forotex 2011 cash johnson
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Trade Negotiations UPDATE
Cass JohnsonNCTO
FOROTEX 2011
Trade Update
• China loses share of U.S. market for the first time.
• Lower cost Asian suppliers reap benefits, but so do Western Hemisphere suppliers.
• Western Hemisphere:– New trend after decade of declines– Volume and market share increase– Duty costs, fast response and new capabilities create new
interest.
After Long Slide, West Hemisphere is Now Moving Up
• Developing countries’ internal apparel and home textile consumption trends - China
• Substantial raw material cost increases occur globally—not just cotton – enhance duty free benefits
• Rising energy and transport costs in Asia• Labor cost escalation across Asia with lower wage escalation
in Western Hemisphere.• Apparel labor availability in China shrinks, while turnover
increases.• Heightened U.S. speed-to-market demand.
Global Sourcing Shift Drivers
• At Magic Show, Western Hemisphere suppliers quadrupled their presence – Executive Sourcing Summit on Western Hemisphere: “Way Beyond the Basics”
• JC Penney’s, Abercrombie & Fitch, VF, Men’s Warehouse, Kohls, Walmart, Dollar Store are all increasing sourcing from the region– Performance outerwear/activewear, men’s suits, fast fashion/jr
women’s, designer jeans
• Denimatrix, Guatemala: Winner, U.S. State ACE Award (Award for Corporate Excellence)
• Launched New CAFTA-DR Sourcing Database
www.DRCAFTASourcing.com
Regional Developments
Policy Issues• Except for Korea, Colombia FTAs, no new
significant U.S. trade legislation expected before U.S. election
• Duty-free for Bangladesh and Cambodia very unlikely
• With passage of Senate currency bill, new pressure on China to revalue faster
• TPP (Vietnam) on slow track with many problematic issues, including textiles
State of TPP Negotiations• After 10 rounds, U.S. wants TPP done by July 2012: post U.S.
elections more likely• Japan, Mexico and Canada want to join – adding complications to
talks.• Many difficult areas: state-owned enterprises, labor, competition
chapter, textiles and apparel, agriculture.• A FRAMEWORK AGREEMENT – last “FTA”
On Textiles:• U.S. proposing a “yarn forward” rule
– Vietnam opposing; first time in an FTA• New Zealand, Aust. also opposing• Strong importer opposition
– Peru supporting; Malaysia somewhat supportive• Other key textile issues unresolved: market access, customs
enforcement, short supply
Vietnam & Textiles• 2nd largest apparel supplier to U.S. ($6.6 bil)
– Now two times larger than Mexico– Concentrates on U.S. – 55 percent of apparel exports
• VINATEX is the 10th largest garment producer in the world – expanding rapidly
• Uses mostly foreign yarns and fabrics (China)• Apparel exports to U.S. have more than doubled over
last five years – up 10 % YTD SME (world – 0%); projected to double again by 2020 (full duty scenario).– Average export prices have fallen 28% over last five years– Vietnam prices would be significantly below CAFTA levels if
duties are taken out.
Vietnam’s Government & Textiles
• Five Year Plan for Textiles• 21 subsidy programs – none notified to U.S.
per U.S.-Vietnam WTO agreement on textiles• Vinatex NOT privatized – gov still controls
main holding company• Loan discounts, state financing, free or
discounted land, preferential tax reductions, subsidies for research and development, export promotion subsidies. . .
More info on TPP: www.ncto.org - issues
0.0
0.5
1.0
1.5
2.0
2.5
2005 2006 2007 2008 2009 2010 YE 9/11
Billi
on s
me
US Apparel Imports, 2005-YE/2011
Vietnam
Honduras
Mexico
El Salvador
Nicaragua
Guatemala
Haiti
Dom Rep
6th
2nd
Knit shirts, 294
Knit shirts, 85
Underwear, 262
Underwear, -471
Trousers, 206
Trousers, -227
-600
-400
-200
0
200
400
Mill
ions
SM
E
Change in Top Three Cafta Product Areas (2005-11)
Vietnam (paying full duty)
CAFTA(duty free)
VITA’s Apparel World Export Projections (bil)
‘Yarn Forward’ TPP Activities
• Joint industry effort during Chicago round– Guatemala, El Salvador, U.S. industry
presentations/meetings
• 25 trade associations from U.S., CAFTA, NAFTA, Andean, Haiti & AGOA countries urge tough textile rules – over 2 million workers
• 52 textile supporters in Congress send letter
