Speech at the first Global Textile Economic Forum

Source: CCPIT TEX | Date: 2006-02-08

Du Yuzhou , born in 1942 in Qiqihaer of Heilongjiang Province, is a senior architect and professor. Graduated from Tsinghua University in 1966, Du had ever served in the Designing Institute of the Ministry of Textile as the Chief. Since 1985, he took up the appointments as the Vice-Minister of the Ministry of Textile, the Vice-President of the China National Federation of Textile Industry and the President of China National Textile Council. Now, Du is the President of China National Textile & Apparel Council, concurrently the Chairman of China National Garment Association.


 Preserving Market Access in the Post-quota World, Political Storms and Legal Battles of 2004 and Beyond in Textile Trade

By----Mr. Donald Johnson, Vice Chairman of Fleishman-Hillard Government Relations

(Former Chief Textile Negotiator at USTR)


It is a pleasure to be with you at the first Global Textile Economic Forum and to discuss effect of the new liberalized trade period beginning at the end of this year. The year 2004 is of critical importance for two important reasons to the textile trade world. First, this is a presidential and congressional election year in the United States, which is always effected heavily by the textiles issue. Secondly, the textiles issue is especially impacted this year by the elimination of quotas on textile and apparel imports pursuant to the WTO Agreement on Textiles and Clothing (ATC) on December 31, 2004. Much of this significance is directed at Chinese export potential and its effect on the markets of the world. Domestic industry is demanding protection and politicians of all parties are responding with every remedy available. It is therefore even more critical now for China to develop a strategy to defend against the onslaught of trade remedy cases, such as the current safeguard measures and the future anti-dumping cases, which can be expected in the very near future.

The first anticipated consequence of the elimination of quotas is a significant contraction in the number of countries exporting textiles and apparel to the U.S. Well over 100 countries currently supply to the American apparel import market. This number is expected to be cut in half almost immediately, and over the next 10 years the major suppliers, other than those with preference programs, will be down to a dozen or so. Countries like the Philippines and Sri Lanka are predicted to lose market share, whereas countries like China, India, and Pakistan are expected to be large winners. It could be that the effects will not be this drastic, since these predictions are largely based on price factors and not all sourcing is solely price driven. Yet there will certainly be contraction and the mere perception of drastic increases in market share to China will have a significant political impact in the U.S. and around the world.

Another anticipated economic effect of ending quotas is the elimination of the very substantial quota costs resulting in significant world-wide price reductions. In order to maintain market share in this new unlimited, competitive market, the small suppliers may be forced to lower their prices even further, often with the support of government subsidies. The net effect on the U.S. textile industry and its NAFTA and Caribbean partners is likely to be very detrimental. Low prices added to the recent pattern of decreasing demand for apparel will inevitably lead to more bankruptcies and factory closures in the textile industry and increased political pressure for protection - all leading to a proliferation of safeguard, anti-dumping, and countervailing duty cases. It could also lead the U.S. to adopt a position in Geneva and in regional trade initiatives that is more susceptible to finding a way to retain preferences and other arrangements to limit larger suppliers and advantage smaller suppliers, particularly the least developed or strategically important trading partners in Mexico and the Caribbean countries, which provide an export market for U.S. inputs.

Of course, there are some who would like to keep the quotas on for a longer period. In fact, the American textile industry, led by the American Textile Manufacturers Institute (ATMI), has just this month joined with the textile associations in Mexico, Turkey, and 13 Sub-Saharan African nations to call on the World Trade Organization to extend the quota phase out until 2008. The basis for their demand is their claim China has engaged in "unfair trade practices" which "have enabled China to gain a chokehold on world market in textile and apparel trade." At this point, it seems doubtful that such an effort will gain official support, protectionist policies are enjoying high popularity in politics this year.

The U.S. textile industry has not traditionally been an aggressive user of trade remedy laws, because they have been protected by the quota system and by domestic safeguard laws. Furthermore, antidumping and countervailing duty cases can be very expensive and often require the cooperation of the apparel industry. A significant impediment to these trade remedy cases is that as the American apparel producers have for some time now begun sourcing their products offshore, they have shown little desire to cooperate in an apparel dumping case sponsored by fabric producers. Despite these problems and the general reluctance of the textile industry to bring antidumping cases, they have shown that they are willing to make the effort when necessary. In the 1980's, for example, a number of cases were brought against exporting countries to bring pressure on them to renew their participation under the old Multifiber Agreement.

With the removal of the quotas and the lack of success in safeguard actions under Article 6 of the ATC in recent years, however, they will have no alternative but to seek relief through antidumping cases, as well as safeguard sanctions. In fact, ATMI has expressed its intention to do so in recent Congressional testimony and has urged the President not to agree to weaken U.S. anti-dumping laws in the Doha round citing the need for this remedy in "the free-for-all that is sure to ensue after all quantitative restraints on textile and apparel imports are abolished."

The textile industry will always try first for the political remedy rather than the more expensive antidumping case. As the steel industry did in pressuring the Bush Administration to initiate the safeguard cases against steel imports, the textile industry will also seek low-cost political relief. For example, ATMI has called for the Bush Administration to initiate antidumping cases against Asian textile and apparel imports based upon currency devaluations. While this is not considered a valid basis for an antidumping case, it offers a justification for political attention. The result might be some legislative relief along the lines of the Byrd Amendment (which has been ruled illegal in the WTO) providing compensation for successful trade remedy petitioners. Furthermore, one has to assume that the Bush White House will be very focused on the Presidential elections and key battleground states, as was the case in steel. The textile producers will be well-positioned to leverage trade policy concessions from Presidential candidates in 2004, the final year of the quotas. In fact, it would be surprising if they did not make an effort of this type. It is clear that politics, for example, played a major role in the current China textile safeguard decision. It is expected that there will be more safeguard cases filed later this year - probably on hosiery, gloves, babies wear, and fiberglass products.

It is generally assumed that China is likely to reap the most benefit in terms of market access in the U.S. from the elimination of quotas. The International Trade Commission has predicted that China's share of the U.S. import market will triple to 30% in an unrestricted environment. Under this prognosis, the most likely trade remedy to be used will be the textile-specific safeguard provision in China's WTO Accession Agreement with the U.S. Under this provision, which is effective through 2008, imports may be restrained for up to a year upon a finding by the U.S. that they are "due to market disruption, threatening to impede the orderly development of trade in [the effected] products." This standard is considered to be easier to meet than the general product-specific safeguard (valid for 12 years) in the same Agreement, which allows for restraints of up to three years, and which in turn is easier to meet than a normal Section 201 restraint governed by the WTO Safeguards Agreement. It is anticipated that the textile-specific safeguard will be the preferred remedy until 2009, when the slightly more difficult product-specific safeguard will likely be used, which likely will be joined and followed by antidumping cases.

In the view of U.S. retailers and importers, the invocation of these safeguards against China is "virtually inevitable." The effect of this inevitability is to impose a serious degree of uncertainty for both the producers and importers of Chinese textiles. Unfortunately, we are already seeing the truth these predictions with the safeguard measures now being imposed on knit fabrics, dressing gowns, and brassieres.

Notwithstanding the likely use of the special safeguard provisions affecting China, antidumping cases have traditionally been, by far, the most popular trade remedy tool. China has now become the top target worldwide of antidumping cases, with 48 cases filed against it in 2001. The next most frequent target was Korea with less than half that many. This trend also holds true in the U.S., where China has supplanted Japan and Korea as the top target of U.S. antidumping cases. This trend will only increase as the textile quotas are phased out.

U.S. trade remedy cases have become both increasingly complex and political. U.S. procedures for these cases are considered to be the most complicated in the world. They are constantly changing and require a sophisticated understanding of the interaction of detailed statutes, agency regulations and determinations, and court decisions. And as we have seen this year with textiles and other industries, more and more cases have a political element. Under U.S. law, it is easy for industries to have trade remedy cases initiated. They have low initiation standards and very limited discretion by agencies not to initiate. If the threshold criteria are met, a case must be initiated.

The key conclusion to be drawn from this analysis is that the year 2004 is the beginning of a multi-year offensive of protectionist forces against Chinese textile exports in the U.S. market. It is a year when the issue of Chinese textile imports is highly controversial and political. This protectionist offensive can not be defended effectively simply as a legal matter on a case by case basis. The legal standards, particularly in safeguard cases, are vague at best, and politics will trump both law and economics at least in the short run to the detriment of the Chinese producer and the American consumer. China does not have the luxury of time in building a political foundation of support to mobilize against what has now become a political storm of demagoguery in this election year. There are many supporters of Chinese textile imports and there are many potential supporters who understand the importance of maintaining an open and equitable market for Chinese products, but they will have to be organized and mobilized into an effective political force to combat a well-organized opposition in a difficult and turbulent time. It is vitally important to the preservation of your market access that your industry develop coalition partnerships with political interests in the United States and other countries where your markets exist. If the opposing forces succeed in imposing barriers to Chinese imports it will be very damaging not only to your industry, but also to American consumers and to others who depend on your products in the supply chain. It can also be harmful to U.S. exporters in the U.S. - China trade. Not near enough work has been done to build up the political coalition to battle against the unfair attacks against Chinese imports. The year 2004 will be one of many battles for your industry, but unfortunately, it is only the beginning. Prepare yourself well!


Prospects for the International Textiles and Clothing Trade from a German Perspective


By---- Mr. Josef Albert Beckmann, President of Confederation of the German Textiles and Fashion Industry


1. Introduction / Greetings

2. Expiring quotas and the corresponding impacts on supplying and importing countries

Since China joined the WTO, the People's Republic has benefited from the successive liberalisation measures as set out in the ATC. In this way, China's access to major textile buyer countries, such as the USA and EU, has increased considerably.

China is one of the few supplier countries subject to actually binding - i.e. fully exhausted - quotas. Following the liberalisation of some binding quotas of this kind in 2002, Germany, along with the EU as a whole, saw a considerable increase in imports of the products in question. In this process, the third stage of liberalisation under the ATC, and the retrospective liberalisation required by China's accession to the WTO, has had an even stronger effect in the USA than in the EU.

In the EU, as in the USA, it can be seen that growth of liberalised imports from China has been considerably higher in terms of quantity than in terms of value. The same is to be expected from the liberalisation of the largely exhausted quotas which remain, which is due in 2005.

With the gradual fall in quotas, import competition will further increase for the textile and clothing industry in the industrialised countries. But, import development as regards quantity ought to remain within limits since these markets are, comparatively speaking, saturated in the area of standard goods. In Germany, for example, overall imports of textiles are stagnant, and figures for clothing even show a decline. In this situation, large additional quantities can only be offered successfully for sale by means of considerable price reductions, thus undercutting the competition. Thus, not so much the increase in overall imports, but, rather, the battle for market shares - above all in low-priced segments - will dominate the landscape after the falling-away of quotas.

In this way, some suppliers can be forced out of the market, leading to larger gains in market share for others. China, for example - Germany's third largest supplier of textiles and clothing, after Turkey and Italy - has succeeded in expanding its market share of ready-made clothing, mainly at the expense of Turkey.

An argument frequently put forward in favour of a faster abolition of textile quotas is that the developing countries should no longer be robbed of their comparative advantage in the manufacturing of textile products and the resulting export chances. In principle, there is nothing against this argument. However, the quota system enabled some countries to build up a comparatively strong position. Up to now, there are still certain advantages for some small suppliers: Either they are themselves not subject to quotas, or, they profit from the fact that larger competitors have to operate with relatively large quotas. If these advantages no longer exist, some suppliers will not be able to hold out against price competition. It will therefore depend on as to whether the supplier can also offer, besides price, further arguments in order to influence the buying decision.

Given the very limited potential for growing demand in the traditional buyer countries, smaller suppliers or even newcomers will have great difficulty in gaining a foothold in the market. Instead, established, high-volume suppliers with a long tradition of textile manufacturing will be able to strengthen their position. Smaller countries will not be able to hold their own in competition with giants such as China, India and Pakistan - at least, not in a direct price battle. Therefore, they must place greater emphasis on quality, design and reliable deliveries. In many cases, infrastructure factors independent of the products, e.g., an inadequate transport system with associated delays in delivery, make it unattractive to buy in certain countries. Thus, many smaller countries have only a chance of keeping up with massive investments in technology and infrastructure.

As is generally known, consumer behaviour has changed noticeably in the world's highly developed countries. This phenomenon may, in the meantime, also be observed in threshold countries, indeed, even in less developed regions. Not only luxury segments are expanding. The more strongly the living standards of emerging middle-class sectors grow, the greater their desire for differentiation via up-market consumption. Easier access to information speeds up this trend. Price no longer stands alone in the foreground. Values such as quality, fashion, innovation or brand name prestige gain increasingly in significance.

The textile and clothing industry in the industrial countries can indeed therefore overcome the disadvantage of the expensive location in that it uncouples itself from the pure price argument through qualitatively high-value products, innovative solutions, modern logistical organisation and technical know-how. Enterprises who continue to concentrate on the production of mass goods and labour-intensive products will, as against this, be exposed to even tougher competition than before. The relocation process of these segments to more cost-effective sites will thus continue.

However, no matter how competitive and innovative an enterprise may be - sales success finally depends to a decisive degree on the openness of potential sales markets. Improved access to third markets which are up to now strongly protected must therefore enjoy highest priority in trade policy. A fair and level playing field is therefore our first objective in international textile and clothing trade.

3. Current developments in Sino-German trade in textiles and clothing

China as the leading international textile and clothing manufacturer, is expanding its exports considerably, year after year. Mass production and an apparently unending reservoir of cheap labour give China considerable cost advantages over its international competitors. In many product sectors the pressure on world market prices is already enormous. The successive abolition of quantity restrictions, as set out in the Agreement on Textiles and Clothing (ATC), is encouraging this development. No wonder that some German businessmen are extremely worried about this.

At the same time, however, China's importance is growing as an export market and location for investment - for the German textile and clothing industry, too. Stable economic growth, the abolition of numerous regulations in the wake of China's accession to the WTO, and a constantly growing section of consumers with high disposable incomes, have all raised the prospect of potential sales. For two years now, China has been the Number One investment country for the German textile industry. Given the dismal economic situation at home and a subdued world economy, exports of textiles and clothing to China have shown an outstanding increase.

In the wake of its accession to the WTO, China itself has made large concessions to market access. By 2005, according to the reduction timetable agreed, customs duties on textiles and clothing will be reduced considerably. Moreover, liberalisation measures also include the removal of major non-tariff barriers, such as quantity restrictions on the import of particular textile pre-products and the abolition of the state trading monopoly. This has substantially improved export opportunities for the German textile and clothing industry.

Given the strong economic growth seen in the most populous country in the world, an ever larger group of consumers with high disposable incomes is on the rise, interested in high-quality clothing products and home textiles. Infrastructure projects, industrialisation and construction work in towns and cities are all leading to increased demand for technical textiles. How strong this demand is can be seen from China's relatively low export ratio, despite large increases in production: nearly 80 percent of production currently goes to the home market.

