Du Yuzhou , born in 1942 in Qiqihaer of Heilongjiang Province, is a senior architect and professor. Graduated from Tsinghua University in 1966, Du had ever served in the Designing Institute of the Ministry of Textile as the Chief. Since 1985, he took up the appointments as the Vice-Minister of the Ministry of Textile, the Vice-President of the China National Federation of Textile Industry and the President of China National Textile Council. Now, Du is the President of China National Textile & Apparel Council, concurrently the Chairman of China National Garment Association.
Preserving Market Access in the Post-quota World, Political Storms and Legal Battles of 2004 and Beyond in Textile Trade
By----Mr. Donald Johnson, Vice Chairman of Fleishman-Hillard Government Relations
(Former Chief Textile Negotiator at USTR)
It is a pleasure to be with you at the first Global Textile Economic Forum and to discuss effect of the new liberalized trade period beginning at the end of this year. The year 2004 is of critical importance for two important reasons to the textile trade world. First, this is a presidential and congressional election year in the United States, which is always effected heavily by the textiles issue. Secondly, the textiles issue is especially impacted this year by the elimination of quotas on textile and apparel imports pursuant to the WTO Agreement on Textiles and Clothing (ATC) on December 31, 2004. Much of this significance is directed at Chinese export potential and its effect on the markets of the world. Domestic industry is demanding protection and politicians of all parties are responding with every remedy available. It is therefore even more critical now for China to develop a strategy to defend against the onslaught of trade remedy cases, such as the current safeguard measures and the future anti-dumping cases, which can be expected in the very near future.
The first anticipated consequence of the elimination of quotas is a significant contraction in the number of countries exporting textiles and apparel to the U.S. Well over 100 countries currently supply to the American apparel import market. This number is expected to be cut in half almost immediately, and over the next 10 years the major suppliers, other than those with preference programs, will be down to a dozen or so. Countries like the Philippines and Sri Lanka are predicted to lose market share, whereas countries like China, India, and Pakistan are expected to be large winners. It could be that the effects will not be this drastic, since these predictions are largely based on price factors and not all sourcing is solely price driven. Yet there will certainly be contraction and the mere perception of drastic increases in market share to China will have a significant political impact in the U.S. and around the world.
Another anticipated economic effect of ending quotas is the elimination of the very substantial quota costs resulting in significant world-wide price reductions. In order to maintain market share in this new unlimited, competitive market, the small suppliers may be forced to lower their prices even further, often with the support of government subsidies. The net effect on the U.S. textile industry and its NAFTA and Caribbean partners is likely to be very detrimental. Low prices added to the recent pattern of decreasing demand for apparel will inevitably lead to more bankruptcies and factory closures in the textile industry and increased political pressure for protection - all leading to a proliferation of safeguard, anti-dumping, and countervailing duty cases. It could also lead the U.S. to adopt a position in Geneva and in regional trade initiatives that is more susceptible to finding a way to retain preferences and other arrangements to limit larger suppliers and advantage smaller suppliers, particularly the least developed or strategically important trading partners in Mexico and the Caribbean countries, which provide an export market for U.S. inputs.
Of course, there are some who would like to keep the quotas on for a longer period. In fact, the American textile industry, led by the American Textile Manufacturers Institute (ATMI), has just this month joined with the textile associations in Mexico, Turkey, and 13 Sub-Saharan African nations to call on the World Trade Organization to extend the quota phase out until 2008. The basis for their demand is their claim China has engaged in "unfair trade practices" which "have enabled China to gain a chokehold on world market in textile and apparel trade." At this point, it seems doubtful that such an effort will gain official support, protectionist policies are enjoying high popularity in politics this year.
The U.S. textile industry has not traditionally been an aggressive user of trade remedy laws, because they have been protected by the quota system and by domestic safeguard laws. Furthermore, antidumping and countervailing duty cases can be very expensive and often require the cooperation of the apparel industry. A significant impediment to these trade remedy cases is that as the American apparel producers have for some time now begun sourcing their products offshore, they have shown little desire to cooperate in an apparel dumping case sponsored by fabric producers. Despite these problems and the general reluctance of the textile industry to bring antidumping cases, they have shown that they are willing to make the effort when necessary. In the 1980's, for example, a number of cases were brought against exporting countries to bring pressure on them to renew their participation under the old Multifiber Agreement.
With the removal of the quotas and the lack of success in safeguard actions under Article 6 of the ATC in recent years, however, they will have no alternative but to seek relief through antidumping cases, as well as safeguard sanctions. In fact, ATMI has expressed its intention to do so in recent Congressional testimony and has urged the President not to agree to weaken U.S. anti-dumping laws in the Doha round citing the need for this remedy in "the free-for-all that is sure to ensue after all quantitative restraints on textile and apparel imports are abolished."
