NEW YORK — Apparel importers face myriad challenges in the months ahead, including record high energy prices, intensifying environmental pressures and political uncertainty on global trade.
"Life is not going to get any easier for us as we all hoped when quotas went away," said Laura Jones, executive director of the U.S. Association of Importers of Textiles & Apparel. She spoke at last week's Textile & Apparel Importers Trade and Transportation Conference at the Chelsea Piers Event Center here.
Bob Zane, a recently retired Liz Claiborne sourcing executive and USA-ITA's chairman, said at the Nov. 13 conference presented by USA-ITA and the American Import Shippers Association that there were few issues from which importers and sourcing executives could hide from now or avoid in the future. Apparel producers and retailers this year faced continued consolidation in the department store channel, a depreciating dollar and a widespread problem in the banking and credit markets.
Efforts to reimpose quotas on China and other protectionist measures are likely to be constant threats to the industry in the near term, Zane said. He noted that Chinese-produced goods face the threat of countervailing duties and that subsidies on 73 products have already been alleged. Zane believes it is reasonable to expect that several of those 73 claims will succeed.
"Add to this the prevailing anti-China sentiments throughout Congress, the specter of new or renewed quotas by the end of next year and the vagaries of the U.S. presidential election, and the confusion is compounded," Zane said.
Speakers also noted that shifting global trade volumes, lack of domestic infrastructure investment and stringent new environmental standards being proposed at West Coast ports were likely to disrupt the flow of goods moving into the U.S.
Although trade with Asia is growing at respectable levels, the U.S. is losing ground in trade volume compared with other regions of the world. High fuel prices and a lack of domestic infrastructure expansion are forcing ocean carriers such as Maersk and APL to reorganize operations to focus on more profitable trade lanes between Asia and Europe and within Asia.
"The U.S. has become a smaller portion of trade with Asia because of the size of the growth in the intra-Asia market," said Ron Widdows, chief executive officer of ocean carrier APL and a keynote speaker on transportation. "So, the U.S. importance relative to growth overall has diminished a little bit."Container shipping between Asia and the West Coast grew 10.5 percent in 2006 to 21.3 million 20-foot equivalent units, or TEU — the standard maritime industry measurement used to count cargo. Transpacific container traffic has increased 7.8 percent year-to-date. However, container traffic between Europe and Asia rose 13 percent to 17.8 million TEU in 2006 and has already jumped 21 percent this year. Intra-Asia represents the largest trade market, with container shipping gaining 9.7 percent to 44.3 million TEU last year and 11 percent this year.
Fuel costs are unequivocally the biggest issue faced by ocean carriers. Widdows asserted that ocean carriers are failing to recoup the cost of fuel on Asia-Pacific trade. The price of a metric ton of bunker fuel has exploded to more than $500 this year compared with less than $75 in 1998. Fuel represents more than 50 percent of ship operating costs, according to APL.
"Now, at $500 a ton of fuel, the industry overall is going to take a heck of a beating serving the U.S. market between now and contracting for next year," Widdows said. "It's just simple economics."
The annual bill for one year's worth of fuel for the transpacific trade route has risen $7.4 billion between 1998 and 2007, according to Widdows.
The slowdown in trade has alleviated concerns over congestion at U.S. ports. However, Widdows noted that the infrastructure investments needed to keep pace with the natural expansion of trade aren't being made, particularly on the East Coast. In an effort to avoid delays on the West Coast, importers have increasingly opted to move goods through the Panama Canal and up to East Coast ports. But investment and expansion of East Coast facilities is almost nonexistent because of lack of space and environmental hurdles.
"The cargo wants to come [to New York and New Jersey], it does not want to go to other places on the East Coast at the same level," Widdows said. "Landside congestion, whether it's rail or truck, in this area is a significant problem today. Imagine what that picture looks like 10 years from now."
Scott Quesenberry, special textile negotiator in the office of the U.S. Trade Representative, tried to assuage fears that the administration was looking for ways to implement new quotas on China."I have a safe in my office," Quesenberry said. "It's a classified safe. I can't tell you what's in there, but let me tell what's not in there. What is not in there is a plan to extend quotas past the end of the current plan, past the end of 2008. I don't even know how we'd do it if we'd want to do it."
Quesenberry was less optimistic about the prospects of the stalled Doha trade talks.
"It's unfortunate that I'm not needed in Geneva yet because we have not seen the level of ambition and the level of willingness to open up markets around the world that the United States asks," he said.
Quesenberry said the refusal to renew President Bush's trade promotional authority, the lack of movement on Doha negotiations and the winding down of the current administration likely meant talks would be stalled well into next year.
"We are at a time that is going to continue to be difficult in Geneva from a U.S. perspective," he said.
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