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Trading in a freer regime
Even as the WTO is advocating freer movement of goods, the changing market
place will witnessed several protectionist ways which will try to block free
trade. Towards this end, the Indian textile industry needs to re-write its strategy
accordingly in order to effectively face these contingencies. If not dealt addressed
properly these contingencies may go a long way in hampering the market share.
The companies will have to create a niche for themselves by focussing on issues
like costs, logistics, infrastructure, supply chain management, plant efficiency,
reliability and relationships. Textile producers need to be competitive on the
basis of product quality and pricing. Moreover, they should concentrate on those
products which they can produce with optimal competency. This will not only
infuse efficiency in the production chain but also help satisfy the end user.
The success of the industry in future will call for an efficient handling of
emerging issues and contingencies in terms of regional trade pacts as also anti
dumping and countervailing duty measures. Players will have to formulate action
plans to counter trade barriers. However, it is not the regional trade agreements
that are driving business or altering the global trade pattern, but it is the
end of quotas. End of quota means companies could take advantage of single country
sourcing in stead of transporting components to unrestricted or less restricted
locations. We have seen as to how China’s share which was 15 per cent in
US imports in 2001, grew considerably to around 65 per cent in 2003. In a quota-free
environment, major importers will favour locations with vertical capabilities
i.e the availability of production from the point of yarn to fabrics to finished
goods without extensive lead times and transportation cost. Vertical integration
allows companies to meet increased price competition and increased pressure
to shorten the fashion cycle with shorter production cycles. This will be the
area where Asian suppliers like India will have an edge. Currently, the US importers
are trying to reduce merchandise cost structure and increase flexibility in
the supply chain. Speed, quality, legal compliance, logistics and product costs
are the core considerations in the sourcing decision. In the past 10 years,
textile and apparel imports of the US have gone up to around $ 38 billion in
2002 from around 14 billion in 1992. With 35.27 per cent share, Asia has the
biggest share in the US imports; followed by NAFTA countries with 20.17 per
cent share, south Asia 15.26 per cent and 10 per cent CBI countries. Though
at 23.5 per cent growth rate, India is one of the fastest growing top suppliers
to the US market, there is still a plenty of scope for increasing the market
share. The share of the Indian textile industry in the global textile trade
has remained a pretty little. Except in case of cotton yarn, the industry has
been unable to take advantage of the world growth in textile business.
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