On January 9, 2013, the U.S. Association of Importers of Textiles and Apparel (USA-ITA) and the American Import Shippers Association (AISA) hosted the 24th Annual Textile and Apparel Importer Trade and Transportation Conference in New York. To read the recap, USFIA members can login to the website.
- USA-ITA Chairman's Address
- Transportation Keynote
- Trade Policy Outlook for 2013
- Transportation Panel
- Keynote by U.S. Customs & Border Protection
- Cotton Update
- Regulatory Issues Keynote
- Regulatory Issues for 2013
- Sourcing Keynote
- Sourcing Opportunities & Challenges for 2013
Julia K. Hughes, President of USA-ITA
Hubert Wiesenmaier, Executive Director of the American Import Shippers Association (AISA)
Hughes and Wiesenmaier opened the conference, noting that this year commemorates the 25th anniversary of the American Import Shippers Association (AISA). Hughes thanked Hubert Wiesenmaier for his hard work and successes, as well as other AISA staff members including Fred Dela Pena, Edna Dela Pena, and Kurt Wiesenmaier, who have worked tirelessly for the industry, not to mention the conference. On behalf of USA-ITA, Hughes presented Wiesenmaier with a plaque to commemorate the anniversary.
USA-ITA President Julia K. Hughes presents AISA Executive Director Hubert Wiesenmaier with a plaque in recognition of AISA's 25th anniversary.
Maureen Gray, Vice President of International Trade for Ralph Lauren Corporation
Gray then welcomed the conference attendees and highlighted USA-ITA’s accomplishments during 2012. USA-ITA was founded in 1989 by nine companies who wanted to create a unified vision and voice for importers of textiles and apparel throughout the country. Today, USA-ITA continues to provide information on trade issues, represent the industry before policymakers in the U.S. and overseas, and train executives on sourcing, logistics, imports, and compliance through webinars, events, and publications.
One of the priority issues for 2013 is the negotiation of the Trans-Pacific Partnership (TPP). Gray said that she saw the negotiations firsthand in Auckland in December and understands how important it is for USA-ITA to remain engaged in the TPP stakeholder meetings. USA-ITA will continue to be a leader working with the industry and with government until there is an apparel provision in the agreement that works for apparel brands, retailers and importers. USA-ITA has been working with TPP negotiators to guarantee less restrictive Rules of Origin and more open market access for apparel products.
Gray noted that USA-ITA has been working with other textile and apparel organizations across the globe to increase sourcing opportunities. She applauded the passage of U.S. Free Trade Agreements (FTAs) with Colombia, Korea, and Panama in 2012. Gray acknowledged USA-ITA’s role to support legislation passed this year to extend the African Growth & Opportunity Act’s (AGOA) Third-Country Fabric provision and implement the CAFTA “fixes.” USA-ITA has sent several letters to Congress and the President over the past year and is taking an active role in human rights issues, such as child labor in Uzbekistan, mulesing in the wool industry in Australia, and labor rights issues in Bangladesh. Gray concluded by saying that USA-ITA gives companies the tools to make a difference.
Gene Seroka, President of the Americas for APL Ltd.
Following the introductions, the conference opened with an overview of the transportation landscape for the year and its projected impact on the industry. According to WWD’s coverage of the conference,
Gene Seroka, president for the Americas at American President Lines, said, “Container trade continues to move along sluggishly. [There’s been] five straight months of double-digit declination with respect to Asia-Europe trade. Transatlantic trade has also seen declines. Some bright spots have been Latin America and trade within Asia has been going up.”
Seroka said the shipping industry has been unprofitable for many major carriers, with new-build orders generally down, although new, larger vessels are being built.
Seroka said industry is currently focused on how to project supply and demand gaps in the coming years, particularly the need to better plan and anticipate future trends. In terms of market dynamics, carriers have experienced serious losses in recent years and have been forced to drastically reduce costs. As a result, they are now focused on ambitious cost savings and have turned to bigger ships with reduced slot costs. The recent change in cargo flow has also proved costly to carriers as repositioning costs and moving empty containers are extremely expensive. According to WWD,
“But there is a dilemma — 60 percent of imports are coming from China, but exports are moving to Southeast Asia, the Asian Subcontinent and the Middle East,” he said. “How to get those containers back to the point of origin has been a topic of consideration for some time.”
