Between January and June of 2005, textile products imported into Europe from China increased by 534%, according to figures from the European Commission. It wasn’t long before protests were being made by Euratex, an association of Europe’s principal textile producers, which include countries such as Italy, France and Spain. In order to stem the complaints, the EU agreed to limit the number of Chinese imports in ten significant product categories, such as T-shirts, until 2008. However, the conflict resurfaced in August, when 80 million items of clothing fabricated in China were held at EU borders for having exceeded the established quotas. After a month of negotiations, Beijing and Brussels arrived at a solution: the shipment of clothing would enter Europe and the excess stock would count against the 2006 quotas.
To wear or not to wear?
During the year 2004, the EU sold China €514 million euros worth of textile products, whilst China exported clothing valuing €16 billion euros to Europe. But this abysmal contrast can be read in more than one way. The market entry of Chinese textile products cannot be considered solely in terms of export figures. A large part of the shipment blocked last summer was merchandise that the big European distribution chains (Zara, H&M, Marks & Spencer…) had had made in China. Manufacturing part of their production in Asian countries to cut costs is a strategy that utilises the emergence of China in the clothing industry to their advantage, and converts them into one of the few sectors in the textile market not affected by the flood of Chinese merchandise.
At another level, however, the situation is not quite as positive. Small and medium-sized businesses in the clothing industry, from countries such as Italy, France, Spain, Greece, and Portugal, are having a rough ride. The crisis isn’t new; they have been experiencing a clear recession for years, but the effects of the opening up of European markets have aggravated the situation. In these countries, the estimates of job losses are chilling: France could lose 7,000, Spain 40,000, and Italy 200,000 employees.
The clothing industry is one of the pillars of the Italian economy. It is suffering a grave crisis accentuated by the liberalisation of the sector and the existence of “Made in Chinitaly”: low quality or imitation brand products that Chinese immigrants make within Italy. Now, the fight from the Italian corner is concentrating on branded goods and clear labelling, which the Federation SMI-ATI (Sistema Moda Italia and Associazione Tessile Italiana) considers indispensable in order to offer greater transparency.
France, with the second largest textile industry in Europe, distributes 75% of its production to countries within the EU. The effect of Chinese products on them is evident: loss of market share with the consequent disappearance of jobs. Enmmanuelle Butaud, Director of Economic and International Business for the French Union des Industries Textiles (UIT), claims “since 2002, there has been an annual reduction in jobs of around 10%”.
Spanish textile production is also suffering the effects of this crisis. Principally formed by small or medium-sized businesses, in recent years it has seen many closures and a growing risk to professions linked to the clothing industry. One of the causes that has provoked the erosion of the sector is the outsourcing that some European giants in the clothing industry, like the group Inditex that incorporates Zara and Massimo Dutti among other brands, have been practising for decades. The strategy of Inditex, which produces some 30% of its products in Asia, is the way forward to combat a declared crisis, according to Victor Fabregal, director of Centre d’Informacio Textil i de la Confeccio.
China is an immense market with some peculiarities that make it a difficult competitor. What some see as a business opportunity, others perceive as a threat. What is certain is that the volume of Chinese production has the power to destabilise the markets that it enters.
Many predict the end of the European textile market if immediate changes are not effected. However, the reality is that this is “a declared crisis”, as Pablo Rovetta, an economic analyst at Iberglobal, affirms: “The liberalisation of this market was predicted a decade ago. To anyone observing the dynamism of the Chinese economy, it was predictable that it would produce a flood of textile products. In this way, we can suggest that the European businesses in the sector failed to sufficiently prepare themselves for this new international scenario.”
What to do faced with the Red Dragon?
The strategies that the European textile industry has adopted have one goal: to promote value added products, as in the quality of the material and the design. Those who didn’t opt to outsource to Asia do not have an alternative than to enforce their market position by offering a different product of quality that overshadows the comparative prices and that can compete in the overcrowded clothing industry. Butaud emphasises the necessity of developing independent monitoring of the textile sector and protecting the intellectual property of textile products. It is also important to react now as future predictions are not all that encouraging: according to Banco Mundial, in a few years China will control half of all global commerce in the textile industry.