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China Negotiations to Avoid 2008 Trade Problems
to Cut 5000 More Workers
Repeat of the Bra Wars?
Limited Cuts Corporate
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July 1, 2007
Women's Wear Journal
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China Negotiations to Avoid
2008 Trade Problems
The European Union and China are negotiating an agreement on handling their trade in textiles and clothing once outgoing World Trade Organization restrictions are removed on December 31, 2008, and special protections for EU producers end this December.
EU trade Commissioner Peter Mandelson and Chinese commerce minister Bo Xilai met on June 12 in Brussels to assist these talks, with Mandelson claiming later: "We were both
cognizant of the…re-entry problems of the return to normal trade and we agreed that we wanted to avoid any
destabilization of the market."
He said both sides recognized "the possible issues and problems that we would encounter as this agreement continues during 2008 but which sees the end of the limitations on China's export growth [to the EU] at the end of 2007."
Under China's WTO 2001 accession agreement, Chinese exporters could profit from the
organization's 2005 global abolition of import quotas for textiles and clothing.
However, other member states could impose temporary restrictions if Chinese export booms for certain products
destabilized their markets.
This allowed the EU to impose its own controls following the so-called 'bra-wars' row in 2005, restricting a wide range of Chinese exports, but only to this December. WTO sanction for such measures expires in December 2008.
Mandelson said the EU's automatic licensing system of Chinese clothing and textile exports would continue through 2008 "so we can continue to monitor market developments and discuss jointly with Chinese authorities any action that we need to ensure a smooth transition…to normal trading."
Hanesbrands to Cut 5000
Underwear and knitwear marketer Hanesbrands Inc instigated its latest wave of cost-cutting measures which will see the closure of nine plants in four countries employing around 5,000 workers.
The closures will affect employees in Canada, the Dominican Republic, Mexico, the United States and Puerto Rico, with an additional 350 management and administrative positions being axed in the US.
Hanesbrands said it is adding 3,000 jobs at other plants by moving production to lower-cost operations in Central America and Asia.
Most of the changes should be completed by the end of the year the company said in a statement, adding that restructuring and related charges are likely to be around $42m.
In total, the Winston-Salem, North Carolina-based company expects restructuring charges of $250m in the three years following its spinoff as an independent company from Sara Lee Corp in September 2006.
Hanesbrands has 50,000 employees in 24 countries producing brands including Hanes, Champion, Playtex, Bali, Just My Size, Barely There and Wonderbra.
Its long-term annual growth goals are 1-3% for sales, 6-8% for operating profit and double-digit gains for earnings per share based on its performance in 2007.
However, the company's first quarter profits fell 83.9% to US$12m in the three months ended March 31. At the time it blamed large increases in restructuring costs for the fall. The business also continues to deal with a large amount of long-term debt, which was down only a fraction, to $2.475bn from $2.484bn as of 30 December 2006.
The company's global supply chain strategy is to move production and operations to lower-cost countries, operating fewer and bigger facilities and aligning production flow for maximum flexibility.
Today's moves are intended to concentrate bra sewing and manufacturing at lower-cost operations in Central America and Asia, and create a lower-cost sewing network for knit products in Central America.
In the long-term, Hanesbrands expects to balance its supply chain between the western hemisphere and Asia.
Since being spun off by consumer goods giant Sara Lee last year for $2.4bn, Hanesbrands has taken drastic steps to strengthen its global supply chain. It has closed 13 manufacturing facilities in the Dominican Republic, Mexico, Puerto Rico, and the US, with the loss of more than 4,600 jobs.
These cost-cutting initiatives across the global supply chain are all seen as key to the company's future growth.
Significantly, the company has also been on the acquisition trail and, with 92% of its sales currently in the US, is keen to expand its business internationally.
In October 2006 it bought its first Asian sewing plant near Bangkok in Thailand, where around 1,600 workers make bras. This facility is seen an important building block for Hanesbrands' Asian supply chain base. Not only is it the company's first move to own production capacity in Asia, but it will also help in the ongoing effort to drive costs out of its supply chain.
