Apparel Exports Research Articles

Industrialization Trajectories in Madagascar’s Export Apparel Industry: Ownership, Embeddedness, Markets, and Upgrading

Summary The paper shows the importance of ownership as a conceptual category within global value chain (GVC) analysis through analyzing firm types based on their GVC linkage, market access, and ownership profile in Madagascar’s apparel export industry. The central argument is that ownership leading to variances in embeddedness matters. Ownership characteristics of supplier firms shape the ability to shift between different end markets, respond to lead firm requirements, and pursue upgrading. With Madagascar’s exclusion from AGOA benefits this has enabled locally embedded European/French diaspora-owned firms and regionally embedded Mauritian-owned firms to shift market channels and upgrade while Asian-owned firms largely exited the industry.

GSP+ Removal and the Apparel Industry in Sri Lanka

The withdrawal of GSP+ concessions granted by the European Union in August 2010 could bring about important implications for Sri Lanka’s apparel industry, which is heavily dependent on the European market for its exports. A particular concern is the lack of an international level-playing field, with many of Sri Lanka’s competitors having preferential access to European countries. In this context, the study analyzes the current impact of GSP+ withdrawal on the Sri Lankan apparel industry, possible future impacts and means of mitigating negative impacts and moving forward. An empirical analysis indicates that the GSP+ scheme has been central for apparel exports in penetrating the EU market, with the utilization rate averaging at 72 per cent over the 2005–2010 period and declining thereafter. While interviews carried out with stakeholders in the apparel industry reveal diverse viewpoints, the study concludes that the apparel industry remains highly vulnerable to the loss of GSP+ concessions and proposes several strategies in moving forward.

The rise and fall of (Chinese) African apparel exports

During the final years of the Multifiber Agreement (2001–2005) the US imposed quotas on Chinese apparel while it gave African apparel duty- and quota-free access. We argue that the combination of these policies led to a rapid but ephemeral rise of African exports that can be explained in part by ethnic-Chinese firms using Africa as a quota-hopping export platform. We first provide a large body of anecdotal evidence on the ethnic-Chinese apparel wave in Africa. Second, we show that Chinese exports to Africa predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products facing US quotas and in countries with preferential access to the US unconstrained by rules of origin. Our estimates indicate that direct transhipment may account for around 22% of Africa's apparel exports during 2001–2008.

Preferential Market Access Design: Evidence and Lessons from African Apparel Exports to the United States and the European Union

The least developed countries rely on preferential market access. To benefit from these preferences, proof of sufficient transformation must be provided to customs in importing countries by meeting the rules of origin requirements. These rules of origin are complicated and burdensome to exporters in least developed countries. Since 2001, under the United States (U.S.) Africa Growth Opportunity Act (AGOA), 22 African countries that export apparel to the U.S. have been able to use fabric of any origin (single transformation) and still meet the criterion for preferential access (the so-called special rule). In contrast, the European Union (EU) has continued to require yarn to be woven into fabric and then made into apparel in the same country (double transformation). Panel estimates for the 1996-2004 period exploit this quasi-experimental change in the design of preferences. Estimates show that this simplification contributed to an increase in export volume of approximately 168 percent for the top seven beneficiaries, or approximately four times as much as the 44 percent growth effect from the initial preferential access under the AGOA without single transformation. This change in design was also important for diversity in apparel exports because the number of export varieties grew more rapidly under the AGOA special regime.

