Overview

According to Peter Dicken's Global Shift, the textile and apparel sectors were "the first manufacturing industries to take on a global dimension." Although the industries are geographically dispersed throughout the world, China dominates the scene with respect to both textiles and apparel; however, intra-regional trade is also very important. For example, 40% of North American textile exports go to Latin America, while 60% of Latin America's textile exports go to North America. Furthermore, almost 66% of North America's apparel exports go to LatinAmerica, while Latin America exports almost 100% of its garments within the Americas.

China

According to the United States International Trade Commission's January, 2004, report Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the U.S. Market, China has a population of 1,271,900,000 and a GDP per capita of $878. While world exports of apparel rose by 7 percent between 1997-2001 (to $199 billion), China's apparel exports rose by over 15 percent (to $36 billion), making it the world's largest apparel exporter with 18 percent of the world total. China supplies a wide variety of apparel, ranging from standard- to medium-quality goods to high-quality apparel.

China is the world's largest producer and exporter of textiles and apparel and it has invested in more spinning and weaving equipment than any other country during the last 5 years.

In November 1999, the United States signed a market access agreement with China that became part of China's WTO accession package; it obligates the United States to eliminate quotas on imports of Chinese textiles and apparel as of January 1, 2005, the same date as for other WTO countries. However, the agreement allows the United States to apply selective safeguards (quotas) on import on imports of textiles and apparel from China for an additional four years. The agreement also states that no safeguards during the 4-year period will remain in effect beyond one year, without reallocation, unless both countries agree. The country is likely to be a supplier of choice for most large U.S. apparel companies and retailers; however, uncertainty regarding these textile-specific safeguards may temper export growth.

Over the long term competitiveness may diminish as strong economic growth leads to greater domestic demand for textiles and apparel, and for the labor and capital to make these goods. China showed tremendous growth in export of goods for which it became eligible for quota-free entry in 2002.

According to the United States International Trade Commission's 1998 report on Textiles and Apparel, the labor per-unit cost is very low due to both low wages and as well as high productivity. In the textile industry a workers in China earn between $0.41 to $0.69 per hour, depending on the region. In the apparel industry a worker earns between $0.68 to $0.88 an hour, depending on the quality of the goods. Although wage rates are higher in China than in suck countries as Bangladesh, India, and Vietnam, productivity is considered much higher in China, making its overall labor cost lower.

China produces fabrics, trim, packaging, and most other components used to make apparel and made-up textile articles. The availability of fabric, trim, and findings (e.g. zippers and buttons) is considered one of the many advantages of sourcing from China, because almost all the raw materials needed to make a garment are produced there.

The Chinese products are considered by the industry the best in making most garments and made-up textile articles at any quality or price level. The country is the world's largest producer and exporter of textiles and apparel, notwithstanding tight quotas in major world import markets.

Mexico

Originally, Mexico controlled nearly all of America's outsourcing business in the textiles and apparel sectors due to its low wage workers and proximity to the U.S. market.

Currently, U.S. quotas are being phased out for Mexico under the North American Free-Trade Agreement. Imports from Mexico grew by 43 percent from 1997 to 2002. Mexico's shipments have grown more slowly in recent years, following rapid growth during the early years of NAFTA.

Mexico's hourly wage for the textile industry is $2.30 an hour and $2.45 for the apparel industry. After the quotas are eliminated in 2005 Mexico's share of the US apparel imports is likely to decline further, even with NAFTA preferences. The country may continue to be niche suppliers for some basic apparel, particularly goods that are needed on a short turnaround basis. Mexico's labor costs are relatively high and product quality and production have reliability problems. Middle management that is responsible for running the factories is considered weak and product design expertise is limited.

Other Countries

Bangladesh: The country specializes in mass-produced and low-end apparel, including knit cotton tops and woven cotton pants. Workers receive low wages while the government is working to improve labor standards. Bangladesh's overall productivity is improving, but still lags behind China.

India: Many American firms consider India to be the primary alternative supplier to China. The labor force is huge, relatively inexperienced and skilled. India is among the world's largest producers of yarns and fabrics; however, personal safety and security of shipments between factories and ports leads US firms to use agents in stead of dealing directly with producers.

Pakistan: Due to access to local supplies of large cotton and a large, relatively inexpensive labor supply, Pakistan is a competitive alternative to China. The country is especially competitive for men's apparel.

Peru: The country's overall share of US apparel imports may decline due to the 2005 quota removals, but it is expected to continue to be a niche supplier of high-end knit shirts. Peru domestically produces yarns and fabrics.