Fashion Merchandising 2.04 Understand the Global Nature of Fashion

Global Trade in the Fashion Industry Key terms:,,, export sales agent, franchising, full package production, import commission house, import merchants,, international retailing, joint venture, licensing agreements,, multinational corporations (MNCs), parity,, resident sales agent, value added Global trade trends and policies Impact of apparel production for developing nations Major trade regions of the world International sourcing for U.S. fashion importing Market opportunities for U. S. fashion exporting

Global Trade Trends & Policies Globalization is the growth of international commerce and communications that makes national boundaries less important, especially in economic matters In recent years, due to trade trends and government policies, international trade has grown faster for fashion goods than for any developing nations

Global Trade Trends & Policies Trade involves imports, exports, and exchanges of money Imports are goods that come into a country from foreign sources, or what a country buys from other countries Import penetration is the percentage of imports in a country’s total market consumption. It measures foreign against domestic goods

Global Trade Trends & Policies Imports account for more than 60% of the total US textile and apparel market A country’s balance of trade is the relationship between the values of its imports and exports, described as being a deficit or a surplus Trade deficit occurs when imports exceed exports. The US has a large trade deficit Trade surplus exists when exports exceed imports. Japan sends more out than it brings in

Free Trade Vs Protectionism Free trade is a government’s policy of allowing goods to flow freely in and out of its economy, without interference. Protectionism is the opposite of free trade. It includes many government imposed trade restraints

Free Trade VS Protectionism Market disruption: a situation, usually caused by too many imports, that threatens a particular industry with products that are in direct competition with that industry Lower sales of domestically-produced goods in the US and sever price competition has weakened some industries.

Free Trade Vs Protectionism Transshipping is the rerouting of goods to evade quota limits Dumping is the selling of goods at lower prices in foreign markets than in the home market. The World Trade Organization (WTO) is an international trade accord that reduces tariffs, quotas, and other trade barriers around the world Agreement of over 150 countries that negotiaties and enforces global trade rules Serves as an international trade court for the settlement of differences

Impact for Apparel Production for Developing Nations As counties begin to develop, companies form to make and sell specific products Eventually, they enter into the marketplace which turns into economic growth Textile and apparel industries are usually the first internationally competitive industries to be formed in emerging economies

Impact for Apparel Production for Developing Nations Structural adjustment refers to the process of industries and economies adapting to long- term shifts and economies adapting to long- term shifts in competitiveness. A comparative advantage is the ability of one nation to produce a certain goods or services better than other nations because of specific circumstances

Trade with Developing Nations Before trading with developing nations, companies should learn about the other countries’ Political stability: can influence the degree to which a country’s laws and regulations are subject to change and are enforced Economic climate affects businesses’ abilities to earn profits in a reasonable amount of time Infrastructure involves the existence and condition of roads, transportation systems, electricity, telephones, technology, etc A nation’s culture is is set of social norms or values

The World’s Major Trade Regions Asia-Pacific Plus India Europe Plus North Africa The EU is a family of over 25 European countries united for economic stability and with common policies of free trade among the members

The World’s Major Trade Regions The Americas The North American Free Trade Agreement (NAFTA) set up an open trading zone among the US, Canada, and Mexico Value Added is the increase in worth of products as a result of a particular work activity If the cut fabric parts of a jacket are worth $8 each when they are shipped offshore, and each jacket is worth $10 when it comes back, the value added while it was out of the US is $2 per jacket Latin American Parity Parity is equal monetary value or treatment by the law Latin American countries are moving toward full package production, focusing on supplying design and sample work, fabrics/findings/trims, all parts of construction

International sourcing for U.S. fashion importing Purchase through domestic wholesale importers Import merchants buy and import particular classifications of goods A resident sales agent represents and is paid by a group of foreign manufacturers An import commission house also serves as a brokerage between domestic buyers and foreign sources

International sourcing for U.S. fashion importing Buying Directly from Foreign Sources Export sales representatives represent selected manufacturers, but do not maintain a wholesale inventory Using Foreign Contractors Licensing Agreements Franchising Joint Ventures are agreements that bring necessary skills or products of two companies together for added strength Company-Owned Foreign Facilities

Market Opportunities 1. International retailing, also called cross-border retailing, involves retail company operations that serve customers in multiple countries. Mail order retailers Internet retailers US retailers opening malls in foreign countries Multinational corporations (MNCs) operate globally and have direct investments in several different countries

Market Opportunities 2. Satisfying Market Differences Countries that sell goods in another country must understand the cultural attitudes and practices of the people in that country Differences in languages, beliefs, religion, race, income distribution patterns, and customs