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View the AnswerBlaming Chinese fabric quotas does not fit facts
Author: Etienne Vlok
Article:
THE past few days have seen calls by large corporate interests for the removal of fabric from the Chinese textile import quotas. Some argue that clothing manufacturers are suffering as a result of the imposition of quotas on Chinese fabric imports.
Regrettably, such calls are made without looking at the facts.
The Chinese quotas affect only a small part of SAs fabric imports just 16% of total fabric imports in 2006 (the year before the quota came into effect) and cover imports in six fabric tariff headings (out of 26 categories).
These categories were carefully chosen from those where SA has existing manufacturing capacity.
The quota is not a ban on imports. It merely places a limit on the volume of imports from one country, China. In three of the six textile categories, companies are still entitled to import between 70% and 80%, and in one category more than 350%, of what they imported in 2006 (a year with particularly high imports, partly because companies stocked up before the quotas came into effect last year).
Those lobbying for the removal of fabric quotas argue that the clothing industrys problems are caused by the shortage of fabric, which is due to the fabric quota.
They fail to point out that fabric supplies from other countries are not affected.
And even if one were to accept this argument, you would have expected to see full utilisation of the quota because of the local fabric shortages.
What do the facts show? In three of the six product categories, less than 40% of last years quota was utilised, while the highest utilisation rate was only 71%.
Notwithstanding the above, in order to create flexibility within the quota regime, Trade and Industry Minister Mandisi Mpahlwa amended the quota regulations last year to allow companies to apply for additional quota if they make commitments to the development of the local industry.
This was, in part, aimed at catering for certain specialised fabrics not manufactured in SA but which fall under the quota categories.
So why are local companies struggling?
A month ago, we surveyed local manufacturers on the outlook for the industry. Many clothing companies reported that they were receiving fewer orders than last year, mainly because retailers saw a decrease in demand due to higher interest rates and higher food and transport costs.
The apparent slowdown in clothing retail is a worrying sign for local manufacturing and jobs. But blaming reduced orders on the fabric quotas is only possible when one does not take into account all factors.
We accept that certain corporate groups will lobby for their interests, and may stretch the facts to suit their arguments. Some have argued that the quotas are useless as they are not blocking imports. Those same people are now complaining that the quotas are not working because they are, in fact, blocking imports.
Regarding the first argument, we have studied the South African Revenue Services trade data and have found that in all tariff lines (24 clothing, six textile and one home-textile) covered by the quota, the volumes of worldwide imports have come down significantly an average of 50% even though the quotas cover only imports from China. In addition, a number of traditional importers have said they are experiencing cost and reliability problems with the Chinese supply chain.
After years of job losses, which saw the industry lose a third of the more than 200000 workers in the industry since 2003, the situation has improved recently.
Trade unions have called for steps to secure more jobs. One way is to ensure the rapid implementation of the competitiveness strategy that has been developed by the industry.
Vlok is a researcher with the South African Labour Research Institute, which is associated with the South African Clothing and Textile Workers Uni
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Author: Etienne Vlok
Article:
THE past few days have seen calls by large corporate interests for the removal of fabric from the Chinese textile import quotas. Some argue that clothing manufacturers are suffering as a result of the imposition of quotas on Chinese fabric imports.
Regrettably, such calls are made without looking at the facts.
The Chinese quotas affect only a small part of SAs fabric imports just 16% of total fabric imports in 2006 (the year before the quota came into effect) and cover imports in six fabric tariff headings (out of 26 categories).
These categories were carefully chosen from those where SA has existing manufacturing capacity.
The quota is not a ban on imports. It merely places a limit on the volume of imports from one country, China. In three of the six textile categories, companies are still entitled to import between 70% and 80%, and in one category more than 350%, of what they imported in 2006 (a year with particularly high imports, partly because companies stocked up before the quotas came into effect last year).
Those lobbying for the removal of fabric quotas argue that the clothing industrys problems are caused by the shortage of fabric, which is due to the fabric quota.
They fail to point out that fabric supplies from other countries are not affected.
And even if one were to accept this argument, you would have expected to see full utilisation of the quota because of the local fabric shortages.
What do the facts show? In three of the six product categories, less than 40% of last years quota was utilised, while the highest utilisation rate was only 71%.
Notwithstanding the above, in order to create flexibility within the quota regime, Trade and Industry Minister Mandisi Mpahlwa amended the quota regulations last year to allow companies to apply for additional quota if they make commitments to the development of the local industry.
This was, in part, aimed at catering for certain specialised fabrics not manufactured in SA but which fall under the quota categories.
So why are local companies struggling?
A month ago, we surveyed local manufacturers on the outlook for the industry. Many clothing companies reported that they were receiving fewer orders than last year, mainly because retailers saw a decrease in demand due to higher interest rates and higher food and transport costs.
The apparent slowdown in clothing retail is a worrying sign for local manufacturing and jobs. But blaming reduced orders on the fabric quotas is only possible when one does not take into account all factors.
We accept that certain corporate groups will lobby for their interests, and may stretch the facts to suit their arguments. Some have argued that the quotas are useless as they are not blocking imports. Those same people are now complaining that the quotas are not working because they are, in fact, blocking imports.
Regarding the first argument, we have studied the South African Revenue Services trade data and have found that in all tariff lines (24 clothing, six textile and one home-textile) covered by the quota, the volumes of worldwide imports have come down significantly an average of 50% even though the quotas cover only imports from China. In addition, a number of traditional importers have said they are experiencing cost and reliability problems with the Chinese supply chain.
After years of job losses, which saw the industry lose a third of the more than 200000 workers in the industry since 2003, the situation has improved recently.
Trade unions have called for steps to secure more jobs. One way is to ensure the rapid implementation of the competitiveness strategy that has been developed by the industry.
Vlok is a researcher with the South African Labour Research Institute, which is associated with the South African Clothing and Textile Workers Uni
Return to the list of News Articles