New era for clothing industry
End of quota system could lower prices but cost jobs
Government's response called `too little, too late'
SHARDA PRASHAD
BUSINESS REPORTER
Clothing prices could drop by as much as 20 per cent after a 30-year-old quota system protecting the Canadian textile and apparel industries is removed tomorrow.
But fierce competition from countries such as China and India could hamper the ability of the Canadian industries to survive.
The end of the decades-old quota system, known as the Multifibre Arrangement, prompted the federal government this month to announce $170 million in funding in the form of duty relief, elimination of tariffs and for innovation to the garment industries.
The Multifibre Arrangement limited the amount of textiles and apparel that could be exported to Canada from any one country.
"Canadian textile and apparel companies face a challenging global trade environment," Finance Minister Ralph Goodale said in announcing the aid. He said the funding "will help provide these two industries with the tools needed to lower costs and invest in competitiveness through a focus on productivity improvements, new products and market opportunities."
However, industry insiders have called the government's response to the expiry of the quota arrangement "too little, too late."
"The removal of the duties is a gesture," said Abe Glowinsky, president and CEO of The Incredible Clothing Company in Toronto. "But it is a very small gesture. ...The legislation announced on Dec. 14 should have been done a long time ago."
The Incredible Clothing Company has been preparing for the end of the Multifibre Arrangement for the past five years. In 1999, all its clothing was manufactured domestically.
By 2005, Glowinsky estimates that just 20 per cent will be manufactured in Canada. The remainder will be manufactured in countries such as China, India and Pakistan. He says Canada just can't compete with low, offshore labour costs.
"Overseas, (labour costs) $25 to $30 per month," Glowinsky said. "Unless we can convince the consumer to pay higher prices, we can't compete."
Chak Cheng, president of Toronto-based Wing Son Garments Ltd., agreed that cheap foreign labour costs are making it difficult to compete.
To remain competitive, Wing Son — a supplier of apparel to Roots, Nike and Columbia Sports Wear — started importing products about five years ago. Previously, the 17-year-old company relied exclusively on domestic production.
"I would expect that imports will be half of our business in the next year or two," Cheng said. "You have to do what you have to do to survive."
It's not just Canada that's worried about what the end of the quota system will bring. In a move designed to diminish U.S. and European concern about the influx of foreign clothing, the Chinese government yesterday announced it would tax textile exports. Effective Jan. 1, China will impose export duties on 148 textiles products. The tariff will last until 2007.
China is expected to benefit most from the end of the quotas. The Dec. 18 issue of The Economist magazine predicted that China's share of the world textile trade will rise from 17 per cent in 2003 to more than 50 per cent by 2007.
Not all developing countries are expected to benefit from the end of the quota system. Toronto-based Maquila Solidarity Network and the United Nations Development Program are concerned that the end of the quota system will cause countries like Nepal, Cambodia, and Haiti to lose their textile industries. These countries can't compete with China's technology.
"Some countries risk having their garment industry wiped out substantially," said Linda Yanz, a spokesperson for Maquila.
Large retailers such as Gap now produce apparel in 50 countries and use 3,000 suppliers. Yanz expects the end of the quota system will narrow production to 10 countries and significantly fewer suppliers. "The number of jobs that would be lost would be those primarily held by women."
Yanz is hoping to encourage retailers to maintain their supplier base even if it means a slightly higher price for the final product.
Glowinsky said it's unlikely consumers will be willing to pay more for apparel made in Canada or in a specific developing country.
"The world has become Wal-Mart-ized. We want the cheapest price," he said.
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