WARSAW — Poland’s apparel industry is in for a roller-coaster ride during its first year in the European Union.
This story first appeared in the July 13, 2004 issue of WWD. Subscribe Today.
Entry into the trading bloc, which occurred May 1, is intended to boost Poland’s economic growth, but some experts warn that it may drive up costs as the world’s garment and fabric industry braces for intensified competition.
On Jan. 1, the 147 nations of the World Trade Organization plan to drop the system of quotas that has controlled their trade in textiles and apparel for the past three decades, potentially causing price-cutting, with low-wage nations seeking to undercut their wealthier rivals.
Even Poland, where the minimum wage is the equivalent of less than $2,700 a year, stands to lose market share to poorer rivals, some industry executives said. Wages are a significant component of pricing in the labor-intensive garment industry.
“Wages in Poland have been growing rapidly, but that hasn’t fully translated into strong productivity gains,” said Joergen Nielsen, a sales executive with Danish innerwear producer JBS, which has moved production to neighboring Lithuania.
The legal minimum salary in Poland is 9,888 zloty annually, the equivalent of $2,697 at current exchange rates. In the apparel industry, the average wage is higher than that, with the typical worker earning about 14,000 zloty — the equivalent of $3,818. While that’s still far below prevailing wage rates in Western Europe, it’s no longer a bargain in the eyes of some industry buyers.
“Initially, wages in Poland were only one-tenth of Western European levels, but now in Ukraine you can find wages that are perhaps only 20 percent of the Polish level,” said Jens Bloch, a director with the Danish Textile Association, an industry organization that saw many member companies move production to Poland in the 1990s.
The drive for lower prices among apparel manufacturers has sent them even farther afield, from Eastern Europe to Asia.
“Some companies have relocated their manufacturing capacities to China, Belarus or Ukraine,” said Elzbieta Sankowska, a board member of the Polish Federation of Apparel & Textiles.
Apparel exports, primarily to other European countries, remain an important part of the Polish economy. The textile and clothing sector accounts for about 15 percent of manufacturing employment in Poland, according to EU figures. The sector employs 160,000 workers.
About 80 percent of Poland’s $2.8 billion in annual exports in the fabric and garment categories go to the EU, with a little more than 2 percent to the U.S., federation figures show. Those shipments came to $63 million for the year ended in April, a 1.3 percent decline from the prior year, according to U.S. government data.
“Most Western producers based here are focusing exclusively on EU markets,” said the director of a Western European lingerie producer with operations in Poland, who spoke on the condition of anonymity.
The director fretted that a surge of low-cost clothing from producers in Asia and elsewhere in Eastern Europe could take a toll on the Polish industry.
“The general tendency toward lower prices and margins will certainly hit Poland because its clothing industry has grown less competitive in recent years,” the executive said.
However, Polish manufacturers feel their familiarity with the EU market, as well as the duty-free access that comes with EU membership, will allow them to remain competitive.
“We have been present in international markets for quite some years, so we know the EU markets very well,” said Damian Kinczyk of Polish lingerie producer Corin.