Hijacking the Global Garment Export Industry — China and her Accomplices

2010 had but one country winner:China

There seems little doubt that in 2010 China’s U.S. market share will breach the 40% barrier.Good times, bad time, China continues to move inexorably upwards, while at the same time China’s main competitors’ market shares are either stagnating or declining[i].If this trend continues China will takeover the entire industry, leaving the rest of us the bits her factories cannot or do not want to produce

The questions are why and what can we do to stop China?

The answer we receive does not make sense.We are told it is all about price: China maintains its dominant position because illegal government subsidies allow Chinese factories to export garments at FOB prices below real costs. Critics argue that if the Chinese government were forced to remove its subsidies, China’s FOB prices would rise which would allow other garment exporting countries to compete more effectively against their Chinese counterparts.

Like most half-truths, the unfair-price-advantage theory is 50% accurate and 50% nonsense.It is certainly true that the Chinese Government does subsidize Chinese factories.It is also true that until very recently prices for made-in-China garments had been falling[ii].

However, the fact is China’s FOB prices have begun to rise, erodingany price advantage may have had [iii], yet China’s market share continues to rise.More revealing is the fact that China’s market share continues to rise even in such :”commodity” products such asT-shirts where their FOB prices are at a substantial premium to world average.

The answer to the question why, lies not in price but rather in product and product mix.Ironically, China’s competitors compete with one another. They donot compete with China.

U.S. garment imports are dominated by four big basic commodity products which account for 45% of all U.S. garment imports.Of these big-four,two — cotton T-shirts and cotton trousers — account for 36% of all garment imports while the second two —woven shirts and underwear — account for 9%.These four products dominate the exports of nine of the 10largest U.S. garment suppliers[iv] and this is the area where they compete.China is the only exception with the big two accounting for only 26% and the second tier two accounting for only 5

Unlike the other countries, China’s garment industry is diversified.Exports of the big four products, while important do not dominate China’s garment exports.While the other garment exporting countries are busy fighting one another for market share in the big four commodity products, they are leaving China alone to dominate the other products.

China’s product mix:

As of year to date October 2010 U.S. imports from China totaled$23.7 billion dollars.Of that amount $3.8 billion (16%) was divided among 40 products in which China’s U.S. market share was between 67%-98% giving China a virtual monopoly.A further $7.3 billion (31%) was divided among 24 products in which China’s U.S. market share was between 50%-65% giving China market dominance.Altogether 54% of Chinese garment exports are in products where U.S. imports are now controlled by China.

Imagine you are in the sweater business and wish to import women’s wool sweaters.You can go to China (87% market share).You can go to Italy (6% market share) which is a great alternative, if you are Giorgio Armani or Ralph Lauren.After that you have U.K. (1% market share) followed by Peru (0.6% market share) which produces great alpaca but little sheep wool. Let’s face it, for all practical purposes your choice is China, China or China.What is true for women’s wool sweaters is equally true for cotton sweaters, wool knit blouses, women’s wool suits, men’s synthetic jackets, and 36 other products.For these 40 products It does not matterif prices rise substantially.You have to stay with China because no other country supplies your product.

Some may argue that much of this advantage is due to China’s access to indigenous raw material, particularly silk (77% U.S. market share) and linen/ramie (82% U.S. market share).

However, this is not the case.India produces silk but holds only a 4% U.S. market share.Thailand is world famous for silk but accounts for less than 1% U.S. market share.

The same holds true for other-vegetable-fibers (OVF) which includes linen, ramie and related fibers.China monopolizes this market using ramie.However, other, far better fibers are grown throughout the world: Hemp—Canada and France, jute—India and Bangladesh, Sisal—Mexico, the Caribbean, Kenya and Tanzania, and Henequen—Mexico.These OVF fibers exist, but none of these countries are making the effort necessary to compete in the billion dollar OVF garment market.

