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Financial Crisis Seen Taking Toll on Textile, Apparel Industry

The global financial crisis and the possibility of a worldwide recession could see the textile and apparel industry in for some rough times.

GENEVA — The global financial crisis and the possibility of a worldwide recession could see the textile and apparel industry in for some rough times, industry executives and experts said.

This story first appeared in the October 27, 2008 issue of WWD.  Subscribe Today.

Companies are facing a credit crunch and this is putting them in difficult positions,” said Francesco Marchi, director of economic affairs at the European Apparel & Textiles Organization. “The demand is not there.”

Marchi, whose umbrella group represents tens of thousands of textiles and apparel companies across Europe, said this is not only in major markets like the U.S., Japan and Europe, but also other countries such as Russia, South Africa and certain Latin American countries, where consumption is down.

“All elements show we’re going to have a difficult period in the next 18 months, if not 24 months,” Marchi said.

Like other industries, he said, the textile and apparel sector in Europe is also shedding jobs.

Debapriya Bhattacharya, Bangladesh’s ambassador to the World Trade Organization, told a United Nations Conference on Trade & Development forum last week that the financial crisis will have impacts on the trade, currency and investment prospects of poorer nations.

In a similar tone, Supachai Panitchpadki, UNCTAD chief, said the impact on developing nations “will be much deeper than was anticipated.”

Supachai, a former deputy prime minister of Thailand and former head of the WTO, added that, “Trade will suffer,” noting volatile exchange rate movements affecting some developing nations “certainly will not help.”

A report published Oct. 16 by the International Labor Organization said the global slowdown “is affecting low-income groups disproportionately” in rich and emerging nations.

Income inequalities, which “have grown excessively” in the majority of countries, are expected to grow further as a result of the financial crisis, said Raymond Torres, director of the ILO’s International Institute for Labor Studies.

How the slowdown in production will impact on labor “we will see the effects within six months,” he said. But the ILO economist said the crisis will also impact major emerging economies like India and China and noted both were not decoupled from the effects of the U.S. economy. At the same time, he noted that China and India, the two biggest emerging markets, have domestic demand dynamics and can explore new growth potential, and this can help limit some of the impact of the financial crisis.

Torres, who was also lead author of the ILO report “World of Work, 2008,” said the study estimates that in the U.S. the chief executive officers of the largest 15 companies earned 520 times more than the average worker, up from 360 times in 2003. He said that while some income inequality is useful in rewarding people making an effort, talent and innovation, too much of a discrepancy can also be harmful to society and “represents a danger to the social fabric, as well as economic efficiency.”