Required Report - public distribution

**Date:** 6/05/2006

**GAIN Report Number:** IT6026

IT6021

**Italy**

**Cotton and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Robin Gray

U.S. Embassy

**Prepared by:**

Dana Biasetti

**Report Highlights:** Weak domestic economic growth, low export
performance and increased competition from low cost textile suppliers
are leading Italian companies to import finished textiles directly from
the Far East, slowly shrinking the Italian spinning sector.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Rome \[IT1\]

\[IT\]

***Table of Contents***

***Situation Outlook page* *3***

Italian Economy in General ***3***

Italian Textile and Apparel Industry ***3***

***Production 5***

Raw Cotton ***5***

Cotton Spinning

Cotton Weaving ***5***

Textile Apparel & Distribution **6**

***Stocks 6***

***Trade 6***

Italian Cotton Imports and Exports ***9***

Imports from the United States ***9***

***Policy 10***

***PSD Table 10***

**Situation and Outlook**

**Italian Economy in General**

GDP growth in Italy has been anemic for the last three years, with an
average annual growth rate of just 0.6 percent. The Italian
manufacturing sector has had negative growth in six of the last eight
quarters. As reported in the PSD table for cotton imports, exports and
domestic use are all down. Competitive and efficient textile producers
in China and India and Eastern Europe are increasingly able to meet
Italian manufactures' traditional quality and Italian textile producers
are feeling the pinch. This is reducing Italian demand for U.S. cotton.

**Italian Textile and Apparel Industry -- Overview**

Italy is one of the few European nations to maintain a spinning
industry. The overall textile and clothing sector involves more than
67,000 small to medium-sized companies that contribute roughly 12,3% of
the manufacturing sector's added value.  These companies include world
leaders in the fashion industry that offer original and trend-setting
products, which forces them to seek out cutting edge textile and
spinning technologies and products.

The Italian textile and clothing industry is heavily export oriented,
with more than 50% of total turnover coming from exports. The declining
trend in sales shown in the table below is expected to continue at least
until CY 2007 when improved economic conditions in the Italian and major
export markets may improve. The increase in textile and clothing imports
can be expected to continue for the competitive reasons mentioned above.

***Table 1***

+-----------+---------+-----------+-----------+-----------+-----------+
| *         |         |           |           |           |           |
| **Italian |         |           |           |           |           |
| Textile   |         |           |           |           |           |
| -Clothing |         |           |           |           |           |
| Industry  |         |           |           |           |           |
| Total     |         |           |           |           |           |
| Sales     |         |           |           |           |           |
| (2000     |         |           |           |           |           |
| -2004)*** |         |           |           |           |           |
|           |         |           |           |           |           |
| ***       |         |           |           |           |           |
| (Millions |         |           |           |           |           |
| of        |         |           |           |           |           |
| Euro)***  |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | *       | **2001**  | **2002**  | **2003**  | **2004**  |
|           | *2000** |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
| **Sales** |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | 47,101  | 47,789    | 45,889    | 43,150    | 42,551    |
+-----------+---------+-----------+-----------+-----------+-----------+
| **        |         |           |           |           |           |
| Exports** |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | 27,047  | 28,952    | 27,989    | 26,335    | 26,600    |
+-----------+---------+-----------+-----------+-----------+-----------+
| **        |         |           |           |           |           |
| Imports** |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | 13,173  | 14,150    | 14,315    | 14,244    | 14,909    |
+-----------+---------+-----------+-----------+-----------+-----------+
| **Number  |         |           |           |           |           |
| of        |         |           |           |           |           |
| Co        |         |           |           |           |           |
| mpanies** |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | n/a     | 73,344    | 71,840    | 70,001    | 67,457    |
+-----------+---------+-----------+-----------+-----------+-----------+
| **Number  |         |           |           |           |           |
| of        |         |           |           |           |           |
| Em        |         |           |           |           |           |
| ployees** |         |           |           |           |           |
+-----------+---------+-----------+-----------+-----------+-----------+
|           | n/a     | 609,629   | 596,071   | 567,032   | 543,124   |
+-----------+---------+-----------+-----------+-----------+-----------+

***Source:** Istat (Italian National Statistical Bureau)*

Italian mill consumption of cotton continues to decline due to reduction
in mill capacity utilization and mill closures. The vast majority of
Italian cotton spinning and weaving is in the northern region of
Lombardia, where 60% of the ring and rotor-spinning capacity, and 70% of
the cotton-weaving capacity are located.

