WASHINGTON — Sourcing is truly becoming a worldwide adventure.
This story first appeared in the April 21, 2015 issue of WWD. Subscribe Today.
Two areas are ripe for growth in apparel and footwear sourcing — Africa and India — but Asia is expected to maintain its foothold as the prime hub this year, while Western Hemisphere production will continue to expand.
Sourcing executives attending the American Apparel & Footwear Association’s International Sourcing, Customs & Logistics Integration Conference here last week pinpointed the new growth areas for sourcing, which has been impacted by rising costs in Asia and the development of new middle-class economies abroad.
Duncan Scott, vice president of external products at New Balance Athletic Shoe Inc., who gave a keynote speech, said he believes Asia and India will remain strong sourcing hubs despite rising labor costs.
“I don’t expect major shifts beyond Asia that are going to alter the epicenter of manufacturing,” he said.
The reason for that, he stressed, is that China is becoming a larger consumer market and India is following behind.
“The scale of those markets in terms of available dollars to spend as discretionary income is going to dwarf what is seen in the U.S. and European Union,” he said. “That is definitely going to shape the way our sourcing has to evolve. You are going to have some onshoring to Europe and the U.S. because we have some scale here…but the onshoring in India and China is becoming more important and that will compete with any attempt to provide low-cost manufacturing from other sources and imports into China and India.”
He also stressed the importance of Africa as an emerging sourcing region, with many firms already shifting some production or making exploratory trips to Eastern Africa, in particular.
“I do think Africa is going to emerge as a strong hub for low-cost commodity items where speed to market is less critical and cost is paramount,” Scott said.
Imports from India and sub-Saharan Africa have been on the rise, reflecting a move by retailers and brands to place more production in those areas. Apparel and textiles imports from India to the U.S. rose 6.6 percent to $6.7 billion for the year ending Feb. 28, according to the U.S. Commerce Department. Similar growth has been seen from sub-Saharan Africa, which posted $1 billion in apparel and textile imports, an increase of 7 percent in the past 12 months.
Tony Anzovino, vice president of global sourcing at Haggar Clothing Co., said in an interview that the brand is looking “intently at Africa” and particularly Northeast Africa, as a potential new sourcing hub for the company.
Haggar does not have production in Africa, but Anzovino, who was also on a panel discussion, said he plans to make an exploratory trip to Ethiopia in the next several months to look at facilities. Haggar will continue sourcing the majority of its products in Vietnam, Cambodia, Bangladesh and China, he said, but will also “look to do more production in this hemisphere and try to develop more fabric within the hemisphere.”
Haggar’s brand and retail presence is also growing in Canada, and Anzovino said the company has production in Cambodia and Bangladesh for the Canadian market to take advantage of duty savings through trade agreements Canada has with the two countries. Haggar is also planning to expand in Haiti and the rest of the Western Hemisphere, he said.
“Haiti does offer duty-free opportunities [through trade preference programs] and we are looking to expand there,” he noted. “There is a lot that this hemisphere has to offer, but it is very knits-centric. Haiti itself is very workwear-centric, but it also has knits. Making more tailored products and making wovens has become more of a priority for the region.”
Nine African countries topped the list of a study conducted by Sandler, Travis & Rosenberg that reviewed which countries represent the best sourcing opportunities and benefits under trade agreements, according to Tom Travis, managing partner of the firm.
“It turns out there are nine countries that really have a superhighway in terms of getting into all countries but Brazil because nobody can get into Brazil,” Travis said. “The leader on that list is Ethiopia. A number of companies around this room have done serious looking at Ethiopia and the surrounding countries around Eastern Africa.
“It’s not a place that everybody wants to go, but nobody used to want to go to Bangladesh or Cambodia,” Travis said.
The nine African countries provide the best “global access of where you guys are looking for that nirvana, that open highway” of sourcing and trade benefits for products that are exported to China, South Korea, Japan, the U.S. and the EU. Travis declined to name the other eight African countries.
Executives also emphasized the importance of market-opening trade agreements, such as the Trans-Pacific Partnership agreement between 12 countries, including Vietnam, the second-largest apparel supplier.
The AAFA conference ended on Wednesday, a day before senior lawmakers introduced presidential Trade Promotion Authority, which has effectively jump-started the trade agenda and could provide enough momentum for negotiators to conclude TPP this year, although hurdles remain, particularly from Democrats.
“To me, the theme this year [for the industry] may be transformation,” said Bryan Wolfe, vice president of international trade at Ann Inc. “We are at a crossroads. The reason why we’re here again [in Washington] this year is there is a lot of talk and optimism on trade for a change, which is actually quite refreshing. I think the big question is can the parties work together enough to reassure the rest of the world that the U.S. can resume a leadership position on global trade. We may have fallen behind. We haven’t gotten a lot of trade agreements passed and we haven’t been involved in a lot of things globally, so it’s a big question and the rest of the world is watching the U.S.”
Wolfe said some trade preference programs that benefit apparel and footwear brands have expired, including the Nicaragua TPLs [tariff preference levels], while others are poised to expire, such as the entire African Growth & Opportunity Act and the third-country fabric provision, as well as TPLs in the Morocco and Bahrain free trade agreements, which are set to expire in the next eight to 15 months.
Lawmakers introduced a bipartisan trade package on Thursday after the AAFA conference that will renew and extend some expiring and expired trade preference programs.
The AGOA Extension and Enhancement Act of 2015 would extend AGOA for a decade, including a 10-year extension of third-country fabric provisions; renew the GSP that expired in July 2013 and extend it until the end of 2017, and extends trade benefits in the HOPE and HELP programs for products from Haiti through September 2025.