The textile industry will always try first for the political remedy rather than the more expensive antidumping case. As the steel industry did in pressuring the Bush Administration to initiate the safeguard cases against steel imports, the textile industry will also seek low-cost political relief. For example, ATMI has called for the Bush Administration to initiate antidumping cases against Asian textile and apparel imports based upon currency devaluations. While this is not considered a valid basis for an antidumping case, it offers a justification for political attention. The result might be some legislative relief along the lines of the Byrd Amendment (which has been ruled illegal in the WTO) providing compensation for successful trade remedy petitioners. Furthermore, one has to assume that the Bush White House will be very focused on the Presidential elections and key battleground states, as was the case in steel. The textile producers will be well-positioned to leverage trade policy concessions from Presidential candidates in 2004, the final year of the quotas. In fact, it would be surprising if they did not make an effort of this type. It is clear that politics, for example, played a major role in the current China textile safeguard decision. It is expected that there will be more safeguard cases filed later this year - probably on hosiery, gloves, babies wear, and fiberglass products.
It is generally assumed that China is likely to reap the most benefit in terms of market access in the U.S. from the elimination of quotas. The International Trade Commission has predicted that China's share of the U.S. import market will triple to 30% in an unrestricted environment. Under this prognosis, the most likely trade remedy to be used will be the textile-specific safeguard provision in China's WTO Accession Agreement with the U.S. Under this provision, which is effective through 2008, imports may be restrained for up to a year upon a finding by the U.S. that they are "due to market disruption, threatening to impede the orderly development of trade in [the effected] products." This standard is considered to be easier to meet than the general product-specific safeguard (valid for 12 years) in the same Agreement, which allows for restraints of up to three years, and which in turn is easier to meet than a normal Section 201 restraint governed by the WTO Safeguards Agreement. It is anticipated that the textile-specific safeguard will be the preferred remedy until 2009, when the slightly more difficult product-specific safeguard will likely be used, which likely will be joined and followed by antidumping cases.
In the view of U.S. retailers and importers, the invocation of these safeguards against China is "virtually inevitable." The effect of this inevitability is to impose a serious degree of uncertainty for both the producers and importers of Chinese textiles. Unfortunately, we are already seeing the truth these predictions with the safeguard measures now being imposed on knit fabrics, dressing gowns, and brassieres.
Notwithstanding the likely use of the special safeguard provisions affecting China, antidumping cases have traditionally been, by far, the most popular trade remedy tool. China has now become the top target worldwide of antidumping cases, with 48 cases filed against it in 2001. The next most frequent target was Korea with less than half that many. This trend also holds true in the U.S., where China has supplanted Japan and Korea as the top target of U.S. antidumping cases. This trend will only increase as the textile quotas are phased out.
U.S. trade remedy cases have become both increasingly complex and political. U.S. procedures for these cases are considered to be the most complicated in the world. They are constantly changing and require a sophisticated understanding of the interaction of detailed statutes, agency regulations and determinations, and court decisions. And as we have seen this year with textiles and other industries, more and more cases have a political element. Under U.S. law, it is easy for industries to have trade remedy cases initiated. They have low initiation standards and very limited discretion by agencies not to initiate. If the threshold criteria are met, a case must be initiated.
The key conclusion to be drawn from this analysis is that the year 2004 is the beginning of a multi-year offensive of protectionist forces against Chinese textile exports in the U.S. market. It is a year when the issue of Chinese textile imports is highly controversial and political. This protectionist offensive can not be defended effectively simply as a legal matter on a case by case basis. The legal standards, particularly in safeguard cases, are vague at best, and politics will trump both law and economics at least in the short run to the detriment of the Chinese producer and the American consumer. China does not have the luxury of time in building a political foundation of support to mobilize against what has now become a political storm of demagoguery in this election year. There are many supporters of Chinese textile imports and there are many potential supporters who understand the importance of maintaining an open and equitable market for Chinese products, but they will have to be organized and mobilized into an effective political force to combat a well-organized opposition in a difficult and turbulent time. It is vitally important to the preservation of your market access that your industry develop coalition partnerships with political interests in the United States and other countries where your markets exist. If the opposing forces succeed in imposing barriers to Chinese imports it will be very damaging not only to your industry, but also to American consumers and to others who depend on your products in the supply chain. It can also be harmful to U.S. exporters in the U.S. - China trade. Not near enough work has been done to build up the political coalition to battle against the unfair attacks against Chinese imports. The year 2004 will be one of many battles for your industry, but unfortunately, it is only the beginning. Prepare yourself well!
Prospects for the International Textiles and Clothing Trade from a German Perspective
By---- Mr. Josef Albert Beckmann, President of Confederation of the German Textiles and Fashion Industry
1. Introduction / Greetings
2. Expiring quotas and the corresponding impacts on supplying and importing countries
Since China joined the WTO, the People's Republic has benefited from the successive liberalisation measures as set out in the ATC. In this way, China's access to major textile buyer countries, such as the USA and EU, has increased considerably.
China is one of the few supplier countries subject to actually binding - i.e. fully exhausted - quotas. Following the liberalisation of some binding quotas of this kind in 2002, Germany, along with the EU as a whole, saw a considerable increase in imports of the products in question. In this process, the third stage of liberalisation under the ATC, and the retrospective liberalisation required by China's accession to the WTO, has had an even stronger effect in the USA than in the EU.
In the EU, as in the USA, it can be seen that growth of liberalised imports from China has been considerably higher in terms of quantity than in terms of value. The same is to be expected from the liberalisation of the largely exhausted quotas which remain, which is due in 2005.
