the UAE is the largest market for Indian textiles and clothing; The United Arab Emirates accounted for 7% of all textile exports and 10% of India's apparel export
The products in the textile category are the most important export items for cotton yarns, fabrics and compositions. The most important product of the clothing category was cotton clothes and accessories. However, the proportion of imports from India to all imports from the EU and the USA is relatively lower than that of other fiber products, indicating that this category is limited.
The Critical Factors Needed
is one of the most important producers of cotton yarns and fabrics, based on the yield of cotton production lower than many countries. The level of productivity in China, Turkey and Brazil exceeds 1 tonne per hectare, while in India it is only 0.3 tonnes per hectare. In the manmade fiber sector, India is ranked fifth in terms of capacity. However, the capacity and technological infusion of the sector needs to be further improved in view of the changing consumption of fiber in the world. We can mention that the share of cotton in fiber demand in the world was about 50 percent (14.7 million tonnes) in 1982, about 38 percent in 2003 (20.12 million tonnes), while man-made fiber grew by 44 percent (13.10 mt tonnes) to about 60% (31.76 million tonnes) over the same period.
In addition to low-cost work, other factors also affect final consumer costs: relative interest expenditure, energy tariffs, structural anomalies and productivity levels (affected by technological obsolescence). The study by the International Textile Manufacturers Association showed high energy consumption in India compared to other countries such as Brazil, China, Italy, Korea, Turkey and the US. The spinning, weaving and binding of the ring and O-E yarns in India, the percentage of total production costs, changed from 10 percent to 17 percent, which is also higher than in countries such as Brazil, Korea and China. The percentage share of capital cost in India in total production costs was 20 percent to 29 percent higher than in the 12 to 26 percent China achieved.
In India, very few exporters participated in the integrated production facility. It should be noted that countries that would be globally competitive would significantly strengthen the supply chain. For example, competing countries such as Korea, China, Turkey, Pakistan and Mexico unite the supply chain. In contrast, apart from spinning, other activities such as weaving, processing, make-up and garment all can be found fragmented in India. In addition, in the Indian weaving industry, the technology level is low compared to other countries in the world. The wage machine is less than the total loom in India (1.8%), Indonesia (10%), Bangladesh (10%), Sri Lanka (12%), China (14%) and Mexico (29%). ] The supply chain of the industry is not only very fragmented, it is struggling with bottlenecks that can slow down the growth of the sector. As a result, average delivery times (from procurement to production and delivery of clothing) are still 45-60 days. During the 30 to 35-day international lead-time period, India should significantly reduce production cycle time so that it can stay on the market. In addition, the availability of strong power and water supplies, adequate road connections, the shortcomings of port facilities and other export infrastructure have adversely affected the competitiveness of the Indian textile industry.
It is believed that the quota system froze the market share, which even offers high-cost manufacturers. Thus, in the free trade system, the structure of imports in the quota countries may change. In the post-quota system, market share issues are ultimately productivity, raw material fund, quality, import costs, including workforce, planning skills, and economies of scale.
It is thought that quotas are restricted by the artificially high export prices. It is estimated that it will become a price guarantee in the postal quotas system with competitive price reductions. Price and volume effects depend on the efficiency of the manufacturing process, supply chain management and price elasticity of demand
Due to the expected fall in prices, developing countries with high production costs have little choice with the largest low-cost suppliers. In this process we assume that redistribution of better resources would be in these economies.
It can be assumed that quota restrictions will continue in several forms after 2005. It is widely acknowledged that the removal of the quota may not provide direct and easy access to the markets of developed countries. There would be no non-tariff barriers. Standards related to health, safety, environmental protection, work quality of life and child labor gain further momentum in international trade in textiles and clothing
Strategies and recommendations
In the Indian clothing industry, competitiveness is restricted to a limited extent due to obsolete technology and the reservation under the SSI guidelines. In addition to retaining domestic cotton and low cost labor, India needs to strengthen its competitive edge by reducing operating costs by efficiently utilizing inputs and scale operations. In addition, there is a need to rationalize fees, to apply for export logistics, so that they can remain competitive.
Due to the impact on the quota system, consolidating the production and restriction of supplier countries, which is necessarily a better operation. Indians also need to integrate into operational leverage and show high bargaining power
It is reported that Chinese textile companies have invested heavily in expanding and seizing the huge market share in the quota-free world. In India, players in this sector require huge investments to remain competitive in a quota-free world. These players need to vertically expand and integrate to achieve scale operations and introduce new technologies. It is estimated that the sector would need Rs. $ 1.5 billion ($ 35 billion) in new capital investment over the next ten years (by 2014) to bypass the $ 70 billion potential export potential. It is estimated that the US and the EU would jointly offer $ 42 billion for Indian textiles and clothing in 2014.
Technology is a leader in weaving and processing that will improve quality and productivity. Innovation is also possible in this sector as many developed countries will innovate new generation machines that are likely to have low manual interfaces and power costs. The Indian textile industry has to employ high quality technology to enjoy the benefits of scale operations and quality. Foreign investment and foreign technology transfer would help the industry with state-of-the-art technology.
Internationally, textile and clothing trade is handled by large retailers. Most of them are looking for some bulk order manufacturers and therefore choose vertically integrated companies. It is therefore necessary to focus on the operations in India, from spinning to clothing production. This would also reduce the passage of time and improve quality. Indian players need to improve their soft skills, for example. Design Capabilities, Textile Technology, Management and Negotiation Skills
. It would be difficult to keep players full-time, even in the lean season. This calls for changes to contract labor law.
Logistics and supply chains play a decisive role since timely delivery is an important prerequisite for the success of international trade. The logistics and supply chain of the Indian textile companies are relatively weak, need improvement and efficiency. China has already established a world-class export infrastructure. Given India's export forecasts volume, it may be necessary to create additional export infrastructure, in particular investment in modernization of ports. In addition, India has to invest in the creation of brand equity, supply chain management and the apparel industry
In summary, the Indian textile industry's use of quota consumption depends on its capability to increase overall competitiveness through the use of economies of scale, and supply chain. The need for the clock is therefore to create a well-conceived strategy of productivity and efficiency, quality control, faster product innovation, rapid response to changes in consumer preferences and the ability to raise value chains by brand building and acquisition of distribution channels over the long term, outperform competitors' benefits.
Source: Export-Import Bank of India, India
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