Particularly when it comes to technical textiles - which require high expertise and are capital intensive - German companies have a clear lead in quality and technology over their domestic competitors. Increasing demand from automotive construction and in medicine provides good sales opportunities. Moreover, demand is being boosted by a growth in statutory regulations covering the protection of persons, goods and the environment, not to mention huge road and railway projects, and building plans for the Olympic Games in 2008.

Compared with Chinese exports to Germany, German textile and clothing exports to China are currently modest in their amount: they are no more than one twentieth of what China exports to Germany. However, German exports are showing considerable growth: up 48% in 2002, and 38% in the first three quarters of 2003 - excellent figures, given the otherwise subdued nature of export business at the start of the year and the rather uncomfortable conditions in terms of exchange rate developments.

As a location for investment, too, the People's Republic has become distinctly more attractive. China has been, since 2000, the country attracting the largest direct foreign investment by the German textile industry. Over the second half of the 90s, the annual growth of the economy averaged ten percent. Experts from international financial institutes forecast that China could be the fastest growing economy over the next ten years, thus encouraging further FDI flows.

These latter findings strongly indicate that a win-win-situation is indeed feasible.

4. Nevertheless, with ongoing liberalisation in the tariff and non-tariff area, a trend to New Protectionism is visible. On the one hand, there are fears that, after the abolition of quotas, unfair trading practice will be increasingly applied in battle of market shares. On the other hand, one assumes that increased protective instruments could be adopted world-wide.

Efficient instruments are needed in liberalised world trade in order to put a stop to unfair trading practices. In so doing, one must take care, of course, that the instruments cannot be abused for protectionist purposes. Otherwise there is a danger that the liberalisation success achieved is again annulled by the inappropriate application of protective instruments and that spiral of protective measures is set in motion.

The protocol on China's accession to the WTO contains provisory clauses for protection against imports from China over a transition period. Should there be a disruption to the market caused by Chinese imports, or should a "significant trade distortion" take place, protective measures may be introduced for a limited period, in the form of customs duties or quantity restrictions. At the start of 2003 the EU enshrined these regulations in community law. Further WTO members, such as the USA, Canada, India and South Korea, have also incorporated these China safeguards into their own national legislation in an analogous way. Such safeguards may be applied especially for textiles and clothing up to the end of 2008. In addition, a "product-specific protection mechanism" was instituted, to which recourse can even be made up to the end of 2013.

Contrary to widespread belief, these safeguards are not a tool - as are anti-dumping regulations, for instance - to combat unfair trade practices. Safeguards are designed as temporary protection should fair competition lead to a jump in imports, thus threatening the existence of the home industry. The use of such protective clauses is normally only authorised by the WTO if they are non-discriminatory, i.e. if they are directed against all countries equally. The special regulation for China permits a deviation from this practice, and China agreed to it in the WTO accession protocol.

Given the strong growth of imports from China, the European Commission is currently subject to increasing demands to apply the existing safeguard regulations. Many European companies see them as a tool to staunch unfair competition from the Far East. Those supplier countries which compete with China are naturally observing this with great interest, since restrictions for China would definitely improve their own position.

However obvious the use of the protective clauses may seem, the application of safeguards means interfering in a complicated web of trade relationships, in the course of which a series of unpleasant side effects would be inevitable. To begin with, importing countries would certainly incur the charge of wanting to prolong the quota system through substitute tools - and with the intention of specifically disadvantaging an individual, particularly competitive country. After all, the China safeguards are not directed towards unfair pricing or restrictions on overall imports. Finally, use of safeguards could trigger an international chain reaction, since trade distortions increase the pressure on further markets. Therefore, the safeguards are tools to be used with great care. However, in their potential for negotiations at the diplomatic level, safeguards could play a major role in implementing market-access goals in a persuasive way.

Quota liberalisation is an irreversible process. China will further increase its dominant position in the German and other industrialised countries` markets. The German textile and fashion industry will find it increasingly difficult to maintain its position in its traditional EU markets, since international competition is growing in other member countries too. However, to be put on the defensive side in this situation, and to trust in measures of protection, does not seem to offer much hope of success. Such measures would provide no long term solution, would be politically difficult in their implementation - and could, above all, turn out to be a type of Trojan horse. The proper strategy for the future involves concentrating on the particular strengths of the German textile and fashion industry and developing its international competitiveness.

Given the saturated home market, it is vital to have international markets for the sale of high-quality products. China is certainly one of the most promising target markets. Sales and production in an expanded Europe can also continue to be managed in a promising way, since local advantages, such as geographical proximity, short delivery times and the traditional collaboration between suppliers and purchasers in Europe cannot be counterbalanced by the price benefits alone offered by Asian competitors.

5. Building up Partnerships

Because German exports are being increasingly successful and because investment is growing, many businessmen consider it time to establish a partnership with China, with the aim of improving market access, and thus gaining a lead over their competitors. It is against this background that the Confederation of the German Textile and Fashion Industry signed a memorandum in July 2003 with the China National Textile Industry Council on the subject of collaborative partnership. The core of this agreement is the encouragement of German-Chinese commerce in the textile and fashion area. Agreement covers regular exchange of ideas on questions of trade policy, as well as collaboration in trade fairs, investment, education and training as well as in fostering trade via New Media instruments.

To represent the economic interests of German textile and clothing companies in China even more effectively, the Confederation of the German Textile and Fashion Industry is planning to open its own representative office in Shanghai. This office is intended to support companies interested in trade with China, or investment there, in their entry to the market, to act as a contact for German firms already working locally, and to provide general market information. A basic tasks will also be to maintain contact with the relevant Chinese authorities and government decision makers.

China is often described as the main winner in quota liberalisation. That does not mean that Germany must be on the losing side. Experience shows that business collaboration and mutual opening lead to better results than a policy of barriers, a policy which seldom fails to create errors in economic development. This applies to our relationship with China, just as it does to our relations with all our other trading partners. The Confederation of the German Textile and Fashion Industry will therefore do what it can to encourage the further liberalisation of world trade and will emphatically support all further efforts to multilaterally dismantle restrictions on the textile and clothing trade within the framework of the current WTO round. For it is only in an open world market that the real qualities of the German textile and fashion industry, and its competitiveness, will make themselves properly felt.

6. To conclude, please let me add some words with respect to the significance of continued liberalisation.

Trade with textiles and clothing has, over decades, been distorted by massive trade-political interventions. Here, I do not only mean the quota system. ATC liberalisation is not an obligation for the industrialised countries alone. In Art. 7 ATC, all signatory countries undertook to dismantle entry barriers to their markets. Unfortunately, in several important supplier countries little has been done about improving conditions of access to their own markets. Up to today, some large textile exporting countries protect their own markets through high customs walls and further barriers. As long as this continues, completely false incentives are set up in international trade. Enterprises and consumers in these countries cannot decide freely on the purchase of certain products, competition in quality cannot take place and technology transfer is arrested. The protective walls thus injure not only those who would like to supply to these countries but also these countries' own economy.

My appeal to all international representatives present today is therefore to make use of the opportunity of the Doha Development Agenda in order to massively push forward the world-wide opening-up of the textile and clothing market. Only in this way can we ensure that trade and competition develop in a sound manner after 2005.



Japanese Textile Industry and Future Regime of World Textile Trade

By----Mr.Kunio Yagi, Secretary General of Japan Textile Federation


Ladies and Gentlemen,

Today, I would like to speak about two subjects, namely the present situation of the Japanese textile industry, and the dominance of the Chinese textile industry in recent global textile trade and future regime of the world textile trade.

Regarding the present situation of the Japanese textile industry, I will talk about:

1) Current situation of Japan's textile industry and its foreign trade,

2) Structural reform of the Japanese textile industry and new report on the "Vision of Japan's Textile Industry and Policies for the Industry", and

3) Characteristics and technical advantages of the industry.

After that, I will talk about the situation in view of the present dominance of the Chinese textile industry as well as the prospect of a new order for international textile trade.

Please understand that what I will say here today is fully based on my personal opinions, and is not necessarily the official view of the Japan Textile Federation.

1. Present situation of Japanese textile industry

Firstly, I would like to explain the present situation of the Japanese textile industry.

(1) Both the number of establishments and the number of employees involved in the Japanese textile industry have reduced to less than half of their early-80s level. During the past 20 years, we experienced a decrease in exports and a sharp increase in imports because of the appreciation of the yen after the Plaza Accord of 1985, which caused our foreign trade to plunge into a huge net deficit and accelerated hollowing out in the textile industry. To cope with this situation, enterprises took desperate measures such as "selection and concentration", which downsized loss-making businesses and gave priority to their strong areas, relocating factories overseas, shifting their businesses to high-quality and/or differentiated products, shifting to producing non-apparel products, scrap & build of production capacity, bankruptcies, closures and withdrawals of small and medium-sized businesses, and rationalization in distribution systems.

(2) Even so,
's textile industry's presence in the economy remains quite large. It represents as much as 7% of the total manufacturing industry, with around 610 thousand employees. It occupies 13% of the business establishments in the total manufacturing industry, and the shipment is 6,600 billion yen, accounting for 2.3% of the value of goods shipped by the total manufacturing industry. Also, we have formed textile manufacturing regions in many areas of our country, and they have substantial influence, particularly on local economies.

(3) Looking at the current situation of
Japan's foreign trade in textiles, we continue to have an enormous import surplus. In the year 2003, Japan imported textile products to the value of 25.1 billion yen, but exports amounted to only 7.8 billion yen. Import penetration is such that more than 90% of cotton products and as much as 55% of man-made fiber products are now imported. Specifically, imports from China
have been increasing sharply and now amount to 80% of the total imports.

(4) Now I will move on to talk about the transition in the production capacity. Regarding the capacity to produce man-made fiber in 2004,
China has grown to occupy a third of the world total, accounting for 14.3 million tons, compared with 1.7 million tons capacity in Japan. Japan has been lagging far behind Korea, which has a capacity of approximately 3 million tons, Taiwan with 3.8 million tons and other major man-made fiber producing countries such as the USA, India and Indonesia

Also in the apparel industry in particular, it is said that the number of industrial sewing machines in operation in
Japan has decreased to approximately 200,000 units, while China has more than 7 million. The reason for this is that production bases of the Japanese apparel industry, excluding those for high quality products, have been transferred to countries like China
, where an extensive and cheap labor force is available.

2. Structural reforms in Japanese textile industry and new report on the "Vision of Japan's Textile Industry"

(1) In recent years, we have been making efforts to compete with Korea and Taiwan, and China, the textile giants, through producing higher quality and differentiated products, downsizing of and withdrawal from basic products, and plant relocations to ASEAN nations and Chinese coastal areas.

(2) The latest version of a report on the "Vision of
's Textile Industry and Policies for the Industry", which is revised every five years, was released in July, 2003. The report indicates the problems at each production stage and specifies the overall strategies to be implemented from now on. These strategies can be summarized as follows:

1) To promote further reforms in the structure of the industry,

2) To encourage exports as well as improvements in the textile trade environment,

3) To emphasize research and development in technology and design, and

4) To create excellent human resources.

For implementation of these strategies, the significance of prompt action is stressed in the report.

(3) I would like to report that instead of regarding
China as a threat, the Japanese textile industry is turning its interest to how to work together with China for mutual prosperity. That is to say, we are seeing China as a huge market, and our interest is shifting to how to utilize the production bases and distribution channels in China
, into which we have invested.

(4) For these purposes, the latest version of a report on the "Vision of Japan's Textile Industry and Policies for the Industry" suggests that the industry should further promote exports of the Japanese made textile and apparel products by producing higher quality and differentiated products.

3. Characteristics of the Japanese textile industry and its technical advantages

(1) Let me say that the Japanese technology in fiber and related areas is regarded as the best in the world. We take pride in this and feel aware that we should try to maintain our status by emphasizing research and development. We also need to take measures to protect intellectual property rights, and so on.

(2) I will now summarize the characteristics of the Japanese technology in fiber and textiles. First of all, we have made remarkable progress in the development of high-function fiber. Higher value-added products with fiber structure control and/or textile surface control by nano-technology, and various types of biodegradable fibers are the examples. Also, companies in spinning, weaving/knitting and dyeing sectors have come together to make use of new materials and produce various kinds of new textiles.

(3) Secondly, the Japanese textile industry has been developing new products continuously in various fields with its advanced processing technology, such as hygiene products including microbial control products, safety products including flame-retardant products, high functional products with cold protection, warmth retention and/or another excellent function for sportswear, and beauty and nutrition products.

(4) Besides, the Japanese textile industry has been developing so-called "super fibers" such as high-strength fibers and carbon fiber, and by utilizing such "super fibers", new products for new industrial applications such as geo-textiles for new construction methods in civil engineering and construction industries, materials for new energy, and materials for global environmental protection with recycling technologies are coming onto the market.

(5) Moreover, many Japanese textile companies, especially companies engaged in man-made fiber products, are challenging to enter into various kinds of chemical fields by utilizing high polymer chemistry originated from textile technology. These fields are various films, seawater desalination with membrane technologies, medical and pharmaceutical fields, and bio- and nano-technology fields.

4. Expansion of Chinese market shares in world textile exports and prospects for new future regime of world textile trade

(1) As aforementioned, China has shown remarkable development in recent textile production and trade in the world, and especially in recent 2 or 3 years, China has been only one winner in the industry. Now
is not only a superpower in the world textile industry, but is the textile giant.

(2) It should be taken notice that the following concerns are rising among related countries proportionately:

1) Chinese textile production and exports are growing prominently in the world. There is a possibility that Chinese prominent growth over the long term may trigger objections from other countries, as the exports from other countries have been on the decrease.

2) Chinese companies have flexible and multi-level energies and their remarkably speedy and prompt readiness for change of situations in the world textile trade, and many other countries, especially developing countries, can hardly follow
. In addition, weaker Chinese yuan and nearly unlimited young labour power support prominent growth of the Chinese textile industry.

3) Other textile exporting countries, especially developing countries, are mainly specialized in apparel manufacturing industry, since they do not have diversified and multi-level textile industries as
, and they are lack of readiness for rapid change of situations in the world textile trade.

4) Many textile exporting countries including developing countries are beginning to have a sense of crisis that only China will be benefited from the removal of quantitative restriction on imports by quota under ATC (the Agreement on Textiles and Clothing) by the EU and the USA effective 1st January 2005, judging from the market trends after the 3rd integration in 2002.

5) In the case of Japan, where there is no quantitative restriction on imports by quota and tariffs on textile products are the lowest in the world, the import penetration ratio of textiles and apparel on the volume basis are more than 70%, and 80% to 90% of the imports come from China. There is rising a concern among the
USA and the EU that they will face to the same difficult situations as Japan
after the removal of quantitative restriction on imports by quota at the end of 2004.