With the gradual fall in quotas, import competition will further increase for the textile and clothing industry in the industrialised countries. But, import development as regards quantity ought to remain within limits since these markets are, comparatively speaking, saturated in the area of standard goods. In Germany, for example, overall imports of textiles are stagnant, and figures for clothing even show a decline. In this situation, large additional quantities can only be offered successfully for sale by means of considerable price reductions, thus undercutting the competition. Thus, not so much the increase in overall imports, but, rather, the battle for market shares - above all in low-priced segments - will dominate the landscape after the falling-away of quotas.
In this way, some suppliers can be forced out of the market, leading to larger gains in market share for others. China, for example - Germany's third largest supplier of textiles and clothing, after Turkey and Italy - has succeeded in expanding its market share of ready-made clothing, mainly at the expense of Turkey.
An argument frequently put forward in favour of a faster abolition of textile quotas is that the developing countries should no longer be robbed of their comparative advantage in the manufacturing of textile products and the resulting export chances. In principle, there is nothing against this argument. However, the quota system enabled some countries to build up a comparatively strong position. Up to now, there are still certain advantages for some small suppliers: Either they are themselves not subject to quotas, or, they profit from the fact that larger competitors have to operate with relatively large quotas. If these advantages no longer exist, some suppliers will not be able to hold out against price competition. It will therefore depend on as to whether the supplier can also offer, besides price, further arguments in order to influence the buying decision.
Given the very limited potential for growing demand in the traditional buyer countries, smaller suppliers or even newcomers will have great difficulty in gaining a foothold in the market. Instead, established, high-volume suppliers with a long tradition of textile manufacturing will be able to strengthen their position. Smaller countries will not be able to hold their own in competition with giants such as China, India and Pakistan - at least, not in a direct price battle. Therefore, they must place greater emphasis on quality, design and reliable deliveries. In many cases, infrastructure factors independent of the products, e.g., an inadequate transport system with associated delays in delivery, make it unattractive to buy in certain countries. Thus, many smaller countries have only a chance of keeping up with massive investments in technology and infrastructure.
As is generally known, consumer behaviour has changed noticeably in the world's highly developed countries. This phenomenon may, in the meantime, also be observed in threshold countries, indeed, even in less developed regions. Not only luxury segments are expanding. The more strongly the living standards of emerging middle-class sectors grow, the greater their desire for differentiation via up-market consumption. Easier access to information speeds up this trend. Price no longer stands alone in the foreground. Values such as quality, fashion, innovation or brand name prestige gain increasingly in significance.
The textile and clothing industry in the industrial countries can indeed therefore overcome the disadvantage of the expensive location in that it uncouples itself from the pure price argument through qualitatively high-value products, innovative solutions, modern logistical organisation and technical know-how. Enterprises who continue to concentrate on the production of mass goods and labour-intensive products will, as against this, be exposed to even tougher competition than before. The relocation process of these segments to more cost-effective sites will thus continue.
However, no matter how competitive and innovative an enterprise may be - sales success finally depends to a decisive degree on the openness of potential sales markets. Improved access to third markets which are up to now strongly protected must therefore enjoy highest priority in trade policy. A fair and level playing field is therefore our first objective in international textile and clothing trade.
3. Current developments in Sino-German trade in textiles and clothing
China as the leading international textile and clothing manufacturer, is expanding its exports considerably, year after year. Mass production and an apparently unending reservoir of cheap labour give China considerable cost advantages over its international competitors. In many product sectors the pressure on world market prices is already enormous. The successive abolition of quantity restrictions, as set out in the Agreement on Textiles and Clothing (ATC), is encouraging this development. No wonder that some German businessmen are extremely worried about this.
At the same time, however, China's importance is growing as an export market and location for investment - for the German textile and clothing industry, too. Stable economic growth, the abolition of numerous regulations in the wake of China's accession to the WTO, and a constantly growing section of consumers with high disposable incomes, have all raised the prospect of potential sales. For two years now, China has been the Number One investment country for the German textile industry. Given the dismal economic situation at home and a subdued world economy, exports of textiles and clothing to China have shown an outstanding increase.
In the wake of its accession to the WTO, China itself has made large concessions to market access. By 2005, according to the reduction timetable agreed, customs duties on textiles and clothing will be reduced considerably. Moreover, liberalisation measures also include the removal of major non-tariff barriers, such as quantity restrictions on the import of particular textile pre-products and the abolition of the state trading monopoly. This has substantially improved export opportunities for the German textile and clothing industry.
Given the strong economic growth seen in the most populous country in the world, an ever larger group of consumers with high disposable incomes is on the rise, interested in high-quality clothing products and home textiles. Infrastructure projects, industrialisation and construction work in towns and cities are all leading to increased demand for technical textiles. How strong this demand is can be seen from China's relatively low export ratio, despite large increases in production: nearly 80 percent of production currently goes to the home market.
Particularly when it comes to technical textiles - which require high expertise and are capital intensive - German companies have a clear lead in quality and technology over their domestic competitors. Increasing demand from automotive construction and in medicine provides good sales opportunities. Moreover, demand is being boosted by a growth in statutory regulations covering the protection of persons, goods and the environment, not to mention huge road and railway projects, and building plans for the Olympic Games in 2008.
