THE FLANARANT: Apparel sourcing rules start to unravel
Did the underlying principles of apparel sourcing completely change at the beginning of this month? Two events, happening more or less simultaneously in the US and Bangladesh, may well signal a complete reversal of how sourcing works, suggests Mike Flanagan.
Since the 1970s, the history of apparel sourcing has been dominated by a progressive lowering of trade barriers. Almost always, the lowering has been rich by countries. Indeed, no one paid much attention to the barriers relatively poor countries put up against each others' products. And of course, the attractive markets people wanted to sell to were all in rich countries.
So when recession hit after 2007, it took a while for observers to notice how many newly-built trade barriers were being put up by the likes of India, China, Brazil, Russia and Turkey.
It's China that has the only quota system in the textile industry (improbably, China still retains a system of quota limits on cotton imports). It's Russia that, faced with protests from local garment producers, simply closed the market were Chinese imported clothes were being sold.
It's Turkey that slammed import duty on Bangladeshi clothes - just as the EU and Japan were removing their last obstacles to Bangladeshi manufacturers selling as much as they want. It's India that banned cotton exports to protect local mills and garment factories. And it's Brazil that's just passed legislation allowing imports to be detained for months over the slightest paperwork discrepancy.
Meanwhile over the past three years or so, Europe, America and Japan (or at least some of their political leaders) forged ever more ambitious plans to liberate trade - especially with poorer, fast-growing, countries in Asia and South America.
But a surprising number of those Western plans seem to have gone nowhere recently.
US agrees GSP extension
So there was a great deal of excitement on 6 September when the US House of Representatives agreed a motion to continue America's Generalised System of Preferences (GSP) programme of small reductions in import duty to developing countries.
Though GSP doesn't apply to garment and textile imports, agreeing the GSP extension is part of an elaborately choreographed deal between the Democrat and Republican leadership aimed at unblocking the log-jam of American trade agreements.
If all goes well, the US Senate will endorse the GSP bill and tack onto it a programme for retraining American workers. Then both houses will agree long-delayed free trade agreements with Panama, Korea, and Colombia - and the US can start reviewing a host of other bills (such as extending the AGOA concessions to Africa) that various legislators have been tabling for the last year.
Now it's very unlikely that everything will go well. Tension between the two parties is toxic, and in the current economic climate there's any number of reasons for someone to oppose trade concessions that would have been relatively uncontroversial a decade or two ago.
It's likely to be sometime in October before the US Congress' congested legislative timetable will even allow discussion about the Korea and Columbia agreements.
Personally, I think a number of grand plans - like the Trans Pacific Partnership, and the Doha Development Round - just aren't going anywhere. They're going to turn into pure vapourware: projects that tie up immense amounts of officials' time and travelling (at taxpayers' expense), but end up producing absolutely nothing.
And I suspect that applies to a number of European, Australian and Canadian projects as well. Free trade, for most rich countries, isn't sexy anymore.
Bangladesh imports into India
Now contrast that with what happened in Bangladesh. Also on 6 September, India's Prime Minister, Manmohan Singh, simply announced the almost total removal - allegedly with immediate effect - of all restrictions and import duty on clothes made in Bangladesh.
Only a month or so after China made a remarkably similar announcement - and after years of Indian trade diplomats seeing international negotiations as being uniquely about protecting Indian jobs.
According to Mr Singh's supporters, that's precisely the point. According to Clothesource Tradetrak, clothes made in India are consistently 20-30% more expensive than clothes made in Bangladesh. Keeping Bangladeshi clothes out of India (Bangladesh sold several hundred times more clothes to distant Europeans last year than it did to its billion next door neighbours) deprives India's poorer consumers of affordable clothes.
Running policies entirely for the benefit of your own producers may go down well with their trade associations - but it's not a way of making sure the benefits of rapid growth trickle down to the whole population.
China's leaders seem to agree. China can't ever be (and as I'm forever banging on about in this column, never has been) the world's cheapest producer of clothing. By keeping more efficient countries' clothes out of China, Chinese consumers have been forced - at a time of growing inflation - to pay more for clothes than they need.
Now in neither India nor China does changing a regulation immediately lead to changes on the ground. India's garment makers are reacting incandescently to the possibility of the free trade they're forever demanding in Europe and America - and no doubt will be arguing for some kind of reimposed import control for the rest of the century.
But, for the first time in half a century, India and China are showing signs of being more enthusiastic about reducing import barriers in their own countries than many in Europe and the US. And they're doing this at a time when worldwide retailers are increasingly interested in emerging market investment.
Unravelling worldwide controls
What was already a complicated worldwide system of controls and incentives on the international garment trade has now got even more entangled.
Rich country rules are getting increasingly uncertain, while some developing countries are tightening their restrictions and others are losing them.
That's why we're launching 'The Clothesource Guide to the world's apparel trade regulations 2012-2016.' Not just summarising rich countries' current rules in an easy to understand form, but giving an informed evaluation of how those rules are likely to change in the next few years. We also look at the growing strength of developing retail markets, showing how they control or incentivise imports - and predict how their rules will change in the next few years.
Available for just GBP500 from just-style, if you order by 31 October you also get a free year's subscription to the Clothesource monthly newsletter The Source, an authoritative review of the changing world of apparel sourcing.
An interactive databank with intelligence on the major apparel sourcing countries
- Can Gap maintain its momentum minus Larsson?
- Brands back Cambodia industry-wide wage bargaining
- Patagonia's CSR commitments re-shaping the sector
- Can robotics redefine apparel manufacturing?
- Zalando: profit is so last season
- Unions agree proposed Cambodia minimum wage
- New CEO may focus on Ralph Lauren supply chain
- Nike collaborates on low-impact textile challenge
- Old Navy's Larsson to replace Ralph Lauren as CEO
- H&M falling behind on Bangladesh factory safety?
- The future market potential for smart garments and e-textiles
- Global Database of the Top 1000 Apparel Producers - Company Names, Financial Performance, and Contact Details
- Global market review of lingerie - forecasts to 2020
- Outdoor performance apparel: peaks, valleys, and green fields
- Myanmar's Garment Sector in 2015 - now with updated members' directory