6) Furthermore, the
textile industry has requested the government to take protective measures including implementation of safeguard measures.

(3) I think it is very timely that the 1st Global Textile Economic Forum is held on the theme of "Post Quota Times: Creating the Corporate-Win Future" here in
. I expect the new future regime of world textile trade will be sought and established based on the expertise of participants and discussions at this Forum.

Thank you for your kind attention.


Post Quota Times: New Challenges and Issues for Global and Bilateral Textile Links--France/China, a Bridge to Build

BY--- Mr. Thierry NOBLOT, CEO of Union des Industries Textiles

1. Hello everyone. My name is Thierry NOBLOT, and I am CEO of the Union des Industries Textiles, French counterpart of the CNTIC which has invited us today. UIT gathers 1,200 French textile firms with a turnover of 16 billions euros, employing 120 000 people and with exports of 9 billions euros. UIT is founding member of EURATEX. We have come from France with a large delegation of textile businessmen and we are happy to be here with you today. My speech will focus on new challenges and issues for global and bilateral textile links. France/China: a bridge to build.

2. With my French colleagues here, I have come to spend a week in your country. I am stunned and really impressed by your development and dynamism. Confronted with your presence, our "old"
France and "old" Europe have a hard time adapting. The gap is quite large in terms of outlook between a country like yours, which is so peopled, young, lively and full of projects and a developed country like France, whose prospects are on a higher but much flatter growth curve than China

3. We immediately accepted your invitation because our sector is undergoing a real revolution, a real "big-bang":

1. The WTO's textile quotas will disappear at the end of the year after nearly 40 years of existence.

2. The European Union is expanding to the East and South: we will be 25 member countries in the
Union next May 1st and there is a possibility in the near future that Romania, Bulgaria and Turkey
will join.

3. Your country, leading textile power, became a member of the WTO on
January 1, 2002

4. One is talking of the possibility that
Russia, Saudi Arabia, Iran
and the Gulf countries will join the WTO soon. In short, the textile playing field is becoming planet wide, the speed of change is accelerating and our companies have to adapt. We are becoming participants as much as experts in change. These changes involve new challenges and issues for small and medium sized French textile companies.

4. First of all, our market priority is
Europe with its 25 member nations. In addition, there are some ten closely related countries to the East and South. In short, from the Urals to the Mediterranean. Our main customers are all in this zone, which supplies nearly 60% of our textile needs. The rest of the world supplies 40%, half of which, namely 20%, is supplied by China
. Between us, we would like to supply 20% of the Chinese textile market, but we are far off the mark. So, my first message is the following: open your market to our products and our textile services as much as we are open to yours. Too much imbalance as is the case today will lead to reactions that are unfavourable for our trade and our cooperation.

5. But it is not enough to speak about volumes. We also have to speak about prices and currencies, when one sees an 18% decrease year over year (2003/2002) in the price of a kg of clothing imported from
China into France
. In Europe, on some of the products granted free-trade access to Europe as of January 1, 2002, we have seen unit price decreases (2002/2001) of up to 75% while China's market share in these same categories (anoraks, artificial fibre fabrics, women's underwear and baby's clothing) increased 50 to 200%!

I can tell you that this is a major problem! A market economy cannot function this way.

If this collapse in unit prices is compounded by an artificially low yuan/dollar exchange rate, there is a second major problem.

My second message is the following: One doesn't conquer a market with such sales arguments. Either else one kills the market! Or else one commits suicide because the real production costs are not transferred to the market.

We want to understand because one can't explain, in an economically rational way, that from one year to the next Chinese textile prices drop 50% and, in addition, your currency is devalued 40% compared to the euro (i.e.; as much as the US dollar vs. the euro).

6. My third message concerns your market. We are literally fascinated by it: 1.4 billion residents, three times
's population, which is our reference market. Our experts tell us that your average annual textile consumption per person is 7 to 8 kg. Consequently, we start dreaming. If your textile consumption doubles in 10 years, it will represent 12 million metric tons of textiles (2,5 times the present european textile fibers consumption) .

We have to establish ourselves for the long-term. But how should we proceed? We are tens of thousands of small and medium size textile manufacturers in
Europe and several thousands in France
. How should we proceed so we don't miss the opportunities that you represent?

7. This is my fourth message: We need to organise ourselves to pool our respective ressources. From this point of view, I propose to Mr. Du, President of the CNTIC, to open a new chapter in Franco-Chinese textile cooperation. I clearly see six areas of application:

1. Innovation: the sciences, techniques and technologies that our textile industries will have to work on to prepare the textiles for the next 10 to 20 years. On my return to France, I will ask the Institut Fran?ais du Textile et de l'Habillement (IFTH) to get in touch with selected Chinese research centres and universities, based on Mr. Du's recommendations, to develop scientific and technical cooperation.

2. Cooperation between companies: our two organisations can implement the means so our two countries' textile companies are able to more easily identify the ways and means to work together.

3. Intellectual property: we will implement the resources so our respective rights are better protected in your country. Innovation and creation are two of our major strengths in global textiles. Thus you can surely understand our desire to protect them much better than is the case today.

4. Economic information and regulatory monitoring: we can work together, with our respective means, to better understand the trends and major changes in our respective industries and markets.

5. Professional tradeshows: we can also organise our cooperation in the field of the major textile tradeshows in our two countries.

6. Professional education and training: I will ask the Institut Fran?ais de la Mode (French Fashion Institute) and our best engineering and textile fashion schools to develop Franco-Chinese textile cooperation in terms of initial training. The Union des Industries Textiles is also prepared to initiate work with your best continuous training organisations to move forward together.

8. F. Liebert, who is here with us, represents the entire European textile and clothing industry. Our organisation for
Europe is called EURATEX. All textile subjects, positive and disagreements, on the agenda between Europe and China
, will be handled by EURATEX with your organisation. As such, you will have two categories of contacts:

1. EURATEX on behalf of the Euro-Mediterranean textiles

2. The Union des Industries Textiles on behalf of French textiles

EURATEX and UIT will work hand in hand to improve the quality of our exchanges and our collaboration.

9. Times change. The borders between trades, cultures and peoples become blurred. Be active participants rather than passive observers. This is why we are among you today. And this is why we hope Mr. Du and the members of his team will accept our invitation to come to
France and build with our both industries, the bridge between France and China

Thank you for your attention.



Adhere to Technological Innovation, Enhance International Cooperation, Build an International Famous Business

By-----Mr. Yafu Qiu, Board Chairman of Shandong Ruyi Group

Ladies and gentlemen:

The beginning of a good year lies in its spring. In this fresh and energetic season, I feel honored to stand here, to discuss with you the development of textile and apparel industry.

Shandong Ruyi Group focuses on the production of wool textiles and apparel, but also have business in the field of cotton dyeing and printing, rabbit hair spinning, knitting, chemical fiber, jean fabric, real estate and education. The company holds the total assets of 1.6 billion yuan and has over 10 thousand employees and nearly one thousand technicians. The company has set up a state-level technical center and enjoys advantageous technologies and innovation capacity. The company's strength at products development tops the country in the sector of wool textiles. It has achieved the certifications of ISO9001 and ISO14001. Its brand of Ruyi is well known in China. Under this brand, the company has over 1000 varieties of products with nearly 10 thousand various designs. Some of these products fill the domestic gap and are exported to over 20 countries and regions.

SOEs Reform Opening a New World

Since the reform and opening-up, the spring tide of building socialist market economy keeps on rising. Transforming the operation mechanism of state-owned enterprises and setting up modern corporate system, just as a prairie fire, spread fast and wide. The reform unwraps itself with the emphasis on the clear ownership and separation of enterprise from administration. The ownership of the state property in enterprises belongs to the state, but enterprises, with all their assets of legal persons, make their own management decisions, take full responsibility for their own profits and losses and pay their taxes as required by laws. Reforming large and medium-sized SOEs by standard corporate system will enable enterprises to become legal and competition identities adapted to market.

Up to now, with the withdrawal of state capital from competitive industries, most state-owned textile and apparel enterprises in China have been restructured into individually-run enterprises. The strategic adjustment and reorganization have been on the whole accomplished. A somewhat perfect modern corporate system and market operation mechanism have been set up. Economic benefit is clearly enhanced. The capacity of technological development, market competition and risk resistance are obviously strengthened.

Target at International Position Introduce Advanced Equipments Supported by technological advancement, Ruyi Group increases its input in technological transformation and development, implements technological innovation and promotes industrial upgrade. Early in 1998, we suggested the concept of " Strive to build top international brand, and to become top international business" within two to three years. In order to realize this goal, the company has sent successively over ten groups of engineering and technical staffs to Italy, England to do inspection and study and identify our own gap, studied a quantified standard for this concept, and hired experts from International Wool Secretariat and Italy to make a diagnosis.

Early 1998 is just the time when domestic wool textile industry was at its lowest ebb, the company made a bold decision, it invested190 million yuan to introduce technological transformation project of 1.5-million-meter top-grade western-style clothes product lines, and, backed by equipment introduction, we improve our hardware basis and boost our ability to make further advances. When fixing the project, the company always has international level as its starting point, makes sure that after the accomplishment of the project, we can produce first-class international products and make China's woolen clothes quickly rank among world's stop level.

Believe Technological Innovation Cultivate Core Competitiveness (Some voices are saying that China textile and apparel industry have not paid much attention to the intellectual property protection and Chinese textile is low-price oriented competitor. Such concept is totally wrong, especially to our group. )

Our company emphasizes much effort on the intellectual property protection and specially assigns a manager to administrate the work. The company cooperates closely with research institutes at home and abroad, signs the agreements with them for the use of their technologies and brands and pays the charges or allows them to buy shares as defined in the agreements. Taking the joint-venture with Nogara Italy for exampleNogara joined us as shareholder based on its brand and techniques. The brand and publications of Ruyi Group are under the administration of the specially assigned manager. The company also applies for the patents and takes necessary measures to protect its core technologies.

For many years, in consideration of our own reality, we have adopted advanced and applicable technology to reform the technology of traditional industry, completely reorganized our former arrangement of production equipments and technologies and optimized technological path, our technology has arrived at top international level, and we have basically realized the filtration and transformation from labor-intensive mode to technology-intensive mode. Since the beginning of the production, we have developed a series of new high-grade products rich in high-tech and high value-added.

As the bellwether of technological innovation in textile industry, Ruyi Group's Technology Center was recognized by the State in 1994 as a state-level enterprise technology center, and has for many years been awarded the first place of technology centers in national textile system. Technology Center now has formed "three layers and one belt" quick response mode and highly efficient operation mechanism. " Three layers" refer to three-layer talent structure: the first is the high-tech decision-making layer consisting of persons with doctor and master degrees; the second is the implementation layer composed of persons with college and junior college degrees; the third is the handling layer formed by strictly trained employees. " One belt" refers to Technology Center production test belt.

In recent years, the company aims at top international level, and with the support of high-tech product R & D, gets to make R & D be consistently in the advantage of " have what others have not, improve what others have and change what others improve." Since 1998, Technology Center has built up its cooperation and exchange with domestic and foreign research institutes, experts and scholars, and hired several hundred celebrated domestic and foreign experts and scholars to come to Ruyi to give technological consultation; we have sent successively dozens of engineering, technical and management personnel to Italy, France, Germany, Australia and other countries, to inspect and study their advanced technology and management experience; In order to quicken the step of technological progress, the company has also conducted full cooperation with Donghua University and Northwest Textile Engineering College in areas such as talent cultivation, scientific research and technological development, and has set up " Ruyi Scientific Research Base" and " Ruyi Training Center" respectively in two colleges. The two cooperating parties take advantage of their collaboration, to do joint study in apparel, woolen spinning and dyeing, product designing and development and application of new technology, and jointly tackle technological problems and makes the company consistently remain on the frontline of new product development and technological progress. The Technology Center accepts every year many provincial and national technological projects and there are breakthroughs every year. The company currently undertakes 8 key task projects of State Economic and Trade Commission and Ministry of Science and Technology.

The company has always emphasized the development of unique core technology and high-tech products. In recent years, with the introduction of modern high-tech into textile industry, world textile industry has undergone profound change, new textile materials and the development and utilization of new technology have broadly widened the development room for traditional textile industry. The Sirofil products developed in 1999, are to plant in the traditional woolen fabric a strand of soft "steel bar", use the super-thin chemical fabric thread as the " axis," and wrap the outside by knitting wool, thus weave the Sorofil fabric, which not only have the high-grade appearance of whole-wool products, but also have the merits which woolen fabric does not have, such as thin, light, washable in water, crease-resistant and easy of caring. This Sirofil technology receives third prize of State Science Progress. This is the highest award China's textile industry ever has. Such product, upon its birth, quickly becomes the hotspot of consumption and is called by the insiders as " Sirofil whirlwind." At present, this technology is still under continuous upgrade, and has developed from the single spring and autumn product to nearly one hundred varieties and one thousand assortments, suitable for spring, summer, autumn and winter. Availing itself of Sirofil technology, using micro-fabric, green Tencel fabric, egg silk fabric, SPF and wool blending, the company has successfully developed green woolen products, with superior functions and unique external appearance.

Once the high-tech is planted into traditional industry, it will instantly turn this world richer and more colorful. The company uses industrial technologies, such as the cotton spinning, printing and dyeing and silk, and successfully transplants them to the wool spinning industry, and develops bicomponent fashion tweed with features of flocking, burnt-out print and dyeing, and enables the traditional wool spinning technology to have a fundamental leap and lead the consumption fashion. This series of products has been awarded the only design gold prize in the 2000 first National Textile Product Design Competition. A material developed in 2001, using even 170 counts and new spinning technology, has changed the physical and chemical functions of the woolen fabric and made it as thin, light, refined and soft as silk and with a leap has entered into world's leading position. Currently, 170-countd super-thin material can be manufactured only by few producers in Italy, and this indicates that China's wool spinning has kept abreast with the world in the area of developing top-grade high-count product, Ruyi people realize a century-old dream of China's several wool spinning generations.

Due to our great advantage in the independent scientific and technological development and the ownership of core technology, in the overall appraisal of China National Textile Industry Council in 1999 and 2000, the fine-spinning woolen fabric obtained the highest total score. In 1999, the two products, Cashmere Roman Woolen Cloth and Sirofil, are among the top ten fashionable materials. The company has obtained notable result in using high-tech to transform traditional industry and has formed series of products with high technological content and distinct characteristics. With our high-tech advantage, our products has not only realized "self-production instead of import", but also successfully entered into middle and top-grade market of developed countries and become selected materials for famous international apparel brands. The average export price has increased to 12 dollars/M2 , from original 4 to 6 dollars/M2.