Garment Workers in
Textile and clothing workers joined protests across Malaysia on Monday June 25, calling on the government to introduce a minimum wage and special allowances for low-paid workers in the private sector.
An estimated 30,000 people took part in the demonstrations, demanding a minimum monthly wage of MYR900 (US$258).
Basic wages for textile and garment workers in Malaysia are below RM400 a month, according to the country's largest trade union, the
Malaysian Trades Union Congress.
16/24 Photographed by
Vietnam's Export Licenses
Export licenses are no longer be required for textile and garment shipments to the US, a government group has announced.
The licenses had been required on an interim basis for the past four months to enable authorities to monitor the volumes of exports to the US market and avoid anti-dumping actions by the US Department of Commerce (DOC).
But on June 15, the Inter-Ministries of Trade and Industry issued an official notification to say export
licenses would not be needed on shipments registered from June 22 onwards.
Export categories registered before June 22 will, however, still need export licenses until July 15.
The decision to abolish export licenses was proposed by the Vietnam Textile and Apparel Association.
June UK Retail Sales Slow
UK retail sales growth slowed in June for the second month in a row, as poor weather dampened demand for summer clothing.
The Confederation of British Industry said clothing sales fell at an annual rate only seen once before in the 24-year history of its distributive trades survey - with the balance of -52% previously recorded in July 2005.
John Longworth, chairman of the CBI's Distributive Trades Panel and executive director at Asda, said consumers are also reining in their spending in response to higher borrowing costs.
He added: "A slower housing market is making its impact felt, in particular on sales of consumer durables and more expensive household items.
"But shoppers are also curbing their spending on everyday things such as groceries and a month of mixed weather did not inspire people to buy new summer clothes."
A balance of 17% of all retailers reported higher sales volumes in the early part of the month compared with last June.
Clothing, textiles and footwear wholesalers reported their weakest sales balance (-75%) since July 2001 (-88%).
A Repeat of the Bra Wars?
France raised the prospect of a repeat of Europe's "Bra Wars" of 2005 by saying it would push to extend quotas on Chinese textile imports that are due to expire at the end of this year.
"Europe must help us and must stop being naive about globalization," Prime Minister Francois Fillon said on Tuesday.
"We will fight to push back the 2008 date for the lifting of quotas on Chinese textiles, like the United States," he told reporters during a visit to a textiles plant in northern France.
EU textiles manufacturers are worried that Europe could be particularly exposed to a surge in imports from January 1 next year because the
United States and other countries have quotas with China which only expire at the end of 2008.
New French President Nicolas Sarkozy has previously warned the European Union must not be "a Trojan Horse" for the problems posed by
globalization for EU industry and workers.
Fillon's comments came a week after China and the European Commission said they would stick to a 2005 accord under which the quotas expire at the end of this year.
In 2005, a surge of Chinese clothing and textiles prompted the European Commission to negotiate import quotas with China.
But the quotas quickly filled up, leaving goods impounded in ports and new limits had to be renegotiated, despite opposition from many EU countries, such as Sweden, which slammed the move as protectionist and pandering to struggling European companies.
Italy has also said it will push for an extension of the quotas.
But the French prime minister's comments, so soon after last week's EU-China meeting,
signaled an intensification of the fight to extend the quotas, a trade lawyer in Brussels said.
"As far as I know the textile lobby was waiting for this kind of pronouncement from France whose position was unclear until now. France will be the leader of the alliance," the lawyer said, asking not to be named.
"I am afraid (EU Trade Commissioner) Peter Mandelson may need to withdraw his promise to China to have free trade in textiles in 2008."
A European Commission trade official said Brussels was sticking to its position that the quotas would end on December 31 as scheduled, but China would have to play its part in ensuring there was no sudden flood of imports into Europe.
"The EU and China have agreed that government and industry on both sides have a joint responsibility to ensure the smooth transition when Europe's quantitative import restrictions end at the beginning of 2008," the official said.
The two sides are due to discuss textiles trade in July.
China said it will remove or reduce tax rebates on nearly 3,000 export categories, including textiles, to help reduce its trade surplus which has raised concerns in the United States as well as Europe.