A Case Study : Start up of an Export House by an Entrepreneur

This case study is focusing on the hard work of an Entrepreneur, Mr. Rajiv Kapoor for setting up his export house by the name of 'Affordable Exports' Pvt. Ltd. which is one of the premier Apparel Export Organizations in India established by in 1986. It is a design driven company specializing in Hi-Fashion Ladies garments. Affordable Exports is in the business of creating and manufacturing apparels for some of the leading names in the industry. They are Manufacturer, Exporter and Supplier of Garments and Fabrics with different designs in the following categories namely Woven/Knits Garments, Ladies Wear&Ladies Night Wear. The company has consistently grown over the past few years in product specialization, turnover, infrastructure, and portfolio management. The most important factor for its growth was the management of its Human Resources. According to Mr. Rajiv Kapoor, the most valuable asset for any organization is its human resources. Some employees are in the organization since the last 20 years and still performing very well. Mr. Rajiv Kapoor promoted this company in 1986 with a meagre amount of Rs. 5000 which he borrowed from his father for starting his own venture. He gave it the name of Affordable Exports so that buyers can easily relate to it for affordable prices. He managed to make a mark in this field of apparel exports with his hard work, commitment, dedication, innovation and timely delivery of consignments against all odds and without even support from the family in the core business activities. Though the company has already seen a lots of ups and downs, the future of the company looks promising in the export business by completing 25 successful years in 2011. The company's main strength comes from a professional management, a dedicated work force and a satisfied client base. Their strong infrastructure facilities and sophisticated technologies facilitate coordination in their work processes as the team of professionals is churning out unique ideas for styling.

Local Embeddedness and Economic and Social Upgrading in Madagascar's Export Apparel Industry

Over the past decade, several Sub-Saharan African (SSA) countries have developed or expanded export-oriented apparel industries in the context of the Multi-Fibre Arrangement (MFA) quotas and preferential market access, most importantly under the African Growth and Opportunity Act (AGOA). Madagascar is different to the other main SSA low-income country (LIC) apparel exporters – Kenya, Lesotho and Swaziland – given its more diverse end markets and ownership structures and the political instability that led to the loss of AGOA status at the end of 2009. This paper assesses the development of Madagascar’s export-oriented apparel industry and economic and social upgrading dynamics in particular in the context of the AGOA loss. It identifies four types of firms and value chains that differ with regard to ownership patterns, end markets and, most importantly, ‘local embeddedness’, with important implications for both economic upgrading dynamics and possibilities and the sustainability of the industry. The paper concludes that, despite the contraction in the export-oriented apparel industry post-AGOA, Madagascar is still a more successful apparel producer in terms of economic upgrading than the other main apparel-exporting LICs in SSA. The key to this trajectory lies in the differentiation of global value chain (GVC) relationships, local embeddedness and export diversification.

Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry

Many low-income countries (LICs) are integrated into apparel global value chains (GVCs) through foreign direct investment (FDI). This is also the case in Lesotho that has developed to the largest Sub-Sahara African (SSA) apparel exporter to the US under the African Growth and Opportunity Act (AGOA). More recently, a new apparel export market has emerged in Lesotho the regional market of South Africa. The two export markets US and South Africa are supplied by different types of FDI firms affiliates of largely Taiwanese transnational producers and South African manufacturers that are incorporated into distinct value chains. This paper assesses the implications for upgrading of integration into these two value chains in Lesotho - the value chain characterized by Taiwanese investment and feeding into the US market under AGOA and the value chain characterized by South African investment and feeding into the South African market. These value chains differ with regard to ownership patterns, end markets, export products, governance structures and firm set up, investors motivations, and perceptions on main challenges. These different characteristics have crucial impacts on upgrading possibilities, including functional, process and upgrading. Thus, from the perspective of upgrading and sustainability, ownership patterns, local embeddedness and market diversification matter. The emergence of South Africa as an alternative end market and the different value chain dynamics operating in the South African retailer-governed value chain open up new opportunities from those of the AGOA/Taiwanese-dominated value chain.