The company now has the capacity to work out dozens to nearly one thousand designs each year and preview the fabric fashion in the following year. In this March 31, the company will cooperate with China Textile Products Development Center to host the 2005 Fashion Show of Wool Textiles for Summer and Autumn. Such efforts will not only increase the company's profit, but also guide the fashion trend of wool fabrics and garments in China. The company has shortened the lead-time from past four months to current one month. In recent years, the company was honored the Third Prizes of National Scientific and Technological Progress in developing wool and silk fancy suiting, worsted super-fine wool fabrics, hemp-wool blended fabrics. Of all these, worsted anti-soil wool fabrics was listed as the 1998 National New Products and worsted comfort wool fabrics, high-grade specially finished fabrics, and natural-odor wool fabrics as 1999 National New Products. The Group is one of the 250 key enterprises in China and was awarded the national high-tech enterprise by the Ministry of Science and Technology in 2000.

Enhance international cooperation Create bright future

The development of China's textile and apparel industry is indispensable to international cooperation. In the meanwhile, the development of China's textile and apparel industry also puts into world textile industry a kind of vitality. In 2001, China entered into World Trade Organization. The internalization of international market and the internationalization of domestic market have become a reality.

The raw materials China every year imports from various countries are the best testimony. So far as Ruyi Group is concerned, 90% of our raw materials and accessories come from import. Among them, wool is all imported, Lycra and specialized rayon material are also imported, besides, the import of material cloth and accessories also accounts a large proportion. In the high-tech industrial park by Ruyi Group, investment in the apparel project amounts to 120 million yuans, and it has first-class factory and internationalized equipments. More than 800 equipments, which all come from Germany, the United States, Japan, Italy and other countries, whose configuration has world's most advanced technology, many of which are used by world's apparel manufacturers for the first time.

(Some voices are saying that Chinese market is not fully opened. In this matter, I would like to make it clear that we never cease our efforts to seek international cooperation.)

In recent years, Ruyi Group has, by many ways and in many areas, fully cooperated or jointedly invested with foreign businesses. Early in 1998, our apparel company formed joint venture with Nogara in Italy, uplifted Nogara's technology, recruited with high salary world's renowned designers, adopted advanced international marketing mode and tried to become China's best western-style clothes production base. Now, Group's subsidiary companies all formed cooperation with foreign companies, for the purpose of giving full play to their respective advantage and generating a win-win result. China's accession to WTO will fully open its market. As a result, foreign investments will crowd into China and impose the heavy pressure on Chinese textile and garment companies, sensing the severe competition from their counterparts abroad.

(I'd like to correct the misunderstanding that Chinese companies' financing efforts were much resorted to the governmental preference. Such concept is groundless, especially for our company.)

With the increasing improvement of China's socialist market economy, various big banks in China become very prudent. They have completely freed themselves from governmental bondage and what they care about is enterprise's overall strength, including creditability, the project's feasibility. In our project financing, several investment banks think highly of our good reputation, strong technological innovation strength and the vision of the project, and we do not rely on government interference.

The healthy growth of every industry and every enterprise in this world is inseparable from the collaboration from other countries. The time requires cooperation and the time requires that resource complement each other, closed-door construction will not have a way out. At the same time, only if we can play resource advantages of various parties, communicate and study each other, can we fulfill real a win-win result.

Innovation is the theme of the age, win-win is the call of the time. China, with one fifth of world's population, is the first pushing force of the continuous growth of its textile industry. As a group with over ten thousand employees, Ruyi Group sincerely wish, together with countries of the world, to keep up with innovation and development, and to make new and greater contribution to the development of world's textile industry. Thank all of you!


2005 and beyond-a Positive Role for China

By---Mr. Filiep Libeert, President of European Textile and Apparel Organization


In September 2002 EURATEX organised a first international textile and clothing Conference in
which took as its theme the challenge of 2005 and the Doha Development Agenda. The following major conclusions formed part of the post-Conference statement:

·The need to open closed markets and remove non-tariff barriers

·tariff negotiations in the Doha Round to take place on a sectorial basis.

·the provisions of the TRIPs agreement be properly applied to ensure enforcement of intellectual property rights

·genuine cases of dumping and subsidy to be capable of effective remedy in genuine cases of unfair trade. Respect of social, ethical and environmental standards.

The accession of
China to WTO implies both rights and obligations. The rights have meant that as from January 2002 quotas were no longer imposed by the EU on China in those categories of products which had been liberalised under the ATC process. It will also see remaining quotas removed at the end of 2004. In terms of obligations, China
has agreed to progressively reduce its textile and clothing tariffs, and to remove a range of non-tariff barriers. It has also agreed to respect intellectual property rights.

After two years of WTO membership Chinese exports of textiles and clothing in liberalised categories have grown exponentially at the same time as prices have plummeted to levels which are substantially below those of other suppliers from outside the EU. Such prices seem inexplicable even in the light of the undervalued renmimbi and the end of quota rents. Where EU exports are concerned,
has respected its commitments in tariff reductions. But our members continue to report problems as far as customs clearance, valuation, and conformity with standards are concerned. In addition, counterfeiting and copying of designs and models continues on a large scale. EURATEX takes the view that these anomalies must be corrected promptly by the Chinese authorities.

European industry accepts the principle of free but fair trade. It considers
China to be a huge potential market for its own exports, just as China views the enlarged EU as an important market for its own textile and clothing products. China
has a unique opportunity to bring a radical change in textile and clothing trade about in the next few months. Transparency will encourage mutual confidence and enhanced trading opportunities. It will also facilitate progress in the Doha Round. This in turn will enable the conclusions of the September 2002 Conference to become reality, and it would be most useful if this Conference were today able to endorse those same conclusions, which EURATEX considers to remain entirely valid.

Mr. Chairman,
Ladies and Gentlemen,

Thank you for this opportunity to share with you today a few thoughts on the future of textile and clothing production and trade as the end of the quota system draws near. This Conference comes at a most appropriate time to take stock of the situation and is thus a logical follow-up to the event which EURATEX itself organised in
in September of 2002. The title of that Conference was "Horizon 2005". As a result of two days of intense discussion and debate that first Conference reached a certain number of conclusions which were included in the post-Conference statement. The more important were as follows:

· That there was a need to open closed markets and remove non-tariff barriers

· That tariff negotiations on textiles and clothing in the Doha Round should take place on a sectorial basis

· That the provisions of the TRIPs agreement should be properly applied, to protect brands, models and designs against copying and counterfeiting - without hampering moves to facilitate trade.

· That genuine cases of dumping, subsidy or other forms of unfair trade should be capable of effective remedy and that social, ethical and environmental standards should be respected.

These then were the ambitions in the autumn of 2002. Since then, as we all know,
has come and gone and, whatever moves may have been made recently to re-launch the Doha Agenda, industry still does not know to what extent those objectives will be fulfilled. What we do know is that the EU had already fulfilled its part of the bargain with tariffs amongst the very lowest in the world, with no non-tariff barriers, is actively seeking to stamp out counterfeiting, and, if I may say so, being very sparing in its use of trade defence instruments. The same cannot be said of each and every one of the EU's trading partners, on the contrary.

The beginning of the year 2002 gave rise to a change in the pattern of textile and clothing trade internationally. The last but one slice of quota removals before
December 31st 2004 took place, and China as one of the WTO's newest members was able to benefit from this new freedom to export in those products newly and previously liberalised within the ATC process. This was one of the important rights obtained by China
on its accession to WTO. Other rights relevant to textiles and clothing are a guarantee of non-discrimination between its exports and those of competing suppliers on the world market on the one hand, and of course the benefits of quota free access to the EU and US markets for all textile and clothing products after the end of 2004.

But membership of a rules-based body such as the World Trade Organisation imposes obligations, just as much as it provides rights. Among those obligations were a schedule of tariff reductions, coupled with an acceptance to remove non-tariff barriers, and a commitment to respect intellectual property rights.

I hardly need to underline how important it is for us as an EU industry to ensure that the commitments made by
in becoming a member of WTO are carried out in full. I have absolutely no hesitation in stating publicly here today that we see great opportunities for our own producers of both textiles and clothing to export their high-quality products to the rapidly growing Chinese market. These exports amounted to a modest ? 416 million in 2002, but we expect that final figures to end-December will show that this figure rose by a further 10% in 2003.

If this amount is to grow over time, it will be crucial that WTO members and in our case the EU ensure that
China fully implements its commitments in joining WTO where tariff reductions and the removal of non-tariff barriers are concerned. We accept that China
has indeed respected its undertakings in the field of tariff reductions. However where non-tariff barriers are concerned our members report a number of problems encountered during the course of 2003: lengthy customs clearance procedures, lacking in transparency; high reference prices to increase duties levied; discriminatory application of V.A.T;

costly and complex standards and quality controls which are more stringent than for domestic products; problems in distributing goods around the country; reluctance of some foreign companies to take part in investment projects for fear of lack of protection of their investment. We urge you to play your part in securing the removal of these barriers to trade before the end of this year.

It is just as important that the Chinese authorities should themselves take all appropriate action to stamp out any breaches of intellectual property rights in the country. If I may say so, it is not enough for Chinese legislation to conform to Article 25.2 of the TRIPs agreement, relating to textile designs and models, but at the same time there must be a genuine will in
to apply such legislation. Cases in the recent past which EURATEX has been called upon to deal with have demonstrated that this is not yet everywhere the case. We have seen examples of counterfeit goods where the name of the producer, the country of manufacture, the product design and brand, including the packaging itself have all been copied by Chinese companies. This is a serious problem.

What then of the performance of Chinese exports to the EU in the liberalised categories of products? A look at just a few liberalised but representative product categories tells very much the same story. Chinese exports have grown exponentially at the same time as their prices have plummeted to the point where they are not only substantially below EU producer prices but also below the prices of other non-EU producers.

Let me quote a few examples by way of illustration which cover the period to end October 2003:

Underwear and nightwear 20% below other suppliers to the EU market

  Handkerchiefs               60% below
  Anoraks etc.                50% below
  Velvets and plushes             40% below
  Work wear                60% below

And I could go on….

At the same time and not surprisingly the Chinese share of total EU imports has grown by leaps and bounds, to the obvious detriment of other suppliers.

With the best will in the world I find it somewhat difficult to understand exactly how these low prices have been achieved. We certainly believe, as do many economists, that the renmimbi is very much undervalued. We understand that your bank lending rates are extremely low and we accept that you have the benefit of the disappearance of quota rents. But I would have to say that
China is not alone in having an undervalued currency, certainly against the Euro. One only has to look at the weak US dollar and its impact upon related currencies. Quota rents were high, that is undoubtedly the case, but other countries too have seen the disappearance of these rents as quotas have been removed. What then are the elements which have contributed so much to the success of China as an exporter of manufactured goods in general and textile and clothing products in particular? Is it not highly unlikely that all of the rapid growth and falling prices I have described can be attributed to the elements mentioned? I very much hope that by the end of this Conference we will all be better informed as to how China
has achieved such rapid success.

At all events it is certainly a fact that the sharp unit price drops and the expansion of market share, which in some individual categories has multiplied several times over with average unit price reductions of up to 75% deserve scrutiny as to the conditions under which such performance has been achieved. This last sentence is in fact a verbatim quote from the Communication of the Commission to the Council dated
October 29th 2003. It also begs the question as to what may happen once the quotas have gone on January 1st 2005

Mr. Chairman,

As I understand it the purpose of a Conference of this nature is for businessmen to come together, to debate the issues of the day and to seek to find areas of mutual understanding and indeed to discover how best they can work together. I want to be very clear that this is what we Europeans are ready to do, but I would be doing your members and mine a disservice if I did not state with equal clarity that we will not stand idly by and allow large chunks of our industry to disappear as a result of predatory pricing by anyone. It is here that opportunity and threat come together in the term "challenge".

And here let me elaborate a little as I reach the conclusion of my address: the EU textile and clothing industry will always accept that in an ideal world trade should be free, and that it should be fair. I have been very open about the extent to which we see
as an enormous potential market for our own exports. We know too that the Chinese industry considers the enlarged European Union as one of its two major export markets today and increasingly in the future. This is logical and understandable. However, if there is one element in globalisation which is not fully understood today, it is the failure of many developing countries, including the most developed among them, to accept that market access should be a two-way street, and that they cannot avoid opening their own markets to foreign exports as part of the Doha Agenda. We know that they are very reluctant to do this.

It is my belief that
can bring about enormous change in this respect. Firstly, let me urge you to dismantle all remaining non-tariff barriers and to implement and enforce the TRIPs agreement. At the same time assess very carefully the damage that your catastrophically low prices are causing to your competitors, many of whom are among the least developed and the most dependent upon clothing exports for income. Where you find anomalies, correct them, and where you find reality, explain it. These simple actions can be instrumental in bringing about a radical change in textile and clothing trade and how it is perceived in the coming months. It would challenge us in the EU to be more competitive and to stop complaining; it would offer a ray of hope to the least developed, and above all it would demonstrate to the more advanced of the developing countries that after only two years as a member of WTO China had gone further and faster along the road to market access and transparency than anyone else.

And where would
China benefit? I believe that transparency can only generate mutual confidence and enhance trading opportunities. It will in addition increase the number of Europeans wishing to invest in China, and it will facilitate progress in the Doha Round. On this basis too the conclusions of the Geneva Conference of September 2002, which we in EURATEX continue to view as perfectly valid, will not remain a dead letter but will be transformed into vibrant reality. It may be true today to say that in textiles and clothing China is viewed with apprehension. In the coming weeks and months you have a wonderful opportunity to transform that apprehension into respect and admiration.


The Hong Kong's Solution to the Post-Quota Era

By---Mr. Chan WingKee, Honorary Chairman of Textile Council of HongKong

Ladies and gentlemen,

It is my great pleasure to come to Beijing and have this excellent opportunity to speak to a distinguished audience from around the world .

The year 2003 is a testing time for Hong Kong. The outbreak of SARS severely threatened our health and the consumer confidence. We are glad that with the efforts and contribution of all in different sectors at different levels in Hong Kong, there was a big turnaround in our economy, which enjoyed a swift rebound in the second half. We hope to have a less exciting but more prosperous 2004. Hopefully we could look forward to a year of steady economic growth

The year 2004 is also a significant year for the global textile and clothing industry. At long last, this will be the final year of the Agreement on Textiles and Clothing, the final year when exports to the US, Canada and Europe are subject to quotas. Hong Kong, as the world's freest economy and a great supporter of free trade, welcomes the elimination of quotas. For decades, we have been a strong advocate of the end of quantitative restrictions and we still stand by this commitment. Such restraints created significant market distortions for both producers and consumers, and bred inefficiencies in exporting economies and import markets. We still firmly believe that the removal of artificial barriers is in the best interest of customers who will get the best bargain, and of business people will be able to manufacture and trade textile and clothing products freely in the most efficient manner.

