Economic downturn impacts all aspects of apparel, footwear industry

By: | at 08:00 PM | Channel(s): International Trade  

By Karen E. Thuermer, AJOTThe news coming from the apparel and footwear industry is bleak due to the worldwide economic downturn and recessions in the United States and Europe. That’s because American and European consumers have reduced their spending on clothing and retailers have significantly cut down purchase orders and closed stores, while suppliers have reduced their workforces and adjusted their capacities.
Kurt Salmon Associations (KSA) reports in its Global Sourcing Reference 2009 study that since the end of 2008, the financial and economic crisis has been influencing the worldwide demand for textiles and apparel.
“In the consumption-driven United States, retailers noticed a significant drop in demand due to the recession and, therefore, are cutting down their purchase orders in sourcing countries,” the study reports. “In Germany, apparel retailers had to face a 4% decline in sales in 2008 after slight increases in previous years. Both exporting countries and importing nations are facing a high degree of uncertainty towards future developments.”
Eurostat figures presented in the study indicate that while the growth rate of apparel exports from China, value year-on-year, increased 20.9% in 2007, they increased only 4.1% in 2008. Furthermore, in February 2009, cotton prices were 55% lower than in February 2008. China’s cotton imports dropped by 47.7% in December 2008, and 14.1%, overall, during 2008 year-on-year.
Other leading indicators show the extent of the reduction in worldwide trade, reports KSA. The Harpex, reflecting the container freight rate development—the most common kind of transportation for textiles and apparel—fell by 63%, after a peak of 1,445 points in February 2008 to 552 points in January 2009. The Baltic Dry Index, displaying freight rates for bulk commodities, lost 94% in the same time. Shipping companies are keeping their vessels in Asian harbors, waiting for profitable freight rates.
Kevin M. Burke, president and CEO of the American Apparel & Footwear Association (AAFA) describes the industry as “taking a serious hard hit this year.”
“Whenever hard working American families are squeezed financially, clothing and shoes are consistently the first things to be crossed off shopping lists,” Burke says. According to the Arlington, VA-based trade group, in 2007, the average American consumer purchased 67 articles of clothing and eight pairs of shoes. In 2008, those numbers dropped to 64 and seven respectively.
“Current indicators for 2009 show an even heavier stress on the US apparel and footwear industry,” Burke reveals, referring to AAFA’s Annual 2008 Trends report.
According to the US Department of Commerce, between June 2008 and June 2009, the dollar amount of imports of textiles and apparel fell 8.42% from $88.1 trillion to $86.9 trillion. Among some of the exporting countries taking major hits are Hong Kong, down 50.60%; Canada, down 27.20%; Italy, down 26.05%; the Philippines, down 24.82%; Taiwan, down 22.40%; Korea, down 20.85%; Thailand, down 16.79%; and Mexico, down 16.07%. Few countries gained. Among them were Bangladesh, up 11.27%; Vietnam, up 8.61%; and. China, up 0.74%.
Vietnam’s involvement in the textile and apparel trade has grown dramatically since its membership in the ASEAN Free Trade Area (AFTA) and entry into the US-Vietnam Bilateral Trade Agreement in December 2001. Since then, Vietnam’s exports to the United States increased 900% from 2001 to 2007.
In January 2007, Vietnam joined the World Trade Organization (WTO). The membership has provided Vietnam with multiple benefits, including allowing Vietnam to take advantage of the phase-out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners on Jan. 1, 2005.
Also at the heart of the industry is a set of US trade preference programs such as the Caribbean Basin Initiative (CBI), which provides several tariff and trade benefits to countries in Central Ame

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American Journal of Transportation