Investment in the Italian cotton textile industry in 2005 was stagnant
at €355 million after sizable decreases in previous years. These
disinvestments are expected to continue, despite the Italian clothing
sector enjoying international success. The Italian fashion system
continues to offer original, distinctive products, which remain in
demand and which create and follow styles. We can expect that Italian
clothing manufacturers will continue to thrive as they increasingly
manufacture their textiles and garments in other countries. Italian
spinners and weavers will probably not.

***Table 2***

***Textile- Installed Capacities (MTs)***

+------------------------------+---+---------+---------+---+---+---+---+
| **Textile- Installed         |   | *       | *       | * |   | * |   |
| Capacities**                 |   | *2001** | *2002** | * |   | * |   |
|                              |   |         |         | 2 |   | 2 |   |
|                              |   |         |         | 0 |   | 0 |   |
|                              |   |         |         | 0 |   | 0 |   |
|                              |   |         |         | 3 |   | 4 |   |
|                              |   |         |         | * |   | * |   |
|                              |   |         |         | * |   | * |   |
+------------------------------+---+---------+---------+---+---+---+---+
| Spinning                     |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Ring Spindles             |   | 1,      | 1,      | 1 |   | 1 |   |
|                              |   | 432,460 | 401,275 | , |   | , |   |
|                              |   |         |         | 3 |   | 2 |   |
|                              |   |         |         | 1 |   | 9 |   |
|                              |   |         |         | 7 |   | 8 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 5 |   | 4 |   |
|                              |   |         |         | 8 |   | 6 |   |
|                              |   |         |         | 0 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- O-E Rotors                |   | 88,640  | 82,555  | 7 |   | 7 |   |
|                              |   |         |         | 9 |   | 9 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 9 |   | 4 |   |
|                              |   |         |         | 1 |   | 0 |   |
|                              |   |         |         | 0 |   | 5 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| Weaving                      |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Shuttleless Looms         |   | 11,745  | 11,540  | 1 |   | 1 |   |
|                              |   |         |         | 1 |   | 1 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 4 |   | 3 |   |
|                              |   |         |         | 7 |   | 8 |   |
|                              |   |         |         | 0 |   | 6 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Shuttle Looms             |   | 1,665   | 1,640   | 1 |   | 1 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 6 |   | 6 |   |
|                              |   |         |         | 3 |   | 2 |   |
|                              |   |         |         | 9 |   | 7 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| Average Number of People     |   | 38,860  | 38,065  | 3 |   | 3 |   |
| Employed                     |   |         |         | 6 |   | 5 |   |
|                              |   |         |         | , |   | , |   |
| (full-time equivalent)       |   |         |         | 8 |   | 4 |   |
|                              |   |         |         | 5 |   | 8 |   |
|                              |   |         |         | 5 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
|                              |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| ***Activity Level***         |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| **Fiber Consumption (Metric  |   |         |         |   |   |   |   |
| Tons)**                      |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Cotton                    |   | 255,540 | 245,660 | 2 |   | 2 |   |
|                              |   |         |         | 4 |   | 3 |   |
|                              |   |         |         | 3 |   | 9 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 2 |   | 4 |   |
|                              |   |         |         | 2 |   | 5 |   |
|                              |   |         |         | 1 |   | 6 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- ManMade Fiber             |   | 31,555  | 26,945  | 2 |   | 2 |   |
|                              |   |         |         | 7 |   | 5 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 8 |   | 9 |   |
|                              |   |         |         | 7 |   | 7 |   |