Wal-Mart Offers Financial
Wal-Mart, furthering a lucrative push to offer financial services to its customers, will sell prepaid Visa debit cards allowing millions of low-income shoppers who don’t have bank accounts to keep up with an increasingly cashless society.
Wal-Mart is following other retailers who hope to tap into a large pool of consumers who deal mostly in cash, but want the convenience of plastic. As the world’s largest retailer, Wal-Mart can reach an enormous number of those consumers.
Three months after dropping a bid for a bank license, the world’s largest retailer said it will add hundreds of in-store centers to bundle the financial services it already offers, such as payroll check cashing and money transfers.
The number of so-called MoneyCenters will rise from about 225 now to 1,000 by the end of 2008 and should continue growing. Wal-Mart Stores Inc. has more than 3,300 discount stores and supercenters in the United States.
The new centers and the debit card will help raise the profile and sales of Wal-Mart’s five-year-old financial service business, which is currently growing between 30% and 40% a year in sales, but which still has fairly low recognition among consumers, company officials said.
‘‘It’ll help spread the word that we’re in the (financial) business,’’ said Jane Thompson, president of Wal-Mart financial services.
In March, Wal-Mart withdrew a bank license application that had been strongly opposed by banks, unions and other critics, who argued before federal regulators that a Wal-Mart bank would have too much economic power.
Wal-Mart said at the time that it would focus instead on expanding individual financial services for people who live outside of mainstream banking.
The Federal Deposit Insurance Corp. estimates that 40 million American households are ‘‘unbanked’’ or ‘‘underbanked,’’ meaning they do not have accounts at financial institutions and often pay excessive fees for basic financial services.
Wal-Mart does not disclose the earnings or revenues of its financial services arm, but Thompson said it produces a larger profit margin than retail sales.
Besides the new debit card, Wal-Mart offers payroll check cashing, bill payment, money orders, money transfers and Wal-Mart branded credit cards. Personal finance expert Conrad Ciccotello from Georgia State University said prepaid debit cards can be a boon to low-income consumers who might otherwise be stuck dealing in cash, unable to make such basic transactions as paying for gas at the pump or paying bills online.
The Wal-Mart MoneyCard costs $8.95 to buy and $4.95 for monthly maintenance. Cash can be loaded on the card for free by cashing a payroll or government check at Wal-Mart or direct depositing. Otherwise it costs $4.64 to reload the card.
The card carries the Visa name and can be used anywhere that accepts Visa debit cards, not just at Wal-Mart. Wal-Mart is issuing the card in a partnership with Visa, General Electric Corp. subsidiary GE Money and prepaid card company Green Dot.
China To Cut Export Rebates
China is cutting tax rebates on exports of clothing and footwear from the
beginning of July in an attempt to reduce its trade surplus.
The rebate cuts will be effective from July 1 and come as "part of a series of measures to curb export growth and to mitigate the excessive trade surplus problem," the Finance Ministry said.
Export rebates for knitted and woven garments will be cut from 13% to 11% and for shoes will fall from 13% to 9%.
The measures are intended to slow the growth of China's trade surplus, which in May rose 73% year-on-year to US$22.5bn. Last year, China reported a global trade surplus of US$177.5bn.
However, US textile and manufacturing groups want Beijing to raise the value of its currency, arguing that it is undervalued and gives Chinese exporters an unfair advantage.
Limited Cuts Corporate
Retailer Limited Brands Inc. will cut corporate jobs in Columbus and New York to reflect a smaller company that is moving away from apparel sales to concentrate on lingerie and beauty businesses, the company said.
The operator of Victoria's Secret and Bath & Body Works will reduce the size of its corporate staff by about 530 jobs, or 10%. The reductions will include the elimination of open positions, transfers as part of its plan to sell two-thirds of its stake in Express and reductions of current staff, the company said.
The cuts will save $100 million annually beginning in the next year, according to the company, which will release the cost of the job reductions later this year.
Shares jumped $1.04, or 3.8%, to $28.23, in early trading Friday. The shares have traded between $23.54 and $32.60 in the past year.
"We have launched a broad effort to streamline the company, enhance productivity and efficiency, and focus resources on the most promising growth opportunities," Les Wexner, the company's chairman and chief executive, said in a statement.
