HONG KONG — Innerwear makers in this part of the world aren’t very worried about current quotas, but they are scratching their heads over when and how the U.S. will institute safeguard quotas for Chinese manufacturers next year.
“We need a game plan from both governments,” said Andrew Sia, chairman of the newly created Hong Kong Intimate Apparel Industries Association Ltd. Sia also serves as chief executive of ACE Style Intimate Apparel Ltd., a long-established maker of private label bras. For China’s part, Sia said the industry is still waiting for the country to identify its system for allocating quantities to different manufacturers.
U.S. quotas were reimposed in late 2003 for four textile products from China: bras, dressing gowns, robes and knit fabrics. The growth limit is set at 7.5 percent over imports from the previous 12-month period (in which bra imports from China to the U.S. more than tripled when the quota was lifted). These quotas are expected to be dropped Jan. 1, but the U.S. is permitted to extend or reimpose the quota under provisions set up through the World Trade Organization.
For now, companies seem to be going about business as usual. For Italian company Barbieri Diffusione Ltd., which does all of its production in China, the quotas have had “no real effect, except in some particular cases where they do raise a price issue,” as quota costs sometimes make it difficult to remain competitive, said Olivier Petragallo, the company’s sales director based in Shanghai. Barbieri also has offices in Milan and New York.
Most of what Barbieri ships to the U.S., about 15 percent of its turnover, falls under the three quota categories, Petragallo said. Barbieri specializes in sleepwear for women and men and also has light outerwear collections that include knit sweaters.
The company has been in China for 15 years and now fully owns a sewing factory in Jing Shan, less than an hour from Shanghai. It employs more than 200 workers with 160 sewing machines. It also has a joint venture in Anhui with 320 sewing machines and nearly 400 workers. This is in addition to partnerships with six other factories.
Despite producing 100 percent of its collection in China for import to Europe, North America, Japan and South Korea, Petragallo doesn’t seem worried about what will happen with quotas. “Barbieri does not have a backup plan,” he said. “We are pretty confident down the line. The suppression of quotas starting in January 2005 will create more competition over here in China. Prices should go down.” He added that the expected result could be “bigger orders.”
But Sia said a lot of companies, between 35 and 40 percent of core manufacturers, do have a Plan B. It includes having factories in other countries, such as the Philippines, Bangladesh, India or Indonesia.
While quotas don’t seem to be affecting shipments at this stage, Sia anticipates that U.S. companies will be cautious with their orders in the third quarter of this year, and expects they will switch all manufacturing to other countries in the fourth quarter. “We are nervous and our customers in the U.S. are nervous as well,” Sia said.
Mike Todaro, managing director of American Apparel Producers Network in Atlanta, thinks that China “will eventually and for a long time be constrained somehow as no one likes the big guy.” But he offered this adage: “It’s OK to sleep with the elephant, as long as you know when she’s going to roll over.”
— Vicki Rothrock