Wool is the most important example. Wool garments is a $3+ billion export business. Most importantly, it is a fiber that China like everyone else must import.Nevertheless, if you want to import wool garments you have very few choices. You can go to China (55% market share).After that you have Italy (12% market share), Mexico (5% market share), Canada (3% market share), Vietnam (3% market share).For men’s suits and jackets both Mexico and Canada offer good quality products at very competitive prices.For everything else, once again you are left with China, China, andChina.

China either controls or virtually monopolizes U.S.imports of 64 products, which as of the year to date October 2010 had a total FOB in excess of $21 billion.This is one basis of China’s dominance of the global garment industry.

The second basis is product quality.Why would a customer pay China $3.88 for a cotton T-shirt when the same cotton T-shirt is available from Pakistan for $2.46, from El Salvador for $1.69 and from Honduras at $1.57? The answer is that they are not the same T-shirts.The made-in-Pakistan, made-in-El Salvador and made in Honduras T-shirts are basic commodities competing with Bangladesh, Sub Saharan Africa and other garment export industries based in the least-developed countries, while the made-in-China T-shirt is a quality fashion item.The nomenclature for tariff purposes is the same, but the actual products are very different.

Stopping China

China maintains its dominance, not through unfair or illegal currency manipulation or other underhanded subsidies, but rather because the rest of us — China’s potential competitors —have walked away from China’s main export products.It is far easier to make cheap T-shirts and 5-pocket jeans than wool sweaters and down jackets.The orders are larger, workers require fewer skills and the capital investment much smaller; which is precisely why every country in the world is competing to produce these products.

Everyone competes to make the easy stuff with the result that the price keeps on falling.However, the profit is in the difficult stuffwhich we have all left to China. It is for us, to develop our industry to compete effectively on a product by product basis with China.We have no alternative.

If indeed China does succeed in hijacking the global garment industry, do not look to blame others.We have only ourselves to blame.We are all China’s accomplices.


[i]

Top 10 U.S. Garment Suppliers:Market Share

2006

2007

2008

2009

YTD 10-10

China

25.9%

30.8%

32.0%

37.2%

39.5%

Vietnam

4.5%

5.9%

7.3%

8.0%

8.2%

Indonesia

5.1%

5.4%

5.6%

6.1%

6.2%

Bangladesh

4.1%

4.2%

4.8%

5.4%

5.5%

Mexico

7.4%

6.1%

5.6%

5.4%

4.9%

India

4.4%

4.3%

4.3%

4.5%

4.4%

Honduras

3.4%

3.4%

3.6%

3.2%

3.3%

Cambodia

3.0%

3.3%

3.3%

3.0%

3.0%

El Salvador

2.0%

2.0%

2.1%

2.1%

2.3%

Pakistan

2.0%

2.0%

2.1%

2.1%

2.0%

[ii]

Made in China FOB Prices

2006

2007

2008

2009

YTD 10-10

All Garments

$2.85

$2.83

$2.94

$2.73

$2.69

Cotton T-shirts

$4.36

$4.74

$5.07

$4.04

$3.88

Cotton Trousers

$6.22

$6.66

$6.73

$5.39

$4.98

M&B Woven Shirts

$5.29

$5.91

$6.49

$6.11

$6.05

Underwear

$1.20

$1.26

$1.35

$1.08

$0.99

[iii]

Made in China FOB Prices Premium/Discount to Average from All U.S Suppliers

2006

2007

2008

2009

YTD 10-10

All Garments

-10.4%

-10.6%

-6.7%

-7.9%

-6.8%

Cotton T-shirts

54.3%

64.3%

79.6%

48.8%

44.7%

Cotton Trousers

5.5%

16.7%

19.7%

2.8%

-1.8%

M&B Woven Shirts

-7.6%

-0.8%

2.8%

1.6%

3.1%

Underwear

18.5%

25.7%

34.1%

5.9%

0.8%

[iv]

