HONG KONG — China has become the dominant player in global apparel and textile sourcing, but with ongoing limits on its exports, companies are developing a diversified strategy.
Much of the debate at the inaugural Prime Source trade fair and forum here Tuesday centered on Chinese quotas and World Trade Organization talks to lower tariffs, while India’s growing importance as a sourcing hub also got plenty of play.
Speaking at the forum, Bob Zane, who is retiring as Liz Claiborne’s senior vice president on Friday, emphasized the importance of choosing the location of a factory for long-term plans. China is the most tempting location, but with the pros come quite a few cons, he said, adding that it’s good to look at other options.
Zane was moderating a session titled “The World Beyond China,” at which Carlos Arias, president of Koramsa Corp. in Guatemala, said the firm is trying to keep itself competitive with its advantage of being physically close to the U.S. But, the company president said, “we need to evolve. We need to find value in the Western hemisphere.”
Value lies in innovation, being able to do smaller runs and having a transparent flow of sales data with customers, logistics expertise and an integrated supply chain, he said.
“We make it or break it on speed,” Arias said. Koramsa can’t compete with China on prices, but can on value, Arias said, adding: “Don’t feel too sorry for us; we’ll find a way to make it happen.”
Sri Lanka’s Brandix also is working toward making it happen. In today’s world, important factors are assurance, convenience, cost, flexibility, speed and innovation, said Ashroff Omar, ceo of Brandix. In addition, manufacturers have to become bigger regionally to account for growing demand, he said.
The company, which has $275 million in annual exports, will begin construction of a large, vertically integrated apparel city on the east coast of India in Andhra Pradesh. The $2 billion fiber-to-store concept will span 1,000 acres and have 60,000 employees. Construction begins in August and should be completed in less than five years.
Advantages of setting up the facility in the fourth-largest Indian state range from the area being the second-largest cotton producer in India to having a big workforce, said Udena Wickremesooriya, who is with Agni, a consulting company working with Brandix. The location also makes logistic sense with access to a national highway, strong rail systems and the largest and safest port in India, he said.
“India is the obvious first choice as the hedge,” said Wilbur Ross, chairman and ceo of WL Ross & Co. in the U.S. He added that India will see huge growth in the next few years.
Increasing value-added services continued to be the focus at the last session of the day, “Strategies for the Global Supplier.”
Hong Kong’s Esquel Group is putting the emphasis on quality, as well as diversifying and expanding while focusing on its strength: cotton shirts and T-shirts. It’s building a $150 million fabric mill as part of an expansion plan in Gao Ming in China’s Guangdong province. The facility will have the capacity to produce 42 million yards a year initially and eventually 60 million yards, said vice chairman John Cheh. The facility should be completed in June.
As a safety net, Esquel is spread out across the region in China, Sri Lanka, Malaysia, Vietnam and Mauritius. It also has outward processing arrangements in Hong Kong and Macau.
“OPA is the most inefficient way to make a garment,” Cheh said.
Steven Walton, chairman of Hong Kong’s WingTai Asia, emphasized that, in today’s environment, companies have to push politics aside and create a common goal because the reality is that jobs are moving across borders.
In a keynote address, Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, focused on U.S. trade policy and reiterated his member’s frustration with the U.S.-China accord that limits Chinese imports on a range of products through 2008, even though global quotas were dropped in 2005.
“If we’re getting away from quotas, then let’s get away from quotas,” said Burke, citing a move to limit the number of men’s cotton pants that are imported to the U.S. as proof of politics interfering with common sense. “The quota hadn’t even been filled. Why are we safeguarding a product that has no impact on the U.S. industry? The safeguarding process has become greatly politicized.”
Prime Source comprises two sections: a four-day trade show running concurrent with the Asia Pacific Leather Fair, and the two-day International Apparel Forum.
APLF features about 180 companies, including apparel makers, components suppliers, supply chain managers and textile producers. But the real action was at the IAF, where industry executives, legal advisers and consultants discuss the challenges facing the apparel industry.
Among the topics dominating a session, called “The Politics of Trade,” were: doing business with and in China despite political concerns; dealing with U.S. security fears, especially where cargo and point of origin are concerned, and the potential of separate negotiations for textiles and apparel at WTO talks in Geneva aimed at reducing or eliminating global tariffs across a broad industrial spectrum.
Julia Hughes, senior vice president of international trade and government relations at the U.S. Association of Importers of Textiles and Apparel, said, “The sectoral issue is the battle of the moment. If you need protection, use the means that already exist. Don’t take textiles back to the Dark Ages. This business is tough. It moves quickly. The one thing we don’t need is more government intervention.”
But Tom Travis, managing partner of international trade and customs law firm Sandler, Travis & Rosenberg, said, “To ever hope that politics will be divorced from commerce and trade is folly.”