But of course, it would be too early to assume that we will have 100% free trade in textiles and apparels. Even without a crystal ball, I can foresee that the years ahead will continue to be bumpy. Tariffs for some countries are still far too high. Countries may resort to mechanisms like anti-dumping and countervailing measures, safeguards and other trade remedies, creating new barriers and uncertainties for the trade. This will be a whole new ball game. It also means that we will face increasing competition in the global textile and apparel market.

Significance of the Textile and Clothing Sector in Hong Kong

Although Hong Kong has been transformed into a predominantly services economy, the textile and clothing industry is still an important sector to us. In 2003, the industry remained the mainstream of the manufacturing sector and contributed significantly to Hong Kong's economy. The industry accounted for 57% of Hong Kong's domestic exports in 2003 with a total value of US$9 billion, slightly up by 2% as compared with figure in 2002. Total exports to the world (both domestic exports and re-exports) amounted to US$36 billion, equivalent to 16% of our total exports, an increase by 4% as compared with 2002. At present, the industry employs more than a quarter of our total manufacturing employment. In addition, the number of persons engaged in the business of trading and export of textile and apparel products are about 22% of the total employment in the import and export trades. These statistics are good demonstration of the important role played by the industry and its related trading activities in Hong Kong's economy.

How Hong Kong Deals with the Challenges of the Post-quota Era

While the lifting of quotas in 2005 will free our businessmen from a major constraint, our industry will have to compete head-on with other low cost production centres in the region. However, the cost factor is not the only important factor which a Hong Kong trader would look at when determining the location of his manufacturing base. Likewise, buyers will not want to put all their eggs in one basket and based their sourcing strategies entirely on prices alone because of the uncertainties.

Although production costs in Hong Kong are comparatively high, we believe that Hong Kong has its own unique and significant competitive edges in a wide range of areas. These include :

- The Government does not maintain any tariff or non-tariff barriers on imports. The industry is therefore able to get a stable supply of raw materials and semi-manufactures from other economies;

- We have an origin system which allows a portion of processes to be done outside Hong Kong. This system is called Outward Processing Arrangement (O.P.A.);

- Our workers are skilful, flexible and well-trained;

- Hong Kong has excellent infrastructure conducive to business activities, backed up by efficient seaport and airport facilities;

- We have a sound law system to provide for contractual certainty; and

- Hong Kong is an internationally reputable financial centre, etc.

These favourable factors enable Hong Kong to be positioned as the ideal nerve centre for textile and apparel trade, meeting urgent and quick response orders; controlling the sourcing, production and distribution activities in the region; and integrating with the supply chains of the global customers.

Moving Up the Value Chain

Our industry is also taking steps to further sharpen its competitive edge by moving up the value chain through upgrading product design, quality and other support services rather than competing solely on costs. Many producers are evolving from Original Equipment Manufacturing (OEM) to Original Design Manufacturing (ODM) and Original Branding Manufacturing (OBM).

Recognizing the importance of fashion as a creative industry, the Hong Kong Government is working in collaboration with the industry and has recently developed a series of proposals aiming to enhance manpower training, incubating designers, improve capabilities of enterprises, promote the image of Hong Kong fashion brands, and strengthen infrastructural support to the trade. Specific plans include

- to enhance the professional and technical proficiencies of students, to equip them with more knowledge about business disciplines, to provide more exposure and enhancement opportunities for them, and to nurture their creativity;

- to step up publicity of existing services currently provided by the Government and other supporting agencies as well as to introduce other support services; and

- to adopt a total concept approach in promoting the fashion industry by bringing out the uniqueness of Hong Kong fashion through the promotion of the products themselves and the bundle of related services.

Our Financial Secretary just announced in his 2004/05 Budget Speech the Government's plan to launch a "DesignSmart" initiative with the creation of a $250 million fund to train up manpower in design and branding, as well as to promote and honour design excellence. This would encourage more product design activities in Hong Kong and more Hong Kong brand names to emerge. As fashion design is an important element in the development of the fashion industry, I believe that the initiative will greatly enhance the competitiveness of our fashion industry in the long run.

Cultivating New Markets

Apart from moving up the value chain, another way for producers and exporting countries to cope with the challenge of globalization is to adjust their strategies and to find new markets, in addition to the established ones. Of course, North America, Europe and Japan will continue to be the key battleground. But developing countries and emerging economies like China deserve more attention. Traditionally, Hong Kong businessmen view Mainland China as the manufacturing base for exports to third countries, making use of its cheap land and labour. With the growing affluence of its population, it has become a growing and more sophisticated consumer market for textile and garment products, with many niches waiting to be filled.

With the signing of the Mainland Hong Kong Closer Economic Partnership Arrangement (or CEPA in short), more manufacturers are looking towards the Mainland as a market with strong potential for their products. Starting from 1 January this year, about 90 types of Hong Kong origin textile and apparel products can enjoy tariff free treatment when entering into the Mainland market under CEPA. As the Mainland imposes import tariffs ranging from 5% to 21% on these products, the zero tariff treatment under CEPA would greatly enhance the attractiveness of Hong Kong products. A study by the Hong Kong Trade Development Council reveals that middle class consumers in big Mainland cities find Hong Kong fashion brands in the middle and high-end market particularly appealing. This would in turn attract more local and overseas manufacturers to expand their existing production lines in Hong Kong aiming for the Chinese Market.

In addition, Hong Kong businessmen can leverage on the liberalization measures on trade in services provided under CEPA to expand their trading, wholesaling, distribution and retailing businesses in the Mainland. Under CEPA, Hong Kong enterprises are allowed to provide distribution services in the form of wholly-owned operations. The relevant entry thresholds, such as average annual sales value, asset and registered capital requirements, have been lowered substantially, thus facilitating them to develop their distribution networks, expand their market coverage and increase their sales.

I am aware that there is no lack of initiatives for closer economic integration and free trade agreements among leading economies in South East Asia and the Asia Pacific region that would create enormous opportunities for businessmen. The point I would like to illustrate is that with the right mix of government initiatives and private sector strategies, rivals and competitors can become allies, partners and each other's customers.


We notice that some domestic industries in the US, Europe and a few exporting countries are brewing the idea of delaying the abolition of quotas for a few more years. I believe that this is wrong and probably too late to turn the clock back. Instead of trying to preserve the status quo, the best way to survive is to embrace changes and competition, as Hong Kong did in the past two decades. It is true that without the protection of quotas, competition in the textile and clothing industry will be keen, like all other goods and services sectors. But I am sure that this will not be a zero-sum game or a winner-takes-all situation. Liberalized trade will help enlarge the size of the pie and there will be a slice for every economy and company that are adaptive, efficient and responsive in meeting customer needs.

Thank you.


How the Wool Industry Responds to the Demands of the Consumers

By---Mr. Juan Casanovas, President of International Wool Textile Organization

The speech will discuss the fast and permanent changing of the consumer behaviour concerning fashion and textiles.

Each player within the demand chain has to act and react to survive in the industry. What are the needs and the actions which the wool industry has to do?

How is the wool demand chain responding to the challenge of changing consumer habits? Consumer focus, fastness, added value, precise segmentation, plans without limit, promotion, innovation, research & development etc…? What is the key of success for the wool industry in the future?

The presentation will give a strategic overview of the various activities of their players, the relation to other parts within the demand chain and the adaptation to the changing markets.

Ladies and Gentlemen,

My presentation, as the title self explains, will deal about the different initiatives that the Wool Industry, under the leadership of the International Wool Textile Organisation (IWTO), is developing in order to meet the actual and future demands of the consumers and, at the same time, help the retailers to better achieve their commercial interests.

The main discussions during the First Global Textile Economic Forum have been centered around the issues that post-quota is bringing in: competition, dominance, strategy, market share, globalisation, free trade, new opportunities and challenges, readjustments, co-operation and development.

But I have not heard the key word and the main reason for all our existence: The Consumer. The Consumer and his or her needs and desires.

It is precisely The Consumer that is making a big difference in our industrial and production strategies. And by learning their desires and reacting to their expectations we will better serve them, and better serve our own companies.

Consumers existed during quota times and will exist in the post-quota times. It is worth remembering!

The normal approach that the textile and garment industry does take when looking at the market is focused on the supply-chain concept, which has been common practice during the last decade and, which still dominates our minds and our industrial behaviour.

The supply-chain concept has several pre-established ideas in mind, being one of them the concept of economies of scale; low price focussing and, in consequence, re-localisation of production to low wages countries, and so on. But, price fighting has a limit, a limit that already has appeared in certain markets, like
. Let me tell you a short story about it.

, not long ago, men's suits used to sell at very high prices, which was the delight of the garment makers, of the retailers, and of the same consumers who were proud to pay for those prices.

However, when deflation appeared, the prices for suits declined at a fast pace until reaching the 10.000-yen price level. These suits were basically made in
, because the Japanese garment makers where fighting for lowering their cost, and selling cheaper to the retailers with competitive prices. The Japanese retailers would sell these suits at low price levels in order to increase their sales figures and gain market share.

But surprisingly, the Japanese retailers discovered that, at this price level, they were selling even fewer suits than before. They started figuring out what they did make wrong and, discovered that they misunderstood the needs of their customers. Customers, or a large majority of customers, where not looking for lower prices, customers were looking for technical and comfort features such as performance, or where requesting a clear product differentiation.

Now the pace has changed, and the suits are selling at higher prices, of course by offering some new attributes of performance and use to the garments. Certain garment makers, still pressured by the retailers for cost reasons, moved a substantial part of their production from
China to Myanmar. But also, other retailers, driven by customers' needs, were able to source a portfolio of products from Europe
that offered further performance attributes to the garments. The final result was that these last retailers where marking the products' prices higher because they were selling a differentiated and upgraded product to the final customers, which was precisely what they were looking for. The actual situation is that, at higher prices, more suits are being sold.

The main lessons to be learned from this little story are the following:

1. Lower selling prices do not mean necessarily that you will sell more.

2. When prices and sales turnover are both low, margins do not exist.

3. There is always someone that produces cheaper than you do.

4. There is room for higher priced products in all the markets, provided they include certain attributes.

5. Producing cheaper does not mean producing the right thing.

6. You have to understand what the consumers need, and not giving them just what you make.

My perception of the facts is that
China and probably India
and other countries have seen the post-quota times as a fabulous opportunity for their textile and clothing industrial development. It seemed that the world growth was endless, and that there was only a supply chain problem, or a price issue question.

This wrong belief misleads the different Chinese textile and clothing industries and regions towards a race of extreme investments, aided undoubtedly by the same central and regional Chinese Governments in the form of financial support and export subsidies, among other unfair trading practices under the WTO rules. Sorry to say it crystal clear, but these are the real facts.

This explosion of investments has brought an extreme problem to the entire world: an excess of production capacity that the world textile chain cannot longer digest, even with the natural growth of the population. Textiles and clothing are not buoyant anywhere, precisely because of this excess of production capacity. The severe fight that exists in the market to gain share, or just for survival reasons, is doing harm to all the players and nobody gets the benefits. There is only one solution, which is reducing production capacity, here in
China, in India
, and elsewhere.

There is only one market, with a certain capacity to buy a certain amount of products and services. The markets' growth depends on the economic growth that is associated to them. We have recently seen that the economies of
Europe, America and Japan
do not have real positive terms of economic development. The outcome is that their markets are oversupplied with products from all over the world. We all fight to get a slice of the disposable income of their consumers, which means fighting for an increased share in a market that is not growing. The result: "price squeeze".

Who gets the benefits of it? Nobody does. Not even do the consumers, which are not getting what they want. They are only being offered lower prices as a means of attracting their attention. We are not asking us about their real needs and how to better serve them. We are loosing their loyalty for their future consumption.

We have to understand the lessons from the little story I told you before.

This is precisely what the Wool Industry is trying to do with the help of IWTO. The Wool Industry is not alien to this market situation of oversupply and excess of offer.

In 2003, in view of the changing facts that had been occurring at the world fibre consumption level, IWTO questioned itself the real sense and role that it had as an organisation. World wool consumption had been dropping in the precedent years. The whole industry knew that had to react, but did not know exactly how to do it. There was, and still exists, a fierce price fight for even a reduced market share. This is driving the whole industry nowhere. How do we change this situation?

IWTO understood that the industry did not belong any more to a supply chain. The Wool Industry is part of a Demand Chain. This is precisely the main issue. The Wool is not really sold until the garment is not sold in the shop. The Wool Demand Chain starts in the shop and not in the sheep.

The Consumer is the force that initiates the demand that makes the wool pipeline run. The "diameter" and the "speed" of the demand chain pipeline will depend only on how well we respond to the demands of the consumers. If we are able to meet their demands in a continuous way, the pipeline will contain more of our products, and the replacement will take place faster.

We therefore have to understand the Consumers needs and to develop the products and services requested accordingly, at the right time, at the right place and at the right price.

In order to discover the needs of the consumers, IWTO decided to start a broad world market research on the actual and future habits of apparel consumption. The importance and scope of the research led us decide to center the attention of the study to the following markets:

United States, Canada, 5 main and large apparel markets in Europe (Germany, France, Italy, United Kingdom and Spain), China, Japan and Australia. Recently, we were able to include South Africa
on board.

This study had been consigned to Kurt Salmon Associates on behalf of IWTO. We will have an official presentation of the Market Research during our next annual Conference in
Evian, France, which will take place on the 14th of May 2004
, under the Retail Day Session.

The market research report will be presented to a large audience of retailers and garment makers. It will also be commented by a panel of world key retailers, such as: Aoyama from
Japan, Cortefiel and Zara from Spain, Ann Taylor from the United States, Marks and Spencer from the UK, C&A from Germany, David Jones from Australia
, etc. The list of participants is of high level, including Presidents and CEO of important retail, apparel and textile companies.

During the same Conference we will present the latest products that our world wool producers have developed in order to respond to the new demands of the consumers, and explain the commercial advantages that those products and services can provide to retailers. One of our Associate Members, Australian Wool Innovation (AWI) will report to the retailers about the latest technical developments and findings applied to products that they are working on, in order to meet consumers needs. These features are going to cover areas like high-performance, nano-technology, Easy Care treatments, machine washable suits, etc.

Our member, The Woolmark Company (TWC) will explain the promotional activities that go together with the new developments and products. Promotion is a key service to retailers to ensure that the right communication to the consumer is being performed, in order to inform them about the availability of products that give response to their needs.

There will be a Press Conference to highlight the main findings of the Market Research Report and the conclusions of the Round Table and of the additional presentations. IWTO will also publish the Market Research Report on a later stage.

In case you would like to attend our Conference, or find out further issues of interest, I recommend you to browse our web site www.iwto.org , or the organizer's web site www.iwtoevian2004.com .

IWTO mission is to help our Wool Industry Members to understand the textile demands of the consumers, and to enhance to respond to them with products and promotional activities especially developed to meet their needs, with a fiber that is highly desirable for its social, technical, comfortable and sustainable values.