|                              |   |         |         | 6 |   | 8 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Others                    |   | 1,015   | 800     | 7 |   | 7 |   |
|                              |   |         |         | 0 |   | 6 |   |
|                              |   |         |         | 5 |   | 2 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Total All Fibers          |   | 288,110 | 273,405 | 2 |   | 2 |   |
|                              |   |         |         | 7 |   | 6 |   |
|                              |   |         |         | 1 |   | 6 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 8 |   | 1 |   |
|                              |   |         |         | 0 |   | 9 |   |
|                              |   |         |         | 2 |   | 6 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| **Spun-Yarn Production       |   |         |         |   |   |   |   |
| (incl. Core Yarns) M.T.**    |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Cotton (85% cotton or     |   | 207,510 | 193,100 | 1 |   | 1 |   |
| over)                        |   |         |         | 7 |   | 6 |   |
|                              |   |         |         | 7 |   | 2 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 2 |   | 5 |   |
|                              |   |         |         | 6 |   | 5 |   |
|                              |   |         |         | 5 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Blends (51-84% cotton)    |   | 5,560   | 5,055   | 5 |   | 5 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 0 |   | 0 |   |
|                              |   |         |         | 4 |   | 3 |   |
|                              |   |         |         | 3 |   | 9 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Others                    |   | 36,175  | 33,640  | 3 |   | 3 |   |
|                              |   |         |         | 2 |   | 1 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 7 |   | 8 |   |
|                              |   |         |         | 5 |   | 9 |   |
|                              |   |         |         | 1 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
|                              |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| **Fabric Production/Woven    |   |         |         |   |   |   |   |
| only (M.T.)**                |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Cotton (85% cotton or     |   | 164,475 | 164,215 | 1 |   | 1 |   |
| over)                        |   |         |         | 5 |   | 4 |   |
|                              |   |         |         | 4 |   | 6 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 6 |   | 7 |   |
|                              |   |         |         | 9 |   | 8 |   |
|                              |   |         |         | 0 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Blends (51-84% cotton)    |   | 6,530   | 6,310   | 6 |   | 6 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 2 |   | 1 |   |
|                              |   |         |         | 9 |   | 8 |   |
|                              |   |         |         | 0 |   | 7 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| \- Others                    |   | 40,735  | 39,235  | 3 |   | 3 |   |
|                              |   |         |         | 9 |   | 8 |   |
|                              |   |         |         | , |   | , |   |
|                              |   |         |         | 0 |   | 2 |   |
|                              |   |         |         | 1 |   | 8 |   |
|                              |   |         |         | 1 |   | 7 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| **Capacity Utilization**     |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| Hours Worked per Active      |   | 6,772   | 6,420   | 6 |   | 6 |   |
| Spindle/Year                 |   |         |         | , |   | , |   |
|                              |   |         |         | 0 |   | 0 |   |
|                              |   |         |         | 2 |   | 0 |   |
|                              |   |         |         | 0 |   | 5 |   |
+------------------------------+---+---------+---------+---+---+---+---+
| Hours Worked per Active      |   | 6,015   | 5,915   | 5 |   | 5 |   |
| Loom/Year                    |   |         |         | , |   | , |   |
|                              |   |         |         | 7 |   | 6 |   |
|                              |   |         |         | 7 |   | 3 |   |
|                              |   |         |         | 0 |   | 0 |   |
+------------------------------+---+---------+---------+---+---+---+---+
|                              |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+
| ***Source:** Associazione    |   |         |         |   |   |   |   |
| Tessile Italiana*            |   |         |         |   |   |   |   |
+------------------------------+---+---------+---------+---+---+---+---+