Compared with Chinese exports to Germany, German textile and clothing exports to China are currently modest in their amount: they are no more than one twentieth of what China exports to Germany. However, German exports are showing considerable growth: up 48% in 2002, and 38% in the first three quarters of 2003 - excellent figures, given the otherwise subdued nature of export business at the start of the year and the rather uncomfortable conditions in terms of exchange rate developments.
As a location for investment, too, the People's Republic has become distinctly more attractive. China has been, since 2000, the country attracting the largest direct foreign investment by the German textile industry. Over the second half of the 90s, the annual growth of the economy averaged ten percent. Experts from international financial institutes forecast that China could be the fastest growing economy over the next ten years, thus encouraging further FDI flows.
These latter findings strongly indicate that a win-win-situation is indeed feasible.
4. Nevertheless, with ongoing liberalisation in the tariff and non-tariff area, a trend to New Protectionism is visible. On the one hand, there are fears that, after the abolition of quotas, unfair trading practice will be increasingly applied in battle of market shares. On the other hand, one assumes that increased protective instruments could be adopted world-wide.
Efficient instruments are needed in liberalised world trade in order to put a stop to unfair trading practices. In so doing, one must take care, of course, that the instruments cannot be abused for protectionist purposes. Otherwise there is a danger that the liberalisation success achieved is again annulled by the inappropriate application of protective instruments and that spiral of protective measures is set in motion.
The protocol on China's accession to the WTO contains provisory clauses for protection against imports from China over a transition period. Should there be a disruption to the market caused by Chinese imports, or should a "significant trade distortion" take place, protective measures may be introduced for a limited period, in the form of customs duties or quantity restrictions. At the start of 2003 the EU enshrined these regulations in community law. Further WTO members, such as the USA, Canada, India and South Korea, have also incorporated these China safeguards into their own national legislation in an analogous way. Such safeguards may be applied especially for textiles and clothing up to the end of 2008. In addition, a "product-specific protection mechanism" was instituted, to which recourse can even be made up to the end of 2013.
Contrary to widespread belief, these safeguards are not a tool - as are anti-dumping regulations, for instance - to combat unfair trade practices. Safeguards are designed as temporary protection should fair competition lead to a jump in imports, thus threatening the existence of the home industry. The use of such protective clauses is normally only authorised by the WTO if they are non-discriminatory, i.e. if they are directed against all countries equally. The special regulation for China permits a deviation from this practice, and China agreed to it in the WTO accession protocol.
Given the strong growth of imports from China, the European Commission is currently subject to increasing demands to apply the existing safeguard regulations. Many European companies see them as a tool to staunch unfair competition from the Far East. Those supplier countries which compete with China are naturally observing this with great interest, since restrictions for China would definitely improve their own position.
However obvious the use of the protective clauses may seem, the application of safeguards means interfering in a complicated web of trade relationships, in the course of which a series of unpleasant side effects would be inevitable. To begin with, importing countries would certainly incur the charge of wanting to prolong the quota system through substitute tools - and with the intention of specifically disadvantaging an individual, particularly competitive country. After all, the China safeguards are not directed towards unfair pricing or restrictions on overall imports. Finally, use of safeguards could trigger an international chain reaction, since trade distortions increase the pressure on further markets. Therefore, the safeguards are tools to be used with great care. However, in their potential for negotiations at the diplomatic level, safeguards could play a major role in implementing market-access goals in a persuasive way.
Quota liberalisation is an irreversible process. China will further increase its dominant position in the German and other industrialised countries` markets. The German textile and fashion industry will find it increasingly difficult to maintain its position in its traditional EU markets, since international competition is growing in other member countries too. However, to be put on the defensive side in this situation, and to trust in measures of protection, does not seem to offer much hope of success. Such measures would provide no long term solution, would be politically difficult in their implementation - and could, above all, turn out to be a type of Trojan horse. The proper strategy for the future involves concentrating on the particular strengths of the German textile and fashion industry and developing its international competitiveness.
Given the saturated home market, it is vital to have international markets for the sale of high-quality products. China is certainly one of the most promising target markets. Sales and production in an expanded Europe can also continue to be managed in a promising way, since local advantages, such as geographical proximity, short delivery times and the traditional collaboration between suppliers and purchasers in Europe cannot be counterbalanced by the price benefits alone offered by Asian competitors.
5. Building up Partnerships
Because German exports are being increasingly successful and because investment is growing, many businessmen consider it time to establish a partnership with China, with the aim of improving market access, and thus gaining a lead over their competitors. It is against this background that the Confederation of the German Textile and Fashion Industry signed a memorandum in July 2003 with the China National Textile Industry Council on the subject of collaborative partnership. The core of this agreement is the encouragement of German-Chinese commerce in the textile and fashion area. Agreement covers regular exchange of ideas on questions of trade policy, as well as collaboration in trade fairs, investment, education and training as well as in fostering trade via New Media instruments.
