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March 15, 2010
The McPete Sez Lingerie Newsletter & Women's
US Cotton Subsidies
Brazil is set to impose a 100% tariff on imports of US cotton in a series of retaliatory measures against US
cotton subsidies, the country’s government has announced.
The action, which also includes the imposition of tariffs against other US products, has the backing of the World
Trade Organization, which ruled last year that the US had spent too much on cotton subsidies and export credit
The measures will come into effect within 30 days unless the two countries can agree a compromise, the Brazilian
The US National Cotton Council has opposed the proposals, arguing that they will cause “unwarranted harm on Brazilian
and American interests in times of economic hardship for all”.
The NCC added: “The two governments should engage in discussions to avoid the harmful effects of retaliation,
but any resolution must recognize the realities of today’s cotton market and the previous changes in US programs.”
The planned 100% tariff on US cotton imports is the highest on a list of US goods affected by the move, including cars,
wheat and milk powder.
The Brazilian government said it was reluctant to impose retaliatory tariffs, but could see no other solution after
eight years of negotiations over the dispute.
The total trade impact of the sanctions is estimated at US$591m a year, with a second wave of retaliatory measures
expected to add another $238m to that figure.
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APTMA Threatens Strike
The All Pakistan Textile Mills Association (APTMA) has
threatened a nationwide strike to protest against quota restrictions on exports of cotton yarns.
APTMA chairman Anwar Ahmed Tata, addressing a press conference on March 10, said that APTMA has decided to
disassociate itself with the Ministry of Textile Industry due to its "discriminatory policies"
He also appealed to the country's President and the Prime Minister to intervene before the strike, which is planned
for March 18, and would involve hundreds of thousands of workers.
Tata said that the recent reopening of spinning plants had resulted in cotton yarn production jumping to 241,000 tons
However, yarn exports could come to a complete halt within a week, he said, since current export quotas are fixed at
35,000 tons per month, de-railing the revival process.
Tata warned that the spinners will close down their plants and arrange protest rallies if the Textile Ministry fails
to withdraw quota restrictions on yarn exports within ten days.
APTMA is the largest textile industry association in Pakistan with 400 members representing around 250,000
Pakistan’s Ministry of Textile Industry has reduced the monthly yarn export ceiling from 50,000 tons to 35,000 tons
for the four months from March 1, 2010 to June 30, 2010 to ensure availability of yarns to domestic garment producers.
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US Requests WTO to
Examine India's Exports
The US has requested that the World Trade Organization examines whether Indian textiles and apparel exports are
within the threshold that exempts some poor nations from strict rules that ban the provision of export subsidies.
India would not be allowed to benefit from the carve-out if WTO analysts determine that products have reached "export
competitiveness", equaling 3.25% share of world trade for two consecutive years.
Should the WTO calculations - going back to 1996 - side with the US submission, India would be obliged to phase-out
any export subsidies over a period of eight years.
Cass Johnson, president of the US National Council of Textile Organizations, said the most recent export subsidy
issue with India was the creation of a 2% rebate for garment exports.
"This was imposed in October 2009 but was made retroactive to 2008," he said. "2% can mean the difference in a sale
and our yarns and fabric go into clothes from the CAFTA and NAFTA region that compete with India head on."
The last request by the US for an evaluation by the WTO of certain Indian textiles and apparel products was made in
EU, Peru & Colombia's Free
Free trade agreements struck between the European Union, Peru and Colombia offer significant benefits to the
clothing and textile sector, the European Commission has said.
Once ratified, the deal will remove duties for finished textile products traded between the EU and these two
medium-sized Latin American markets - populations 28m and 43m respectively.
Both Peru and Colombia export finished garments, apparel, footwear and cotton to the EU and negotiations regarding
reducing textile duties have gone smoothly - the main disputes focusing on bananas, sugar, geographical
indications, spirits and cars.
The exact duty cuts will be released once the agreement has been signed.
Before the deal, the Commission's trade directorate general had hailed "good progress on text of all chapters and
improved offers on market access for goods and services."
Many duties will disappear on ratification - with immediate abolition 80% of industrial products traded between the EU
and Peru, 65% regarding Colombia: the rest will be phased out.
Trade Deal Between EU
European textile and clothing outsourcers and buyers are
buoyed that the European Union (EU) has started free trade negotiations with key exporter Vietnam.
The negotiations were launched March 2, in Hanoi after a meeting between new EU trade Commissioner Karel De
Gucht and Vietnam prime minister Nguyen Tan Dung.