The expected outcome should be a better positioning of the Wool fiber on top of consumers' choices and preferences, and to bring a steady increase of wool sales and higher market share, and the maintenance of commercial advantages along the entire wool demand chain, from retailers to woolgrowers, all around the world.

For the next conferences to be held in future, like the one that will take place in May 2005 in
Hobart (Australia
), we will be using a similar methodology, but will be approaching different targeted end uses: floor coverings, transportation industry, home textiles, technical textiles, and so many more.

Hoping to have raised enough interest among the audience.




State and Development Prospects for Russia's Textile & Light Industry

By---Mr.Boris Fomin, President of Russian Union of Entrepreneurs of Textiles &Light Industry

We see our objective in boosting further partnership and stepping up international integration. We are ready for a dialogue on setting up joint ventures and implementing new technical and investment projects.

The transition to the market-oriented economy called for innovative methods of promoting products on markets. The instability of the Russian market in terms of the inadequate supplier-buyer relationship is due to the weakness of wholesale links.

Today, you can count major wholesalers on your fingers, while the bulk of them are middle-sized and little wholesalers as well as own merchandise supply networks organized by manufacturers who set up trade representative offices and brand name stores.

According to polls taken among participants of federal and interregional fairs held by "Textilexpo" JSC, the manufacturers point out that on average up to 30-35 percent of annual sales accounts for new buyers.

This market situation compels the suppliers to follow tougher marketing policies in order to maintain their positions. At the same time, this makes the market more attractive for new participants.

We get convinced in staking on Federal Trade Fairs for Textile and Light Industry Goods and Equipment (Textillegprom).

Today's federal fairs are a constituent part of the program of forming the domestic market of textile and light industry goods "Russian Textile and Fashion Weeks"; leading exhibition centers from nearly 40 Russian regions are involved in the mentioned program.

Federal, international, interregional and regional fairs held under the project in combination with information expansion ensure maximum efficiency in promoting all types of commodity groups, while at the same time keeping the whole variety and polarity of consumer groups; these fairs provide the suppliers with an environment for filling all the segments of the Russian consumer market.

Over these past 10 years, such fairs have been traditionally held at the All-Russian Exhibition Center, Russia's main exhibition fairground.

The distinctive feature of the fairs is the fact that, along with textile and light industry goods, they display all groups of products, equipment and services used in the manufacture of said goods.

The past week saw the closure of the regular 22nd Federal Fair that brought together more than 2700 exhibitors from 42 countries thus becoming the biggest fair ever held in
so far.

The bulk of the foreign participants came from
Belarus (representing the CIS) as well as from the People's Republic of China, Turkey, Poland, Italy, and the Czech Republic

The Russian enterprises represented at the fair account for over 93 percent of the total domestic output.

And now I would like touch on the participation of the People's Republic of
in the fair.

We were satisfied with our meeting in Moscow with a delegation of the China National Textile Industry Council headed by Mr. Du Yu Zhou held in May 2002 when we had an opportunity to exchange information of mutual interest. We think the meeting marked the start of our cooperation.

At the 22nd Federal Fair Chinese enterprises were represented by four delegations.

The delegation of
province was the largest one.

I take this opportunity to thank our Chinese colleagues once again for their cooperation.

As a matter of fact, federal fairs, called federal or national, are, in essence, international shows recognized abroad as well.

Starting from October 2004, a new project under the general title "ELITE SHOW" will be launched: it will rally several new exhibition events at a time.

The "Fashion Directory" exhibition is the first in the series of five fairs to be held under the ELITE SHOW project reflecting international trends of shaping the lifestyle of today's man. The ideology behind the project is the formation of mankind's system of ideas about the image and life in high quality. Within the general project, the Fashion Directory ranks first, thus reflecting the present-day man's outward appearance in all areas of his activity.

Its logical continuation is the concurrently held international MODERN HOME exhibition of goods and services needed to equip a modern house.

The fair covers all aspects of interior finishing and styling as well as the layout and design. The MODERN HOME exhibition, being one of the ELITE SHOW project components, is dictated by the demand of a modern Russian citizen for reaching international standards. It is precisely the systemic approach to the exhibition show, which requires the presence of the full range of goods and services and allows to provide the man's comprehensive habitat image, that sets this exhibition apart from many multi-purpose exhibition fairs held in this thematic series.

I would also like to draw your attention to an international exhibition of equipment for the textile and light industry scheduled for 2005. The show provides for a large-ranging international participation, specifically, that of Chinese manufacturers. Asian-made equipment is in special demand in
; this explains the keen interest of manufacturers of that region in taking part in the exhibition. The fair will be based on requests put forward by numerous consumers. Therefore we ask all interested companies to let us know about their intention to take part in the event in advance.

Summing up the coverage of the exhibition program, I can state with satisfaction that in this area
has put in place a comprehensive, integral and highly effective system of advertising and promoting textile and light industry goods over the last few years; the system is now supported and highly assessed by the Government. Most importantly, both the product manufacturers and suppliers realize its significance.

While expanding the structure of fairs, we are clearly aware of the fact that participation in fairs is a crucial yet insufficient element of product sales. To draw up and implement a marketing plan, we need a wide information spectrum and the application of advertising technologies.

This is why the creation of an information bloc is one of the elements of the Russian Textile and Fashion Weeks project.

This project is being implemented through the "Textile Industry" publishing house that puts out monthly editions: the "Textile Industry" magazine and the "Textile World" newspaper.

Since 2002, a unified information system of goods, raw materials and equipment of the textile and light industry has been in operation. The system's release parameters for access by suppliers and buyers are posted on the site www.textilemarket.ru.

Actually, it is
's only system today that enables the suppliers to present their entire product range, including all parameters, photo and video and to independently update their information. The list of product items is not limited, as the system structure is based on a full classifier or index and has extension resources.

And in conclusion, I would like to discuss one more issue that has recently become extremely relevant for us in the business-government dialogue based on the development of self-regulated organizations.

In the Russian textile and light industry the Russian Union of Entrepreneurs of Textile and Light Industry I represent here is an example of such an organization. The
Union includes 46 regional branches and comprises over 20 branch-related unions and associations whose share in Russia
's output amounts to more than 85 percent.

With the same purpose in mind, the Committee on Free Enterprise in the Textile and Light Industry, which I also head, was set up in 2002 at the initiative of the
and the Chamber of Commerce and Industry of Russia.

I wish to once again express my gratitude to the organizers of this forum and particularly to Mr. Du Yu Zhou as well as to the participants in this assembly.

I hope in the process of our work here we will be able to discuss in depth the issues we are interested in and exchange more detailed information

Let me also express the confidence that the Global Textile Economic Forum find its continuation, specifically, on the territory of the Russian Federation.

Thank you.


Possible Impact of Quota Elimination in 2005 on Korean Textile & Clothing Industry

By---oung-Kie Ahn, Vice Chairman of Korea Federation of Textile Industries

1. Preface

has a relatively large, vertically integrated, textile and apparel sector, which has played an engine of the nation's modernization, contributing significantly to employment, production and exports.

Korea T & C industry is highly export oriented and it has recorded more than US$10 billion trade surplus for the last 16 years and has contributed to maintain its prestige as a largest job maintaining industry by recording 13.3% of total employment or more than 380,000 jobs, in 2002

However, due to shortage of skilled labor, labor-management dispute, rapid wage increases, and other issues, domestic importance of the sector has been in decline since the late 1980s and the production of all textile and apparel products declined significantly in recent years.

Now, it remains about 9 months until the end of current quota system. Although the elimination of MFA quotas is predicted to result in an increase in global trade, the impact is likely to differ among countries and regions. For each country, it is said that quota elimination represents both an opportunity and a threat: an opportunity because markets will no longer be restricted and a threat because other suppliers will no longer be restrained and major markets will be opened to intense competition.

2. Present Status of Korean Textile & Clothing Industries

1) Position

The Korean T & C industry is an export-oriented industry, as export accounts for 60% of sales. T & C accounts approximately 7.8% of the total national export.

< Table - 1 > Importance of Textile Industry in
Korea in 2002

2) Exports Fall, Imports Rise

Statistics show that for the past few years the import growth rate has dwarfed the export growth rate. Illustrating the trend, the industry covering the 12 months of 2003 showed that Korean T & C exports declined 2.7% year-on-year to US$15.3 billion. Despite the negative growth of exports, imports over the same period grew 3.7% to US$ 5.9 billion.

This situation is attributed to the economic recession in advanced nations, which demand shrinkage and stronger competition among
Korea firms. In fact, this is not a one-year phenomenon. If this trend continues, Korea will soon become a net importing nation in T & C sector.

In 2003, Korean T&C were exported to the U.S. (19.5%), China(17.4%), EU(9.7 %), Hong Kong(7.5%), Japan(5.3%), Indonesia(3.6), etc.

At the same time, these were imported from China(20.5%), EU(5.1%), Japan(3.1%), Italy(2.9%), US(1.5%), etc.

Of total export, fabric accounted for 54.5%, textile products including clothing 30.2%, yarn 10.3%, and raw materials 5.1%. Of total imports, clothing accounted for 51.5%, fabric 22.9%, yarn 22.8%, and raw materials 2.8%.

< Table - 2 > Export and Import in Textile & Clothing Industry
                           (unit : US$ mn)

3) Export Trends for the Products Restrained by Quota in 2003 The export US$ 15.3 billion in 2003 consists of textile (70%) and clothing (30%). Among them, export restrained by quota is US$ 2.9 billion, representing 19% of the total T&C export.

- Export restrained by Quota accounts for 5.0%(US$ 540 million) of the total textile export in 2003 (US$ 11.1 billion). And clothing by quota represents 72%(US$ 2.38 billion) of the total clothing export (US$ 3.3 billion).

< Table 3 > Export of Quota products in T&C industry
                            (Unit : bn, %)

As to each export country, the
U.S. ranks the first with US$ 2 billion, representing 69.3%. It is followed by the EU which shows US$ 660 million, representing 22.7%, Canada with US$ 150 million (5.0%), and Turkey with US$ 90 million (3.0%). In terms of the quota export, the U.S. represents 75.4%, EU, 49.5%, Canada, 68.2% and Turkey, 36.2%.

Considering the export trends of Korean quota products, the Korean textile industry doesn't seem to be substantially influenced in the Post-ATC period. But there would be substantial impact on the Korean clothing industry.

In the recent years, export's market share and export amount of quota products have shown gradual decline. It represents that the Korea T & C industry is losing its international competitiveness gradually.

3. Change of Market Shares in U.S. Affected by the 3rd Integration Phase

Since the 3rd phase of integration has commenced on
Jan. 1, 2002, U.S.
import for the integrated items increased 12.1% in 2002 and 17.0% between January and August in 2003, compared with the same period of the previous year.

The changes of market share in
U.S. on the products integrated by 3rd phase have been presented in Figure 1 & 2. Several aspects of change are noteworthy. First, China
showed a rapid increase at the expense of other countries in the clothing sector. Second, Korean textile has an international competitiveness in the textile sector on the contrary to clothing industry.

Apparel Market Share in the
U.S. for the Products to be integrated in the 3rd phase

Textile Market Share in the
U.S. for the products to be integrated in the 3rd phase

4. Impacts of Quota elimination in 2005 on Korean T &C Industry

The impacts of Quota elimination will be unequivocally positive or negative for all countries. Others will differ in their impact depending on the countries' stage of development, current trade patterns, trade policies by major importing countries, and their comparative advantage.

Considering all of the facts indicated above, the possible impacts of the quota elimination on the T & C sector in Korea can be predicted as follows:

i. The Korean Clothing industry will lose its market share in global market

The Korean apparel industry predicts China will gain more market share in global market than so far in post quota regime at the expense of Korea and Taiwan. Competition with
China is a challenge for Korea as well as many other countries, especially those that have similar comparative advantage in labor intensive apparel products.

The Korean apparel industry would have significant competitive problems. The production of apparel products declined significantly in recent years. The main reasons for such decline were the continued slowdown in
Korea's principle export markets, especially the United States
and EU and the shift in production to overseas factories.

may continue to be a major supplier of fabrics to global industry, but will face fiercer competition in world markets

Korea Textile Industry maintains the international competitiveness at present in the world market fortunately.
China's growth is an opportunity for us to sell more Korean textile products to China. We are expected to raise the output of textiles in response to increased demand from China
's expanding apparel industry after 2005.

However, the Korean textile producers would not be competitive in common products and should pursue higher technology, niche markets with high quality items targeted to customers' needs, and relocation of production overseas. Otherwise
will face fiercer competition in world markets within unexpected time.

iii. Large scale labor market adjustments are predicted

Fierce competition will lead to unit price declines and this will lead the apparel industry with less comparative advantage to be restructured.

The number of employees engaged in the clothing industry of
is 145,000 representing 13.5% of the total manufacturing industry and about 40% of the total T & C industries in 2002.

In post ATC era, it is forecasted that the Korean employment market would be unstable due to the increased unemployment in apparel industry unless the unemployed be absorbed in other industries in short terms.

iv. De-industrialization of Korean textile and apparel industry will be accelerated

The significant increase in foreign investment by the Korean textile industry in recent years is a response to many factors, including increasing wage rates and labor shortage in Korea, increasing competitiveness of China, and the eventual phase-out of the quota system.

The industry had invested a cumulative US$2.6 billion through the end of 2003, compared with a cumulative US$ 2.1 million 15 years ago.
China topped the list of destination countries with 1,570 projects and total investment of US$850 million, followed by the Philippines, Indonesia, Bangladesh, and Vietnam

However, despite the fact that an increasing number of companies are relocating to overseas not only in apparel sector but also in the sector of textile and dyeing & processing, the domestic facilities investment is decreasing significantly. Therefore, there are rising concerns that hollow-out, not de-industrialization that the advanced countries have experienced, could take place rapidly.

5. Conclusion

After 2005, the trade order in this sector will be changed significantly by the liberalization of textile trade, individual country's trade policy, regional agreements, WTO/DDA, etc. The structure of Korean textile and apparel industry will also be altered considerably.

Taking these circumstances into consideration, Quota elimination is expected to strike a negative impact on the Korean textile industry in a short term;
Korea foresees difficulty in terms of the decrease in employment. However, in the long run, Post-ATC will accelerate the restructuring of the Korean textile industry and influence Korea
in a positive manner.

Today's theme, "Cooperation" and "Development" urges me to make the following remark. If
China, the largest apparel production country represented by Down-stream, and Korea
, one of the largest manmade fabric production country represented by Middle-stream, reinforce their cooperative relationship, the two countries can benefit each other in building a stronger market in the textile fashion world. Strengthening the industrial partnership is another possibility that would maximize the synergy and enhance effectiveness. The potential dynamism underlying the two countries is not to be overlooked.

