When it comes to global clothing supply, theres China...then theres everyone else

When it comes to global clothing supply, there's China...then there's everyone else

The two largest apparel import markets in the world – the European Union and United States – are dominated by a comparatively small group of supplier countries. At the same time, fewer types of products are also sold in greater quantities. Here, Robert Antoshak, managing director at Olah Inc, wades through the trade data.

It is an irony that at the height of the old Multifibre Arrangement (MFA), many more countries participated in the global apparel trade. This may seem counterintuitive; after all, the MFA was a quota program designed to restrict trade.

However, the MFA had the effect of scattering trade as sourcing companies in Europe, the US and elsewhere scrambled to stay one step ahead of new quotas, reaching into corners of the world where clothing manufacturing was only just beginning to take hold. In the end, virtually all apparel products from more than 50 exporting countries were under under some form of quota restraint.

Today, however, it's a different story: there's China, then there's everyone else. Indeed, China dominates the global trade of clothing. What's more interesting, though, is that after China comparatively few exporting countries make up the bulk of the global trade. Whereas in the past dozens of exporting countries maintained a substantial share of the major importing markets, today the bulk of the trade has consolidated into about a dozen major suppliers.

In turn, the same thing can be said of the kinds of products traded today. For sure, more stuff is exported than ever, only that the kinds of products shipped are things like jeans, sweaters, woven shirts and T-shirts. Gone are the days of ever-increasing exports of tailored clothing; they've been lost to changing fashion, at least when compared to sportswear.

So, let's look at take a look at the markets. For the purposes of this analysis, we begin with the two major importing markets of the European Union and the United States.

In 2016, the US imported about US$81bn worth of apparel, which compares to just US$56bn in 2001, an increase of nearly 45%. Similarly, the EU imported US$90bn of apparel in 2015 compared to nearly US$37bn in 2001, a growth of about 143%. Although apparel imports rose sharply in both markets, the rate of growth has lessened in recent years. In both cases, market saturation plays a major role; after all, people will only buy so much clothing in a given year and, after years of heavy spending, consumers appear to be taking a rest. For exporters, this means their products will increasingly compete in a crowded, slow-growth market.

EU and US apparel imports from world

2001200220032004200520062007200820092010201120122013201420152016
United States56.4656.9661.1664.7768.7171.6373.9271.5763.171.477.6676.8179.881.7885.1680.71
European Union36.7339.2947.755.860.9469.6279.687.4180.2582.897.2786.9588.9797.4689.61

Source: UN Comtrade and US Census Bureau

As the rate of growth in apparel imports has eased in recent years, the spread of suppliers has also decreased. In fact, the top ten suppliers to both the US and EU markets are clearly dominant, with these suppliers now claiming more than 64% of the imported apparel business in the US in 2015, up from a comparatively modest 25% in 2001. Similarly the top ten suppliers to the EU made up a whopping 80% of apparel imports, compared to only 24% in 2001. Talk about market consolidation!

US apparel imports: top 10 suppliers vs. ROW

2001200220032004200520062007200820092010201120122013201420152016
Top-1024.8926.3129.4432.1439.7744.4749.8850.6848.4956.3661.0660.7163.2964.5967.8164.39
Rest of world31.5730.6531.7232.6228.9427.1624.0520.8814.6115.0416.616.116.5117.1917.3616.32

Source: US Census Bureau

EU apparel imports: top 10 suppliers vs. ROW

200120022003200420052006200720082009201020112012201320142015
Top-1024.3827.9635.0941.6548.9755.3665.8974.4270.1672.8486.3677.1479.1786.9480.08
Rest of world12.3511.3212.6114.1511.9614.2713.7112.9910.099.9610.919.819.810.529.53

Source: UN Comtrade

Now let's turn our attention to the countries that make up the top ten suppliers to the EU and US. In both cases, countries benefiting from free trade agreements or preferential trade deals populate the top ten supplier lists. For instance, Morocco, Tunisia and Pakistan in the case of the EU; Mexico, Honduras and El Salvador in the case of the US.

However, for both markets, the two largest suppliers are China and Bangladesh. In fact, these two countries made up 61% of the top ten suppliers to the EU in 2015, and 60% of the top ten suppliers to the US in 2016 – startling when compared to 41% for the EU and only 19% for the US in 2001. The third largest supplier to the EU was Turkey in 2015, while that status was afforded to Vietnam in the US market during 2016. Further, Turkey was not in the top ten list of suppliers to the US.

US apparel imports from top 10 suppliers

2001200220032004200520062007200820092010201120122013201420152016
China4.65.597.268.9315.1418.5222.7522.9223.527.9729.3929.0629.7829.7930.5427.92
Vietnam0.050.92.372.562.723.224.365.225.075.886.647.18.139.2710.5610.81
Bangladesh2.11.881.851.982.372.913.13.443.413.934.514.474.954.835.45.31
Indonesia2.212.042.162.42.883.673.984.033.864.425.054.944.984.834.944.71
India1.721.922.222.983.193.173.072.853.113.323.043.213.43.673.64
Mexico7.817.426.96.686.085.34.524.013.393.543.83.73.683.733.563.4
Honduras2.342.442.52.672.622.442.512.62.032.412.622.562.52.582.672.55
Cambodia0.931.041.241.431.712.142.422.381.872.222.592.532.562.482.482.14
Sri Lanka1.51.411.441.551.651.681.571.471.211.221.41.481.651.762.041.97
El Salvador1.611.671.721.721.621.411.491.531.31.641.741.841.861.91.951.94

