NEW YORK — As they look ahead to the first year of quota-free apparel and textile trade, importer executives are preparing for changes and for a few minor hiccups.
“The phaseout of quotas brings with it a degree of change unlike what we’ve seen in modern times,” said Peter McGrath, chairman of J.C. Penney Purchasing Corp., adding that “2005 will be defined as a transitional period.”
While executives said they are pleased that the 148 nations of the World Trade Organization are set to drop their restrictions on global trade of textiles and apparel Jan. 1, they’re also ready for a few final snags.
Key among them is the fact that Chinese apparel and textiles still will be subject to the threat of safeguard quotas, temporary category-specific restrictions that can be renewed through 2008. The U.S. already has imposed safeguard quotas on four categories of Chinese imports — bras, robes, knit fabric and socks — and has agreed to review other petitions brought by the domestic industry. Those petitions, brought on the premise of a threat of market disruption instead of actual changes in the marketplace, have been challenged in court by the U.S. Association of Importers of Textiles & Apparel.
Even with safeguards, China is expected to retain its dominant position in the apparel trade. For the year ended in September, U.S. imports of Chinese apparel and textiles rose 24.9 percent to $13.79 billion, giving it the largest share of the U.S.’s overall $80.49 billion of imports of those products.
Given the threat of continued restrictions on China, executives said they’re not planning on shifting large amounts of business into that country in the early months of the post-quota era.
Ron Shulman, vice president of strategic sourcing at Limited Brands, said his company would be moving carefully on that front, since for several months it has been “anticipating the restrictions that we’re now seeing placed on China.”
Gary Ross, vice president of global sourcing and quality at Liz Claiborne Inc., estimated that sourcing executives at his firm currently “spend 40 percent of our time and energy dealing with quota issues of one kind or another.”
Related Articles
You May Also Like
With quotas out of the picture, he said, Claiborne will probably cut back its sourcing operations from 35 countries to between 10 and 15.
Executives also said the competitive forces unleashed by the end of quotas, which will send factories around the world scrambling to maintain or improve market share, likely will bring a drop in prices, ranging from 8 to 50 percent depending on the country, product and time of year.
But Limited’s Shulman said, “Although the price reductions are important, they are not the biggest prize. Successful retailers and brands make money on the sell side, not the buy side.”
The biggest advantage, he said, would be allowing importers to use suppliers that can work quickly, the “holy grail” of the apparel business.
Ron Widdows, chief executive officer of steamship company American President Lines, warned that importers will continue to face troubles in the form of delays at West Coast ports.
He noted that the volume of container-cargo traffic worldwide has been growing at 9 percent a year in recent years and predicted that in 2005 it would hit 12.5 percent, which he said likely would exacerbate the port backups.
“This is a global problem,” he said. “It’s not a problem of Los Angeles.”
“Infrastructure problems and congestion are not temporary,” he said. “This is going to be with us for years.”
Importers also noted that, even with quotas lifted for most nations, they will still face antidumping actions and other trade challenges.
Penney’s McGrath said dumping duties were recently imposed on one of its Chinese furniture suppliers. The duties came to 198 percent, he said, which meant “that $2,000 bedroom sets just became $6,000.”
Fighting dumping complaints — that goods are shipped to countries below the cost of producing them — likely will become one of importers’ new major challenges in the years ahead, he said, adding that the defense “can run into millions of dollars, easy.”