COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE ECONOMIC AND SOCIAL COMMITTEE AND THE REGIONS - The competitiveness of subcontracting in the textile and clothing industry in the European Union
Date: 1996-05-15
Institutions: European Commission
Subjects: EU programme, competitiveness, small and medium-sized enterprises, subcontracting, textile industry

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  15.05.1996 
COM(96) 210 final 

COMMUNICATION FROM THE COMMISSION 

TO THE COUNCIL, THE EUROPEAN PARLIAMENT, 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 

The competitiveness of subcontracting in the textile and 
clothing industry in the European Union 

CONTENTS 

1. 

Introduction 

2. 

Situation of subcontracting in the European textile and 
clothing industry 

3. 

Factors for improving competitiveness 

4. 

Action to promote the competitiveness of subcontracting 

in Europe 

4.1  Multisectoral programmes  and instruments 

4.2 

Community action in support of subcontracting 

4.3 

Promotion of the competitiveness  of subcontracting 
in the textile and clothing industry 

5. 

Conclusions 

3 

4 

6 

7 

7 

9 

10 

13 

d 

1. 

INTRODUCTION 

Small  subcontracting  firms  working  for  local  or  distant  manufacturers  make  up  a  large 
proportion of the textile and clothing  industry in the European Union, varying from  10% to 
60% depending on the Member  State.  These subcontracting  activities  are spread  between 
a web of thousands  of small  businesses, often  taking the form  of cottage  industries,  which 
play  an  essential  role  as  a  source  of  employment  and  income,  particularly  in  certain 
regions. 

The latest estimates  suggest  that  subcontracting  employs 650 000 people, of whom  around 
200 000  are  home-based.  Approximately  150 000  undeclared  workers  must  be  added  to 
this.  This  accounts  for  a considerable  proportion  (approximately  one  third)  of  all jobs  in 
the textile and clothing  industry  in the European  Union. 

Subcontracting  is  highly  labour-intensive  and  an  extremely  important  source  of  jobs. 
However,  these  firms  suffer  from  certain  structural  weaknesses.  They  have  to  cope  with 
far-reaching  changes  and  the  adjustment  strategies  adopted  by  their  customers  (industrial 
manufacturers  and  distributors),  on  which  they  often  depend  heavily.  They  are  also 
vulnerable  to  competition  from  low-wage  countries.  Finally,  a  series  of  cultural  and 
psychological  barriers  have  given  rise  to  underinvestment  in  training  and  innovation  and 
difficulties  in  building  strategies  tailored  to  the  changes  and  with  access  to  the  markets. 
Small  subcontractors,  in particular,  have extremely  lean  management  structures  unwilling 
to take action not connected  directly  with running the firm. 

In a climate of major  industrial  change and fiercer  international competition,  strengthening 
the competitiveness of subcontracting  is essential in order to maintain significant  industrial 
activity  in Europe,  bearing  in  mind  the close  links existing  within  the  textile  and  clothing 
industry. 

While the bulk of  the efforts  to adjust  must be left  to the skills  and capacities  of  the  firms 
themselves,  the  public  authorities  must  contribute  towards  creating  an  environment 
conducive  to  making  the  firms  more  competitive  and  capitalizing  on  the  advantages 
stemming from completion  of the internal market. 

The  objective  of  this  communication  is  to  propose  a  package  of  measures  and  a 
structure  for  supporting  the  efforts  made  by  subcontractors  in  the  textile  and 
clothing  industry  to  improve  their  competitiveness.  The  Commission,  assisted  by  a 
Group  representing  the  industry,  could  play  a promoting  and  organizational  role  to 
ensure complementarity  and synergies between the various levels and partners. 

Dissemination  of  information  and  of  best  practices,  in  the  context  of  the  competitive 
advantages of the industry,  and  strengthening  of industrial  cooperation  are the two lines of 
action  to  be  given  priority.  The  action  envisaged  consists,  in  particular,  of  intangible 
investment  to  implement  a  work  programme  initiated  with  the  collaboration  of  both 
management and workers. 