**Production**

**Raw Cotton**

Italy does not produce any cotton. Italy's major cotton suppliers are
shown below in Table 8. Raw cotton imports have declined because of
manufacturing competition from Eastern European countries that recently
joined the EU and from the Far East.

**Cotton Spinning**

Italian cotton spinners are famous for producing the finest yarns for
use in weaving, knitting and even hand-knitting. Italian yarns are
sought after by wholesalers, weaving mills, and knitwear manufacturers
worldwide. Italian combed/carded cotton production value in 2004 was
€516 million compared to €580 million in 2003 (minus 11 percent) and the
downward trend has continued in more recent years.

***Table 3***

+---------------+----------+----------+----------+----------+----------+
| ***Italian    |          |          |          |          |          |
| Cotton        |          |          |          |          |          |
| Spinning      |          |          |          |          |          |
| (Cotton Yarn  |          |          |          |          |          |
| Sector)***    |          |          |          |          |          |
|               |          |          |          |          |          |
| ***(Millions  |          |          |          |          |          |
| of Euro)***   |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
|               |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
|               | **2000** | **2001** | **2002** | **2003** | **2004** |
+---------------+----------+----------+----------+----------+----------+
|               |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
| #### Pro      |          |          |          |          |          |
| duction Value |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
|               | 3,641    | 3,651    | 3,116    | 2,796    | 2,777    |
+---------------+----------+----------+----------+----------+----------+
| **Exports**   |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
|               | 892      | 983      | 900      | 826      | 913      |
+---------------+----------+----------+----------+----------+----------+
| **Imports**   |          |          |          |          |          |
+---------------+----------+----------+----------+----------+----------+
|               | 308      | 333      | 313      | 294      | 333      |
+---------------+----------+----------+----------+----------+----------+

***Source**: Sistema Moda Italia*

**Cotton Weaving**

Italian cotton weaving production decreased in 2004 (from 197,100 to
186,865 tons) due to a general drop in internal demand. This decrease
was also found in sectors that, until last year, had shown a good
performance, such as shirting and denim. Delivery of fabrics decreased
from 196,260 to 187,351 tons. The number of looms installed at the end
of 2004 was 11,880 representing a slight decrease from 2003. In 2005 and
2006 this trend has continued.

***Table 4***

+---+-------------+-------------+-------------+-------------+-------------+
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| I |             |             |             |             |             |
| t |             |             |             |             |             |
| a |             |             |             |             |             |
| l |             |             |             |             |             |
| i |             |             |             |             |             |
| a |             |             |             |             |             |
| n |             |             |             |             |             |
| C |             |             |             |             |             |
| o |             |             |             |             |             |
| m |             |             |             |             |             |
| b |             |             |             |             |             |
| e |             |             |             |             |             |
| d |             |             |             |             |             |
| / |             |             |             |             |             |
| C |             |             |             |             |             |
| a |             |             |             |             |             |
| r |             |             |             |             |             |
| d |             |             |             |             |             |
| e |             |             |             |             |             |
| d |             |             |             |             |             |
| C |             |             |             |             |             |
| o |             |             |             |             |             |
| t |             |             |             |             |             |
| t |             |             |             |             |             |
| o |             |             |             |             |             |
| n |             |             |             |             |             |
| S |             |             |             |             |             |
| e |             |             |             |             |             |
| c |             |             |             |             |             |
| t |             |             |             |             |             |
| o |             |             |             |             |             |
| r |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
|   |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| ( |             |             |             |             |             |
| M |             |             |             |             |             |
| i |             |             |             |             |             |
| l |             |             |             |             |             |
| l |             |             |             |             |             |
| i |             |             |             |             |             |
| o |             |             |             |             |             |
| n |             |             |             |             |             |
| s |             |             |             |             |             |
| o |             |             |             |             |             |
| f |             |             |             |             |             |
| E |             |             |             |             |             |
| u |             |             |             |             |             |
| r |             |             |             |             |             |
| o |             |             |             |             |             |
| ) |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+
|   |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+
|   | **2000**    | **2001**    | **2002**    | **2003**    | **2004**    |
+---+-------------+-------------+-------------+-------------+-------------+
|   |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| P |             |             |             |             |             |
| r |             |             |             |             |             |
| o |             |             |             |             |             |
| d |             |             |             |             |             |
| u |             |             |             |             |             |
| c |             |             |             |             |             |
| t |             |             |             |             |             |
| i |             |             |             |             |             |
| o |             |             |             |             |             |
| n |             |             |             |             |             |
| V |             |             |             |             |             |
| a |             |             |             |             |             |
| l |             |             |             |             |             |
| u |             |             |             |             |             |
| e |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+
|   | 749         | 648         | 589         | 580         | 516         |
+---+-------------+-------------+-------------+-------------+-------------+
| * |             |             |             |             |             |
| * |             |             |             |             |             |
| E |             |             |             |             |             |
| x |             |             |             |             |             |
| p |             |             |             |             |             |
| o |             |             |             |             |             |
| r |             |             |             |             |             |
| t |             |             |             |             |             |
| s |             |             |             |             |             |
| * |             |             |             |             |             |
| * |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+
|   | 147         | 137         | 145         | 150         | 136         |
+---+-------------+-------------+-------------+-------------+-------------+
|   |             |             |             |             |             |
+---+-------------+-------------+-------------+-------------+-------------+

***Source**: Sistema Moda Italia*

## 

**Textile and Apparel Distribution in Italy**

Distribution in Italy is dominated by small independent outlets. The
economic and organizational efficiency of large-scale distribution,
however, is beginning to change this reality. The modern retail system
enables a stronger producer -- retailer -- consumer interaction on a
wider scale using new technology in communication and improved
organization of the production cycle from the first yarn processing to
the point of sales.

