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Is Price and Cost Competitiveness Enough for Apparel Firms to Gain Market Share in the World after Quotas? A Review

Meenu Tewari

Global Economy Journal, 2006, vol. 6, issue 4, 1-48

Abstract: This paper challenges the frequently held position that price, volumes and cost-competitiveness will be enough for export success among apparel producers in supplier countries post-MFA. Based on a review of the growing literature on the changing organization of production and trade regimes in the global textiles and apparel industry, the paper argues that while cost-competitiveness is important, several additional, non-price and institutional factors are key to the competitiveness of textile and apparel producers going forward. In an environment of volatility and intensified competition where buyers increasingly demand variety, quality, and timely delivery in addition to price, competing on the basis of low wages and large volumes can lock producers at the lowest end of the value chain where price competition is the harshest and where opportunities to cultivate the skills needed to sustain competitiveness are limited. The paper illustrates this with examples from China, India and Latin America. Specifically, it makes the point that the attribution of China's remarkable export performance in textiles and apparel to its low labor costs and large production scales is, in part, a misreading of the China story. China's unit costs are low, and its production scales enormous, but they are embedded within crucial abilities, key investments by the state, and access to world class distribution networks organized by locally rooted Hong Kong, Taiwanese and South Korean companies that have helped lower the "costs" of large scales of operation (i.e., of rigidity) in the context of uncertain markets. The end of quotas, and the ongoing churning in the global division of labor can be an opportunity for apparel firms to chart an alternative growth path based on deeper skills, innovation, design and quality upgrading, in addition to low unit costs.

Date: 2006
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DOI: 10.2202/1524-5861.1134

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