Better Work in Central America: Assessing the Opportunities for Upgrading in Nicaragua's Apparel Sector

What can Better Work offer producers in a country like Nicaragua to alleviate the burden caused by the heavily trade-dependent nature of the industry’s development, and how do the relatively high-level institutional development and work-place protections in the country affect the willingness of manufacturers to cooperate with Better Work Nicaragua? Drawing on data collected by the authors during fieldwork in Nicaragua, as well as from secondary literature, this working paper explores the contemporary context of the Nicaraguan industry, outlining the opportunities and challenges confronting the country’s apparel sector. Nicaragua is the first and only Central American country to participate in Better Work. The second poorest country in the hemisphere, its manufactured exports are heavily concentrated in apparel. While Latin America’s share of the US apparel import market has declined in recent years, Nicaraguan export growth has remained robust. Nicaragua’s strong performance relative to other regional exporters reflects the special benefits it has received under the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) with the US, namely the tariff preference levels (TPLs) that permit apparel exports from Nicaragua to enter the US market duty-free even when these garments do not meet CAFTA rules of origin (RoO). Although these preferences have enhanced Nicaragua’s competitiveness vis-a-vis other regional exporters, the TPL programme is set to expire in 2014. Better Work Nicaragua is thus being implemented during a period of uncertainty, therefore it is critical to understand what local stakeholders in both the public and the private sectors believe will be the consequences of this change in the regulatory regime, and how they are trying to respond to it. This paper concludes that there is a crucial need to craft a programme that reflects the specific conditions that characterize Nicaragua and differentiate it from other Better Work countries.

An Analysis of Responsible Factors for Merchandiser's Performance and Role in Apparel Industry

Fashion industry requires talented executives with a keen sense of the marketplace and finely honed management skills that enable them to make the critical decisions needed to keep a company's product line competitively marketable and profitable. The driving force in today's apparel business is merchandising. A merchandiser is defined as a person who ensures that the right product at the right price reaches in right quantity and at the right time to the final destination. A merchandiser is the responsible person to make the product according to the buyer's parameters and satisfaction. Merchandisers have to look after every job right from buying the raw material, components and accessories, making the apparel, finishing the apparel, documentation and communication to and from all business partners to finally shipping and much more. The merchandisers play the role of a ‘fulcrum’ within apparel export organisations, coordinate and balance the business needs of the supplier on one end and buyer on the other. Their performance affects the business results of apparel export companies. The paper aims to identify the key parameters for assessing merchandisers' performance in apparel export companies. The recommendations based on key findings of the research show that merchandiser selection process, training and performance appraisal could significantly contribute towards improving the performance of merchandisers in the apparel industry.

The United States–Korea Free Trade Agreement (KORUS) and Its Impacts on China’s Textile and Apparel Exports to the United States

This study is an empirical evaluation of the impact of the U.S.-Korea Free Trade Agreement (KORUS) on China's textile and apparel (T&A) exports to the United States, with special focus on potential trade diversion effects of the agreement. On the basis of estimated export similarity index and trade elasticity of substitution values for T&A products of China and South Korea, trade diversion caused by the KORUS is predicted to most strongly affect China's apparel exports (in HS Chapters 60-63). The KORUS may also affect China's exports in other T&A categories (in HS Chapters 51, 52, 56, 57 and 59), but results suggest the effects will be limited. This study contributes to understanding the T&A-specific sectoral impacts of the KORUS and suggests a need to reconsider the competitiveness of China's T&A exports in the era following elimination in 2005 of Multi-Fiber Arrangement quantitative trade restrictions.

Development of firm export market oriented behavior: Evidence from an emerging economy

Based on gathered survey data from Chinese apparel exporters, using structural equation modeling technique, a proposed firm's export market oriented (EMO) behavior model was empirically tested. A great set of antecedent factors (i.e., organizational structure, export systems, export coordination, top management factors, and export dependence) and moderating factors (i.e., environmental turbulence, export experience) were examined in the context of China, which extends the EMO literature from mainly Western business setting to non-Western business environment. This study identifies several key antecedents (i.e., export reward and training systems, top management support, and export dependence) facilitating the development of firm's EMO behavior while determining the specific moderating effects of environment and experience, and therein explains a large percentage of variance in EMO behavior (78.3%). Importantly, we uncover some instances where the theory of firm EMO behavior's antecedents does not hold for Chinese apparel exporters.

