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    Textiles and Garments

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2001 

    The textile sector represents around 25% of LDCs' total exports. Bangladesh alone accounts for more than 75% of textile exports, to the value of US$ 4 billion.

    LDC products: low-price garments in a higher-quality market 

    In clothing as in cotton fabrics, the LDCs tend to focus on exporting standard products such as T-shirts, men's shirts, and woven and printed fabrics, for which price is the main determinant of success and in-depth knowledge of fashion and design trends is not essential. However, in recent years a change has been taking place in the developed markets, away from cheap imports towards better-finished, higher-quality casual fashion and more individual clothing, the opposite of LDC garment exports.

    Success: up the value chain 

    Nevertheless, Bangladesh has a number of 'champion' export products (i.e., achieving high growth in a dynamically expanding market), particularly women's knitwear. Haiti, another example of a textile-exporting LDC, has been doing very well with exports of cotton T-shirts and women's clothing. Its garment exporters are increasingly exporting sophisticated items like high-quality suits, jackets and branded items. This has helped them to penetrate Japan's extremely quality-conscious market.

    Bangladesh has shown that it is possible to move successfully up the value chain by exporting finished products. In 1999, it was by far the largest single LDC exporter of finished, woven fabrics with 85% cotton or more, weighing up to 200 g/m².

    Production moving to lower-cost countries 

    Labour shortages and rising costs of labour have forced even the leading Asian producing and exporting countries, such as India and the Republic of Korea, to move their production facilities to lower-cost countries (Bangladesh, Cambodia, Lesotho, Madagascar or Nepal), as well as to offshore processing zones in China.

    The result is that the major world exporters are also becoming major importers, buying intermediate inputs to produce the products in which they specialize.

    A new structure of the world textile trade is taking place, based on specialization. As different products are moved backwards and forwards across the value chain, competition between exporters is becoming increasingly fierce.

    Now: privileged market access 

    In countries like Bangladesh, which make full use of their quota allowances, exports of garments have grown rapidly due to privileged market access in the European Union (EU) and liberal quota allowances in the United States. The impact of the Agreement on Textiles and Clothing to liberalize trade by 2005 will be critical for textile exporters in these countries with the removal of the quotas associated with the Multi-Fibre Arrangements (MFA).

    Preferences for LDCs 

    The EU has recently taken steps to further enhance market access for least developed countries. The European Council has also decided that rules of origin would be simplified by promoting regional cumulation. In this regard, the EU granted a derogation from normal rules of origin and encouraged Bangladesh, Cambodia, Laos and Nepal to use neighbouring countries' raw materials to produce garments that could then be exported to the EU duty-free under the Generalized System of Preferences (GSP) scheme.

    For the future 

    Preference erosion is certain to increase competition, for example by allowing new players into the market. China's accession to the WTO, which is expected to take place by 2002, should result in new competition for Asian LDCs such as Bangladesh, Cambodia, Laos, Myanmar and Nepal.

    Opportunities and constraints 

    Depending on their actions now, these countries could face a restriction or an expansion in their textile trade following the removal of quotas by 2005. In a competitive global market, and with the phasing out of the MFA, export-oriented textile production has to be supported by vigorous marketing strategies that include a search for niche markets, strict quality control, and frequent and timely design innovations. Future comparative advantages for LDCs will increasingly depend not just on cheap labour but on a workforce that is both relatively cheap and technologically skilled. This calls for increased investment in workforce training and skill development for the future, and drawing on the latest in information technologies and marketing systems.

    For more information, see ITC's technical papers, Fibres and Textile Industries at the Turn of the Century: Some Observations and Major Markets for Cotton T-Shirts (abstracts are available on page 38). For technical assistance from ITC, contact Antero Hyvarinen, ITC Senior Market Development Officer, at hyvarinen@intracen.org