Catalog

	Table of Contents
p. 15 of 36 BACK | NEXT Foreword 1. Developing Asia and the world Overview Prospects for developing Asia, 2006 and 2007 Prospects for the world economy, 2006 and 2007 Subregional summaries Suspension of Doha talks and emerging trade issues Suspension of Doha Development Round negotiations Renewed momentum for preferential trade agreements Textile and clothing trade: Performance of Asian suppliers What developing Asia can now do II. Economic trends and prospects in developing Asia III. Developing Asia's imprint on global commodity markets Appendix Statistical notes and tables ADO forecasting performance for GDP growth and inflation

Asian Development Outlook 2006 Update : 1. Developing Asia and the world

---

Textile and clothing trade: Performance of Asian suppliers

The trends noted in world trade in textiles and clothing in ADO 2006 have continued and deepened over the first half of the year. The prediction made in April 2006 (ADB 2006, p. 36) was:

“Going forward, it is likely that the PRC will lose some of the rapid gains it made in market share in 2005 and preferential non-Asian suppliers will continue to see contraction while other Asian suppliers increase their market shares.”

In the US market for clothing this has proven to be the outcome.

Performance in the US market

Clothing. One of the most significant changes in the US has been the reversal of growth of shipments of clothing from the PRC in volume and value terms under the safeguard memorandum of understanding that the PRC signed with the US in November 2005. (Figures 1.5.1. and 1.5.2 show US market share for the top six developing Asian suppliers over various periods.) During the first 6 months of 2006, the volume of shipments from the PRC fell by almost 15% and the value by almost 11% (implying a slight rise in unit values). The impact on imports of textile intermediate products of the safeguards has been far less pronounced than upon clothing: although growth in volume and value of yarn and fabric imports from the PRC slowed in 2006, both remained positive. suppliers (clothing, by volume) Jan-Jun 2006 Jan-Jun 2005 2005 2004 Viet Nam India Indonesia Bangladesh China, People's Rep. of

The effect of the memorandum on trade overall has been negative, with volume and value of imports from the world both declining in 2006 compared with the first half of 2005 (before the restrictions were imposed). As volume declines have exceeded value declines, there has been a slight upturn in unit values overall. Despite the overall tradechilling effect of the safeguards on US imports to textiles and clothing from the world, competitive Asian suppliers other than the PRC have by and large had banner performances.

Indeed, the first 6 months of 2006 have evidenced a remarkable performance by major Asian competitive suppliers (other than the PRC) in the US market for clothing, despite the fact that imports have actually contracted in terms of total import volume (2.4%—Table 1.5.3) and value (0.5%—Table 1.5.4) from all foreign suppliers.7 The second through tenth largest Asian suppliers by volume all experienced double-digit growth in volume and the second through eighth did so in value terms as well in the US market. In contrast, the PRC had double-digit declines in volume and value over the same period.

Of the major Asian suppliers, the three economies of Viet Nam, Philippines, and Hong Kong, China had the largest positive turnaround in performances relative to 2005, while Bangladesh, Indonesia, Cambodia, and Pakistan continued to build on solid growth relative to 2005. India experienced a slowdown in 2006 compared with 2005 while Thailand had strong volume growth but low value growth. Among all competitive Asian suppliers, Sri Lanka had the weakest performance aside from PRC in the first half of the year, with negative volume growth and low single-digit value growth. This growth, in part, stemmed from a rise in unit values, again reflecting the suppression of supply from the largest producer on the globe—the PRC.

Small and marginal suppliers like Fiji Islands, Mongolia, and Nepal continued to experience a winding-up of production of clothing for export as did the two former large quota-holders of Korea and Taipei,China. Preferential suppliers performed poorly almost across the board, with only Egypt, Jordan, Morocco, and some small Caribbean Island suppliers having positive growth in volume and value. Large preferential suppliers in Central America and North America (particularly Mexico) had double-digit falls over the first 6 months of 2006 compared with the same period in 2005 in both volume and value in the US market. Among the poorest performers, however, were sub- Saharan African countries as they experienced a sharp deterioration in performance for the second year running (with a 17% drop in volume and an 18% fall in value).