Source: US Census Bureau

EU apparel imports from top 10 suppliers

200120022003200420052006200720082009201020112012201320142015
China7.368.8711.6514.4121.1623.8930.2637.1736.0437.742.7235.9535.3737.7133.24
Bangladesh2.522.593.534.644.45.826.076.977.217.7611.1411.4712.8914.715.22
Turkey5.286.618.499.6510.0810.412.2811.619.8410.4211.911.2711.5812.2110.46
India1.962.22.73.094.034.85.285.745.745.596.635.295.496.175.69
Cambodia0.350.40.480.650.590.70.730.810.770.791.511.892.312.973.28
Vietnam0.680.660.590.790.861.31.561.831.691.812.372.282.412.973.11
Morocco2.362.472.823.022.822.983.53.522.792.773.072.792.783.072.57
Pakistan0.580.710.921.140.971.141.251.31.251.321.821.671.852.432.53
Tunisia2.582.753.113.243.073.113.543.813.173.073.372.722.732.772.21
Sri Lanka0.690.710.81.010.991.221.431.661.651.611.841.811.741.951.76

Source: UN Comtrade

Despite the different role Turkish suppliers play in the EU and US markets, it is nevertheless enlightening to compare the clothing exports of Bangladesh, China and Vietnam, as there are significant trends in each country's export performance over time that underscore the aforementioned product consolidation as well as shifts in global demand.

The Harmonised Tariff Schedule of Classifications (HS) provide a useful system of product groupings where trade in knit and woven apparel products are identified separately and in turn are subdivided into product groupings.

For example, HS codes beginning with '61' mean an apparel product is knitted, while codes beginning with '62' convey that products are woven. Then there are four- and six-digit levels of classification; some countries, like the US take their classifications to an even more granular level with 10-digit levels of classification. For the purposes of this product analysis, we will use 4-digit classifications. Granted, 4-digit HS classifications tend to group lots of products into broad buckets, but even at that level of aggregation, trends emerge in the trade flows particularly when comparing trade in knits versus wovens.

To begin with, Bangladesh's apparel exports to the world continue to reach new highs, reaching US$13bn in 2015, while exports from China peaked in 2013 to a level of US$97bn, but have since pulled back to US$74bn in 2016. Vietnam, on the other hand, has continued to post impressive growth in its global exports of apparel reaching US$10bn in 2015, up a staggering 3,233% from the 2001 level of US$0.3bn.

In the case of knitted versus woven apparel exports, both China and Bangladesh export nearly equal amounts of each. However, Vietnam exports far more woven apparel than knits, largely due to how its industry developed as an alternative to China as a cut and sew centre. In the case of wovens, Vietnam offers very competitive pricing opposite China, while in the case of knitting, China still maintains a price advantage.

Furthermore, Vietnam imports much of its basic fabrics from abroad, including from China, offering Vietnamese clothing companies other competitive advantages. Although China's exports of clothing to the world have declined since 2012, the decline has been less pronounced in knitwear than in woven goods. Bangladesh appears to have picked up much of the global knit trade as China has pulled back in recent years.

Bangladesh apparel exports to world

200120022003200420052006200720082009201020112012201320142015
Knit1.281.442.123.013.354.074.736.36.477.799.949.429.57N/A12.77
Woven2.762.612.923.223.54.184.595.655.817.069.239.8510N/A13.77

Source: UN Comtrade

China apparel exports to world

Source: UN Comtrade

Vietnam apparel exports to world

200120022003200420052006200720082009201020112012201320142015
Knit0.30.761.361.61.722.033.043.893.974.95.916.647.929.1810.11
Woven1.521.82.022.542.843.394.174.614.355.226.917.448.8310.5211.32

Source: UN Comtrade

China exports of woven apparel to world

Source: UN Comtrade

Bangladesh exports of woven apparel to world

Source: UN Comtrade

Vietnam exports of woven apparel to world

Source: UN Comtrade

In the case of knits, however, the mix is different with T-shirts (HS #6109) and structured shirts and blouses (HS #6109) comprising much of the exports from China and Bangladesh, while sweaters (HS #6110) make up much of the trade from Vietnam.

China exports of knit apparel to world

Source: UN Comtrade

Bangladesh exports of knit apparel to world

Source: UN Comtrade

Vietnam exports of knit apparel to world

Source: UN Comtrade

Although this analysis has waded through reams of trade statistics, the bottom-line conclusion is that world trade has consolidated in recent years, with fewer countries supplying more apparel to import buyers while at the same time becoming more selective in terms of the variety of products shipped. Cost of production plays a significant role, but so does the vitality of import markets, which has been lacklustre in recent years.

As we have seen, the two largest apparel import markets in the world – the European Union and United States – are dominated by a comparatively select group of countries, a consolidation that may accelerate in the future if China's exports continue to decline.

A key factor weighing on the global industry is weak consumer demand. For sure, the financial crisis of 2007 is still being felt ten years on. The overriding challenge for brands and retailers remains how to entice a reluctant consumer. And that, of course, is even before we consider the impact of new retailing and delivery strategies afforded by online sales on consumer attitudes.

Finally, the global search for value continues. Lower costs and higher margins drive our industry. Although many people after the end of the MFA touted trade liberalisation as a magic potion to boost consumer demand – and, hence, industry profitability – history suggests otherwise.

It is possible that the post-consumer boom in clothing consumption may have plateaued or simply be in a temporary lull. Regardless the case, what is evident from official statistics is that fewer countries make up more of the global apparel trade than ever. At the same time, fewer types of products are also sold in greater quantities by manufacturers from a comparatively small group of countries. For now, at least, it is a time of consolidation.

Top three product exports from Bangladesh, China & Vietnam to world as % of total trade

Bangladesh knit (2015)China knit (2016)Vietnam knit (2015)Bangladesh woven (2015)China woven (2016)Vietnam woven (2015)
Top 3785763856161
Other224337153939

Source: UN Comtrade

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