The textile industry is vital to the economy of more than one country, both in terms of the number of people it employs and the revenues it generates. In the last half century, the apparel industry – which was concentrated in industrialized nations in the mid-twentieth century – has gradually spread to developing countries. The global “redistribution” of the textile industry began in the late 1960s, with the expansion of new manufacturing centers in Asia. In some cases, particularly in South Asia, imported fabrics were progressively substituted with national ones as a domestic textile industry began to take shape.
Many developing countries applied this strategy and, over the last 20 years, textile production has grown at an average global rate of 1.2%, with variations depending on the level of development of the country in question. In more industrialized economies, for example, growth has averaged 2.7%, compared to 3.6% in Asia.
Nonetheless, many developed countries still have viable textile industries that operate mainly at the top end of the market. And thanks to restructuring and modernization measures, several still feature on the list of the world’s top ten textile exporters in terms of the value of their products.
Since the majority of producer countries in the developing world are exporters, their share of the global apparel market has almost doubled since 1970 to over 60%, with Asia taking the lead. In Central and Eastern Europe, foreign companies entered into sub-contracting agreements during the Cold War, attracted by the proximity of the Eastern European market and lower production costs. Over time, some of these countries have come to establish themselves as leading apparel suppliers in the region.
The structure and production characteristics of the apparel industry are akin to those of the footwear industry, which has witnessed similar changes in the distribution of manufacturing activities and international trade.
On average, in Mexico two pairs of shoes per capita are purchased per year, while global shoe production currently stands at 24 billion pairs a year, 60% of which are exported. China alone produces approximately 9.5 billion pairs a year, 7 billion of which are exported. The most spectacular growth has probably been posted by China and India –which manufactures 700 million pairs of shoes a year– ousting countries like Italy that were once major producers, but whose annual output has now fallen to 400 million pairs.
The world’s biggest footwear importer is the USA, which purchases 1.8 billion pairs a year, followed by Japan and Germany. Together, these three countries account for almost half of total net footwear imports.
Global trade in non-sporting footwear is valued at approximately US$15 billion a year. Footwear with leather uppers accounts for a massive 85% of this total.
On the international market, “cheap”Asian products –spearheaded by China, which has the advantage of low labor costs– compete with a more “expensive” European product that is superior in design and quality, represented by Italy, Spain and Portugal, in that order.
Brazil is an interesting, but equally successful case that falls somewhere between the Chinese and Italian models. In the last 25 years, the country has tripled its output and positioned itself among the large global exporters, due largely to its strategy of supplying the USA with ladies’ shoes in the medium-to-low price range. Annual shoe exports are valued at US$1.6 billion, 70% of which –mainly ladies’ shoes– are destined for the USA, where Brazil is the leading supplier of women’s footwear with a 42% market share, followed by China with 38% and Italy with 10%.
The Mexican Experience
Mexico’s textile industry plays an important role on both the USA and the domestic market, where its contribution to the economy of certain states is not to be underestimated. In the 1990s, the industry benefited from the dismantling of trade barriers, particularly the lifting of duties provided for in the North American Free Trade Agreement (NAFTA).
However, since 2000, the industry has faced growing competition from countries like China, a situation that was compounded when the latter joined the World Trade Organization (WTO). On the upside, fiercer competition has forced the sector to take stock and shore up its activities.
It is important to remember that, in Mexico, micro and small companies make up approximately 85% of the sector. In terms of value, the scales tip in favor of the manufacture of textile inputs (69.5%), as opposed to textile products (30%).
Despite more aggressive international competition, the domestic industry has several strengths it can fall back on, not least existing infrastructure for the manufacture of fibers and textiles and complete packages in the case of certain products; its proximity to the US market and other Latin American suppliers; and existing infrastructure and services in textile-manufacturing regions of the country.
There are also opportunities to be had in the area of product design, development and differentiation, the promotion of foreign investment and the introduction of modern technology to yarn and textile production processes. In addition to supplying the domestic market and increasing its share of the international market, the industry needs to implement more efficient manufacturing processes, reduce costs, integrate operations with other companies in the value chain and develop competitive, integrated regional clusters.
As regards Mexico’s footwear industry, this is an activity that dates back to Pre-Columbian times. Today, it closely mirrors trends in the textile sector. Once again, micro and small companies account for the bulk of enterprises in operation (roughly 89%) and employ some 600,000 people, either directly or indirectly, in the supply of inputs and product marketing. There are approximately 8,000 footwear manufacturers in Mexico, 3,300 of which are located in the state of Guanajuato, although Guadalajara and the Estado de México/Mexico City cluster are also major producers.
The footwear industry is of enormous importance to the Mexican economy, accounting for 0.22% of Gross Domestic Product (GDP) in 2008 and 1% of manufacturing GDP.
Mexicans buy around 300 million pairs of shoes a year, which translates into about 2.5 pairs per capita. Of the 250 million pairs of shoes the country manufactures, 20 million are exported, while imports stand at 60 million. The main international market for Mexican-made shoes is the USA, followed by Canada and Japan.
Some of the advantages the industry has over its international rivals include a well-established supplier chain, a highly-skilled workforce and good communications infrastructure. Also, Mexican-made footwear is affordable and the industry has a long-standing tradition in certain parts of the country like León, Guanajuato.
Generally speaking, the challenges facing Mexico’s footwear and textile industries are not that different to those facing their rivals. And while the international economic crisis could eventually affect sales on the domestic and international markets, demand continues to grow on both. Meeting that demand will depend on all the micro and small companies operating in these industries, which, so far, have proven flexible enough to adapt to change. Then there are areas of specialization to be tapped into. For example, the footwear sector could focus on manufacturing boots, which are very popular among international consumers.
Likewise, proximity to the USA opens up endless opportunities for these sectors, not to mention the potential benefits of the numerous free trade agreements Mexico has entered into with countries across three continents.
In addition to the backing of well-structured organizations at home, manufacturers also have access to international fairs, where their products enjoy a high degree of prestige.
What we are seeing today is a shift towards strategic alliances for the sub-contracting of production processes, which is particularly appealing to investors.
Equally important is the fact that government institutions have acknowledged the need to promote these industries, which are capable of taking on international manufacturers in terms of price and quality.
In short, if the footwear and textile industries can continue to adapt quickly to the needs of the domestic and international markets, and turn competition from abroad into an opportunity for innovation, the outlook for both will be rosy.
ProMéxico is the federal government’s agency in charge of strengthening Mexico’s participation in the international economy. To that end, it supports the export and internationalization activities of companies established in Mexico and coordinates actions to attract foreign investment to national territory. Since its creation, ProMéxico has grown significantly. Currently, it has 3 7 offices abroad located in 2 5 leading economies which, in turn, represent over 70% of the global Gross Domestic Product (GDP). Moreover, ProMéxico has 29 offices in 23 states where several services can be provided.
ProMéxico has become a strategic partner to promote the country overseas in investment-related areas. Since its creation, the Investment and International Business Promotion Unit in ProMéxico has supported over 5,000 companies and will be increasing this figure even more.
Get to know more at http://www.promexico.gob.mx/