US bilateral trade agreements distinctly favor preferential suppliers over nonpreferential suppliers (Figure 1.5.3) and in FTAs (as was noted above) tariff preferences in clothing are particularly large. However, Asian suppliers’ price competitiveness has won them greater market share. Tariff discrimination in FTAs is a concern for small Asian countries that rely heavily on clothing shipments (Figure 1.5.4). By contrast with non-FTA suppliers, only Jordan has a similar reliance on shipments of clothing to the US market as other existing FTA partners either ship negligible amounts (Australia, Chile, Singapore) or have strongly diversified shipments to the US (Canada, Mexico, Israel).

Intermediate products. The situation in the US market for textile intermediate products (yarns and fabrics) has been slightly different from clothing in that volume has not declined in the aggregate even though unit prices have, bringing about a decline in value (Tables 1.5.5 and 1.5.6). Shipments of textiles from the PRC experienced sharply decelerating growth in the first half of 2006, but market share has been maintained (Figures 1.5.5. and 1.5.6)—in sharp contrast to market share in clothing. As noted in ADO 2006, the US import market for textile intermediate products is much smaller than for clothing, and there are only a few major suppliers of any significant volume. Of these, Pakistan, India, Indonesia, and Malaysia had quite strong performances in 2006 (first 6 months) with high double-digit growth in volume and value for India and Indonesia and sharp reversals from contraction to growth for Pakistan and Malaysia. Viet Nam also performed well in terms of high growth from a very small base. Large East Asian suppliers (Korea and Taipei,China) increased volumes but had declines in value, reflecting the falling prices in the US market.

Preferential suppliers, chiefly Canada and Mexico (North American Free Trade Agreement members) experienced a contraction in volume and value in 2006 compared with 2005 and saw an erosion of market share as a result (Figure 1.5.7).

Performance in the European Union market

The EU also negotiated a trade restraint pact with the PRC in 2005, but had initial problems in implementing it when shipments continued to exceed agreed limits, as was pointed out in ADO 2006 (p. 50). Although the EU-PRC restraint agreement covered fewer items than the US-PRC memorandum of understanding, it had a negative impact on the volume of trade with the PRC, with imports from the PRC falling by 2.4% in the first 4 months of 2006 compared with the same period in 2005 (Table 1.5.7). The EU also has initiated antidumping measures against synthetic fiber fabrics from the PRC, leading to a sharp reversal in growth of shipments to a contraction of 1.5% in early 2006 compared with a 25% increase in 2005 (Emerging Textiles 9 August 2006). The combined effect of restrictive measures has been to drive up unit prices in the EU, and this has led to a different result than that in the US market—values of import shipments actually increased by over 12% from the PRC in early 2006 and the value of global imports of textiles and clothing in the EU surged by over 15% in the first 4 months of 2006 compared with the same period in 2005 (Table 1.5.8). Unit prices of textiles and clothing in the EU jumped by 13% in the first 4 months of 2006 (Table 1.5.9).

The performance of Asian suppliers in the EU market for textiles and clothing in 2006 has improved dramatically over the poor showing in 2005. For example, the euro value of shipments from Indonesia had contracted by 10% in 2005 but rose by 37% in 2006 with market share climbing from 2.2% to 2.4% (Figure 1.5.8). For India, the improvement in growth was from 17% to 23% with an increase in market share from 7.5% to 8.8%. The following Asian suppliers saw similar turnarounds in value of shipments to the EU in 2006: Bangladesh; Cambodia; Hong Kong, China; Malaysia; Pakistan; Thailand; Sri Lanka; and Myanmar. Nepal and Taipei,China also improved their performance, although growth was in single digits in value terms in 2006. The extent to which Asian suppliers were able to make use of EU preferences in achieving this performance is unknown, but it is certainly likely to be a factor. Unlike the US, the EU has included textiles and clothing in its GSP-eligible trade.

Non-Asian suppliers (most of them preferential suppliers) improved from declines to low value increases in 2006 relative to 2005. Volumes continued to shrink for these suppliers, however. Market share of Asian suppliers rose to over 60% in the EU market (69% for volume) in 2006, while non-Asian suppliers’ share (excluding intra-EU imports) fell to below 40% (31% in volume). (The top six developing Asian suppliers by volume are shown in Figure 1.5.9.) Unit prices of non-Asian suppliers rose by less than half those of Asian suppliers.

Back Renewed momentum for preferential trade agreements	Next What developing Asia can now do