Do trade policy differences induce sorting? Theory and evidence from Bangladeshi apparel exporters

This paper provides a new heterogeneous firm model for trade where firms differ in their productivity and experience different market demand shocks. The model incorporates the variations in trade policy, trade preferences, and the rules of origin needed to obtain them that are faced by Bangladeshi garment exporters to the US and EU. We estimate firm's productivity using an extension of the Olley Pakes procedure that accounts for the biases arising from both demand shocks and productivity being unobserved. Predictions of the model are then tested non-parametrically and are shown to be supported empirically.

The EU Market for apparel exports, China's cotton imports, and the end of the ATC

Abstract The expiration of the WTO Agreement on Textiles and Clothing (ATC) in January 2005 coincided with surges of China's apparel exports and apparent increases in China's cotton imports, the former of which has led to trade conflicts between China and its main trading partners, and the latter of which has seemingly prompted China to relax its restrictions on cotton imports. Using monthly trade data, this study employs a vector autoregression model to investigate the interlinkages between China's and its competitors’ apparel exports to the EU and between China's apparel exports and its cotton imports. Our analysis shows that (1) there appears to be a downward-sloping and elastic demand curve for China's apparel products by the EU; (2) China's and its competitors’ apparel exports to the EU are imperfect substitutes and the “crowding out” effects of Chinese apparel exports seem to be modest in the EU market; (3) the interrelationship between China's apparel exports and its demand for imported cotton is f...

The trade destruction effect and trade diversion effect of RMB appreciation

This paper examines how Chinese RMB appreciation affects China and its competitor’s exports to the third market at industry level. We develop a two-country competition model to analyze the trade destruction effect and trade diversion effect of RMB appreciation. The theoretical analysis shows that the appreciation of RMB has negative impacts on China’s exports and positive impacts on its competitor’s exports. We then empirically test how the appreciation of RMB to the US dollar affects China’s and India’s textiles and apparel exports to the US from 1995Q1 to 2008Q4. The empirical results show that an 1% appreciation of RMB to US dollar will reduce China’s exports of textiles & apparel to the U.S. by 2.63% and raise the India’s exports of textiles & apparel to the U.S. by 2.71%.

The effects of the removal of US safeguards on imports from China

The expiration of temporary safeguard measures against Chinese exports of certain cotton apparel to the US beginning 2009 is estimated to result in lower apparel prices in the US by $0.02/kg, on average, whereas cotton prices in the US remain unaltered in the medium term (2009–2015). A price equilibrium simulation model (of both the cotton apparel and cotton sectors) was used to estimate the trade effects of China's increased access into the US import market on other Asian and Latin American exporters to the US, and ultimately in these exporters' demand for US cotton.

DECOMPOSITION OF LABOUR DEMAND BY EMPLOYER SECTORS AND GENDER: FINDINGS FOR MAJOR EXPORTING SECTORS IN TURKEY

This paper attempts to provide insight into the likely impacts of the current global crisis on employment in Turkey. As this crisis hits the Turkish economy through a demand squeeze in the international market, our focus is on the labour demand generated by major export sectors. The decomposition of impacts with respect to gender is of particular interest given the significant gender imbalances in the labour market. The findings indicate that female (male) employment is most sensitive to wearing apparel (trade) exports. In general, employment generation potentials of major export sectors are found to be weaker for females and stronger in agriculture, trade and finance, while they are very limited in manufacturing for both genders.

The applicability of cluster theory to Canada's small and medium‐sized apparel companies

