Download Clothing and Textiles Industries

The Clothing and
Textiles Industries
The Relevant Production Chain
The World’s leading textile
exporting countries, 1995
Country
Germany
China
Italy
Korea
Taiwan
Belgium-Lux.
France
USA
Japan
Share of World Exports (percent)
1980
1995
11.4
9.3
4.6
9.1
43%
7.6
8.3
4.0
8.1
3.2
7.8
6.5
5.1
6.2
4.9
6.8
4.8
9.3
4.7
Trade balances in textiles,
1995
Developed
economies
Italy
Belgium-Lux.
Germany
USA
UK
Canada
Japan
$ millions
+6,356
+3,672
+2,036
-3,069
-2,536
-1,831
-1,193
Developing
economies
Taiwan
Pakistan
India
China
Hong Kong
$ millions
+10,116
+4,134
+3,504
+3,004
-3,044
World’s leading clothing
exporters, 1995
Country
China
Hong Kong
Italy
Germany
USA
Turkey
France
Korea
Thailand
Share of World Exports (percent)
1980
1995
4.0
15.2
11.5
6.0
11.3
8.9
7.1
4.7
3.1
4.2
0.3
3.9
5.7
3.6
7.3
3.1
0.7
2.9
Trade balances in clothing,
1995
Developed
Italy
$ millions
+9,438
Developing
China
$ millions
+24,049
(less imports)
USA
Japan
Germany
France
UK
-34,716
-18,228
-16,845
-4,664
-3,695
Hong Kong
Portugal
Taiwan
Malaysia
+8,634
+2,827
+2,374
+2,118
Shares of textiles and clothing
in a country’s total
merchandise exports, 1995
Country
Bangladesh
Pakistan
Sri Lanka
Turkey
India
China
Portugal
Textiles
13.6
53.3
4.1
11.7
Clothing
54.8
20.2
46.0
28.3
Combined
68.4
73.5
50.1
40.0
15.3
9.4
7.0
14.8
16.2
16.0
30.1
25.6
23.0
Explanatory Framework
Textiles
Demand
Production
costs/
technology
Gov’t
policy
Corporate
strategy
Clothing
SemiConsumer
conductors electronics
Demand
• Demand for clothing is the key
• clothing demand is roughly
proportional to personal income
• elasticity of demand < 1
• increasingly dominated by
purchasing policies of major
multiple retailing chains
Production
costs/technology
• Labor costs.
– labor intensive industries
– substantial geog. variability
• even if we control for productivity
of labor
Labor costs per standard
minute in the clothing
industry, 1995
Cost per std. Minute (DM)
0.10 to 0.15
0.15 to 0.20
0.20-0.25
0.25 to
0.30 to
0.35 to
O.40 to
0.50 to
> 0.60
0.30
0.35
0.40
0.50
0.60
Countries
Mexico, Jamaica, Honduras,
Guatemala, Dominican rep., China
Vietnam, Russia, Sri Lanka
Bulgaria, Romania, Slovakia,
Malaysia, Czech rep., Estonia,
Poland, Indonesia, Philippines,
Pakistan, India, Tunisia
Hungary, Slovenia, United States
Hong Kong, UK. Taiwan
Greece
Italy
France, Eastern Germany
Western Germany, Denmark
Sensitivity to labor costs
depends on:
• Kind of item being produced
• possibility of substituting capital
for labor
Production
Fibers
Characteristics
(synthetic)
Textiles
Clothing
Capital Intensity
High
Low
Labor Intensity
Low
High
Material Costs
High
Low
Av. Size of
Production Unit
Large
Small
Sophisticated
Simple
Technology
Implications re. sensitivity to labor???
Government policies
• Policies pursued by DEVELOPING
countries to stimulate
development
• Policies pursued by DEVELOPED
countries in response to
competition
Policies of DEVELOPED
countries
• Encouragement of restructuring and
rationalization
• protection from external competition
– Multifiber Arrangement
• reactions to protection
– item switching
– country hopping (Triangle Manufacturing)
Recent Trends
• MFA to be phased out over 1995-2004
period
• but the integration is heavily
backloaded
– U.S. integration of 70% of imports by
value is left to end of the transition period
Corporate Strategies
Textiles
• World textile oligopoly of about 30 firms
• implementation of Fordist methods to
achieve scale economies
• offshoring was pioneered by Japanese
textile firms and general trading companies
– to avoid U.S. quotas on imports from Japan
• U.S. & European firms are less
internationalized. Depend more on merger
• exception is U.K. firms
Clothing
• Production is more fragmented
• Retail chains and buying groups
have enormous leverage over
producers
• Japanese general trading
companies pioneered international
subcontracting
Response of U.S.
producers
• Concentrated on high fashion
products
• made investments to cut costs and
improve worker productivity
• increased own offshore processing
via subcontracting
• FDI in overseas subsidiaries
directed at local markets
Western Europe: the
Italian Exception
• Industrial district solution.
– Large network of independent Italian
subcontractors
– strategy of product specialization and
fashion orientation
Jobs in the textiles and
clothing industries
Employment losses in textiles and clothing
1963-1987
U.K.
780,000
Germany
564.000
France
520,000
U.S.
470,000
Adjusted U.S. Penetration
Ratios, Value Basis
1986
1984
1982
1980
1976-1979
1971-75
1966-70
Textiles
Apparel
1961-65
35
30
25
Percent 20
15
10
5
0
Components of Employment
Change---Textiles
Percentage growth rates
1972-77 1977-82 1982-85
Consumption
1.44
-0.56
3.03
Exports
0.28
0.09
-0.51
Imports
0.21
-0.17
-0.65
Productivity
-3.19
-2.70
-4.27
Total
-1.25
-3.34
-2.40
Components of Employment
Change---Clothing
Percentage growth rates
1972-77 1977-82 1982-85
Consumption
3.31
1.86
5.99
Exports
0.20
0.15
-0.44
Imports
-0.95
-0.98
-3.25
Productivity
-3.05
-2.22
-3.79
Total
-0.50
-1.20
-1.49