The Hindu Business Line : EU textile quota crisis — China's loss can be India's gain

WHAT is being described as "negotiating obduracy on both sides of the textile quota fence (the European Union and China)', has triggered a minor "supply revolution".

Frustrated European importers and retailers are moving textile production from China to Eastern Europe, Turkey and India, as the average consumer's appetite for "fast fashion" is forcing a fundamental change in the traditional supply chain, so far dominated by China.

China still has a competitive edge. An ordinary quality blouse costs £6.50 to manufacture in China, compared to £7 in Eastern Europe, £8 in Turkey, and £10 in the UK. The cost in India could be £6.50-7. Indian textile observers, hence, are monitoring the unfolding "Chinese textile quota scenario" which has led to a piling up of some 75 million garments worth $52 million, to avert possible trading loss of $200 million by European importers and distributors. Teams of negotiators in Beijing and Brussels are looking at "ways and means" to end the impasse without "losing face".

India has "an advantage" over China in high-class textiles (not silk) and Indian fashion designers have made a modest impact in the European market. As one veteran Indian observer put it: "The overall strategy should be to establish a trading and manufacturing base in the European Union (EU) and import only raw materials from India to avoid a "textile quota" handicap as and when applied." All this calls for "hard sales promotion" by Indian suppliers and fashion designers. It is necessary that Indian exporters and manufacturers have a "physical presence" in the market. The days of swapping catalogues and negotiating orders are almost over. While China has been working towards popularising "top ten" global brands of various manufactured goods, Indian brands, with a few such exceptions, continue to remain largely unknown. This situation needs to be corrected in the immediately. In the on-going Euro-Sino textile quota negotiations both sides want to reach "an amicable" settlement.

The huge pile up of inventory in European Customs warehouses could trigger a "serious shortage" of merchandise during the peak Christmas season, if a solution is not reached swiftly. Pressure is mounting on Brussels to reach a deal. The 4,00,000-odd strong European Association of National Organisations of Textile Retailers has appealed for a solution "without delay".

China has emerged the second largest two-way trading partner of the EU, after the US. Observers here have long predicted that China with its huge, modern textile and garment factories backed by inexpensive labour would be the winner in a free-for-all global textile trade.

Conforming to the World Trade Organisation (WTO) norm, the EY abolished textile quotas at the start of the year, but later, "fearing Chinese onslaught", re-employed them in June with `mutual approval".

According to Chinese statistics, textile exports to Europe from China increased by 130 per cent in the first six months of the year reaching $8,700 million by the end of June.

The Chinese textile companies are also on a "serious lookout" to buy European textile and garment companies, which are facing financial problems due to high volume of imports and severe price competition. The Indian textile observers are also keen to establish a foothold in key European markets, but unlike the Japanese, both Chinese and Indians lack "management capabilities and financial resources" to establish a manufacturing and trading base in the EU. Today, Japan, dominates hi-tech electronic and auto manufacturing in the EU.

The Japanese companies have not ventured into textile or garment manufacturing as their industrial base has become more sophisticated and substantial.

The current China-EU textile quota crisis is but a passing phase as both sides are desperate to reach an amicable solution by the end of next week.

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