Seroka highlighted the need to build a sustainable organization, especially by working smarter. Seroka also noted the importance of understanding and meeting customer needs more effectively. APL has been focusing on innovation as a means to lower costs and provide clients with surety and predictability. APL is in the process of modernizing its fleet and building economic security through the following initiatives:
- Match-back planning
- Domestic synergies
- Eastbound and Westbound contracting
- Customer forecasting and pipeline visibility
- Matching outbound bookings with inbound shipments
Discussing sustainability, Seroka said that APL is trying to be a good neighbor and that eco-responsible operations will lead to a sustainable future. APL new builds include environmental features and new technology that provide the best fuel consumption possible and “take us into a new age in the industry.” Seroka also discussed the importance of integrated partnerships, noting that collaboration, planning, innovation, and cost efficiency build a sustainable organization. According to WWD,
Seroka noted that the shipping industry and port operators are dealing with the issue of larger ships now able to come through the reengineered Panama Canal. He said APL has instituted a $500 million Efficiency Leadership Program to achieve goals such as reducing its carbon footprint and becoming more fuel efficient.
On the topic of the ILA-USMX ongoing labor negotiations, Seroka said that he hopes talks will conclude by the new deadline of February 6th. He is encouraged by the involvement of the federal mediators and by the work being done by the U.S. Secretary of Transportation.
When asked about fluctuations in price and rates in container shipping, Seroka explained that “the market creates the rate.” APL is continuously improving its processes and that predictability is important. Seroka discussed building a cost structure that is sustainable. He also said that constant changes in energy prices exacerbate these fluctuations.
Hughes introduced the first panel, covering the trade policy landscape for 2013 and what importers and service providers can expect in terms of policy. The discussion focused primarily on the Trans-Pacific Partnership (TPP) negotiations, but also touched on the Administration’s work on a variety of other trade issues and what we can expect from the new Administration and Congress.
Commerce's Kim Glas & USA-ITA Washington Counsel David Spooner
Kim Glas, Deputy Assistant Secretary of Textiles and Apparel at the U.S. Department of Commerce
Glas started by discussing the Trans-Pacific Partnership (TPP) negotiations going on between 11 countries: Australia, Brunei Darussalam, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Glas thanked USA-ITA and its members for their participation in the negotiations. The Department of Commerce is currently soliciting input from stakeholders on the new TPP Rules of Origin proposal for apparel. Since the U.S. just released this new proposal to the public, Glas spent much of the presentation talking about the initiative and asking USA-ITA member companies to share their recommendations for how to improve the TPP market access benefits.
Recognizing that some products may not be available from TPP partners, the new proposal consists of the traditional yarn-forward approach and includes two separate short-supply lists: 1) The permanent short-supply list would include fibers, yarns, and fabrics for which production is limited to certain geographic regions outside of the TPP area. 2) The temporary short-supply list would contain fibers, yarns, and fabrics that are determined to be unavailable in the TPP region at the start of the agreement, but for which capabilities to produce in the TPP region can be encouraged and developed. These products would qualify for preferential tariff treatment for three years after the agreement enters into force.
According to Glas, on day one of the agreement, companies will know what products will be on the short-supply lists. After the end of the three years, the temporary short-supply list will expire. Glas explained that under the new proposal, there will be no ongoing process for short supply. The U.S. will work with industry to vet the proposed products and create the list. Following are the different types of product descriptions that could be included on short supply lists:
- Entire HTS classification
- Subset of HTS classification
- Product with a specified end-use
- Composite product with a specified end-use
Glas argued that the changes under the new short-supply mechanism are simplified, consolidated, logical, and efficient. She encouraged USA-ITA members to contact her Gail Strickler at the Office of the U.S. Trade Representative to make a short-supply request.
Glas discussed the Obama Administration’s support for the extension of the African Growth and Opportunity Act (AGOA) Third-Party Fabric provision and CAFTA “fixes.” On August 10, 2012, President Obama signed the AGOA Third-Party Fabric extension and CAFTA “fixes” into law. Glas thanked USA-ITA for helping move the legislation through Congress and for supporting President Obama’s agenda. Glas added that the Obama Administration is committed to working with Congress to extend AGOA beyond September 30, 2015, and asked USA-ITA to support full extension of the program.
