Hosuk Lee-Makiyama European Centre for International Political Economy (Ecipe) !Rue Belliard 4-6 1040 Brussels, Belgium tel: -32 2 289 1352 email: hosuk.lee-makiyama@ecipe.org twitter: @leemakiyama

ECIPE PRESENTATION »

Global Nonwoven Summit

» Growing importance of nonwoven in trade

Global trade impacting the economy » In 10 years, the share of world GDP from

international trade increased from 40% to 52% » Increasing ‘natural’ regional integration – boosted

by major free trade agreements » Increased role from investments, services and

inputs

The shape of global competition has changed » Rapid growth in developing countries, but main

demand induced in West » Complemented by Inner demand (China), south-

south trade » Developing countries now moving upstream in

value-chain, and to inputs » First real signs of inner demand in emerging

markets (especially in China)

Nonwoven ahead of the curve

0

500,000

1,000,000

1,500,000

2,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EU

US

ChinaJapan

Korea

Exporters of nonwoven 2002-2012

» The increased importance of non wovenRelative share of nonwovens increasing » Free market competition/competitors, less politicised than traditional textiles trade » Increasing trade dependency and supply-chain benefits

!3

0%

4.167%

8.333%

12.5%

16.667%

20.833%

25%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

15.1% 15.7% 15.7%17.1%

18.2%19.0%

20.9%

24.0%

21.2%20.5%

22.1%

3.7% 3.8% 3.8% 4.2% 4.4% 4.6% 5.0% 5.3% 5.2% 5.0% 5.2%

nonwoven + use of nonwovens index = 146

nonwoven index = 142

Trade in nonwovens (expressed as % of textile trade)

» Most economies are improving their nonwoven competitivenessRelative importance of exports in traditional textiles and clothing declining

» Emerging markets replacing each other, moving towards inputs (textiles) or specialisation » OECD economies, high-value added leading to relatively stable competitiveness on traditional textile

No impact from T/C on nonwoven developments » Increased relative importance of nonwoven across all exporters » Both emerging and developing countries developing export competitiveness » No correlation between textiles and nonwoven competitiveness

country/year

Nonwoven Textiles Clothing2003 2005 2011 2003 2005 2011 2003 2005 2011

China 0.47 0.58 0.99 3.86 3.97 4.89 2.4 2.26 2.06EU 1.04 0.94 1.16 0.9 0.92 0.83 0.41 0.41 0.42

Indonesia 0.23 2.95 3.14 2.74 1.53 1.45 0.99India 0.02 0.01 0.26 4.29 3.72 2.99 2.74 2.82 1.78

Japan 0.99 1.04 1.06 0.61 0.61 0.69 0.02 0.02 0.03Korea 1.75 1.70 1.08 3.15 2.32 1.66 0.34 0.2 0.12

Morocco 0.07 0.03 0.03 5.35 4.73 7.62 7.04Mexico 0.42 0.46 0.38 1.31 1.08 0.56 1.02 0.95 0.47

Pakistan 0.00 0.00 0.09 10.04 8.9 8.58 9.6 10.41 9.62Turkey 0.69 0.86 2.13 9.2 8.61 7.85 3.87 3.53 2.46

US 1.61 1.88 1.64 0.84 0.84 0.64 0.14 0.13 0.12Vietnam 0.17 0.4 4.03 3.82 5.83 3.64 3.63 3.65

Revealed comparative advantage (RCA) Relative importance of sector in a country’s exports where 1 = global average; 2 = twice the average share

» Different regional developments in T/C. Yet common trends in nonwoven

2011

0

1

2

3

4

5

6

7

8

9

10

Nonwoven Textiles Clothing

2011

0

1

2

3

4

5

Nonwoven Textiles Clothing

2011

0

1

2

3

4

5

Nonwoven Textiles Clothing

Turkey EU28

2011

0

1

2

3

4

5

Nonwoven Textiles Clothing

China India

» A different view on competing imports and supply chains

High degree of intra-industry (non-woven to non-woven) but also » Importing nonwovens leads to increase in exports of nonswoven-based products » Importing nonwovens does not lead to decrease in locally made nonwovens