To represent the economic interests of German textile and clothing companies in China even more effectively, the Confederation of the German Textile and Fashion Industry is planning to open its own representative office in Shanghai. This office is intended to support companies interested in trade with China, or investment there, in their entry to the market, to act as a contact for German firms already working locally, and to provide general market information. A basic tasks will also be to maintain contact with the relevant Chinese authorities and government decision makers.
China is often described as the main winner in quota liberalisation. That does not mean that Germany must be on the losing side. Experience shows that business collaboration and mutual opening lead to better results than a policy of barriers, a policy which seldom fails to create errors in economic development. This applies to our relationship with China, just as it does to our relations with all our other trading partners. The Confederation of the German Textile and Fashion Industry will therefore do what it can to encourage the further liberalisation of world trade and will emphatically support all further efforts to multilaterally dismantle restrictions on the textile and clothing trade within the framework of the current WTO round. For it is only in an open world market that the real qualities of the German textile and fashion industry, and its competitiveness, will make themselves properly felt.
6. To conclude, please let me add some words with respect to the significance of continued liberalisation.
Trade with textiles and clothing has, over decades, been distorted by massive trade-political interventions. Here, I do not only mean the quota system. ATC liberalisation is not an obligation for the industrialised countries alone. In Art. 7 ATC, all signatory countries undertook to dismantle entry barriers to their markets. Unfortunately, in several important supplier countries little has been done about improving conditions of access to their own markets. Up to today, some large textile exporting countries protect their own markets through high customs walls and further barriers. As long as this continues, completely false incentives are set up in international trade. Enterprises and consumers in these countries cannot decide freely on the purchase of certain products, competition in quality cannot take place and technology transfer is arrested. The protective walls thus injure not only those who would like to supply to these countries but also these countries' own economy.
My appeal to all international representatives present today is therefore to make use of the opportunity of the Doha Development Agenda in order to massively push forward the world-wide opening-up of the textile and clothing market. Only in this way can we ensure that trade and competition develop in a sound manner after 2005.
Japanese Textile Industry and Future Regime of World Textile Trade
By----Mr.Kunio Yagi, Secretary General of Japan Textile Federation
Ladies and Gentlemen,
Today, I would like to speak about two subjects, namely the present situation of the Japanese textile industry, and the dominance of the Chinese textile industry in recent global textile trade and future regime of the world textile trade.
Regarding the present situation of the Japanese textile industry, I will talk about:
1) Current situation of Japan's textile industry and its foreign trade,
2) Structural reform of the Japanese textile industry and new report on the "Vision of Japan's Textile Industry and Policies for the Industry", and
3) Characteristics and technical advantages of the industry.
After that, I will talk about the situation in view of the present dominance of the Chinese textile industry as well as the prospect of a new order for international textile trade.
Please understand that what I will say here today is fully based on my personal opinions, and is not necessarily the official view of the Japan Textile Federation.
1. Present situation of Japanese textile industry
Firstly, I would like to explain the present situation of the Japanese textile industry.
(1) Both the number of establishments and the number of employees involved in the Japanese textile industry have reduced to less than half of their early-80s level. During the past 20 years, we experienced a decrease in exports and a sharp increase in imports because of the appreciation of the yen after the Plaza Accord of 1985, which caused our foreign trade to plunge into a huge net deficit and accelerated hollowing out in the textile industry. To cope with this situation, enterprises took desperate measures such as "selection and concentration", which downsized loss-making businesses and gave priority to their strong areas, relocating factories overseas, shifting their businesses to high-quality and/or differentiated products, shifting to producing non-apparel products, scrap & build of production capacity, bankruptcies, closures and withdrawals of small and medium-sized businesses, and rationalization in distribution systems.
(2) Even so, Japan's textile industry's presence in the economy remains quite large. It represents as much as 7% of the total manufacturing industry, with around 610 thousand employees. It occupies 13% of the business establishments in the total manufacturing industry, and the shipment is 6,600 billion yen, accounting for 2.3% of the value of goods shipped by the total manufacturing industry. Also, we have formed textile manufacturing regions in many areas of our country, and they have substantial influence, particularly on local economies.
(3) Looking at the current situation of Japan's foreign trade in textiles, we continue to have an enormous import surplus. In the year 2003, Japan imported textile products to the value of 25.1 billion yen, but exports amounted to only 7.8 billion yen. Import penetration is such that more than 90% of cotton products and as much as 55% of man-made fiber products are now imported. Specifically, imports from China have been increasing sharply and now amount to 80% of the total imports.
(4) Now I will move on to talk about the transition in the production capacity. Regarding the capacity to produce man-made fiber in 2004, China has grown to occupy a third of the world total, accounting for 14.3 million tons, compared with 1.7 million tons capacity in Japan. Japan has been lagging far behind Korea, which has a capacity of approximately 3 million tons, Taiwan with 3.8 million tons and other major man-made fiber producing countries such as the USA, India and Indonesia.
Also in the apparel industry in particular, it is said that the number of industrial sewing machines in operation in Japan has decreased to approximately 200,000 units, while China has more than 7 million. The reason for this is that production bases of the Japanese apparel industry, excluding those for high quality products, have been transferred to countries like China, where an extensive and cheap labor force is available.