***Table 5***

***Retail Channels in Italy, Textile/Clothing Items***

![](media/image2.wmf)

***Source:** ISTAT (Italian National Statistical Bureau)*

# 

**Stocks**

Textile mills throughout Italy report that ending stocks of raw cotton
are still low. In the private sector industry these stocks have to be
carried and financed, which is costly. Manufacturers and importers
hesitate to burden their balance sheets with high cotton stocks or
simply lack the credit to do so.

**Trade**

**Italian Cotton Imports and Exports**

While world demand for cotton is increasing, Italian imports of raw
cotton are declining due to the relocation of manufacturing plants to
more price competitive countries. However, the high quality of Italian
manufactured cotton products still has a great appeal, maintaining the
industry, and manufacturers recognize the value, consistency and quality
of U.S. cotton.

By comparing Tables 6 and 7, it is evident that Italy is now importing
more combed cotton than it produces and exports. Compared to 2003, in
2004 the Italian combed cotton sector suffered a 12% production
decrease. In part these imports are growing because of the decrease in
textile milling capacity in country. Australia maintains its position as
Italy's largest supplier, while Poland is the number one export market
for Italian combed cotton.

***Table 6***

***Italian Combed Cotton Imports***

+-----------------+------------------------------+--------------------+
| **Italian       |                              |                    |
| Combed Cotton   |                              |                    |
| Imports**       |                              |                    |
+-----------------+------------------------------+--------------------+
| **Value for     |                              |                    |
| 2004**          |                              |                    |
+-----------------+------------------------------+--------------------+
|                 |                              |                    |
+-----------------+------------------------------+--------------------+
| **Top           | **Millions of Euro**         | **Market Share**   |
| Countries**     |                              |                    |
+-----------------+------------------------------+--------------------+
| Australia       | 47                           | 15,9               |
+-----------------+------------------------------+--------------------+
| France          | 45                           | 15,3               |
+-----------------+------------------------------+--------------------+
| Germany         | 40                           | 13,5               |
+-----------------+------------------------------+--------------------+
| South Africa    | 29                           | 9,9                |
+-----------------+------------------------------+--------------------+
| Uruguay         | 22                           | 7,3                |
+-----------------+------------------------------+--------------------+
| Other           | 114                          | 38,1               |
+-----------------+------------------------------+--------------------+
| #### Total      | 297                          | 0                  |
+-----------------+------------------------------+--------------------+

> ***Source**: Sistema Moda Italia*

***Table 7***

***Italian Combed Cotton Exports***

+----------------------+-------------------------+--------------------+
| **Italian Combed     |                         |                    |
| Cotton Exports**     |                         |                    |
+----------------------+-------------------------+--------------------+
| **Value for 2004**   |                         |                    |
+----------------------+-------------------------+--------------------+
|                      |                         |                    |
+----------------------+-------------------------+--------------------+
| **Top Countries**    | **Millions of Euro**    | **Market Share**   |
+----------------------+-------------------------+--------------------+
| Poland               | 21                      | 15,6               |
+----------------------+-------------------------+--------------------+
| Turkey               | 15                      | 10,8               |
+----------------------+-------------------------+--------------------+
| Check Republic       | 14                      | 10,4               |
+----------------------+-------------------------+--------------------+
| Romania              | 13                      | 9,7                |
+----------------------+-------------------------+--------------------+
| Bulgaria             | 12                      | 8,4                |
+----------------------+-------------------------+--------------------+
| Other 61             |                         | 27,0               |
+----------------------+-------------------------+--------------------+
| #### Total 136       |                         | 0                  |
+----------------------+-------------------------+--------------------+

> ***Source**: Sistema Moda Italia*

In 2004, Greece became the number one supplier to Italy of raw cotton,
surpassing Syria in this position. The Italian market for raw cotton has
a large share of \"fine count\" spinners. Egyptian cottons and USA Pima
compete for finest yarn counts. Egypt continues to be the major
competitor of the U.S. ELS (Extra Long Staple) cotton in Italy. Egyptian
prices are usually a few cents per pound below that of U.S. cotton
landed in Italy.

