Hong Kong textile industry has seen a shake-out in recent decades as production moved to China and countries such as Bangladesh and Cambodia, squeezing the territory global market share from 20 per cent a decade ago to under 10 per cent. .
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But local companies have survived by setting up factories in mainland China and creating a niche in Hong Kong in supply chain management and high-end production. They believe an open market place will be to their advantage. .
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“The quota system has skewed the textile trade for years by giving preferential treatment to countries with no regard for their production capability,” said Andrew Leung, chairman of the Textile Council of Hong Kong. .
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“Now Hong Kong companies will be able to truly compete on price, performance and quality without worrying about quota availability.” .
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Under the 1974 global Multi-Fibre Agreement, developing nations were given quotas for textile and clothing exports to North America and Europe, aiming to help pull such countries out of poverty. .
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In 1994, the US and other World Trade Organisation members (then known as the General Agreement on Tariffs and Trade) agreed to eliminate quotas among WTO members by January 2005. China has since joined the WTO and so its quotas expire next year.Leung company, Sun Hing Knitting Factory Ltd., which produces knitwear for French designer Sonia Rykiel and Marks & Spencer Plc… is investing US$2.5 million this year to expand production capacity by 25 per cent in China and Hong Kong. .
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The territory textile exports totaled US$36 billion last year, about 16 per cent of its total exports. This year, garment shipments were 11 per cent higher in the first quarter than a year ago and should accelerate next year, analysts said. .
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The scope to expand in China is huge: under quotas, the mainland is restricted to exporting around 250,000 dozen cotton shirts a year to the United States, while Bangladesh exports about seven million dozen, according to the Textile Council. .
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Luen Thai Holdings Ltd. the territory biggest garment maker with clients like Polo Ralph Lauren Corp. will use proceeds from listing on the stock exchange this month to fund new factories in China. It has also formed a joint venture with Hong Kong-based Yue Yuen Industrial Holdings Ltd, the world largest athletic shoe maker, to make sports apparel. .
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The transition to a quota-free system will not be easy. .
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Under WTO rules, the United States and Europe can impose “anti-surge” quotas until end-2008, curbing annual import growth from a country to 7.5 per cent per product category if they feel their domestic industry is being disrupted. .
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The United States introduced the quotas last year as China bra exports doubled after the removal of quotas. Last month, American sock manufacturers called for emergency restrictions. .
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Burce Rockowitz, executive director of Hong Kong-based Li & Fung Ltd, the world biggest supply chain manager, has no doubt the US will implement anti-surge quotas next year. .
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“I think they will impose them in the second half of next year and Europe will probably follow suit,” he said. “We see people rushing to do as much business as possible in the first half.”Still, Li & Fung, which shipped US$4 billion of garments globally last year, will double its network to 36 offices in China in three years. China textile output will eventually account for 80 per cent of the world market, the company says. Hong Kong, where Li & Fung employs more than 2,000 people, is the brains of the industry. Rockowitz says, cutting lead times to retailers through the development of supply chain management services. Leung forecasts expansion of such services will create up to 10,000 jobs in the territory in the next few years. .
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As global supply increases, prices of garments could drop 15 per cent over the next few years. Rockowitz said, and inefficient countries and companies will be weeded out. .
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But that does not worry Hong Kong. .
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“It good when there is fair competition,” said Queenie Cheng, merchandise manager at Hong Kong garment maker Yuen Fung Garment Manufacturing, whose clients include US retailer Abercrombie & Fitch com. .
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“With quotas, prices are sometimes high and some times low so it very risky..
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Source: Reuters
Date:7/8/2004
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