2. Structural reforms in Japanese textile industry and new report on the "Vision of Japan's Textile Industry"
(1) In recent years, we have been making efforts to compete with Korea and Taiwan, and China, the textile giants, through producing higher quality and differentiated products, downsizing of and withdrawal from basic products, and plant relocations to ASEAN nations and Chinese coastal areas.
(2) The latest version of a report on the "Vision of Japan's Textile Industry and Policies for the Industry", which is revised every five years, was released in July, 2003. The report indicates the problems at each production stage and specifies the overall strategies to be implemented from now on. These strategies can be summarized as follows:
1) To promote further reforms in the structure of the industry,
2) To encourage exports as well as improvements in the textile trade environment,
3) To emphasize research and development in technology and design, and
4) To create excellent human resources.
For implementation of these strategies, the significance of prompt action is stressed in the report.
(3) I would like to report that instead of regarding China as a threat, the Japanese textile industry is turning its interest to how to work together with China for mutual prosperity. That is to say, we are seeing China as a huge market, and our interest is shifting to how to utilize the production bases and distribution channels in China, into which we have invested.
(4) For these purposes, the latest version of a report on the "Vision of Japan's Textile Industry and Policies for the Industry" suggests that the industry should further promote exports of the Japanese made textile and apparel products by producing higher quality and differentiated products.
3. Characteristics of the Japanese textile industry and its technical advantages
(1) Let me say that the Japanese technology in fiber and related areas is regarded as the best in the world. We take pride in this and feel aware that we should try to maintain our status by emphasizing research and development. We also need to take measures to protect intellectual property rights, and so on.
(2) I will now summarize the characteristics of the Japanese technology in fiber and textiles. First of all, we have made remarkable progress in the development of high-function fiber. Higher value-added products with fiber structure control and/or textile surface control by nano-technology, and various types of biodegradable fibers are the examples. Also, companies in spinning, weaving/knitting and dyeing sectors have come together to make use of new materials and produce various kinds of new textiles.
(3) Secondly, the Japanese textile industry has been developing new products continuously in various fields with its advanced processing technology, such as hygiene products including microbial control products, safety products including flame-retardant products, high functional products with cold protection, warmth retention and/or another excellent function for sportswear, and beauty and nutrition products.
(4) Besides, the Japanese textile industry has been developing so-called "super fibers" such as high-strength fibers and carbon fiber, and by utilizing such "super fibers", new products for new industrial applications such as geo-textiles for new construction methods in civil engineering and construction industries, materials for new energy, and materials for global environmental protection with recycling technologies are coming onto the market.
(5) Moreover, many Japanese textile companies, especially companies engaged in man-made fiber products, are challenging to enter into various kinds of chemical fields by utilizing high polymer chemistry originated from textile technology. These fields are various films, seawater desalination with membrane technologies, medical and pharmaceutical fields, and bio- and nano-technology fields.
4. Expansion of Chinese market shares in world textile exports and prospects for new future regime of world textile trade
(1) As aforementioned, China has shown remarkable development in recent textile production and trade in the world, and especially in recent 2 or 3 years, China has been only one winner in the industry. Now China is not only a superpower in the world textile industry, but is the textile giant.
(2) It should be taken notice that the following concerns are rising among related countries proportionately:
1) Chinese textile production and exports are growing prominently in the world. There is a possibility that Chinese prominent growth over the long term may trigger objections from other countries, as the exports from other countries have been on the decrease.
2) Chinese companies have flexible and multi-level energies and their remarkably speedy and prompt readiness for change of situations in the world textile trade, and many other countries, especially developing countries, can hardly follow China. In addition, weaker Chinese yuan and nearly unlimited young labour power support prominent growth of the Chinese textile industry.
3) Other textile exporting countries, especially developing countries, are mainly specialized in apparel manufacturing industry, since they do not have diversified and multi-level textile industries as China, and they are lack of readiness for rapid change of situations in the world textile trade.
4) Many textile exporting countries including developing countries are beginning to have a sense of crisis that only China will be benefited from the removal of quantitative restriction on imports by quota under ATC (the Agreement on Textiles and Clothing) by the EU and the USA effective 1st January 2005, judging from the market trends after the 3rd integration in 2002.
5) In the case of Japan, where there is no quantitative restriction on imports by quota and tariffs on textile products are the lowest in the world, the import penetration ratio of textiles and apparel on the volume basis are more than 70%, and 80% to 90% of the imports come from China. There is rising a concern among the USA and the EU that they will face to the same difficult situations as Japan after the removal of quantitative restriction on imports by quota at the end of 2004.
6) Furthermore, the US textile industry has requested the government to take protective measures including implementation of safeguard measures.
(3) I think it is very timely that the 1st Global Textile Economic Forum is held on the theme of "Post Quota Times: Creating the Corporate-Win Future" here in Beijing. I expect the new future regime of world textile trade will be sought and established based on the expertise of participants and discussions at this Forum.
Thank you for your kind attention.