Top 10 U.S. Garment Suppliers:Four Major Products:Market Share

338/339

347/348

340/640

352/652

Big 2

Total 4

World

19%

17%

4%

5%

36%

45%

China

12%

13%

3%

2%

26%

31%

Vietnam

26%

16%

4%

3%

42%

49%

Indonesia

27%

13%

6%

2%

40%

47%

Bangladesh

10%

39%

12%

5%

49%

66%

Mexico

14%

41%

3%

2%

56%

61%

India

26%

11%

7%

9%

37%

53%

Honduras

33%

3%

5%

17%

37%

58%

Cambodia

29%

28%

1%

3%

57%

61%

El Salvador

31%

5%

3%

21%

37%

61%

Pakistan

41%

23%

1%

5%

64%

70%

Share
This entry was posted in Articles, China-Greater China and tagged , , . Bookmark the permalink.

196 Responses to Hijacking the Global Garment Export Industry — China and her Accomplices

  1. binaurals says:

    Somebody essentially help to make seriously articles I would state. This is the first time I frequented your website page and thus far? I amazed with the research you made to create this particular publish incredible. Great job!

  2. I wish to understand a lot more about this simply because it essentially catches my attention. Hold on posting useful content about this dude! Thank you so substantially for sharing.

  3. Hello…I absolutely dig what you are writing! Your site is a great blog, so I have linked back to you from my site at web hosting coupon codes. You can check the link here. Thanks and best wishes with the blog. Keep up the great job :)

  4. I do accept as true with all the ideas you’ve presented in your post. They’re very convincing and can certainly work. Still, the posts are very quick for novices. May you please prolong them a little from next time? Thank you for the post.

  5. Bonjour from Marseille, France – We know that our French readers will enjoy what you propose here with this post, Hijacking the Global Garment Export Industry — China and her Accomplices » David Birnbaum's Blog. That’s why your site, http://www.birnbaumgarment.com/?p=55 is now recommended on our TOP website list – check it by yourself on http://www.prix-maison-en-bois.fr/top-sites/. Two thumbs up for the excellent job

  6. There may be noticeably a bundle to learn about this. I assume you made certain good points in features also.

  7. excellent formulate here yoga exercise mat.e you are extremely good & you should be satisfied with yourself pertaining to writing these kinds of great blog posts!

  8. Free CSS says:

    What’s Happening i’m new to this, I stumbled upon this I’ve found It absolutely helpful and it has helped me out loads. I hope to contribute & help other users like its helped me. Great job.

  9. Hello…I really love what you are writing! Your site is a great blog, so I have linked back to you from my blog at freelance job sites. You can view the link here. Thanks and good luck with the blog. Keep up the good work :)

  10. I will be back soon and follow up with a response.

  11. 1293D says:

    I was searching for content about this on Yahoo and discovered your put up. I discovered it to be adequately explained. Many thanks

  12. I¡¯m delighted that I have noticed this weblog. Lastly anything not a junk, which we undergo incredibly frequently. The web site is lovingly serviced and saved as much as date. So it must be, thank you for sharing this with us.

  13. I done a research on the issue and discovered most peoples will agree with your blog.

  14. Hey all, I was just checkin out this site and I really admire the foundation of the article!

  15. The new Zune browser is surprisingly good, but not as good as the iPod’s. It works well, but isn’t as fast as Safari, and has a clunkier interface. If you occasionally plan on using the web browser that’s not an issue, but if you’re planning to browse the web alot from your PMP then the iPod’s larger screen and better browser may be important.

  16. @ Andrew: Well theyre not exactly good, but bad is relative. Five games under .500 at this stage isnt where I hoped theyd be but its also not where my worst fears had them. I dont think at all that a .500 season is out of reach. Last year it was out of reach in April.

  17. I came across your internet site from wikipedia and read some of your other websites. They may be cool. Pls continue this brilliant work.

  18. I enjoy your posting! Why didn’t I obtain this posting previously? Retain up the good labor!

  19. howdy im from germany and my english isnt that awesome, but i was in a position to fully understand every  sentence of your report. Im browsing english online pages to advance my english expertise and im incredibly glad to ultimately find a journal, that publishes clear and structured english i can grasp. Many thanks from Germany!

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>