The Clothing and Textiles Industries

The Relevant Production Chain

The World’s leading textile exporting countries, %

Trade balances in textiles, 1995

World’s leading clothing exporters, 1995

Trade balances in clothing, 1995

Shares of textiles and clothing in a country’s total merchandise exports, 1995

Explanatory Framework

Demand Demand for clothing is the key clothing demand is roughly proportional to personal income elasticity of demand < 1 increasingly dominated by purchasing policies of major multiple retailing chains

Production costs/technology Labor costs. –labor intensive industries –substantial geog. variability even if we control for productivity of labor

Labor costs per standard minute in the clothing industry, 1995

Sensitivity to labor costs depends on: Kind of item being produced possibility of substituting capital for labor

Production Characteristics Fibers (synthetic) TextilesClothing Capital Intensity Labor Intensity Material Costs Av. Size of Production Unit Technology High Low High Large Sophisticated Low High Low Small Simple Implications re. sensitivity to labor???

Government policies Policies pursued by DEVELOPING countries to stimulate development Policies pursued by DEVELOPED countries in response to competition

Policies of DEVELOPED countries Encouragement of restructuring and rationalization protection from external competition –Multifiber Arrangement reactions to protection –item switching –country hopping (Triangle Manufacturing)

Recent Trends MFA to be phased out over period but the integration is heavily backloaded –U.S. integration of 70% of imports by value is left to end of the transition period

Corporate Strategies

Textiles World textile oligopoly of about 30 firms implementation of Fordist methods to achieve scale economies offshoring was pioneered by Japanese textile firms and general trading companies –to avoid U.S. quotas on imports from Japan U.S. & European firms are less internationalized. Depend more on merger exception is U.K. firms

Clothing Production is more fragmented Retail chains and buying groups have enormous leverage over producers Japanese general trading companies pioneered international subcontracting

Response of U.S. producers Concentrated on high fashion products made investments to cut costs and improve worker productivity increased own offshore processing via subcontracting FDI in overseas subsidiaries directed at local markets

Western Europe: the Italian Exception Industrial district solution. –Large network of independent Italian subcontractors –strategy of product specialization and fashion orientation

Jobs in the textiles and clothing industries Employment losses in textiles and clothing

Adjusted U.S. Penetration Ratios, Value Basis Percent

Components of Employment Change---Textiles Percentage growth rates

Components of Employment Change---Clothing Percentage growth rates