!6

EU

US

Japan

Korea

0.5 0.6 0.7 0.8 0.9 1

0.80

0.89

0.97

0.98China

India

Turkey

Mexico

0.5 0.6 0.7 0.8 0.9 1

0.83

0.69

0.97

0.91

Net exporters of nonwoven Net importers of nonwoven

Correlation (R2) between exports of nonwoven and imports of nonwoven Correlation (R2) between exports of nonwoven based products and imports of nonwovenCorrelation (R2) between exports of textiles and imports of textiles

» A new trade policy environment for nonwovensNew geometries of global trade rules

» Trans-Pacific Partnership (TPP) » Most expansive sectoral annexes on non-tariff barriers (NTBs) » Including market disciplines on investments, SOEs, intellectual property, subsidies

» Transatlantic Trade & Investment Treaty (TTIP) » Mirrors TPP, with horizontal measures on NTBs » Regulatory co-operation on chemicals, medical devices, cars and car parts » Aspirations for a creation of a “Regulatory Council”

» EU-Japan FTA » Conforming to EU safety standards on car parts (UNECE) » Review starting last week of April 2014

Issues for the textiles and nonwoven industry » Sequencing and completion?

» Most rules emerging from TPP » Political sensitivities in traditional textiles and manufacturing

» China left outside of all major economic partnerships » China’s FTAs with Switzerland, New Zealand too minor to make a difference for technical upgrade » Only open door is China-Japan-Korea (CJK), leading to RCEP (ASEAN+6)

» Cementation of conflicting rules between different regions and regulatory systems » Trade diversion?

» Trade diversion (impact on GDP)

-0.6-0.4-0.2

00.20.40.60.8

11.21.41.61.8

2

Japan China Korea US EU

0.7

-0.4-0.1

0.8

-0.10.1

-0.2-0.3

0.8

Tariff / RoO onlyTariff / RoO / NTM

-0.6-0.4-0.2

00.20.40.60.8

11.21.41.61.8

2

Japan China Korea US EU

1.9

0.2

-0.1-0.2-0.1

0.10.2-0.1-0.1-0.1

-0.6-0.4-0.2

00.20.40.60.8

11.21.41.61.8

2

Japan China Korea US EU

1.9

-0.1-0.1

0.8

0.1-0.1-0.1

0.3

Aggregate impact = 1% GDP

Trans-Pacific Partnership (TPP)

Transatlantic Trade & Investment Partnership (TTIP)

EU-Japan FTA

» Plurilateral agreement on nonwovenWTO allow for sectoral agreements that are plurilateral

» Critical mass (90%) agreements, zero-for-zero on tariffs » Information Technology Agreement (ITA), Pharmaceutical Agreement » Zero-for-zero on tariffs makes Rules of Origin irrelevant

» Only 19 WTO members needed to reach critical mass on nonwovens » ITA initiated with 29 signatories (now 46); more than 27 member needed for services

» Jointly with inputs (chemicals) and other sectors creates political priority

90%

0%

25%

50%

75%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Nonwoven

Nonwoven + derived productscritical mass

Information Technology

Perc

ent o

f glo

bal t

rade

Number of WTO members (according to falling shares of trade)

» Some policy implicationsA coherent trade policy need and priorities for nonwoven across territories » Different set of NTBs than local industry counterparts » Duties makes little sense with rising competitiveness across all regions » Reflection of an industrial and societal change

Three dimensional market access issues for nonwoven » Lack of import substitution effects, third party FTAs could theoretically improve export sales » Effects from changes on market access on usage, outputs, inputs » Thus, triple competitive risks from trade diversion from TTP and TTIP

Market liberalisation through trade agreements » Sector agreements in absence of a major WTO deal

» Renegotiation of ITA in its final phase (by APEC meeting in May?) » New agreement announced on environmental goods » China applies to join the Trade in Services Agreement (TISA) outside WTO, receives EU endorsement

» Zero for zero ideal to delink nonwoven sector from political issues it has no interest in

!10