GENEVA — The sharp growth in China’s market share in global textile and apparel exports is likely to level off after an initial boost from the end of global quotas, an industry study by the International Labor Organization predicts.
However, the study also concludes that employment in the industry will “continue to decline” in developed countries such as the U.S. and in the European Union, where jobs have fallen on average by 6.3 and 2.7 percent a year, respectively, since 1995.
Globally, the study by the 178-member agency, which includes the U.S., projects that employment in the politically sensitive textile sector will decline by between 1 and 2.5 percent by 2018.
The U.S. has responded to the flood of Chinese imports by imposing safeguards on certain categories, while the EU recently made a deal with China capping growth in Chinese exports in 10 sensitive categories to between 8 and 12.5 percent a year until the end of 2007. But the ILO report argues that China has reached the development stage where the textile and apparel share of its total output and exports has started to decline.
Other factors the ILO identified as likely to contribute to the leveling-off in textile exports is the likelihood that the domestic Chinese market “is likely to absorb an increasing share of local production as Chinese consumers become more affluent.”
Already, China’s 1.3 billion population absorbs about one-third of its production of textiles and apparel, the report notes.
The fact that leading firms want to diversify their sourcing is likely to have an impact as well, the report says.
Other low-cost producers such as India, Bangladesh and Pakistan could also become more competitive, provided they follow through with planned reforms, said the ILO.
“India, in particular, is a future giant” in textiles and apparel, according to the ILO report on the implications of the quota phaseout. The South Asian nation’s textile and apparel industry, it notes, has access to raw materials and a huge labor force, and is currently only held back by weak infrastructure and counterproductive regulations.
The ILO report argues that import penetration “is likely to remain larger” in the U.S. than in the 25 EU member countries due to a more fragmented market in the latter.
“The relative importance of branded goods in the mid-fashion market is larger in the European Union than in the United States, contributing to a more fragmented market,” the study says.
Moreover, it goes on to say, this market structure provides opportunities for local companies, which have an advantage over foreign providers due to “better information on consumer tastes and preferences.”
The ILO report also predicts that in the post-quota era, a likely outcome could be a consolidation of the supply chain, where the informal industry and so-called sweatshops will decline in countries such as Bangladesh, Pakistan and India and will be replaced “by larger and more efficient formal sector producers.”