Post Quota Times: New Challenges and Issues for Global and Bilateral Textile Links--France/China, a Bridge to Build
BY--- Mr. Thierry NOBLOT, CEO of Union des Industries Textiles
1. Hello everyone. My name is Thierry NOBLOT, and I am CEO of the Union des Industries Textiles, French counterpart of the CNTIC which has invited us today. UIT gathers 1,200 French textile firms with a turnover of 16 billions euros, employing 120 000 people and with exports of 9 billions euros. UIT is founding member of EURATEX. We have come from France with a large delegation of textile businessmen and we are happy to be here with you today. My speech will focus on new challenges and issues for global and bilateral textile links. France/China: a bridge to build.
2. With my French colleagues here, I have come to spend a week in your country. I am stunned and really impressed by your development and dynamism. Confronted with your presence, our "old" France and "old" Europe have a hard time adapting. The gap is quite large in terms of outlook between a country like yours, which is so peopled, young, lively and full of projects and a developed country like France, whose prospects are on a higher but much flatter growth curve than China's.
3. We immediately accepted your invitation because our sector is undergoing a real revolution, a real "big-bang":
1. The WTO's textile quotas will disappear at the end of the year after nearly 40 years of existence.
2. The European Union is expanding to the East and South: we will be 25 member countries in the Union next May 1st and there is a possibility in the near future that Romania, Bulgaria and Turkey will join.
3. Your country, leading textile power, became a member of the WTO on January 1, 2002.
4. One is talking of the possibility that Russia, Saudi Arabia, Iran and the Gulf countries will join the WTO soon. In short, the textile playing field is becoming planet wide, the speed of change is accelerating and our companies have to adapt. We are becoming participants as much as experts in change. These changes involve new challenges and issues for small and medium sized French textile companies.
4. First of all, our market priority is Europe with its 25 member nations. In addition, there are some ten closely related countries to the East and South. In short, from the Urals to the Mediterranean. Our main customers are all in this zone, which supplies nearly 60% of our textile needs. The rest of the world supplies 40%, half of which, namely 20%, is supplied by China. Between us, we would like to supply 20% of the Chinese textile market, but we are far off the mark. So, my first message is the following: open your market to our products and our textile services as much as we are open to yours. Too much imbalance as is the case today will lead to reactions that are unfavourable for our trade and our cooperation.
5. But it is not enough to speak about volumes. We also have to speak about prices and currencies, when one sees an 18% decrease year over year (2003/2002) in the price of a kg of clothing imported from China into France. In Europe, on some of the products granted free-trade access to Europe as of January 1, 2002, we have seen unit price decreases (2002/2001) of up to 75% while China's market share in these same categories (anoraks, artificial fibre fabrics, women's underwear and baby's clothing) increased 50 to 200%!
I can tell you that this is a major problem! A market economy cannot function this way.
If this collapse in unit prices is compounded by an artificially low yuan/dollar exchange rate, there is a second major problem.
My second message is the following: One doesn't conquer a market with such sales arguments. Either else one kills the market! Or else one commits suicide because the real production costs are not transferred to the market.
We want to understand because one can't explain, in an economically rational way, that from one year to the next Chinese textile prices drop 50% and, in addition, your currency is devalued 40% compared to the euro (i.e.; as much as the US dollar vs. the euro).
6. My third message concerns your market. We are literally fascinated by it: 1.4 billion residents, three times Europe's population, which is our reference market. Our experts tell us that your average annual textile consumption per person is 7 to 8 kg. Consequently, we start dreaming. If your textile consumption doubles in 10 years, it will represent 12 million metric tons of textiles (2,5 times the present european textile fibers consumption) .
We have to establish ourselves for the long-term. But how should we proceed? We are tens of thousands of small and medium size textile manufacturers in Europe and several thousands in France. How should we proceed so we don't miss the opportunities that you represent?
7. This is my fourth message: We need to organise ourselves to pool our respective ressources. From this point of view, I propose to Mr. Du, President of the CNTIC, to open a new chapter in Franco-Chinese textile cooperation. I clearly see six areas of application:
1. Innovation: the sciences, techniques and technologies that our textile industries will have to work on to prepare the textiles for the next 10 to 20 years. On my return to France, I will ask the Institut Fran?ais du Textile et de l'Habillement (IFTH) to get in touch with selected Chinese research centres and universities, based on Mr. Du's recommendations, to develop scientific and technical cooperation.
2. Cooperation between companies: our two organisations can implement the means so our two countries' textile companies are able to more easily identify the ways and means to work together.
3. Intellectual property: we will implement the resources so our respective rights are better protected in your country. Innovation and creation are two of our major strengths in global textiles. Thus you can surely understand our desire to protect them much better than is the case today.
4. Economic information and regulatory monitoring: we can work together, with our respective means, to better understand the trends and major changes in our respective industries and markets.
5. Professional tradeshows: we can also organise our cooperation in the field of the major textile tradeshows in our two countries.
6. Professional education and training: I will ask the Institut Fran?ais de la Mode (French Fashion Institute) and our best engineering and textile fashion schools to develop Franco-Chinese textile cooperation in terms of initial training. The Union des Industries Textiles is also prepared to initiate work with your best continuous training organisations to move forward together.