According to just-style’s coverage of the conference,
"We got a lot of good engagement in the Auckland round of talks on the short supply list," Glas said. "We had a lot of member countries asking questions about the short supply mechanism. We had some good energy at the table. We hope to make good progress on this in March."
Putting together a 'short supply' list will likely be completed by June this year, Glas said, with TPP negotiations expected to close by the end of 2013. She urged US textile importers to suggest products that should be included.
Other highlights from President Obama’s trade agenda include signing U.S. Free Trade Agreements (FTAs) with Colombia, Korea, and Panama, as well as the National Export Initiative, a program started in 2010 by President Obama to double U.S. exports in the next five years. Glas also talked about U.S. Department of Commerce participation at MAGIC, and mentioned the success of its Sourcing in the Americas Summit and Pavilion at the event last year. As part of the export promotion initiatives, the U.S. Department of Commerce will launch a database over the next couple of months that will match companies with U.S. manufacturers to make “Made in the U.S.A” products.
Glas said that the Obama Administration is committed to help American companies maintain market access to other countries as well. She provided an update on the U.S. World Trade Organization (WTO) case against Argentina trade barriers. Glas also said the Administration is aware of potential problems created by tax breaks for the textile industry in Brazil and increases in duties by MERCOSUR countries. Glas assured attendees that the U.S. government is working on these issues.
Finally, Glas promoted the Office of Textiles and Apparel (OTEXA) website (www.otexa.ita.doc.gov) as a resource for commercial availability and textile and apparel trade statistics.
David Spooner, USA-ITA Washington Counsel with Squire Sanders
During his remarks, Spooner covered five questions:
1. Will there ever be a Secretary of Commerce?
Spooner explained that as of right now, the role of Secretary of Commerce is open. In the meantime, Rebecca Blank serves as the Acting Secretary of Commerce.
2. When will U.S. Trade Representative (USTR) Ron Kirk resign?
USTR Ron Kirk, the chief U.S. trade negotiator announced that he would step down after the U.S. Presidential election in 2012. However, he remains in office. While there is speculation around who will replace him, Spooner said Mike Froman, the White House Chief Economic Trade Counselor, is the top contender. Spooner also pointed out that Kirk will likely step down before TPP negotiations conclude, which could interrupt the negotiations.
3. How fun will it be to have the Senate’s foremost protectionist and the former USTR on the Finance Committee, making trade policy, together?
Senators Sherrod Brown (D-OH) and Rob Portman (R-OH) will be serving on the Senate Finance Committee during the 113th Congress together. Brown is a trade protectionist, while Portman is known for his support for trade and open markets. According to Spooner, their differences will likely divide the Finance Committee and make for interesting trade policy debates.
4. Who is Devin Nunes and how did he get to lead trade policy in the House?
Devin Nunes (R-CA) replaced Kevin Brady (R-TX) as the Chairman of the Trade Subcommittee after Brady announced he would become the Chairman of the Ways and Means Health Subcommittee. While little is known about Nunes’ trade agenda, Spooner said that he has introduced a lot of trade liberalization bills during his career and seems to be interested in open markets.
5. Will President Obama make tough decisions to close the TPP Trade Agreement?
Spooner pointed out that TPP negotiations still have a long way to go. The big issues are still out there – state-owned enterprises, Rules of Origin for apparel, intellectual property rights, agriculture market access, environment, and labor. The President will also need Trade Promotion Authority (TPA) to conclude TPP talks, and Spooner speculated that the Administration will ask Congress for TPA once it gets close to closing TPP negotiations.
According to just-style’s coverage of the conference,
"There's a great disconnect between the rhetoric pushing hard to close the TPP agreement and the need to grant President Obama the trade negotiating authority to close the TPP," Spooner said during a panel discussion.
He believes that without Congress granting that trade authority for the president (allowing him to present a completed text for a straight up-or-down vote by representatives and senators), it "would be impossible" to complete the TPP.
And the problem is that the 'yarn forward' rule has bred disagreements between groups such as the National Council of Textile Organizations (NCTO), which support this provision, and major US retailers.