Vietnam's textile and apparel exports rose 20% during 2009 to US$439m.
A European Commission communiqué said EU and Vietnamese officials would now work towards the formal start of
negotiations, agreeing a structure for the talks before they begin.
It said: "This key step reflects the deepening trade relations between the EU and Vietnam," noting total
bilateral trade in goods was almost EUR12bn in 2008, and trade increased 12% annually from 2004-2008.
"Vietnam has seen rapid economic and social transformation over the past decade. Vietnam is a good example of an
economy successfully opening up to trade and investment…," added the commission, noting its GDP growth averaged 8%
from 2003-2008, and was 5% last year.
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Chinese Apparel Firms Report
A year after Chinese manufacturers laid off millions of workers to cope with declining exports, many are now reporting a shortage of
labor to meet the pick-up in demand from Western retailers.
And factories fear they will be forced to raise wages this year if they are to attract enough workers.
The problem is common in the weeks following Chinese New Year, when migrant workers travel home for holidays. But millions of workers have not returned to the export hubs.
James Fu, general manager at Quanzhou Green Garments in China's eastern Fujian province, said only 70% of his workers had returned.
"It's better than many others in this city but we still need to find more. Right now the production schedule is very tight."
In Guangdong, some factories are said to be falling behind schedules because they cannot find enough workers. Many are offering signing bonuses and higher salaries.
One of the reasons that workers have not returned to factories is because a huge government stimulus program is creating jobs closer to home.
But others point out that the problem is not new. Masked by the downturn, it has simply returned.
"It appeared last year and the year before that there was a small signal. But this year it is very serious," said John Wong, export manager at Red Kids, another Quanzhou-based company.
China's supply of factory workers is on the decline, with the one-child policy reducing the pool of young people requiring jobs.
The younger generation is also better educated and not prepared to accept the same conditions as their parents.
"Young workers are becoming more discriminating. For them to take a job in the city, there has to be added value there," explains Geoffrey Crothall, spokesman for China
Labor Bulletin, an NGO that defends workers' rights.
Crothall says the current labor shortage should be blamed on the low pay at factories. "Wages in major manufacturing areas are not going up sufficiently."
The basic wage in the Pearl River Delta is still little more than the minimum wage, which has been frozen at between RMB770 and RMB1,000 (US$113 to US$146) since the crisis hit at the end of 2008, he added.
Some companies are considering moving inland, closer to the rural labor supply. They can benefit from low taxes and other government policies designed to reduce the income gap between residents in the coastal cities and those from poorer regions.
But many factories will simply have to pay their workers more, and those extra costs will have to be passed on to customers.
"We will need to increase the salary, probably by about 10%, to attract workers," said Fu. "For sure this will affect the selling price."
With rising inflation becoming a concern, provincial governments are anyway likely to raise minimum wages this year, said Crothall. Jiangsu has already moved, increasing wages by 13%.
"Eventually business has to wake up and realize they've had it all their own way for the last 20-30 years and it's time for that to change."
Haiti's Infrastructure Problems
Haiti’s earthquake is likely to significantly bolster
investment after the tragedy brought to light the country’s major infrastructure problems, a leading textiles
consultant has said.
"The quake has brought attention to the country’s infrastructure needs," said Walter Wilhelm, chief executive
of trade consultancy Walter Wilhelm Associates, adding that long-delayed infrastructure upgrades may now be pursued
with the help of international banks and aid agencies.
"Haiti’s labor force and needle is quite good but past investment has been hampered because of very poor
The January quake, which paralyzed the impoverished country’s bread-winning textiles industry and could halve
this year’s GDP, has triggered an outpouring of international aid and support.
"The response has been exceptional, especially from North America, but also from the whole world," Wilhelm continued.
"I think people appreciate that the country’s hourly rates are equivalent or worse than China and that this needs to
Indeed, the country has already seen a huge inflow of investment, with some World Bank and other international
bank and aid agency loans forgiven, Wilhelm said.
Moreover, in mid February, the Plus 1 for Haiti program was launched to encourage US brands and retailers to source
at least 1% of their apparel production from Haiti to help the country recover from the tragedy, which killed 300,000
Wilhelm estimated it will take at least five more months for the industry to recover. He said 80% or as much as
US$40m of the country’s production was lost or delayed for 60-90 days because of the quake.
"You don’t recover from a tragedy like this in two weeks," he added, adding that the country’s roads and ports remain
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