8. F. Liebert, who is here with us, represents the entire European textile and clothing industry. Our organisation for Europe is called EURATEX. All textile subjects, positive and disagreements, on the agenda between Europe and China, will be handled by EURATEX with your organisation. As such, you will have two categories of contacts:
1. EURATEX on behalf of the Euro-Mediterranean textiles
2. The Union des Industries Textiles on behalf of French textiles
EURATEX and UIT will work hand in hand to improve the quality of our exchanges and our collaboration.
9. Times change. The borders between trades, cultures and peoples become blurred. Be active participants rather than passive observers. This is why we are among you today. And this is why we hope Mr. Du and the members of his team will accept our invitation to come to France and build with our both industries, the bridge between France and China.
Thank you for your attention.
Adhere to Technological Innovation, Enhance International Cooperation, Build an International Famous Business
By-----Mr. Yafu Qiu, Board Chairman of Shandong Ruyi Group
Ladies and gentlemen:
The beginning of a good year lies in its spring. In this fresh and energetic season, I feel honored to stand here, to discuss with you the development of textile and apparel industry.
Shandong Ruyi Group focuses on the production of wool textiles and apparel, but also have business in the field of cotton dyeing and printing, rabbit hair spinning, knitting, chemical fiber, jean fabric, real estate and education. The company holds the total assets of 1.6 billion yuan and has over 10 thousand employees and nearly one thousand technicians. The company has set up a state-level technical center and enjoys advantageous technologies and innovation capacity. The company's strength at products development tops the country in the sector of wool textiles. It has achieved the certifications of ISO9001 and ISO14001. Its brand of Ruyi is well known in China. Under this brand, the company has over 1000 varieties of products with nearly 10 thousand various designs. Some of these products fill the domestic gap and are exported to over 20 countries and regions.
SOEs Reform Opening a New World
Since the reform and opening-up, the spring tide of building socialist market economy keeps on rising. Transforming the operation mechanism of state-owned enterprises and setting up modern corporate system, just as a prairie fire, spread fast and wide. The reform unwraps itself with the emphasis on the clear ownership and separation of enterprise from administration. The ownership of the state property in enterprises belongs to the state, but enterprises, with all their assets of legal persons, make their own management decisions, take full responsibility for their own profits and losses and pay their taxes as required by laws. Reforming large and medium-sized SOEs by standard corporate system will enable enterprises to become legal and competition identities adapted to market.
Up to now, with the withdrawal of state capital from competitive industries, most state-owned textile and apparel enterprises in China have been restructured into individually-run enterprises. The strategic adjustment and reorganization have been on the whole accomplished. A somewhat perfect modern corporate system and market operation mechanism have been set up. Economic benefit is clearly enhanced. The capacity of technological development, market competition and risk resistance are obviously strengthened.
Target at International Position Introduce Advanced Equipments Supported by technological advancement, Ruyi Group increases its input in technological transformation and development, implements technological innovation and promotes industrial upgrade. Early in 1998, we suggested the concept of " Strive to build top international brand, and to become top international business" within two to three years. In order to realize this goal, the company has sent successively over ten groups of engineering and technical staffs to Italy, England to do inspection and study and identify our own gap, studied a quantified standard for this concept, and hired experts from International Wool Secretariat and Italy to make a diagnosis.
Early 1998 is just the time when domestic wool textile industry was at its lowest ebb, the company made a bold decision, it invested190 million yuan to introduce technological transformation project of 1.5-million-meter top-grade western-style clothes product lines, and, backed by equipment introduction, we improve our hardware basis and boost our ability to make further advances. When fixing the project, the company always has international level as its starting point, makes sure that after the accomplishment of the project, we can produce first-class international products and make China's woolen clothes quickly rank among world's stop level.
Believe Technological Innovation Cultivate Core Competitiveness (Some voices are saying that China textile and apparel industry have not paid much attention to the intellectual property protection and Chinese textile is low-price oriented competitor. Such concept is totally wrong, especially to our group. )
Our company emphasizes much effort on the intellectual property protection and specially assigns a manager to administrate the work. The company cooperates closely with research institutes at home and abroad, signs the agreements with them for the use of their technologies and brands and pays the charges or allows them to buy shares as defined in the agreements. Taking the joint-venture with Nogara Italy for example£¬Nogara joined us as shareholder based on its brand and techniques. The brand and publications of Ruyi Group are under the administration of the specially assigned manager. The company also applies for the patents and takes necessary measures to protect its core technologies.
For many years, in consideration of our own reality, we have adopted advanced and applicable technology to reform the technology of traditional industry, completely reorganized our former arrangement of production equipments and technologies and optimized technological path, our technology has arrived at top international level, and we have basically realized the filtration and transformation from labor-intensive mode to technology-intensive mode. Since the beginning of the production, we have developed a series of new high-grade products rich in high-tech and high value-added.
As the bellwether of technological innovation in textile industry, Ruyi Group's Technology Center was recognized by the State in 1994 as a state-level enterprise technology center, and has for many years been awarded the first place of technology centers in national textile system. Technology Center now has formed "three layers and one belt" quick response mode and highly efficient operation mechanism. " Three layers" refer to three-layer talent structure: the first is the high-tech decision-making layer consisting of persons with doctor and master degrees; the second is the implementation layer composed of persons with college and junior college degrees; the third is the handling layer formed by strictly trained employees. " One belt" refers to Technology Center< |
