NEW YORK — The end of the global apparel and textile quota system last year solved problems for some, but importers face new challenges.
High duties, ensuring sourcing diversity and an overburdened domestic infrastructure were some of the key topics discussed among importers and sourcing executives at the Textiles and Apparel Trade and Transportation Conference here Nov. 14-15 at Chelsea Piers.
Bob Zane, senior vice president in charge of manufacturing, sourcing, distribution and logistics at Liz Claiborne Inc. and chairman of the U.S. Association of Importers of Textiles & Apparel, opened the conference by praising the work importers have done in the last 10 to 20 years to bring down apparel prices.
“We’ve done this with both hands tied behind our backs,” he said. Zane said the cost of quota was the first metaphorical handcuff, adding, “I, for one, am very hard-pressed to come up with anything of value that came from quota.”
Duties are the second hurdle, which Zane said do little to protect domestic manufacturing and unfairly burden the American consumer with higher costs.
“It’s my fervent hope that dealing with high duties will be the next rallying cry of importers,” Zane said.
The reduction or elimination of global duties is the goal of the Doha Round of global trade talks, which face a crucial meeting in Hong Kong next month.
China is fueling the import surge, but Osamu Suzuki, president and chief executive officer of shipping company MOL America, said China’s exports will only rise if the country rapidly improves its port facilities and begins highway projects throughout its southern provinces.
Suzuki compared the growth of China’s southern ports over the past 10 years with that of Hong Kong to illustrate his point. The port of Hong Kong, the world’s largest, handled 22 million 20-foot equivalent units — the standard maritime industry measurement used to count cargo containers — in 2004, up from 12.6 million in 1995. However, Hong Kong’s growth rate has slowed as more ports in the Pearl River Delta region have opened or expanded capabilities. For example, the port of Shanghai handled 14.6 million TEUs in 2004, up from 1.5 million in 1995.
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“Shanghai could become the third-largest container port in the world,” Suzuki said.
The growth has been even more marked for the port of Shenzhen, which handled 13.6 million TEUs in 2004 compared with 284,000 TEUs in 1995.
Officials in China’s southern provinces have joined together to develop a freeway network, Suzuki said, that will have an impact beyond China’s borders. A new freeway is being built that will cut travel time between Hanoi and Hong Kong to 15 from 58 hours, making Hanoi a more viable port option in the region, he said.
Apparel and retail sourcing executives stressed that survival hinged on diversity in manufacturing and developing strong relationships with suppliers.
Don Baum, senior vice president of global manufacturing for Polo Ralph Lauren Corp., said long-term planning helped Polo through the quota transition period without experiencing any negative impact in its business.
“We really haven’t shifted much of our production in the last couple years because we have good partners,” Baum said. “The moral of the story is flexibility in your manufacturing.”
At the end of May, Polo paid $110 million to acquire the rights for Ralph Lauren footwear from Reebok, which held the license since 1996. Baum said, “I’ve been in more footwear factories in the past six months than I have apparel factories in the past 10 years.”
Keeping up with the flow of goods is already putting pressure on almost every aspect of the domestic infrastructure, said John Bowe, president of the Americas region for APL Lines.
Bowe warned that, while congestion at West Coast ports hasn’t been a problem this year, it is not because of improvements in operations. Instead, goods have been diverted primarily to other West Coast ports. Shipping firms also are taking on the added cost of the Pier Pass program, which allows containers to be moved and transported at night and during the weekends. According to Bowe, 40 percent of APL’s West Coast business is now moved at night.
New container ships capable of carrying 8,000 TEUs also are posing a potential problem for the West Coast ports, Bowe said, “because many of the ports they’re pointed toward can’t handle them.”
The Panama Canal is another major cause for concern. An APL-commissioned study of the canal conducted by Drewry Shipping Consultants said improvements in systems, equipment and facilities are expected to increase the canal’s capacity by 10 percent, boosting the number of ships passing through to 42 a day by 2007 from the current 38. However, those capacity gains will be wiped out by 2008 with only a nominal growth rate in trade. In 2003, 5.2 million TEUs passed through the canal, half generated by trade between Asia and the U.S. East Coast.