3 

Accordingly,  in  December  1992  the  first  subcontracting  forum  was  held  in  Madrid, 
followed  by  several  sectoral  conferences. 
In  1994  a  study  on  subcontracting  in  the 
clothing  industry  analysed  the  importance  and  structure  of  subcontracting,  identified  the 
difficulties  encountered  by  finishers  and  manufacturers  and  studied  the  competitiveness 
strategies  needed  in order to find  solutions  in the  form  of redeployment  and the  measures 
taken by the public authorities and firms. 

In March  1994 the European  Commission  organized  a European  forum  on  subcontracting 
in  the clothing  industry  in  Brussels,  attended  by  over  200 representatives  of  the  industry. 
This provided  an opportunity  to exchange  information  on  the  programmes  in  progress  or 
being  prepared  and  on  the  action  best  suited  to  the  needs  of  the  subcontracting  sector 
(finishers, industrial manufacturers  and distributors). 

In the wake of these moves, a series of pilot projects  has been launched to test the viability 
of  the  action  envisaged.  At  the  same  time,  five  round  tables  have  been  organized  in 
various  Member States  (Belgium,  France,  Italy,  Greece  and  Portugal)  to  examine  the 
suitability of the programme in the  field. 

The  entire  exercise  has  been  carried  out  in  close  collaboration  with  management  and 
labour.  To  this  end,  a  steering  committee  has  been  set  up,  bringing 
together 
representatives  of the Commission  departments  concerned,  the relevant  trade  associations, 
including  small  businesses,  and  the  trade  unions.  Depending  on  the  subjects  discussed, 
various independent experts have also been asked to contribute. 

On  28  March  1996,  the  Industry  Council  asked  the  Commission  to  present  it  with  a 
communication  on  the  position  of  subcontracting  in  the  European  textile  and  clothing 
industry. 

2. 

SITUATION  OF  SUBCONTRACTING  IN  THE  EUROPEAN  TEXTILE  AND  CLOTHING 
INDUSTRY 

Subcontracting  involves all the areas in the textile and clothing industry, but is particularly 
widespread  in  the  finishing  and  made-up  articles  sectors  (knitweaiVclothing).  It  covers  a 
multitude  of  undertakings,  including  large numbers  of  small  firms,  many  of  them  located 
in rural regions where they offer  local employment, mainly for women, and thereby  make a 
considerable contribution to local prosperity. 

Subcontracting  firms  vary  widely  in  terms  of  size,  areas  of  activity,  development  and 
relations within  the industry.  It is a relatively  unknown  world from  the statistical  point of 
view.  With  the  cooperation  of  the  firms  concerned  the  Commission  has  launched  a 
statistics programme to fill at least some of the gaps. 

Subcontracting  today  is  subject  to  a  series  of  constraints  stemming  from  the  major 
structural  and cyclical changes affecting  the entire textile and clothing  industry.  The  firms 
face  a  market  with  increasing  outside  competition,  stagnant  demand  in  Europe  and  big 
changes in consumer preferences.  To develop subcontracting and keep it profitable,  a  shift 
in the comparative  advantages  of these  activities  is required, principally  by using  flexible, 
quick response systems and harnessing  know-how. 

In particular, subcontractors in the textile and clothing industry face: 

(a) 

(b) 

(c) 

(d) 

Internationalization  of  production  and,  in  particular,  relocation  to  low-wage 
countries, which are the basic competition facing  subcontractors.  The relocation of 
making-up  activities to these countries  has been  accentuated  by transfers  of  orders 
by  leading  manufacturers.  A  number  of  third  countries  have  attained  high 
standards of sophistication and quality, while transport costs and times have  fallen. 
Flexible  relocation  is  increasingly  within  the  reach  major  distributors  who  take 
decisions  on the basis of an in depth  analysis of  all  the relevant  economic  factors, 
both  positive  and  negative.  Such  distributors  also  have  the  capacity  to  control 
complex logistics, information  and management systems for relocated plants. 