When it comes to new global trade order in this sector, Cooperation is achieved on the principle of mutual reciprocity, and Development is maximized on the basis of mutual cooperation. The complementary relations between the two countries' T & C industry have been a lasting one so far. I hope it will continue to be a mutually advantageous enterprise for many more years to come.

A New Business Model for the American Textile and Apparel Market

By----Mr. Howard Li, Chariman and CEO of Waitex Group of Companies

I am very honored to participate in the Global Textile and Apparel Economic Forum. All individuals here today are prestigious government leaders, entrepreneurs and of the textile and apparel market and it is a unique opportunity for me to learn from all of you.

I have been involved in the textile and apparel industry in the United States for the past 28 years. Waitex Group of Companies designs, manufactures, imports and wholesales our own brands of apparel. Also, we are one of the largest supply chain solution providers to several hundred world-class companies, covering every link of the supply chain from logistics, warehousing, distribution, internet-fulfillment and information technology. We handle for our clients US $1 billion worth of consumer products annually. At this meeting I would like to share with you the updated data on the American textile apparel market and discuss with you the new business model for the American textile and apparel markets. Furthermore, as of January 2005, the quota system will be eliminated and I will address how business enterprises can compete in the changing competitive marketplace, grow and achieve their goals.

Current Conditions in the American Textile and Apparel Market

1. When the remnant quotas are being eliminated, supplying countries are expanding their exports of textiles and apparel to USA, among which China gets the biggest increase. Market growth are also enjoyed by countries like Pakistan with 6%, India 7.8%, Vietnam 31.1%, South Korea 3.2%, and Honduras 5.98%. The countries with declining textile and apparel exports to the US were Mexico with a 9.43% decline, Thailand 16.5% and Canada 2.2%.

By now, China is ranked number one among all exporting countries to USA with 7.8 billion SME. The number two ranking country is Mexico with 4 billion SME. The following countries in decreasing order are Canada, Pakistan, South Korea, India, Taiwan, Honduras, Indonesia and Thailand. This is the new world order of the world's textile and apparel exporters to the United States.

2. With the phasing out of all quotas in January 2005, this year's 2004 will be the most unstable and dramatic year for the textile and apparel markets on a global scale. The US economy is still troubled with a deficit that has increased tremendously, relatively high unemployment rates, low consumer confidence levels and extremely competitive retail prices. With all these significant factors, the importer, wholesaler and retailer do not have a clear compass and have no orientation in the sea of global market changes. As such, they do not know exactly how to respond in preparation for the uncertainty of 2005.

3. For year 2004 there will be a shortage of 6% of quotas. The reason for this is that customarily "carry forward" was permitted in which at the end of every year it was permissible to borrow up to 6% from the following years' quotas for use in the current year. This year, however, with the quota system phasing out in 2005, there is nothing to borrow against and the 6% carry forward is eliminated. Recently, the US government has rejected applications requesting the increase of quotas for this year to make up for the loss of the carry forward, in particular for knit tops, bottoms and sweaters. Some of the manufacturers worry about early embargo this year and they are trying to ship merchandise as early as possible while some other manufacturers are delaying delivery until 2005 and plan to ship by air to avoid the quotas. Furthermore, it is unclear whether additional quota restrictions will be imposed in 2005 or the near future. With the complexities of the quota problems, many companies do not know how to make the decision on sourcing. This year because of the quota uncertainty, the global textile and apparel environment is disorganized and certainly confusing.

4. After the quota is eliminated, who will be the winner and who will be the loser?

(i) The biggest winner will be the American consumer. Particularly, the middle and low income American family. The duty and quota policies have already been in existence for the past 40 years. Today Americans spend US $315 billion on apparel and shoes. Quotas and tariff policies increase the price of goods by 12% for duty and 23% for quota costs. That would add onto American families US $80 billion annually for the cost of apparel and shoes. In fact, quotas have not protected US jobs, which have fallen steadily over the past decades, and have only increased the burden on American families. Last year American consumers paid over US $1 billion in quotas for Chinese apparel exports to the US.

(ii) Chinese textiles and apparels enjoy a conspicuous advantage in USA market. For the next 10 - 20 years China's assets remain vital - China has an ample labor force, high efficiency, low production cost, increasing quality levels - making China the biggest and best manufacturing country in the world. This is an uncontroversial fact. Other winners beside China are: Cambodia, India, Pakistan, Vietnam, Thailand, and Indonesia. In the Western Hemisphere, contenders include the South and Central America CAFTA duty free countries.

(iii) The major suppliers of American textile and apparel are about 40-60 countries. A report issued by the US government predicts that in 2005 and 2006 this number will drop to 20-30 countries and by 2010, the number of countries will continue to drop by 1/4 - 1/3 of the number of countries. Unless sourcing efficiencies are developed, regions that lack market competitiveness and depend on apparel manufacturing as a major source of income will face huge unemployment and social problems. China and the other 20-30 countries will be the major manufacturing and exporter of American textile and apparel in the near future.

5. No quotas mean big markdowns in the American textile and apparel markets. JC Penny's CEO Peter McGrath, a large US department store with annual revenue of US $32 billion, stated at the Nov. 17 2003 at the 15 Annual American Textile and Apparel Trading Transportation Conference that "Due to the quota elimination JC Penny cost structures will be decreased by 18% in 2005 and 2006." A January 14, 2004 article from WWD, the most authoritative newspaper on the American apparel industry, cited Liz Claiborne's CEO Paul Cahrron, one the largest American apparel manufacturers, that prices will drop 5-20%, average 15%. William Fung the managing director of Li & Fung Ltd. a sourcing company with annual sales of US $4.3 billion, predicts that the price will be lowered 15% or more. Quota costs are considered to be half of the LDP landing cost. After the retail and wholesale markups on the landing cost, quota rights represent about 15% of cost of apparel brought in to the US. Today, 50% of each sourcing decision is dependent on the quotas.

After the quota is eliminated, competition will force efficiency to be greater and at the same time the cost of goods will be reduced.

6. After the elimination of quotas in 2005, the new outlook on American textile and apparel market will be different

(i) Factories will consolidate and be large with labor force of 5000-10,000 workers.

(ii) New factory locations will be linked closely to the supply chain.

(iii) Mills will become vertical apparel manufacturing.

(iv) The big department stores in the US, large importers will be focused on a few countries and select a few suppliers.

(v) Sourcing decisions will be focused on the most efficient supply chains.

(vi) There may arise new barriers such as anti-dumping procedures

(vii) From 2005-2006, the cost structure will drop 15% or more.

In the history of our industry, the elimination of quotas is unprecedented and will result in fundamental changes. The global business model for the American textile and apparel market is changing - fast. It is vital to adapt to the America new business model and to face the economic globalization challenges that face us in the near future.

As we enter the 21st century, increasing globalization is an unstoppable phenomena. There is no doubt that technology will continue to change and improve, information will be delivered amazingly fast, conducting business will have almost no national boundaries and China will become the world's factory. China's entry into WTO has connected it to the world, and Chinese companies now face greater global competition and can no longer walk away but will focus the Chinese economy to develop and promote the economic performance of business enterprise. Business enterprise is the backbone of a nation and its economy. The existence of more multinational conglomerations, is a measure of the status of a country's economic power, its ability to synthesize its economic strengths and is a mark of its international competitive ability. After 20 years of Chinese economic reform, Chinese enterprise already is a formidable technological and economic power. It definitely has qualified and has entered the global playing field. Chinese enterprise's current competitive edge of low cost skilled labor to manufacture products must be further harnessed and turned into China developing their own products, building their own brands, doing their own marketing and sales through the world wide supply chain to get into the international market for Chinese products in order to get the full value of the products.

There is a great opportunity for Chinese entrepreneurs. It is time for China to utilize the world-wide supply chain and sell directly into the international market.

In a few years, the business model in the United States will continue to change tremendously. The traditional operation and processing systems will be replaced by high-tech information-based, computerized technology. The chart shows a comparison of the information flow between the traditional business model and the new business model based on an e-commerce platform.

Chart 1. In order for one unit of product to travel from manufacturing to the retailer, it must pass through many links in the supply chain with many of people involved throughout the entire chain.

From Retailer - Wholesale dealer - Importer - Foreign firm (agent) - Domestic import and export company - Factory - Material supplier, and also involving Transportation - Warehousing - Customs - Government inspection - Financial institute and Accounting. With all these many links in the chain involving people communicating with people, many obstacles and miscommunications arise which increase costs and wastes a lot of time.

Chart 2. Recently, more than 60% of US retailers such as Walmart, Kmart, Sears, Federated Department Stores, Target, JC Penny and hundreds of retailers request that vendor suppliers have EDI, ASN, UCC 128 capabilities to process their orders. If you are not compliant with all these requirements you may not get their orders. Within a couple of years, we believe that all retailers will demand this requirement. Why? Because information is the key to gaining competitive advantages. With this new technology, when the consumer pays and buys merchandise from the store or when they pay with a credit card and scan the bar code - that exact second - the retailer creates consumer product information and accordingly that information is used to select what they need of the product. The information captured will go through each link in the supply chain enterprise causing a series of reactions. The factory will buy material for production and arrange import and export. The factor will check retailer credit, the bank will make the transaction, the management will make decisions based on product flow and financial performance and the distribution center will scan each bar code of the product -- all the information will be in the information system. After that whatever link you are in the supply chain, you can get all the information from the system directly. Paper exchange is reduced and less communication by phone and fax is required. This is efficient to manage the processing of the delivery of the product and also at the same time to handle the money transaction. Management can act according to the available information and can fully utilize its capital, reduce inventory, make the perfect business decision and increase the profit. The key is the information platform.

The merchandise gets into the market through three different channels: from the manufacturer to retailer, wholesaler to the retailer, and mail order and e-tailer on the web - all those different channels of the companies will be integrated in the information platform to go forward together and increase business. As soon as you have one marketable product, you immediately put the products information such as pictures, description, and inventory pricing to the information platform. You can sell globally, including wholesale, mail-order and internet sales. The money will be automatically registered to your account.

The supply chain means the information flow, money flow and product flow. When you do business overseas, selling your goods is not easy. How would you ensure getting your payment? This is the most worrisome aspect to business. United State has the most complete and secure credit system and credit insurance compared to Europe and Asia. When you get your order and before you deliver you can check Dunn & Bradstreet or other financial credit agencies to check your clients financial condition and make your own decision. Also you can insure your orders. Most of the companies select to use the factoring system where the factor would approve the client's credit rating and do the collection for the receivable. Factor charges are around 1% of the invoice value. This service already extended to Hong Kong and to China. If your clients do not get the approval by the factor you can request your client to pay CBD or COD in order to reduce the risk of non-collection of your receivables. All the information between the retailer and the vendor is located in the information system platform.

In the future, manufacturing and sales will be integrated, and the supply chain is the vital connection between them. Through this integrated and interlinked supply chain system, you can develop product, increase efficiency and save money. According to the Federal Reserve board, this new business model and e-commerce will be increase GDP 15 times and save 25% of the costs in the next five years.

In this information century, technology will change everyone's work and life. In order to manage their business, every industry must utilize information technology. Computerized information platforms will increase the efficiency and achieve the economic goal. Since China joined the WTO, competition has become greater. To keep up with the changes is a key to every business enterprise and successful economic performance.

Chart 3. Twenty years ago I established the Waitex Group of Companies in New York and today we are one of the larges supply chain solution providers in the US. We own 15 modern distribution centers totaling 2 million square feet located in NY, NJ and LA. Our facilities will be increased to 3 million square feet by next year. We service 500 world-class businesses handling US $5 billion worth of consumer products annually. Waitex information system's new business model is a pioneer in the industry. We have been recognized by many prestigious organizations in the United States, including the US Federal Department of Commerce, Ernst & Young, CNN, Crains, and Time magazine.

I look forward to Chinese business enterprises get into world market. China is the world's largest economic giant. Best wishes for successful Textile and Apparel Global Economic Forum.

The Shifting World Fiber Market

By---Mr.Mark Lange, President and CEO of National Cotton Council of America

The world's textile manufacturing operations are in the midst of a change that is comparable with the introduction of mechanical looms at the onset of the industrial revolution. Today's revolution has been spawned by 2 conditions. The first is the ready availability of communications technology that enables retailers to continually search for ever lower cost products. The second facet is the expected elimination of textile and apparel quotas by the United States (U.S.) and the European Union (E.U.) by January 1, 2005.

For the last 25 years much of the developing world has sought the elimination of textile quotas under the Multi-Fiber Arrangements (MFA).

As the elimination of the MFA is completed, a number of countries have become concerned that the largely assured market access in the
U.S. and the E.U., provided by the MFA due to restrictive quotas, will be swept away and their ability to compete in the new market is uncertain. Several studies of world textile trade project that China
will be the principal supplier of textile and apparel products by the year 2010.

Improvements in handling, transportation, and electronic document processes are reducing the time between orders and delivery as well as lowering direct costs of freight. This is changing the retail sourcing environment. As has been the case throughout mankind's history, uncertainty brings out entrepreneurial effort. In the face of concerns by many, there has also been the view that new opportunities are being created.

Regional Trade Alliances

The location of fiber production and textile manufacturing has undergone profound changes in the past decade. The final elimination of the Multi-Fiber Arrangements (MFA) and their replacement within the WTO promise further changes in trade patterns. While cotton yarn manufacturing is largely concentrated in cotton producing countries, major world textile and home furnishings retail markets are quite distinct from the location of the textile and apparel production facilities. Today, the
U.S., E.U., and Japan
account for approximately 40% of all retail sales of textile, apparel and home furnishings products. Their domestic textile and home furnishings production accounts for less than one-half of their retail purchases.

Both the E.U. and
U.S. have attempted to find regional trading arrangements that retain their domestic yarn and fabric production while the more labor intensive cut and sew operations moved to nearby low wage economies. In Europe, the outward processing model looked at Eastern Europe and Northern Africa as possible partners in apparel production. The U.S. has largely viewed the North American Free Trade Agreement (NAFTA) and the proposed Central American Free Trade Agreement (CAFTA) as offering the trade partnership to further process U.S.
manufactured yarn and fabric.

These regional trading partners are now quite uncertain as to the future of their economic arrangements as
January 1, 2005
draws closer.

Already, many changes have swept the European and American fiber/fabric complex. In the last decade both regions have experienced a reduction in cotton yarn spinning by 50%. Today, 70% of all cotton textile products manufactured in the
U.S. are exported to Mexico or Caribbean
region countries. Shipments to those regions are essentially static and are not likely to grow further without a successful conclusion to the CAFTA negotiations.