Wiesenmaier introduced the next panel, covering the transportation landscape for 2013 and specifically, the effect of the economy, politics, and weather on key ports.
Peter Zantal, General Manager of Strategic Analysis and Industry Analysis, Port of New York and New Jersey
First, Zantal discussed the amount of textile and apparel imports that come through the Port of New York and New Jersey, which receives the second largest number of textile and apparel imports in the United States (and third largest number of total imports). He also summarized the work the port is doing to modernize and expand its infrastructure—two billion dollars have already been spent to rebuild the port and adapt to new larger vessels.
On the topic of the ILA-USMX labor negotiations, Zantal said the Port of New York and New Jersey is looking for a successful completion of negotiations with as little interruption as possible. The ongoing issues at the negotiations surround shift start times and gang size.
Jack Mahoney, Head of Trade Management, Maersk Line
Mahoney noted the current challenges faced by the shipping industry--the financial roller-coaster and the unpredictable fuel costs, in particular. Fuel prices have changed to the point where “they can only be described as known unknowns.” Rates have been moving unpredictably and are almost always out of line with other forecasts. Regardless, reliable choices are available. According to Mahoney, “not all carriers are weathering the storm with the same successes–some are safer than others.” Despite the changes in fuel prices, fluctuating capacity, and rate changes, “you can make a reliable choice if you pick the right option.”
When asked if Maersk Line has considered alternative ports in the event of an East and Gulf Coast port strike, he said it would be extremely challenging to redirect ships to all other ports, and that it would be very difficult to completely avoid the effects of an East and Gulf Coast port strike.
Matt Guasco, Regional Representative at the Port of Lost Angeles
Guasco provided a brief overview of the Port of Los Angeles, which produces about 1 in 8 jobs in Southern California and has a significant impact on the California economy. The Port of Los Angeles is taking many measures to maintain its competitive edge, including terminal improvements, security enhancements, transportation, and community and environmental changes. According to Guasco, carriers are putting capital investments in larger vessels. As a result, ports must adapt to receiving a growing number of larger ships. Predicting into the future, he said that 2013 will likely be a flat year for growth at the Port of Los Angeles.
When asked if the Port of Los Angeles would be able to handle extra container volume in the event of an East and Gulf Coast port strike, Guasco said the railroads have made a commitment to provide the power necessary for the increase in container volume.
Assistant Commissioner Al Gina
During lunch, Gina provided an overview on trade transformation and the Center of Excellence and Expertise (CEE) for Apparel, Footwear, and Textiles (AFT).
U.S. Customs & Border Protection's Assistant Commissioner Al Gina speaks during lunch.
He outlined the seven initiatives that the U.S. Customs and Border Protection (CBP) is working on to transform trade facilitation and enforcement efforts. These initiatives include:
- CBP’s transition to the Automated Commercial Environment (ACE) and the development of this program.
- Centers for Excellence and Expertise. Five more centers will be established in fiscal year 2013, including the CEE for Apparel, Footwear, and Textiles.
- The role of the broker and CBP’s further engagement with them.
- Simplified Entry/Air Cargo Advanced Screening (ACAS).
- Trade partnerships, including the “Trusted Trader” program to merge the key benefits of existing programs.
- Development of one U.S. Government at the border, and CBP's work to create one face at the border.
- Trade intelligence.
Gina said these efforts are necessary to ensure that people want to do business with the United States.
The audience was pleased that Gina also discussed in some detail the expansion of the CEEs to include a CEE AFT in San Francisco, California. The CEE, which he called “a game changer,” will provide one-stop processing to lower the Trade’s cost of business, provide greater consistency and predictability, and enhance CBP enforcement efforts. Gina thanked Julie Hughes, President of USA-ITA, for her involvement in the CEE industry work group.
According to Gina, CBP plans to open the CEE AFT in April 2013 in San Francisco. CBP strategically picked the location of each CEE, and for continuity purposes, CEEs were spread out across different locations. However, the location of the CEE will not put any company at a disadvantage because CBP is going virtual. According to WWD’s coverage of the conference,
The 11th industry-specific CEE to open since 2011, Gina said it will eliminate a regional and often repetitive customs approach for documentation and servicing the industry, which he said represents $131 billion in import value and $14 billion in duties collected annually.
