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India-Pakistan Concerns Mount

WASHINGTON -- In the wake of escalating tensions between nuclear foes Pakistan and India, retailers and manufacturers held emergency meetings around the nation Friday amid growing concern over sourcing from the region.<P>Most executives said they were...

WASHINGTON — In the wake of escalating tensions between nuclear foes Pakistan and India, retailers and manufacturers held emergency meetings around the nation Friday amid growing concern over sourcing from the region.

This story first appeared in the June 3, 2002 issue of WWD.  Subscribe Today.

Most executives said they were taking a wait-and-see approach, though many were concerned about fall apparel and textile shipments, which usually peak in June and July.

India and Pakistan — their nuclear armaments looming — are locked in a dispute spanning decades over the Kashmir border district, where more than one million troops have amassed in a standoff that has sent alarm throughout the world. The military buildup prompted the U.S. State Department on Friday to issue an advisory urging all but essential American diplomats in India to leave, as well as about 60,000 American citizens living there. A similar order was issued for Pakistan on March 27.

Secretary of State Colin Powell will send his deputy, Richard Armitage, to India and Pakistan for talks next Thursday and Friday, with Defense Secretary Donald Rumsfeld scheduled to arrive next Sunday, according to a State Department spokesman.

“Traditionally, these disputes are solved in a diplomatic manner,” said Peter McGrath, president of purchasing at J.C. Penney Co. “With the nuclear capabilities, something horrific could happen, but we can’t plan around that because both countries are too important to the U.S. in terms of apparel and textile trade.”

For the year ending March 31, imports from India totaled 1.29 billion square meters equivalent, valued at $2.6 billion, according to the Commerce Department. Imports from Pakistan totaled 2.24 billion SME, valued at $1.88 billion for the same period. In terms of SME, Pakistan is the fourth-largest supplier of textiles and apparel to the U.S., while India is the seventh, according to Commerce.

McGrath said most garment production in India is done in the southern region. The military buildup is in the northernmost region of India and Pakistan on the border of Kashmir. Apparel and textile production is spread throughout Pakistan, though it is concentrated in Lahore and Karachi, which are both major ports.

Penney’s sources under 10 percent of its production in the two countries, primarily knit tops, shorts and woven shirts, according to McGrath. He said the company plans to continue shipping most of its apparel by sea because air is “too prohibitive.”

In the event of war, McGrath said the company would most likely shift its production to Korea, Taiwan and China.

A Gap spokesman said the company is “keeping an eye on the situation.”

“We have a global sourcing network that allows us to shift production if need be,” he said.

Gap sources such items as hand embroideries, men’s knits and Baby Gap girls’ and boys’ knits in India and Pakistan.

“We are very concerned,” the official said. “That is why they are out there now.”

Ali Sheikh, associate manager of merchandising for Cotton Connection in Lahore, Pakistan, said in a phone interview from Lahore Friday night that U.S. buyers have grown increasingly nervous, though shipments have not been affected.

Cotton Connection represents large U.S. retailers, which import textiles from Pakistan.

“Business is slow now because U.S. buyers have a little confusion,” Sheikh said. “It’s a slow period for orders because they might be waiting for some good times to place orders.”

Concerns also abound about whether underwriters to ocean carriers will increase wartime risk insurance surcharges.

“If there is any more escalation, you can expect underwriters to increase the risk insurance,” said Hubert Wiesenmaier, executive director of American Import Shipper’s Association, which negotiates contracts with 10 ocean carriers for about 200 apparel and footwear members.

He said underwriters are still charging ocean carriers risk insurance of $150 per 40-foot container from Pakistan since the Sept. 11 attacks. At press time, no wartime risk insurance had been placed on India.

“There is clearly increased nervousness given the State Department warnings,” said Ron Sorini, president of trade negotiations and legislative affairs at law firm Sandler & Travis, which has a large apparel importer clientele.

The India-Pakistan conflict further inflames instability in a region still reeling from the war on terrorism in Afghanistan following terrorist attacks in the U.S. on Sept. 11. That war prompted the government of Pakistan — a wartime ally — to ask the U.S. for apparel and textile trade breaks due to the fear of shipping disruptions.

The U.S. provided a $426 million apparel quota increase package over three years that fell far short of what the Pakistanis were seeking and U.S. mills were fighting. Many apparel and textile firms were able to get finished goods out of Pakistan without experiencing severe delays after Sept. 11. Those same firms are now closely monitoring the situation.

“There was a relatively weak [apparel] market during the war in Afghanistan, so [U.S. buyers] could easily make decisions to cancel orders,” said Sorini. “Now the market has picked up and quota is tight around the world, so no one can cancel orders.””