However, consumption of U.S. Pima cotton in Italy continues to remain
strong. In 2004/2005 the export of SUPIMA cotton fell to a 1 percent
market share, while in 2003/2004 it accounted for 3 percent of the
market. Considering the first five months of 2005, total imports of raw
cotton decreased by 10% in volume. Imports from the U.S., unlike most of
the other countries had a very good performance, with a 48% increase
from the previous year.

***Table 8***

***Italian Raw Cotton Imports by Country of Origin***

+----------------------------+---------------+------------------------+
| ####  Origin               | **Imports     |                        |
|                            | (Tons)**      |                        |
+----------------------------+---------------+------------------------+
|                            | **Jan/Dec     | **Jan/Dec 2004**       |
|                            | 2003**        |                        |
+----------------------------+---------------+------------------------+
| Greece                     | 20,116        | 23,613                 |
+----------------------------+---------------+------------------------+
| Syria                      | 23,756        | 20,941                 |
+----------------------------+---------------+------------------------+
| Uzbekistan                 | 33,261        | 18,418                 |
+----------------------------+---------------+------------------------+
| United States              | 19,118        | 15,874                 |
+----------------------------+---------------+------------------------+
| Mali                       | 13,482        | 14,086                 |
+----------------------------+---------------+------------------------+
| Tagikistan                 | 10,628        | 9,866                  |
+----------------------------+---------------+------------------------+
| Australia                  | 11,146        | 8,892                  |
+----------------------------+---------------+------------------------+
| Turkey                     | 13,888        | 8,830                  |
+----------------------------+---------------+------------------------+
| Zimbabwe                   | 4,312         | 8,553                  |
+----------------------------+---------------+------------------------+
| Others                     | 85,070        | 67,988                 |
+----------------------------+---------------+------------------------+
| **Total**                  | **234,777**   | **197,061**            |
+----------------------------+---------------+------------------------+
| ***Source**:Associazione   | *Italiana*    |                        |
| Tessile*                   |               |                        |
+----------------------------+---------------+------------------------+

***Table 9***

Italian Raw Cotton Imports by Country of Origin

<table>
<colgroup>
<col style="width: 17%" />
<col style="width: 6%" />
<col style="width: 12%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 17%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><p><img
src="media/image3.wmf" /><em><strong>Source</strong>: Associazione
Tessile Italiana</em></p>
<p><em><strong>Table 10</strong></em></p>
<p><em><strong>Italian Combed Cotton Exports by Country of
Destination</strong></em></p>
<p><em><strong>(January – May 2005)</strong></em></p></td>
</tr>
<tr class="even">
<td><em><strong>Country</strong></em></td>
<td></td>
<td><em><strong>Tons</strong></em></td>
<td colspan="2"><em><strong>1000</strong></em></td>
<td colspan="3"><em><strong>EURO</strong></em></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td colspan="2"><em><strong>EURO</strong></em></td>
<td colspan="3"><em><strong>KG</strong></em></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td><strong>Europe Total</strong></td>
<td></td>
<td><strong>1,351</strong></td>
<td colspan="2"><strong>2,185</strong></td>
<td colspan="3"><strong>1.62</strong></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td>Switzerland</td>
<td></td>
<td>221</td>
<td colspan="2">410</td>
<td colspan="3">1.85</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Turkey</td>
<td></td>
<td>58</td>
<td colspan="2">122</td>
<td colspan="3">2.12</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td>Hungary</td>
<td></td>
<td>143</td>
<td colspan="2">265</td>
<td colspan="3">1.85</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Bulgaria</td>
<td></td>
<td>175</td>
<td colspan="2">263</td>
<td colspan="3">1.5</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td>Slovenia</td>
<td></td>
<td>40</td>
<td colspan="2">47</td>
<td colspan="3">1.16</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Bosnia-Herzegovina</td>
<td></td>
<td>636</td>
<td colspan="2">664</td>
<td colspan="3">1.04</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td>Tunisia</td>
<td></td>
<td>42</td>
<td colspan="2">52</td>
<td colspan="3">1.24</td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>Saudi Arabia</td>
<td></td>
<td>23</td>
<td colspan="2">259</td>
<td colspan="3">11.28</td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><strong>Total</strong></td>
<td></td>
<td><strong>1,338</strong></td>
<td colspan="2"><strong>2,082</strong></td>
<td colspan="3"><strong>0</strong></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td colspan="4"><em><strong>Source:</strong> Associazione Tessile
Italiana</em></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>