With a goal this year of “trade transformation” at CBP, he said there is a “sense of urgency” for changing the way the agency addresses trade. Gina said, “We really need to focus on our enabling part of the equation between regulations — we don’t want to regulate anybody out of business — and CBP’s contribution to ensuring that the community at large is flourishing, that people want to come and conduct business in the U.S., that people want to establish manufacturing in the U.S.”
John Clark, Vice President of Michar LLC & Immediate Past Chair of the Cotton Board
Clark introduced Elizabeth King, Vice President of Importer Relations at the Cotton Board, and Cotton University, a website dedicated to increasing and enhancing the understanding of cotton textiles for professionals, faculty, and students through education and community.
Elizabeth King, Vice President of Importer Relations for the Cotton Board
King explained that the Cotton Board (which is funded by cotton producers and the cotton fee assessed on imports of cotton products) supports many programs, technical education workshops, and college competitions and grants to benefit U.S. importers of cotton and cotton products. In order to expand its services and education efforts, the Cotton Board created Cotton University, which will be the ultimate textile resource for professionals, from manufacturers to merchandisers and everyone in between. The website, www.cottonuniversity.org, provides online courses and information on sweaters, denim, weaving, finishing, dying, and garment manufacturing. The website also provides educational and career videos, articles, technical bulleting, webinars, and an interactive community. Registration for Cotton University is free.
Janet Ydavoy, Vice President of Customs Compliance and International Operations for the Jones Group
Ydavoy introduced the Consumer Products Safety Commission (CPSC), which regulates the sale and manufacturing of certain products, issues recalls, researches hazards, learns about unsafe products, and manages a consumer hotline and website where consumers can report injuries. According to Ydavoy, after nearly 473 recalls in 2007, Congress passed the Consumer Product Safety Improvement Act of 2008 (CPSIA). The new legislation has increased staffing, created stricter limits on lead, redefined children, and created mandatory testing for certain products, and a public database for its products.
Nancy Nord, Commissioner of the Consumer Products Safety Commission (CPSC)
Nord discussed CPSC efforts to implement the new CPSIA legislation. CPSC “is trying to push safety as far up the supply chain as we can.” She would rather stop an unsafe product from being put on the shelves, or educate the manufacturer about what not to do, than take products off the market after they have already been put in consumer hands. CPSC is looking to target products that are used by more vulnerable population groups such as infants and small children.
Nord emphasized CPSC enforcement efforts. Last year, CPSC increased civil penalties by over 25 percent. In addition, CPSC issues a press release every quarter with a list of products and violations.
Nord also discussed a proposed rule that would make both importers and foreign manufacturers responsible for certifying that a product is in compliance with consumer product safety rules. The proposed rule would affect domestic manufacturers and private labelers. It would ask for more specific information on a certificate, and also require the manufacturer’s name and need to be filed electronically. Nord outlined some of the issues with the proposed rule; having to identify the manufacturer of the product is considered by some companies as sensitive business information. CPSC will be voting the proposed rule out for public comment soon and encouraged companies to weigh in.
In the case of textile and apparel products, products that inherently cannot contain lead, such as cotton, do not need to be certified. However, importers should be mindful of the Flammable Fabrics Act, which requires a certificate for certain fabrics.
Following the conference, Nord’s team provided three documents that she mentioned during her remarks. These documents will likely be useful to importers looking for more information on understanding the CPSC and its requirements.
Navigating the CPSC Import Process: http://www.usaita.com/pdf_files/010913-Navigating-CPSC-Import-Process.pdf
Draft Proposed Rule Amending 16 CFR Part 1110: http://www.usaita.com/pdf_files/010913-Presentation-1110-NPR-Final-6b.pdf
CPSC Desktop Guide: http://www.usaita.com/pdf_files/010913-CPSC-Desktop-Guide.pdf
Nord also wrote a blog post about the conference, available here.
John Pellegrini, USA-ITA’s Customs Counsel with McGuireWoods LLP, introduced the next panel, focused on key regulatory issues for 2013 and beyond.
