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Home » Archives » Business

Return of 'bra wars' looms large

Textile industry braces for a torrent of Chinese imports

By Michael Heitmann
Staff Writer, The Prague Post
January 16th, 2008 issue

ISIFA
The Czech Republic was one of the first European nations to allow unlimited textile imports from Asia, prior to EU accession.
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A flood of Chinese textiles threatens the jobs of up to 5,000 workers in the Czech Republic, industry insiders say.
The influx of imports comes after the European Union dropped the protective quota it had placed on such imports Jan. 1. The move represents the EU’s second attempt to liberalize the trade in clothing and other textiles with China, made under pressure from the World Trade Organization.
The EU received a torrent of criticism from domestic industry when it first opened the market in 2005 — dubbed the “bra wars” — prompting Peter Mandelson, the European commissioner for external trade, to quickly abort the experiment. Mandelson reinstated temporary import limits, deciding that between fashion retailers who demanded lower-priced wares and the textile manufacturing industry, the latter needed more time to prepare.
The Chinese imports will definitely put additional pressure on producers, said Miloš Beran, foreign relations expert for the Association of Textile, Clothing and Leather Industries (ATOK) in the Czech Republic.
Producer prices have spiraled downward for a couple of years, he added, and because of this, European companies have already — at least to some degree — adopted to market forces. In particular, the Czech market had been open to Chinese imports in the 1990s and the early part of this decade prior to EU accession.
“As one of only a few member states, the Czech Republic has already had the chance to experience the ‘danger from Asia,’ ” he said.
While ATOK expects the loss of 3,000 to 5,000 jobs, the industry is already in such dire straits that the situation can’t get much worse, Josef Novák, ATOK’s president, said in remarks published Jan. 8. Novák heads the textile manufacturer VEBA, located in Broumov, northeast Bohemia.
Typically, moves to open trade eventually result in lower prices for consumers, but shoppers in the Czech Republic should not expect cheaper clothing, said Matyáš Vitík, spokesman for the Industry and Trade Ministry.
The transition away from quotas will be closely monitored by Brussels and Beijing. “In the face of a sudden upsurge in Chinese textiles, the [European] Commission stands ready to use all of the instruments at its disposal,” Mandelson announced at a press conference last month.
Should countermeasures become necessary, they would be subject to negotiations between the Chinese government and the EU. Individual states must follow WTO regulations and cannot take individual action, according to the Industry and Trade Ministry.
Techno textiles
Cheap imports are just one of many problems the textile industry faces, Beran said.
“Besides the potential growth of imports from China, India, Turkey and other countries, companies have to deal with rising energy prices and the strong crown,” he said.
To stay competitive, textile industry representatives advocate the introduction of a “made in the Czech Republic” label, a new focus on technologically advanced products and the bundling of several companies’ products into clusters.
“These measures will help to increase Czech manufacturers’ competitiveness more than the introduction of quotas,” Vitík said.
But a move from labor-intensive traditional industry into high-tech presents a formidable task for the sector.
“Companies can apply for financial support from the EU structural funds to pay for training and IT technology, for example,” Vitík said. The transition to new technologies will give the industry “an edge over producers in China, whose main advantage is a huge market and cheap labor,” he added.
While industry representatives raise the threat of job cuts, they have also taken their concerns over their workers’ skills to the Industry and Trade Ministry.
“Textile manufacturers complain to us about the low qualifications of their work force,” Vitík said. A green card project — designed to lure foreign workers into the country — is in the works, but is not expected to pass Parliament before the end of this year, according to analysts.
Meanwhile, a significant proportion of Czech textile manufacturers have already discovered the benefits of producing in China themselves, Vitík added.

Michael Heitmann can be reached at mheitmann@praguepost.com


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