COMMENT: Olympic torch fires up China sourcing debate
Chaotic scenes followed the Olympic torch relay on the streets of London, Paris and San Francisco last week. But pro-Tibetan demonstrators not only raised consumer awareness of China's human rights record, believes Mike Flanagan, they also increased the likelihood of customer boycotts of products made in China - including clothing.
If ever there was any proof needed of how politicians' decisions affect businesses' sourcing strategies, just look at what happened on the streets of London, Paris and San Francisco this week.
Putting graduates from China's police academy onto the streets of London, Paris and San Francisco as part of the publicity campaign for the 2008 Olympics showed quite extraordinary insensitivity to start with.
As did the decision to slap a three and a half year jail sentence on a Chinese dissident for the crime of saying what he thought - as the plane with the Olympic torch was actually on its way to London.
But that's not all.
The Chinese decided to route the Olympic torch - by now guaranteed to attract crowds of jeering anti-Chinese opponents - along London's Oxford Street past the largest Marks & Spencer store in the world while it was open.
Not content with that, they then routed the torch past the front door of Gap's head office in San Francisco's Folsom Street while the buyers were busy buying.
Inviting your opponents to stand outside some of your major customers and tell these customers to boycott you is, well, an interesting innovation in commercial policy.
But it defies belief to be doing it while your decision to suppress opponents back home is leading EU and US politicians to demand more barriers against Chinese trade.
From a commercial point of view, this really is a very silly time for the Chinese to go out of their way to provoke anti-Chinese hysteria in the West. Because China's business people need all the friends they can get.
The country has reported the first annual fall in its clothing exports to Europe and the US for a decade.
And the Chinese Cotton Textile Association reports that 49% of the country's textile businesses want to sell up because Western demand is slowing and the appreciation of China's currency is making sales unprofitable.
Europe and the US have no shortage of people who want to see trade with China made tougher.
They've been growing quiet recently - at least in our industry - as falling Chinese exports rather pulls the rug away from the "the Chinese are taking over the world" argument.
But the Olympic Torch brouhaha has rekindled China-phobia.
Both Hillary Clinton and Barack Obama, for example, are now sponsoring legislation promoting US anti-China sanctions.
When the US removed apparel quotas against Vietnam at the end of 2006, a welter of trade-destroying small print got added to the arrangements late in the day.
The likelihood of similar restraints when the US abolishes quotas against China at the end of this year increases with every news story about repression in China or anti-China demonstrations on Western streets.
The torch may have finished its unfortunate trip through San Francisco. But it's got just as traumatic a journey through Seoul and Canberra still to come.
In Europe, there's a similar problem. The EC keeps monitoring imports from China of products that came off quota at the end of 2007.
It does so to enable rapid investigation of the case for anti-dumping duty if any categories grow too fast.
With January clothing imports from China flat, anti-dumping investigations might seem a remote risk. But imports of the newly-liberated categories aren't flat: shirt imports, for example, are up 25%.
In the new, highly charged, atmosphere of China-bashing, the political will to impose punitive duty is now a lot stronger than it would have been a year ago, even if imports had grown faster.
For China's exporters, though, the problem isn't just what law-makers do.
Think about the issue from the point of view of the British retailers who saw anti-Chinese demonstrations outside their Oxford Street shops last weekend.
That's every single UK fashion retailer, by the way.
For years now, the problem of Chinese human rights has been a minor nuisance for most retailers: something they had to be aware of, something they had to write a few letters to customers and pressure groups about - but rarely business-threatening.
Customers have grown to accept that a large proportion of what they buy comes from China - and even the most passionately concerned about human rights issues simply live with the fact.
Now, though, the risk of a customer boycott or of selective demonstrations is a great deal higher than it was before the Chinese started their insensitive stunt.
What would you do if the manager of your biggest shop had just reported he'd spent Sunday surrounded by anti-Chinese campaigners?
Well, in those shoes, I'd be telling my buyers to have a China-free contingency plan up their sleeves: to make sure there were fall-back arrangements to increase purchases from Vietnam, Bangladesh and Sri Lanka if anti-Chinese sentiment hardened, or punitive duty were imposed on Chinese clothes.
They might choose India as a fallback. Or Cambodia. Or any of the other two dozen countries who have a well-organised apparel industry and don't provoke demonstrations outside shops.
Since you can't just turn on new sources of production, any sensible contingency plan involves switching some volume to other countries as soon as is practicable.
But, with memories still fresh of the unsellable mountains of sweaters piled up at China's ports after the 2005 Bra Wars escapade, retailers are determined not to be caught napping again.
It isn't clear, of course, whether the current peak in anti-China feeling in Europe and America will last beyond the next media fad. But no prudent retailer should bet on it.
China has managed to get on the wrong side of two forces of nature that it can't negotiate with, silence, threaten or cajole: Western consumers and US Presidential candidates.
There's no certainty consumers will avoid Chinese clothes or that legislators will increase barriers against China.
But, just as China is already seeing its share of US and European clothes imports falling, the possibility of anti-China boycotts or duty has suddenly got a great deal likelier.
And I'd say prudent reductions in China's share of retailer and brand procurement has suddenly got close to certain.
Whoever in the Chinese Politburo designed all this has to be working for the US textile lobby. Because surely no-one could be dumb enough to get into this mess by accident?
Mike Flanagan is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries.
Companies: Marks & Spencer Group Plc
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