PurposeThe purpose of this paper is to identify and map trends in the Canadian apparel industry (in a global context) and, through the application of Porter's models, establish strategies that could be employed by Canadian small and medium enterprizes (SMEs) in response to the move toward trade liberalisation since the phasing out of the multi‐fibre arrangement.Design/methodology/approachThe literature review established trends in the apparel industry both in Canada and globally. Qualitative research in the form of case studies highlighted apparel suppliers' perceptions of Canada's strengths and weaknesses as a business setting and provided preliminary information on possible supplier activities which provide value and competitive advantage. The analysis of the primary data also allowed the development of preliminary questions, answers to which will further enhance the understanding of clusters and their applicability to Canada's apparel SMEs.FindingsCanada's apparel manufacturing industry is winding down while imports are continuing to grow. At the same time, the Canadian market is not large enough to sustain all the suppliers, thus forcing those who are competitive to export, primarily to the USA, which is Canada's major apparel export destination. The morphology of related and supporting industries to apparel suppliers is changing. The findings suggest that Canada's apparel supply is becoming more of a service and less of a manufacturing industry.Originality/valueThis paper provides an understanding of Canada's position in the global apparel map and ascertains whether competitive cluster strategies exist for the Canadian apparel industry. Furthermore, it sets the stage for further research by identifying knowledge gaps pertaining to the applicability of clusters to the apparel industry and providing data and findings to bridge these gaps.

Upgrading and restructuring in the global apparel value chain: why China and Asia are outperforming Mexico and Central America

This article uses the global value chain approach to analyse the upgrading trajectories of leading apparel exporters adapting to the end of textile and apparel quotas and the economic recession. These events have been coupled by the consolidation and reconfiguration of global supply chains. China has been the big winner while other Asian suppliers are expanding their roles, largely at the expense of regional suppliers. One key to Asia’s competitive success vis-a-vis Mexico and Central America has been end market diversification. Regional trade agreements (NAFTA; DR-CAFTA) have provided the latter with preferential access to the US market and ties to brand manufacturers, but they also created a reliance on US exports and have hindered suppliers from developing regional linkages into textile production, apparel design and branding. Growing apparel demand in emerging Asian economies and a regionally integrated production network has allowed Chinese apparel suppliers to upgrade and expand global market share.

The Impact of International Outsourcing on Unionization and Wages: Evidence from the Apparel Export Sector in Central America

It is often assumed that manufacturing workers in developing countries, as recipients of outsourced jobs, would achieve economic benefits and organizational power. The author argues that job growth in developing countries through outsourcing to competing firms has often actually resulted in declining unionization and lower wage rates relative to traditional, integrated manufacturing firms. Using time-series data on union membership from 1980–2003 for Honduras and El Salvador as well as 2004 Household Survey Data for El Salvador, he examines the determinants of unionization rates and wages in the manufacturing sectors. He finds that that competitive outsourcing hurts labor at the plant-level in three ways: 1) it reduces labor's strike leverage by geographically dispersing the production process; 2) it increases the threat of plant mobility by decreasing plant-level investments; and 3) it increases labor costs relative to total costs, which creates an incentive for employers to keep wages low and unions out.

An empirical investigation of the determinants and shifting patterns of US apparel imports using a gravity model framework

PurposeThis study aims to quantitatively identify the impact of major economic and political factors on the US apparel imports from its 15 major trading partners between 1995 and 2006.Design/methodology/approachOrdinary‐least‐square (OLS) regression under a gravity model framework was utilized to construct the analysis. The determinants of US apparel imports were determined and their significance and direction of change over the period were quantified.FindingsFirst, the growths of GDP and population both in the USA and within its trading partners have been drivers of US apparel import growth, while greater geographic distance between a trading partner and the USA significantly impedes its exports to the USA. Second, the positive impact on the US apparel imports from the supplying country's infrastructure development, literacy rate and its language commonality with the USA shows that these factors are pivotal to being a competitive US apparel supplier. Finally, preferential market access is proven to be crucial for suppliers to increase apparel exports to the USA.Research limitations/implicationsIn future work, the impact of these factors on disaggregated apparel categories could be investigated. Some emerging issues such as non‐tariff barriers could be exploited.Practical implicationsThe findings reveal that the US apparel sourcing decisions are made on the basis of many different costs, not only labour cost, but also economic condition, government policy, infrastructure, transport time and cost, language/culture commonality etc.Originality/valueThe study provides a springboard for empirically analyzing the US apparel imports under a gravity model framework. The conclusions are drawn based on solid quantitative evidence.