Despite the huge labour cost differential between those countries and Europe, EU industry remains competitive due to higher productivity, and competitive strengths such as innovation, quality, creativity, design or fashion. While, on their home market, EU operators are faced with intense (and increasing) competition from all over the world, many export markets remain virtually closed due to a wide variety of tariff and non-tariff barriers.
Nevertheless, EU industry managed to export, in 1999, 17.4% of its turnover to third country markets, which made it the second largest world exporter of textile and clothing products after China (if intra-Community trade is taken into account as well, the fifteen Member States even outperform China).
Against this background, trade flows have developed as follows:
- Imports show a constant increase, reaching €79.2 billion in 2008. The EU's main suppliers were China (39% of all imports in terms of value), followed by Turkey (14%), India (7.7%), Bangladesh (6.3%) and Tunisia (3.6%).
- Exports after a slow down in the nineties have increased in the recent years reaching €35.7 billion in 2008. Russia has become the first export market of EU textile and clothing (T&C) products (11.9% of total exports) followed by the Switzerland (11.7%), US (10.7%), Turkey (5.6%) and Tunisia (5%). Morocco and Ukraine are also important export markets for T/C products. In total, 15% of EU exports are oriented to the Euro-Med area where EU industry developed outsourcing strategies for labour intensive operations.
At times of increasing globalisation and liberalisation, and in view of the internationalisation strategies of EU industry, trade policy plays a decisive role to provide industry with framework conditions which allow it to prosper on world markets. For this reason, the sectorial unit of DG Enterprise and Industry is closely involved in all trade-related activities, and tries to use its knowledge of the sector's needs and special characteristics whenever the Commission proposes or takes action which might potentially affect the sector.
Regarding market access, tariffs of most of our trade partners remain prohibitively high, including tariff peaks among countries from the Organisation for Economic Co-operation and Development (OECD). Non-tariff barriers too require priority treatment, as their incidence is growing and they are not efficiently tackled in the WTO. In addition, continued prevalence of different non-tariff barriers (NTBs) in the area of textiles and clothing constitutes a significant disincentive for small and medium-sized businesses (SMEs) to participate and benefit from international trade.
Based on market access analysis, as well as analysis of NTBs notified to the WTO carried out by the Commission services, a number of main barriers have been identified which are of relevance for the multilateral negotiations on non-agricultural market access (NAMA). In particular, the EU has proposed harmonisation and more transparency on barriers such as labelling, certifications of conformity procedures, export restrictions, importers' registration.
Increased market access to emerging economies, where middle classes are growing, is of strategic importance, as these represent a quality-conscious market where the EU has the highest competitive advantage.
Regarding relocation, the increased competitive pressure from Asia and the market power of multinational branding or retailing companies, is pushing towards FDI or outsourcing of the whole production process, not just garment-making, mainly to China. Relocation is more limited when the industry is focused on quality upgrading.
Regarding Intellectual Property Rights violation, brand and product piracy is one of the biggest threats to the EU industry. According to OECD estimations, fake products have a share of about 8% of the global trade. Apart from legislative and political measures and awareness raising, Commission's Customs Action Plan as well as bilateral Action programmes and Dialogues with non-EU countries could help in this matter.
Development of the Euro-Mediterranean zone would enhance the competitiveness of textiles and clothing in the region. Furthermore, a successful and balanced outcome of the Doha Development Agenda remains important need for the sector, as it would become a tool for improved market access in currently closed or highly protected markets. Finally, market access potential could be improved by efforts to negotiate Free Trade Agreements with markets with high potential such as South Korea, India and Mercosur.
Priorities of trade policy
Market access constitutes a priority of Community trade policy in the textile and clothing sector. It is generally recognised that global trade in textiles and clothing must be in both directions. The Commission has invited its trading partners to enter into mutual market access negotiations: if they want improved to access to the EU market, they will, in turn, have to be ready to liberalise their markets.
The European Union monitors compliance with the requirements for its trading partners to abolish barriers and open up their markets by means of trade policy instruments available. In the context of litigation procedures, the EU services closely monitor and comment any notification on technical regulations submitted to WTO by its Members.
In parallel, the Market Access Data Bank created by DG Trade of the European Commission aims at providing all useful information to stakeholders about trade barriers, import formalities, complains of the industry etc. In the context of litigation procedures, the application of the Regulation on barriers to trade (TBR) recently led to the abolition of obstacles to European exports towards the USA (rules of origin).
Anti-dumping and anti subsidies policies constitute a major priority for the European Union which has repeatedly demonstrated its compliance with the rules and disciplines of world trade, and it expects to receive the same treatment from its trading partners. However, the number of proceedings initiated in the past few years shows that many trading partners infringe the rules and disciplines by engaging, for example, in competition-distorting dumping and illicit subsidies. The application of the simplified and shortened procedures obtained during the Uruguay Round has enabled the Commission to wrap up various anti-dumping cases quickly, chiefly those concerning products which are easily individualised, such as those involving little finishing (bedlinen), fabrics, polyester staple fibres and thread, but not those involving products with many varieties, such as clothing.
Intellectual Property Rights : Brands and product piracy is one of the biggest threats to EU textile industry. According to OECD estimations, 8% of the global trade is constituted by fake products. The fact that quality, design, creativity and fashion are crucial competitive strengths of EU textile industry explains the priority that is given by the Commission to the fight against counterfeiting, pirating of copyrights, trademarks, patents, and industrial design rights.
This battle is both preventive (policy of informing entrepreneurs and customs officers, restrictive tariff regulations, computerised transit measures, Green Paper on counterfeiting) and reactive (customs and judicial co-operation; stricter checks by the European Fraud Investigation Office).
Combating fraud : In recent years, the sector has been confronted with a wide variety of fraudulent activities by which economic operators have tried to:
- circumvent commercial policy measures (such as anti-dumping measures);
- unlawfully benefit from preferential tariff treatment (such as that granted in the framework of the Generalized System of Preferences, GSP);
- mislead EU consumers (e.g. by claiming an EU origin of products that in reality have been produced elsewhere).
In order to combat such fraudulent activities, the European Anti-Fraud Office has been investigating alleged fraud cases for several years now. Moreover, the relevant services of the DG for Taxation and Customs Union have taken various measures in order to ensure that footwear is classified in a uniform manner throughout the Community so as to avoid trade policy instruments being circumvented by "mis-classifying" footwear under types of products that are not covered by those instruments.