The Clothing and Textiles IndustriesThe Clothing and

Textiles Industries

The Relevant Production Chain

The World’s leading textile exporting countries, 1995

Country Share of Worl d Exports (percent)1980 1995

Germany 11. 4 9. 3Chi na 4. 6 9. 1I tal y 7. 6 8. 3Korea 4. 0 8. 1Tai wan 3. 2 7. 8Bel gi um- Lux. 6. 5 5. 1France 6. 2 4. 9USA 6. 8 4. 8J apan 9. 3 4. 7

43%

Trade balances in textiles, 1995

Devel opedeconomi es

$ mi l l i ons Devel opi ngeconomi es

$ mi l l i ons

I tal y +6, 356 Tai wan +10, 116Bel gi um- Lux. +3, 672 Paki stan +4, 134Germany +2, 036 I ndi a +3, 504

Chi na +3, 004USA - 3, 069UK - 2, 536 Hong Kong - 3, 044Canada - 1, 831J apan - 1, 193

World’s leading clothing exporters,

1995Country Share of Worl d Exports (percent)

1980 1995Chi na 4. 0 15. 2Hong Kong 11. 5 6. 0I tal y 11. 3 8. 9Germany 7. 1 4. 7USA 3. 1 4. 2Turkey 0. 3 3. 9France 5. 7 3. 6Korea 7. 3 3. 1Thai l and 0. 7 2. 9

Trade balances in clothing, 1995

Devel oped $ mi l l i ons Devel opi ng $ mi l l i onsI tal y +9, 438 Chi na +24, 049

( l ess i mports)Hong Kong +8, 634

USA - 34, 716 Portugal +2, 827J apan - 18, 228 Tai wan +2, 374Germany - 16, 845 Mal aysi a +2, 118France - 4, 664UK - 3, 695

Shares of textiles and clothing in a country’s

total merchandise exports, 1995

Country Texti l es Cl othi ng Combi nedBangl adesh 13. 6 54. 8 68. 4Paki stan 53. 3 20. 2 73. 5Sri Lanka 4. 1 46. 0 50. 1Turkey 11. 7 28. 3 40. 0

I ndi a 15. 3 14. 8 30. 1Chi na 9. 4 16. 2 25. 6Portugal 7. 0 16. 0 23. 0

Explanatory Framework

Textiles Clothing Semi-conductors

Consumerelectronics

Demand

Productioncosts/technology

Gov’tpolicy

Corporatestrategy

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, 1995Cost per std. Mi nute (DM) Countri es0. 10 t o 0. 15 Mexi co, J amai ca, Hondur as,

Guat emal a, Domi ni can r ep. , Chi na0. 15 t o 0. 20 Vi et nam, Russi a, Sr i Lanka0. 20- 0. 25 Bul gar i a, Romani a, Sl ovaki a,

Mal aysi a, Czech r ep. , Est oni a,Pol and, I ndonesi a, Phi l i ppi nes,Paki st an, I ndi a, Tuni si a

0. 25 t o 0. 30 Hungar y, Sl oveni a, Uni t ed St at es0. 30 t o 0. 35 Hong Kong, UK. Tai wan0. 35 t o 0. 40 Gr eeceO. 40 t o 0. 50 I t al y0. 50 t o 0. 60 Fr ance, East er n Ger many> 0. 60 West er n Ger many, Denmar k

Sensitivity to labor costs depends on:

• Kind of item being produced• possibility of substituting

capital for labor

Production

Characteristics

Fibers

(synthetic)

Textiles Clothing

Capital Intensity

Labor Intensity

Material Costs

Av. Size of Production Unit

Technology

High

Low

High

Large

Sophisticated

Low

High

Low

Small

Simple

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

1963-1987

U.K. 780,000

Germany 564.000

France 520,000

U.S. 470,000

Employment losses in textiles and clothing

Adjusted U.S. Penetration Ratios, Value Basis

0

5

1015

20

25

30

351961-65

1966-70

1971-75

1976-1979

1980

1982

1984

1986

Textiles

Apparel

Percent

Components of Employment Change---

Textiles1972-77 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

Percentage growth rates

Components of Employment Change---

Clothing1972-77 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

Percentage growth rates