John Leonard, Acting Executive Director of U.S. Customs and Border Protection's Trade Policy and Programs
Leonard opened by discussing the CEEs. He recommended Dora Murphy, the director of the CEE for Apparel, Footwear, & Textiles, and noted that he is confident that she will work particularly hard for our industry.
He outlined the following goals for the CEEs:
- Facilitate legitimate trade through effective risk segmentation.
- Increase industry-based knowledge within CBP.
- Enhance enforcement and address industry risks.
Leonard announced the increase in the informal entry limit for products from $2000 to $2500 effective January 7, 2013. The rule also removes the language requiring formal entry for certain textile and apparel articles that were formerly subject to absolute quotas under the Agreement on Textiles and Clothing; textile and apparel goods are now treated the same as all other merchandise for formal entry requirements.
Leonard also pointed out that most sanctions against Burma were lifted on November 16, 2012. CBP documents require the country of origin to read Burma – not Myanmar.
CBP is in the process of determining how best to apply the provisions on footwear soles of textile materials found in Chapter 64, Note 5 of the Harmonized Tariff Schedule (HTS), and a Federal Register notice should be released soon on the issue.
On the topic of TPP, Leonard said CBP continues to support USTR and the interagency U.S. negotiating team during the negotiations.
Jon Fee, Partner at Alston and Bird LLP
Fee discussed the benefits and challenges of preference programs. He challenged U.S. policymakers to implement preference programs without making compliance so difficult. According to Fee, preference programs like CAFTA come at a compliance cost. Fee compared the necessary paperwork U.S. Customs and Border Protection (CBP) requires for imports from Asia and for imports from CAFTA, and showed that CAFTA rules are far more extensive, concluding that “participation in a free trade agreement is burdensome.”
Fee also presented information on the Foreign Corrupt Practices Act (FCPA). While many companies think that the FCPA does not apply to them, he warned that all industries are potentially affected by the FCPA. Under the law, it is illegal to make payments to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Fee discussed recent FCPA violations by a number of companies, and directed companies to a recent publication by the Department of Justice on the FCPA.
Francisco Sanchez, Under Secretary of International Trade at the U.S. Department of Commerce
Prepared Remarks: http://trade.gov/press/speeches/2013/sanchez-010913.asp
After an introduction by Maureen Gray of Ralph Lauren Corporation, Sánchez emphasized his commitment to helping American businesses compete and succeed in the global marketplace. He highlighted the National Export Initiative (NEI), a program introduced by President Obama in 2010 to double U.S. exports by the end of 2014. U.S. exports are at record levels now, resulting in both job and economic growth in the United States.
USA-ITA President Julia K. Hughes (center) with Kim Glas and Francisco Sánchez of the U.S. Department of Commerce
Sánchez also pledged to work with the apparel and textile industry. He pointed out his participation in 12 textile and apparel industry events during his tenure, and said he is committed to helping to:
- Expand sourcing opportunities for “Made in the USA” products;
- Increase markets for U.S. exports; and,
- Reduce barriers to trade.
Sánchez mentioned the International Trade Administration’s efforts to connect U.S. businesses with opportunities overseas through activities like trade counseling and matchmaking sessions. He also discussed an online resource that the Office of Textiles and Apparel (OTEXA) is working on to showcase U.S.-based manufacturers of apparel, textiles, and footwear, as mentioned by his colleague Kim Glas.
According to Sánchez, the U.S. needs “good policies that level the playing field for American firms and create new opportunities in important markets.” He highlighted new U.S. Free Trade Agreements (FTAs) with Korea, Colombia, and Panama, and discussed the importance of trade with the Western Hemisphere – 66 percent of textile and apparel exports were shipped to the region in 2011.
On the topic of the Trans-Pacific Partnership, Sánchez noted that the Administration is looking to conclude negotiations by the end of the year. He also discussed his support for the legislation that extended the Third-Country Fabric provision in the African Growth and Opportunity Act (AGOA) through September 30, 2015, and implemented the CAFTA “fixes”. Sánchez is committed to extend AGOA beyond 2015.
Finally, he discussed action the U.S. is taking at the World Trade Organization (WTO) against Argentina’s restrictive trade measures. The U.S. government will continue to pursue action because “we want the textile and apparel industry to succeed.”
