GENEVA — Faced with increased pressure from lower-cost suppliers, Romania’s textiles and apparel industry — known for quality outerwear and bottoms — is shifting its production toward higher-end ready-to-wear and more novelty products in a bid to make its exports more competitive, according to a World Trade Organization report.
The Eastern European nation of 22.3 million is in the midst of an ambitious economic-reform program to overhaul burdensome regulations and other barriers in preparation for its slated entry into the 25-member European Union in 2007.
EU membership is expected to give a strong boost to foreign direct investment in Romania, increase productivity and strengthen trade, said the report on the nation’s trade regime compiled by the WTO. The International Monetary Fund projects Romania’s growth rate to increase by 5 percent annually from this year through 2007.
In 2004, Romania’s textiles and apparel exports totaled $5.2 billion, representing a 22.5 percent — 20 percent for apparel and 2.5 percent for textiles — share of total merchandise exports, the WTO said. Last year, Romania’s imports of textiles and apparel reached $3.9 billion, a 12.2 percent share of total merchandise imports.
In 2000, the country’s exports of textiles and apparel totaled $2.5 billion and imports were worth $2 billion, and accounted for 24.4 percent and 15.6 percent share, respectively, of Romania’s total merchandise shipments.
Major apparel exports include women’s and girls’ jackets, blazers and blouses, as well as women’s and men’s sweaters, shirts, trousers, overalls and shorts. Small- and medium-sized companies account for 80 percent of firms in the sector.
The WTO report critically notes, however, that while imports of textiles and apparel are free of quantitative restrictions, they are nevertheless subject to high tariffs that average 20.9 percent and go as high as 40 percent, providing domestic industry with high rates of protection. In 2004, tariffs on articles of apparel averaged 30 percent, substantially higher than the 17.7 percent average for manufactured goods.
The industry, which in recent years has experienced strong growth, also benefits from general incentives provided by the government, the report noted. These include exemption from customs duties and taxes, and reimbursement by the Export-Import Bank of Romania of 50 percent of the interest paid on domestic loans when the funds are used to manufacture textiles and apparel for export.
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WTO trade economists highlight that Romania’s industry is marked by a reliance on “imports of fabrics, and the development of outward processing of garments, mainly for companies in Italy, Germany and France.”