NEW YORK — The windfall for importers from the end of the global quota system probably won’t be as great as originally anticipated.
Most executives predicted that costs would drop by as much as 20 percent after the 148 nations of the World Trade Organization dismantled the three-decades-old system of entry restrictions. Now that 2005 has come, the price breaks aren’t quite as pronounced as they’d hoped. The main beneficiaries will probably be consumers, either in terms of quality or price.
“Stockholders always ask…‘I hear quota’s being eliminated, that’s about 10 to 15 percent, isn’t it? And shouldn’t that drop straight to the bottom line?’ If it were only that easy,” said Peter Boneparth, chief executive officer of Jones Apparel Group. “The reality is, that’s not true. We suspect that, in the end, if you take 15 percent and use it as a number — and it’s arguable whether that’s the right number — there will really be a sharing of that. It’s going on right now. There will be clearly some margin buildup with the stores. We hope to capture some of that, but I think ultimately the consumer’s going to capture a lot of that.”
Quotas contributed to the cost of apparel in two ways. First, in many countries quota rights traded informally as commodities, and by the end of a year the cost of quota for a garment could equal the cost of the garment itself. Second, executives contend that over the long term the dismantling of the quota regime will increase competition and thus reduce prices.
Boneparth was part of a panel of six apparel and textile executives who spoke Tuesday at a Manhattan seminar on quotas sponsored by the American Apparel & Footwear Association and Emanuel Weintraub Associates.
The panelists cited a number of factors interfering with the expected price drops. Key among them is the rise in the price of oil, which is up more than 38 percent from its level last year, driving up the cost of everything from synthetic fibers — an ingredient in many fabrics — to plastic bags for shipping garments, to the bunker fuel that powers the cargo ships that sail the Pacific Ocean.
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