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“New Models” Are Required for Turkey
The Developments After 2005
Chinese Factor
International Working Standards and SA 8000 Standard
One Example Fairwear Organization
Ecological Production and ISO 14000
Result
Achievement of Competition Power
What will happen world textile and clothing industry?
The summary of the report published by National Competitive Researc Institition is as follows:
MFA (multi Fiber Agreement) will be canceled in 2005 and instead ATC (AgreementTextile and Clothing) will be in effect. This means that the quotas will be
canceled and all countries will make trade without quota and with equalconditions. Many developing countries make investment in textile and clothing
industries in Order to create employment and to achieve national income and they trust these industries for development. Textile and clothing from more than 25%
for at least one dozen of developing countries. This ratio exceeds 60% in Bangladesh, Honduras, Pakistan, Nepal and Sri Lanka. Textile and clothing
sectors from the greatest dynamo of unqualified production work power. Light and medium production industries like textile and clothing have a very important
place for breaking the cycle of poverty in developing countries. These sectors consider unqualified work power as the first exit point for development among
informal sector qualified as insufficient employment, low level of education, minimum wages, discrimination and bad treatment to workers. In addition, works
like textile and clothing create opportunities for various sections of the society like women and children.
The presence of quotas in international textile and clothing wxport system during the past half century prevented textile and clothing exporter countries
from competition and it provided them a forecastable export income by offering them market share guarantee. The quotas also permitted many small countries with
low level of competition to enter international trade by giving them advantage in foreign capital, construction, transportation, communication infrastructure,
employment and foreign capital, contruction, transportation, communication infrastructure, employment and foreign exchange income.
If the quotas had not limited the export of efficient countries like China, Korea, Turkey, India and Indonesia, the share of countries like Nepal, Sri
Lanka, Honduras, Tunusia and Morocco would be much lower. For exampe, when the market share of China in product category with quotas had been reduced by half
in 1989-2001, the developing small countries had increased their market share in America.
This situation was causing very inefficient and below international standarts plants in some of the developing countries.
As the quotas will be cancelled in 2005, the international producers will have to arrange the salaries within reasonable limits in order to adapt to
international standarts. The producers who cannot meet these standarts will have loss due to the decreasing sale and market share.
The developing countries will meet with a severe competition after 2005. How will this competition be shaped? The situation after 2005 will be related about
finding the formula to achieve competition power.
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The Developments After 2005
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Chinese Factor:
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It will be the center of textile, clothing and fashion of the world in 10 years.
China, as a success of GATT was not a member of WTO in the beginning. As a result, China did not have the right to get use of the elimination quotas and of
Agreement Textile and Clothing (ATC). However, China became a member of WTO in December 2001 and it took the guarantee to get use of ATC agreement after 2005
including the canceling of quotas in textile and clothing. According to a research made by the World Bank for membership of China in WTO, it was
identified that China could take 50% of world textile and clothing market. The performance of China in American and Japanese markets and the structural
revolutions in cost competition provide important foresights for the future trends. The success of China in Japan, where it is not subjected tý quota in
import, supports the result than this country must be a target country for comprasion for clothing producers in the world. The Japanese consumers are
generally defined with high level of quality-consciousness. The fact that China has 80% share in the clothing import of this country leaves no suspicion that
this country can provide high-quality clothes to developed countries. Chinese product have also gained an equivalent success in the American market after the
quota limitation wa cancelled in 2002. Chinese export has shown 100% increase in 12 categories among 18 categories after the cancellation of the quotas in 2002.
It is forecasted that, after the cancellation of the quotas in 2005, China will reach 8.7 million tons of consumption with 223% increase, USA will reach 9.6
million tons of consumption with 200% increase, Japan will reach 3.4 million tons with 170% increase and EU will reach 8.3 million tons with 150% increase.
Regarding the self-sufficiency ratios of the countries in textile and clothing, the ratio will decrease 59% for Japan, 38% for EU and 32% for USA.
This points out that USA and Japan will be potential consumer and exporter and the importance of EU will decrease as consumer as a result of this trend.
Therefore, the self-sufficiency of Japan will decrease with the highest ratio among developed cuntries and this could lead to increase in export for Asian
countries after 2005. It can aso be expected that Japan will be an iportant new market for our country in clothing sector.
The Multi Fiber Agreement wil be cancelled after the end of 2004 and Agreement for Textile and Clothing (ATC) will be used by WTO. As this agreement will be in
effect, China’s share in textile and clothing export and production will be in effect, China’s share in textile and clothing export and prduction will
increase and reach 50% of the total world production. This situation will cause problems for countries like Bangladesh and Kambochia. Some textile production
centers have already been bought by Chinese companies. The only thing left is to carry the production there to China. The situation was different in more
efficient countries. South Korea began to transport its production units to China due to the markets it lost.