Limited Brands said last month that it would sell 67% of its interest in Express to affiliates of private equity firm Golden Gate Capital for $548 million. The sale is expected to close on July 6.
It also said it is considering options for Limited Stores chain that could include a sale. The company said that the review is underway.
Express and Limited Stores had just $2.2 billion of Limited Brands' $10.7 billion in sales last year.
Limited Brands said it will increase the size of the share repurchase program from $500 million to $1 billion.
Limited Brands operates 3,764 stores under the names of Victoria's Secret, Bath & Body Works, C.O. Bigelow, Express, Limited Stores, La Senza, White Barn Candle Co., Henri Bendel and Diva London.
US Jobless Claims Down
Fewer Americans filed first-time claims for unemployment benefits signaling the labor market remains healthy.
Initial jobless claims decreased by 13,000 to 313,000 in the week that ended June 23, the Labor Department said in Washington. The four-week moving average, a less volatile measure, rose to 316,000 from 315,000.
Companies are retaining staff to meet demand that has held up in the face of a housing recession and higher fuel prices. Gains in jobs and wages will drive consumer spending, which accounts for more than two-thirds of the economy, and help growth to pick up after a slow first quarter, economists said.
``The labor market is very healthy,'' Julia Coronado, a senior economist at Barclays Capital Inc. in New York, said before the report. ``The consumer outlook is still strong, so businesses wouldn't be so quick to fire workers. As economic activity picks up, we'll see a modest tightening of the labor market.''
Another report showed the U.S. economy expanded at an annual pace of 0.7% in the first quarter, the slowest in four years, and a gauge of inflation watched by the Federal Reserve was unexpectedly revised higher.
The increase in gross domestic product compares with the 0.6% rate estimated last month and follows a 2.5% gain the last three months of 2006, according to the report from the Commerce Department. The price measure rose 2.4%, the fastest since the second quarter of 2006.
Economists had forecast initial jobless claims would decline to 315,000 from an initially reported 324,000 the prior week, according to the median estimate of 38 economists in a news survey. Estimates ranged from 305,000 to 328,000.
So far this year, weekly claims have averaged 318,600 compared with 313,000 for all of last year.
The number of people continuing to collect state unemployment benefits fell to 2.490 million in the week that ended June 16, from 2.517 million in the prior week. The unemployment rate among people eligible for benefits, which tends to track the U.S. jobless rate, held at 1.9% for the ninth consecutive week. These data are reported with a one-week lag.
Sixteen states and territories reported an increase in new claims, while 37 reported a decrease, the Labor Department said.
Initial jobless claims, reported weekly, reflect firings and usually fall along with gains in job growth as measured by the monthly non-farm payrolls report. The correlation between the two has weakened recently.
A resilient labor market would help support Federal Reserve Chairman Ben S. Bernanke's forecast of ``moderate'' economic growth. Fed policy makers, ending their two-day meeting today, are forecast to leave the target overnight interest rate unchanged at 5.25%.
Payroll gains have averaged 133,000 a month so far this year, compared with 189,000 a month for all of 2006. The unemployment rate in May held at 4.5%, close to a five- year low, government data showed.
Parliament Kills Fur
The European Parliament has scrapped an exemption to a proposed ban on importing dog or cat fur into the European Union that allowed trade if animals were "not bred or killed for fur production".
In an amendment, MEPs feared this would leave a "gaping loophole" in the legislation, which traders would quickly exploit, sending dog and cat fur clothes to Europe.
As a result, the parliament - having negotiated an agreed text with the EU Council of Ministers - approved a more watertight regulation that bans dog and cat fur imports, only allowing the European Commission to permit cat and dog fur sales within the EU "for educational or taxidermy
MEPs and EU ministers have backed the tough line proposed by Green Swedish MEP Eva-Britt Svensson, who said the exemptions, which also
discluded the import of fur with personal or household effects, would be "ruthlessly exploited by traders…thus rendering the entire regulation useless".
Ministers are now expected to rubber stamp the ban, which comes into force on December 31, 2008.
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