The economic downturn in America, Japan and Europe significantly affected the global textile and apparel industry. Based on industry data, monthly imports fell by USD 4 billion, from USD 30 billion in 2008 to just USD 26 Billion in 2010. This unexpected decline ironically followed a period of rapid growth, following the textile industry’s implementation of non-quota frameworks in 1994 and the formal integration of China in the World Trade Organization in 2001. Until the advent of the financial crisis in 2008, global trade in textile and clothing performed remarkably well.
Changes in Economics
However, the economic crisis in 2008 evolved into a serious recession that caused many advanced economies to experience declines in national output, increased unemployment levels and lethargic investment activity. During this period, consumers in Japan and those in advanced western economies substantially reduced spending on consumer products due to tenuous financial security and other unfavorable market conditions. Some consumers postponed purchases while others resorted to cheaper alternatives. Among the hardest hit by the low consumer demand is the textile and garments sector. Following the recession, industry players suffered declining sales and attempted to hedge profit margins by implementing cost-cutting measures. At the extreme end, some textile factories had to be shut down in many locations.
While signs of recovery have been detected as early as 2009, the global textile and garment industry is yet to replicate its upbeat performance before the crisis. Much of the recovery rides on the resilient economies of India and China, both of which have huge stakes in the textile and garments sector.
Textiles in China
China’s textile sector enjoyed a 30 percent year-on-year growth in the first half of 2011. Easily the world’s largest producer of woolen fabrics and cotton textiles, China shifted textile marketing and distribution to domestic consumers instead of maintaining its traditional export-oriented focus. Given its population, local demand is expected to spur production and support industry growth. Given this realignment, exports still posted a year on year growth of 25.73 percent in the first half of 2011, reaching a value of USD 111.73 billion. While proving resilient to the recession, the Chinese textile and garment industry still faces challenges such as the fluctuations in cotton prices, rising manufacturing and labor costs, as well as hiked financing rates.
Textiles in India
Across the border, India banned cotton exports twice in order to store enough domestic supply as a hedge against fluctuating cotton prices. After all, cotton prices reached an unexpected and alarming peak in March 2011, the highest so far since the 1860s. Following the action of China, the Indian government also hoarded large volumes of the commodity but went further by restricting its outflow in an effort to protect domestic textile players.
However, because the entire world depends on cotton exports from India (the second largest producer after the United States), the decision made in March this year aggravated the perception that the textile industry analysis shows its volatility, with the supply of cotton–the raw material for close to half of all textile products–in a compromised state. Rising cotton prices will impact the international garments sector, which is already experiencing a two-pronged challenge consisting of higher shipment expenses and rising labor costs even in outsourcing countries.