China which is a global producer, also creates a deflator effect in the world. The Chinese products, which are really difficult to complete, cause deflation by
decreasing the price levels. According to the “FEER Report” on 17 October 2002, a 1%-8% decrease is observed in electronic equipment in America. The basic
reason for this situation is the unbelievable cheap work power. This situation gives the Chinese companies to make the prices nearly zero.
The fashion institutes founded and fashion unions have motivated the fashion production of China systematically. Many Chinese fashion designers have taken
top places in the last years by organizing important events. The giant shopping centers and tourism with added value have also created an important effect.
Great importance has been given to growing of man source in the last 5 years. These Chinese fashion designers have show that China can produce fashion for the
world. It is seen as definite That Hong Kong will be one of the important fashion centers of the future.
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Technical Obstacles in Trade :
International Working Standards and SA 8000 Standard:
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Working standards have been put in the agenda in World Trade Organization meeting. However, this action has been denied by developing countries, who are
afraid that developed countries will move towards protectiđve precautions in international trade. It was insisted that the subject must be within the
interest area of ILO. ILO is an establishment with no power of sanction and putting the subject in the agenda of ILO is a more acceptable situation for
developing countries. However, the sensitivity of developed countries on this subject and the activities of trade unions and defendants of human rights will
result in occupation of international standards in international trade’s agenda.
The limit of hunger or wage of living is being mentioned by many foreign buying companies in the last days. Many powerful customers like GAP and Tommy Hilfiger
want to end minimum wage and to pass to “living wage”.
Another situation for working standards is the value of sale of the product and the added value deserved by worker. Price is the most important pressure met by
the suppliers during order. Many probplems encountered by buyers and suppliers are due to disagreements in price. The buyers can make bargaining even with loss
in order to keep their profit. The unbalance in added value share for the workers can be in more extremes. In a factory examined by CAFOD in Bangladesh,
the wage of a woman worker is 51 p for one piece of Nike feather ski coat. A similar coat is sold for 100 GBP in England. So the worker can 0.5% of the sale
price of the coat. The Fairwear Organization has shown that the sale costconsist of 1% worker cost and 25% trademark profit and other costs.
This similar situation will appear more in coming years and this is one of the technical limitations which will replace the quotas.
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One Example Fairwear Organization
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Fairwear Organization is founded in Holland in order to improve the wrking conditions in textile sector. As it is founded in Holland, it is application for
countries with low level of income, making production for Holland. Because the working conditions in those countries are generally below average.
Fairwear Organization was first begun in 1990 in Holland in order to warn people about yhe conditions in textile factories and the place the responsibility in
the improvement of relations with retailers. The campaign, which first targeted the market leader C&A of Holland, was then expanded in order to include other
retailers. Oxfam began Cloth Law Campaign in 1996 in England and focused on the five best retailers. Marks and Spancer,ü Arcadia (now Burton), C&A Neat and
Sears. This was followed by observation of the succes of companies in the application of these laws y CAFOD in 1997. A point Clothing and Sportswear
Industry Worker Law was completed in 1998 in Europe.
Though the demands of various organizations differed, three main themes were achieved and this summarized the “Worker Behind the Label” campaign, which is an
oganization network. The campaign invited the retailers to make the following:
In international platform, Social Responsibility Standards SA8000, which was begun by the USA origin council within Economic Privilege Accreditation, would
provide a structure to acieve the three party control for social performance. This structure would be prepared by a group of experts and controllers that come
from trade unions and NGO’s. Many textile companies like Elieen Fisher in USA and Otto Versand in Germany will begin to apply SA8000 in their supply chain. In
the future, achievement of SA8000 will be an important advantage for competition and then it will become a must.
Ethically, the problem of child worker must be eliminated. All producing companies must give importance to this subject. Child work power can be seen as
cheaps cost, however, more loss can occur as the basic working standard cannot be met. As experienced and qualified worker is not employed, this will effect
production. Therefore low child worker cost will return as loss in short term. Its negative effects in long term are even bore important. The fact that our
children at the age of education will make our future be in danger. The companies must give great importance to certification and education.
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Technical Obstacles in Trade:
Ecological Production and ISO 14000
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Economy and ecology must move together for a continuous improvement and for a world that can be lived in. This must not be within the monopoly of no one and
must be a way of living for everybody in the world. The cloting sector was among the top for the efforts spent in order to increase the social and environment
standards of international trade in last decade. Clothing retailers were put under pressure by environment associations and various social unions in order to
display social responsibility on suppliers for child worker and toxic dyes. This ethical liability goes parallel to fast globalization of the world trade system
and the intense competition faced by textile exporters. The problem met by textile and clothing trade today is whether those efforts, made in order to
minimize the social and environmental risks, will be transfrmed into a regular strategy or not.