Sánchez concluded by pledging to be an ally and advocate for the textile and apparel industry.
Gary Ross, Vice President of Global Fashion and Home Supply Chain for Avon Products Inc. & USA-ITA Board Member
Ross noted that the U.S. and European economies are fragile and that Latin America continues to implement protectionist policies. China will continue to be the leading exporter of textiles and apparel for the next 5 to 10 years. However, he explained, China is no longer a cheap place to manufacture because wage rates are increasing and Chinese textile mills are paying a premium for local cotton. As a result, it’s important to look at other sourcing opportunities like the ones represented by the panel.
Sourcing Panel L to R: Damon Paling of PwC Shanghai, Luis de la Calle of Mexico Fits, Gary Ross of Avon Products, and Mohamed Kassem of Egypt's Ready-Made Garments Exporters Council
Luis de la Calle, Honorary Chairman of MEXICO FITS
De la Calle discussed the economic landscape in Mexico and encouraged companies to consider sourcing there. Mexico has made a commitment in the last 20 years to create a stable economy and is a “very solid place to do business.” Mexico’s GDP is growing for the fourth year in a row at more than 4 percent and is becoming a “platform for exports.” While de la Calle said Mexico is becoming more competitive, he listed some of Mexico’s challenges, such as violence and Rule of Law issues.
De la Calle also highlighted Mexico’s participation in the TPP. Mexico’s involvement in the negotiations show its commitment to an open economy. Mexico is the fourth largest supplier of textiles and apparel in the U.S. market, and is working to become a textile supply chain leader in North America. As a result, Mexico has launched Mexico Fits to show firms the advantages of doing business in Mexico. According to de la Calle, “Mexico fits your business.”
Damon Paling, Partner at PwC Shanghai
Paling said that China experienced a “soft landing” in 2012 and pointed to the lower-than-expected GDP growth of 6.5 percent. However, his outlook remains positive for 2013, as GDP growth will likely reach 7.5 – 8 percent.
Production costs in China are increasing and Paling said that that will remain constant.
He also addressed the role of the migrant worker in China, and the fact that more migrant workers are looking for opportunities closer to home and are becoming less likely to travel for work. According to Paling, “times are changing in China.” He questioned whether China wants to continue to be a leading textile and fabric manufacturer.
Paling next provided an overview of sales trends in Asia. In particular, e-commerce is taking off across China, and there has been a 17 percent year-on-year increase in e-commerce since 2005. Paling also discussed regional distribution centers in Asia and the role that Free Trade Agreements play in sourcing decisions. Tariff rates in Asia are high, and with the exception of China, who is trying to increase its domestic consumption, duty rates will be unlikely to increase.
Mohamed Kassem, Chairman of the Egypt Ready-Made Garments Exporters Council
Kassem presented information on sourcing opportunities in post-revolution Egypt. First, he played a video for the audience by Ann Patterson, the U.S. Ambassador to Egypt. Patterson said that despite the recent revolution, the business climate in Egypt is strong. Specifically, she highlighted Qualified Industrial Zones (QIZs) in Egypt. According to Patterson, and all speakers from the Egyptian and Israeli delegation, the Egyptian government is committed to the QIZ program.
Kassem explained that sourcing opportunities have improved since the revolution. The textiles and ready-made garment sector plays an extremely important role in the Egyptian economy. Egypt has product diversity, a supportive infrastructure, and an established competitive advantage in the textile and apparel industry. The “revolution dust is settling down” and Kassem welcomed foreign investment, especially in the textile and apparel industry.
Kassem was joined by delegations of Egyptian and Israeli officials from the QIZs. Gabby Bar, Co-Chairman of the QIZ Joint Committee, QIZ Israel and Amin Sabry Abdel Meguid, Co-Chairman of the QIZ Joint Committee, QIZ Egyptprovided the audience with a brief overview of QIZs. The two countries both have QIZs and are working together to enhance business, industrial cooperation, and increase bilateral trade between Egypt and Israel. Sabry, who also gave a brief presentation (http://www.usaita.com/pdf_files/010913-USAITA-AISA-Conference-Israel-QIZ.pdf) along with Bar, said he hoped to see a spike in QIZ exports and pledged his commitment to the program.