Fiber Production and Apparel Markets

With consumption in excess of 35 million tons, manmade fiber is challenging cotton in every market. Between 1990 and 2000, cotton retail demand struggled with annual growth of less than one percent, while manmade fiber enjoyed growth of almost five percent per year. Even more striking are the double-digit growth rates seen in
China, India and other parts of Asia

In 1993, chemical fiber production was 19 million tons and 47% of the output originated in
Europe and North America. By 2003, annual chemical fiber use had grown 89% to 35.9 million tons and China and the rest of Asia accounted for 65% of chemical fiber manufacturing. Together, China and Asia now produce more chemical fiber than the entire world used in 1993. China and the remainder of Asia
now produce and purchase at retail the bulk of the world's chemical fibers.

In 1993, the
U.S. consumers purchased 3.4 million tons of cotton at retail and 2.2 million was produced in U.S. textile plants. In 2003, U.S. consumers purchased 4.5 million tons of cotton at retail and only 1.5 million tons were produced in U.S. textile operations. The U.S.
consumer continues to increase purchases of cotton textile and apparel products but an ever increasing share is claimed by imported products.

The location of textile manufacturing has changed dramatically in the last decade while the percent of cotton moving in the international market has shown greater stability. Annually, 30% to 33% of world cotton production moves in international trade as raw cotton. Although the general share of production moving into trade is stable, the participants have changed substantially in recent years.

Relying exclusively on imported raw cotton has not eliminated spinning in a number of countries.
Italy, Switzerland, Japan, and Thailand are major cotton spinners and yet produce virtually no domestic cotton. However, the major cotton producing countries largely account for significant shifts in cotton trade patterns. In the late 1980's and early 1990's the major cotton exporting countries included India, Pakistan, China, and Turkey
. Today these countries are usually included in a list of major cotton spinning and importing countries. If it were not for imported cotton, these countries would not have been able to feed the quick growth of their industries, and the production of certain higher value textile products would not have been possible.

There is also an important country that both grows and has imported cotton, as their raw material needs change over time. In the mid-1990's
Brazil was a major importer of raw cotton to feed an expanding mill sector while cotton production had begun to slip. Brazil has undergone significant expansion in both cotton production and spinning and appears to have only begun to reveal its potential in both areas. Today, Brazil
exports raw cotton and cotton textile products.

Future Developments for
and the U.S.

The Chinese textile industry is blessed with some natural advantages when it comes to textile and apparel production. Ample labor supplies, raw material production and steadily improving infrastructure have brought
China to the largest producer of textile and apparel products and provide the underpinnings for continued expansion. In raw cotton alone, China
now uses an estimated 6.7 million tons with expectations for further expansion. This level is up sharply from just 4.7 million tons in 1997.

cotton industry is likewise able to bring some natural advantages to bear in cotton production. Our land and farm organization keep labor costs in control while water management and technological advances help keep input material costs reasonable.

While the
U.S. cotton supply has been generally consistent over the past decade, domestic mill consumption has dropped sharply and exports of raw cotton have increased. In fact, the U.S.
now ships 70% of its production to international markets in the form of raw cotton.

Despite the decline in domestic mill consumption, the
U.S. remains the largest consumer of textile products in the world. Our growing retail market is now the final destination for the fiber-equivalent of 4.2 million metric tons of cotton textile and apparel products. As I mentioned earlier, the U.S. retail market has grown by more than 1 million metric tons in the past decade. Much of the growth can be attributed to product promotion and research programs that are largely industry-funded. This growth in demand not only benefits U.S.
farmers, but all cotton growers reap the rewards of increased consumption.

However, to insure a prosperous cotton industry for the future, more must be done to enhance cotton demand. Consider that the average consumer in
North America purchases 15 kilograms of cotton textile products per year. But those consumers represent only 5% of the world's population. Yet, the average consumer in China purchases just under 3 kilograms of cotton products, and for all of Asia, the average consumption is only 2.5 kilograms per person. At the same time, that same consumer purchases 5 kilograms of textile and apparel products made from manmade fibers. The bigger problem is that Asia accounts for 55% of the world's population. If each consumer in Asia
were to increase there purchases of cotton products by just one-half kilogram, then the world's cotton crop would need to increase by almost 10% to satisfy the new demand.

Consumer promotions of
U.S. cotton rich products are conducted in over 15 countries around the world by the NCC's export promotion arm, Cotton Council International. In addition, a related organization, Cotton Incorporated, has for over 25 years been promoting cotton at the retail level in the U.S. market. In these promotions, whether in the U.S. or abroad, our partners are the many customers of U.S. cotton, and in turn, their own customers who bring these products to the retail level. Chinese exporters, as their business grows, are the direct beneficiaries of these promotions. Promotional support in the stores is essential. It is only when a consumer chooses a cotton shirt or cotton towel that we have an opportunity to supply the raw materials. The NCC and CCI are very interested to foster any relevant Chinese organization that seeks to increase demand for cotton here in China. Whether in China
or abroad, the key goal remains the same -to increase demand for cotton at the consumer level.

The National Cotton Council of America (NCC) is fully aware of the changing nature of the world cotton complex, and as a result, is also aware of the important business generated by overseas customers. The NCC, in coordination with the U.S. Department of Agriculture, has been active in supporting a number of initiatives all designed to better partner with cotton importers around the world.

Specific to China, the NCC has a number of suggestions on how mutually beneficial cooperation between the U.S. and Chinese industries may be broadened and deepened: locating an intern from the China Cotton Association at the NCC, cooperation in CCI promotions and trade communications, seminars on the use of futures market in contracting and establishing transparent arbitration processes are only a few of our many common interests.


October 30, 2003, I personally congratulated the leadership of the Chinese industry on the formation of the China Cotton Association. We look forward to working with this organization, and all related groups, toward a future of mutually beneficial trade. The transition to trade under the WTO will not be without bumps and obstacles. In some cases, trade frictions will be unavoidable and must be dealt with directly in the spirit of reciprocity and mutual benefit. The job of the NCC is to represent the interests of its members. Clearly, since those interests are tied to China as a growing international textile power, this mediation will be of increasing importance to us all.





Fashion plus Function-Taiwan's Approach towards 2005

By---Mr.Roger J. Ho, Chairman of Taiwan Textile Federation

A. Taiwan's exports

The main exports are fabrics and follow by yarn and apparel.

Due to the worldwide over capacity, the profit margin has not grown. The shift of fabric mills to offshore causes the growth of yarn and fiber exports.

Hong Kong and China are the largest market, and followed by Southeast Asia and South Asia.

Newly expanded capacity of fabrics in China increases the demands of yarns from Taiwan. High performance yarns (incl. fancy yarn) are competitive in Japan, Korea, USA and Europe.

Newly expanded spinning capacity in China, India and Southeast Asia enlarges the demands of fibers from Taiwan. Functional synthetic fibers are also competitive in Korea, Europe, etc.

B. Taiwan's home market

C. Ways to sustainability

Strategy 1: To improve Business Operational Performance of Global Logistic management for International Big Names

Help industries be equipped with knowledge management system

Help industries be equipped with e-Commerce for speeding up business operations

Help industries develop verticalized supply chain management systems

Strategy 2: to Enhance Design & Manufacturing Capabilities of Functional Textiles

Enhance supply partnership with big names

Comprehend global fashion trends and competition between retailers

Renovate capabilities of technology innovation and design development for multi-functional textiles

Strategy 3: to Cultivate Fashion Design and Branding Capabilities

Acquaint Taiwan with fashion trend in East Asian markets

Cultivate the dynamics of research and development for functional textiles

Promote Taiwan fashion to East Asian markets

Stimulate industries to develop branding and retailing strategies

D. Examples

How Taiwan develops sustainable strategies

Example 1: A Cultural Oriented Promotion Plan for Textile & Apparel Design Collaboration Making use of Taiwan culture resource is to develop characters of Taiwan fashion and to target markets mainly at China Mainland.

Example 2: A Certificate System for Taiwan Functional Textiles Without a certificate issued by a neutral institute, it would be difficult for suppliers to effectively differentiate their functional textiles from those textiles of poor functionalities. 9 Functional Standards Announced are 1. Wrinkle Free Cotton Textiles, 2. Far Infrared Textiles, 3. Breathable-Waterproof Textiles, 4. Anti-Bacteria Textile for Apparel & Home, 5. Anti-Bacteria Textile for Medical Use, 6. Sun Protective Textile, 7. Moisture Absorbing & Quick Drying Textile, 8. Anti-Static Textile, 9. Electromagnetic Shielding.

E. Summary

A universal trade liberalization is still an ideal and not yet comes true.

Business sustenance is a "must" rather than a dream.

The reality is to make efforts on keeping businesses survived by facilitating client oriented management system.

To cope with dominant retailing powers is an essential step for all suppliers.


To Preserve the Vitality of the World Market by Sharing of Resources and Mutual Complement of Nucleus Ability

By----Mr. Zheng Yonggang, President of Shanshan Group Co., Ltd

Mr. Chairman, specialists,

Ladies and Gentlemen:

I am very pleasant to participate in Global Textile Economic Forum and give a subject speech. By holding discussions and conducting communications on the series of problems emerging in the global textile and apparel industry, economy and trade in the post-quota times among economic organizations, textile and apparel industrial organizations, top leaders of commercial chambers, famous enterprises and leaders of multi-national corporations at home and abroad, the forum will surely promote the industrial exchange and cooperation in a deeper level and with broader mind and courage , making an onward step on the road of "cooperation and development on the basis of equality and credibility". The forum will encourage the textile and garment enterprises to participate in the global industrial adjustments with more advanced duty and ideology, so that the enterprises can achieve a lasting, steady and healthy development, and thus push forward the progress of the global economy. So my subject today is "To Preserve the Vitality of the World Market By the Sharing of Resources and Mutual Complement of Nucleus Ability".

Under the international environment of peace and development, China has in the past 25years taken big strides in stepping into the outside world by taking full use of foreign capital and resources on the one hand; and on the other hand, it has opened China's domestic market in an all around way and provided equal opportunities of development for countries around the world by introducing foreign brands and enterprises home. By taking part in globalization and building an economy with Chinese characteristics independently, China's enterprises work hard to achieve win-win in the competition with enterprises from various countries. In this process, the first comer and the one that achieved the most rapid development is the apparel industry, which has possessed a set of famous enterprises, fashion brands and industrial concentrations. What's more important is that by the collective efforts of the whole industry, the apparel aesthetics of Chinese consumers has reached the international standards, and the potential international demand to Chinese apparel is enormous. In 2003, the retail volume of China's social consumption reached 4.5842trillion yuan, among which the consumption of clothing accounted for 9.8% and reached 0.46778trillion yuan. Let's take Shanshan as an example: depending on the 2,200 sales points of Shanshan all over the country, its annual sales volume is about 3 billion yuan. China's enormous apparel resources not only creates the prosperity of Chinese domestic apparel industry, but also provides great space of development for the international brands. (In fact, in the big shopping malls, domestic and international brands take half-to-half market share.)

As the global incorporation of China's apparel market accelerates, China's famous apparel enterprises, depending on their own nucleus ability, begin the win-win cooperation with the international top brands in various ways, in order to share resources and complement with each us. As early as 1997, Shanshan Group has began its cooperation with the international top brands such as Tah Tong Textile in Japan, Itochu Corporation and Italian Forall Corporaion by establishing JVs and sold international first class brands such as Italian Marco Azzali, SaschFrench Le coq, and American Callaway and Mushingwear. International cooperation of such kind has also promoted the establishment and development of China's original brands. The internationalization of Chinese enterprises is the inevitable outcome of the integration of Chinese market. Up till now, Shanshan has in its possession 19 brands in its garment plates with different styles and market positioning.

The localization of international brands and the internationalization of China's original brands' quality have made it a necessity in the importation of large quantity of fabrics for China's garment enterprises, especially for the garment manufacturing enterprises. For example, 50% of Shanshan Group's 20million meters' auxiliary materials in demand are imported annually. That is to say, China's constantly developing brand enterprises are the main buyers of the internationally first class auxiliary materials. Working hand in hand in preserving the vitality of the world market is the requirement for the common development of the enterprises around the world.

It is unprecedented either in the way or in the mode of development of China's economy. China's scale apparel enterprises all step into multi-fields development while taking apparel as its main business, which have equipped themselves with comprehensive ability in operation.

As one of the representatives of China's local-run enterprises, Shanshan Group takes apparel, high technology and capital as its three plates for development in the new century, among which the apparel plate sticks to the strategy of "international multi-brand" with an aim to turn Shanshan a first-class enterprise and increase its brands to 30 by the year of 2010, among which 60% will be international brands. The high technology plate will focus on the exploration for its own intellectual property and the projects listed in the National 863 High-tech Project that are still blank in domestic China but leading in the international world. And it will strive to become the first-class supplier of special products in the new material and environmental protection field that represents the future development of science and technology. By the effective operation of the capital, it will set its foot in the development of international trade, finance, real estate and culture publishing, etc.. Shanshan's international cooperation plate, taking it as an example, has 6 large-scale import & export enterprises, and the annual total import & export volume is about 4.5billion yuan, with 2.2 billion of import and 2.3 billion of export and thus a balance is achieved. Shanshan Group takes capital as its link and the three-level-structure of share-holding companies, industrial groups and industrial corporations as its mode of organization to ensure the effective operation of each plate respectively. China's modern local-run enterprises are characterized by the strict supervision of the capital and fully open operation. The Board of Directors of the corporation takes responsibility for the shareholders and has under its power the freedom on the choice of the projects for investment and at the same time undertakes the risks thus brought about. They are the most vigorous industrial groups in China's economy. The developing Chinese local-run enterprises are in need of an equal and just international environment for market competition and new strategic allies. The amendments made in the Constitution by The National People's Council and the Chinese People's Political and Consultative Conference which concluded not long ago have provided the local-run enterprises with "civil treatment", which strengthens the confidence and motivation of development in them. This will surely push China's local-run enterprises up to a new step and encourage them to achieve new breakthroughs. And only when those Chinese enterprises have lasting development can they do new contributions for the maintenance and establishment of a rational and equal economic new order of the world and for the lasting prosperity of the world market. And also, it is only in the equal international economic environment, can the sharing of resources and the mutual complement of nucleus ability among the enterprises be accomplished.

I firmly believe that the holding of this Global Forum will help us in reaching new common understanding for the development of the world apparel industry and in realizing better balance between equality and efficiency. And in the aspect to achieve win-win by cooperation, we are surely to get more opportunities and accomplish greater development. Thank you!


By--- Conclusion by Mr Xu Kun Yuan, Vice President of CNTIC
       Although we have different opinions in today’s forum, we are friendly cooperation partners. We believe that only through cooperation, could we win and make progress. The Global Textile Economic Forum is a communication place for textile sectors and non-government organizations of different countries. In the post-quota era we may face lots of problems, while if we could cooperate and complement each other, we should meet a win-win result. Thanks again for all the friend from various countries and areas here.

Thank you. It is the end of first Beijing Globe Textile Economic Forum

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