Power and strategy authorities change the clothing retailing in the world. Fashion cycles are shortened, those who enter the market shake the established
retailers in both premium and value limits and it sems that e-commerce will lead to more number of shoks. However, one of the trends in the beginning are about
with which supply chainmethd will be the secret of suvccess in retailing and how the producers will adapt themselves to this change. He biggest retailiers are
modernizing supply basis in order to decrease costs and to increase quality. For example, in last years, C&A increased its supply company number by half.
Cost pressures have alsýo increased import 3 times by leading to work losses in domestic textile sector since mid 1980’s. The programmed liberalization in
textile trade by the canceling of “Multi Fiber Agreement” (MFA) in 2005 will increase import to Europe more. The result will display a “buyer market”,
determined by trade conditions like price, quality and delivery in supply chain. This side of the market will open the door for increasing social and
environmental factors.
The potential threats after 2005 are the replacement of quotas and obctacles with tarrifs with obstacles else than tarrifs. The environmental impact factor
will be applied more severely.
Textile trade has been controlled for a long time with customs tax, quotas and other obstacles. One of the reasons for this is to protect the domestic industry
by limiting the import from developing countries. MFA was accepted in 1974 and GATT free trade spirit has been broken. Import to industrialized countries has
been pur under quota. It was decied that MFA would be cancelled in 2005. However most of the changes will note take place till 2005 as they are at the end.
Moreover, certain barriers that can be applied in import will stay. The liberalization of textile trade will be effected in an uncertain way with the
entrance of China in World Trade Organization. China is already the biggest clothing exporter of the world and it acquires great advantage with low value of
worker wage. The canceling of quotas will cause great pressure of Chinese clothing export in the market shares of other developing countries in some
regions. The cancelling of the General System of Preferance (GSP) in 2002 has also affeted trade. GSP helps little-developed countries in order to increase
buying of items from these countries. Bangladesh has benefited from this regulation to a great extent and it will get harm from inverse effects when this
policy is cancelled. GSP envisaged the richening of poor countries. One of the results of increased global buying is the closing of production facilities and
unemployment in England and USA due to the decrease of suppliers and distribution of production to developing countries. GMB reqests that the item
should be labeled in the country it is produced and that the social laws should be formed. The buying policy of Marks&Sapancer, which changed in November 1999,
caused unemployment of 6000 people in England and social unions have started a national campaign to emphasize this. Mars&Spencer has brought the obligation
that its suppliers should meet more social environmental standards.
Here are two main big problems that developing countries and producers in developing countries will meet 2005. The increasing of social and environmental
factors by retailers as a result of the pressure of customers, domestic producers and social and environmental organizations. The other one is the
rationalization of supply baisis. Retailers will decrease number of suppliers in order to increase the continuing of their trade, to increase supply speed and to
decrease costs. They will produce certain product groups in one country by strategic partnership with high-capacity production units. Marks&Spancer, Next
and its American similar like GAP will rationalize their source structure in this way.
Marks & Spancer, as a party of its large strategic studies, considers environmental conditions within the company also. Its aim is to from a strong
environmental management system, based on ISO 140001 approach. But, M&S does not try establish en environmental management system (EMS) on its own. Its target is
to establish an international textile production standard with its main suppliers.
C&A has also born a proactive role in environmental strategies in comparison with other retailers. The target of the environmental policy of the company is
perceived as being one of the five best retailers in Europe with regard to environmental standards in fashion retiling.
Compliance with environmental standards is also observed as a technical obstacle as well as important test standards that companies will apply after 2005. The
obligation to achieve ISO 14001 is regarded as a technical obstacle among these.
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Result
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The ost important factor of this change is to increase competition power of national industires. We see that the big change after 2005 is indexed to
competition power. The decision of the country about where it wants to run and the shaping of its industry according to this will be the pushing force of this
big change.
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Achievement of Competition Power
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The concept of competition was very simple in the past. The company that presented the desired product or servce with the best price made the sale.
Today, competition increased and ways of competition have changed. The increase of the number of companies that make the same job changed the structure of the
market. Similar products are sold in the same markets under the same competition conditions.
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“New Models” Are Required for Turkey
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As a resut, dynamic organizations that consider cahanging customer demands, that have the ability to collect desired features, that apples new approaches in its
structure rapidly and that accepts change will be successful. Turkey must develop new models after determining where it stands in the world today. It has
to make its plans according to this. The businessmen and the eployee must give hands together and follow all changes and developments. They must conduct
training and group studies. University, business world and the goverment must take place in these studies and it has to restructure.
Competitive advantage is qualified man power, capital, effcient use of surces and innovation. This is also the distribution of richness on the base. The Best
Formula of Competition Power is: Innovation and Industrial Clusters. In the cluster approach, regions, where domestic competititors are grouped and
surrunded by end-product and service companies are formed. All units thatcontribute to production form a value chain
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