**Imports from the United States**

Italy mainly imports from the United States extra-long staple (ELS)
cotton for the production of fine-count combed-cotton yarns. The higher
price of U.S. cotton compared to other sources is the main constraint to
higher U.S. exports to Italy. U.S. cotton exports to Italy have improved
in 2005 from a slump in 2004. U.S. cotton is considered to be of quality
and the consistency of the product has helped it maintain its position
in the Italian market.

***Table 11***

***Italian SUPIMA Cotton Imports From the United States***

+---+----------+---------+------------+---+-------+-----------+------------+
|   | #        |         |            |   |       |           |            |
|   | ##### Cu |         |            |   |       |           |            |
|   | mulative |         |            |   |       |           |            |
|   |  to Date |         |            |   |       |           |            |
|   |          |         |            |   |       |           |            |
|   | **Values |         |            |   |       |           |            |
|   | in \$**  |         |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   | **(Time  |         |            |   |       |           |            |
|   | frame    |         |            |   |       |           |            |
|   | January  |         |            |   |       |           |            |
|   | --       |         |            |   |       |           |            |
|   | A        |         |            |   |       |           |            |
|   | ugust)** |         |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   |          | *       | **2002**   | * |       | **2004**  | **2005**   |
|   |          | *2001** |            | * |       |           |            |
|   |          |         |            | 2 |       |           |            |
|   |          |         |            | 0 |       |           |            |
|   |          |         |            | 0 |       |           |            |
|   |          |         |            | 3 |       |           |            |
|   |          |         |            | * |       |           |            |
|   |          |         |            | * |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   | PIMA     |         |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   | ##       | 10,     | 5,862,862  | 7 |       | 165,257   | 1,040,256  |
|   | ## Total | 555,976 |            | 1 |       |           |            |
|   |          |         |            | 9 |       |           |            |
|   |          |         |            | , |       |           |            |
|   |          |         |            | 4 |       |           |            |
|   |          |         |            | 9 |       |           |            |
|   |          |         |            | 2 |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   |          |         |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   | ***S     | *.      |            |   |       |           |            |
|   | ource:** | Dep     |            |   |       |           |            |
|   | U.S\>*   | artment |            |   |       |           |            |
|   |          | of      |            |   |       |           |            |
|   |          | Co      |            |   |       |           |            |
|   |          | mmerce* |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+
|   |          |         |            |   |       |           |            |
+---+----------+---------+------------+---+-------+-----------+------------+

**Policy**

###### General Policy Analysis

Italian exporters and trade officials have expressed concern over the
termination of the multilateral WTO Agreement on Textiles and Clothing,
arguing that the elimination of the agreement poses a serious threat to
the Italian manufacturing industry. Prato, Italy's largest fabric
production province, has lost 30 percent of its textile manufacturing
companies in the last ten years. In the mean time, Italian imports of
fabrics and apparel from China have increased six times, going from €23
million in 1994 to €130 million in 2004. A recent study conducted by the
University of Florence forecasts a further 25 percent decrease in the
number of local textile manufacturers during the next three years.

Italian clothing manufacturing sector is renowned for producing high
quality apparel with worldwide appeal. The Italian government and trade
officials are calling for EU rules to make country of origin labeling
mandatory on all the textiles manufactured and imported into the EU.
Their hope is that this information would encourage fashion conscious
consumers to buy Italian products. Unfortunately, the question "what is
Italian?" is becoming more difficult to answer as Italian companies
increasingly move their textile and garment manufacturing outside the
country, thereby combining economic efficiencies with the stylish
Italian designs.

![](media/image4.wmf)