The  greater  influence  of  distributors  (specialist  chain  stores, department  stores, 
Initially,  subcontracting  benefited  from  this.  However,  more  rational 
etc.). 
management  of  major  distribution  structures 
the 
development  of  mass  distribution,  has  stepped  up  the  pressure  on  prices. 
Moreover,  in  response  to  less  predictable  demand,  distributors  have  attempted  to 
reduce  their commitment  at the  start  of  the  season  and  increased  their  mid-season 
orders for restocking and responding  to demand.  Consequently,  subcontractors  for 
made-up  articles  are  forced  to  accept  the  risk  of  rapid  response  to  more  flexible 
demand across the product range and renewal of collections at prices competitive  at 
world levels. 

in  Europe,  particularly 

This  situation  is  reflected  in  the  new  regulation  on  outward  processing  traffic1 
which  aims  at  keeping  relocation  of  production  within  certain  limits  and  under 
equitable  conditions  to  enable  undertakings  in  the  Community  to  develop  and 
promote  industrial  cooperation.  Subcontractors  can  also  benefit  from  these 
measures in order to keep competitive by cutting their costs. 

the  complex  demand  has  fallen  as  a  result  of 
The  cost  of  managing 
computerization  and  the  introduction  of  new  sophisticated  management  and 
organization  methods.  However,  labour  costs  remain  fairly  high  (75%  to  80%) 
because  of  the  seasonal,  irregular  workload  which  requires  more  flexible  use  of 
working time. 

Some operators have turned to clandestine work to cut costs and satisfy  the needs 
for  lean  production.  There  are an  estimated  150 000 clandestine  workers  (20% of 
the regular  workforce).  According  to the study  mentioned  earlier, every  year these 
activities  cost,  in  unpaid  taxes, an  amount  equal  to  the  support  paid  to  the  textile 
and clothing industry in the EU. In view of the pressure which they exert on prices, 
these practices provide  no lasting  protection  for jobs  or for  the competitiveness  of 
the  undertakings.  They  are  opposed  by  the  workers'  associations  and  cannot  be 
tolerated by the public authorities. 

Council  Regulation  (EC) No 3036/94, OJ L 322,  15.12.1994. 

Today, four rationales dictate subcontractors' operating strategies, namely: 

(a) 

costs, based on low labour costs and direct competition with low-wage countries; 

(b) 

(c) 

(d) 

response  and flexibility,  drawing  advantages  from  competitive  speed  of  response 
to  demand  in  phase  with  the  diversification  and  volatility  of  demand  and 
distribution trends; 

expertise  and  know-how,  on  the  niches  of  the  market  where  know-how, 
experience, learning or specialization offer  significant  competitive advantages; 

service, where finishers  offer  manufacturers  added  services  such as cooperation  in 
design,  coordination  of  subcontracting  networks, 
fabric 
purchases, etc. 

logistical  support, 

In  some  regions,  particularly  in  Northern  European  countries,  response,  service  and 
flexibility  are  the  predominant  concern  under  the  pressure  exerted  on  prices  by 
developments  on the distribution  side. In others, by contrast,  the  situation  is less  uniform, 
with  costs  the  overriding  rationale  for  approximately  one-third  of  subcontracting  in 
Europe, the same share as response  and flexibility.  The remaining  third  is divided  equally 
between expertise and service. 

Subcontracting  based  purely  on  cost  considerations  is  the  area  which  faces  the  biggest 
challenges and will continue to do so. In particular, the gap between costs in Europe and in 
certain of its trading partners is too wide to preserve competitive  advantages  on this point, 
particularly  in the  case  of bottom-of-the-range  products. By  contrast,  Europe  still  holds 
other  competitive  advantages  allowing  productivity  improvements,  particularly  in 
terms  of  qualifications,  service,  better  use  of  flexible  logistics,  style  and  product 
quality. 

Another  major  challenge  faces  small  subcontractors  in  particular.  These  are  an  important 
source of jobs, but often  they are compartmentalized  into their regional markets and find it 
difficult  to  seize  the  opportunities  created  by  the  opening-up  of  the  markets  and  by  the 
changes in demand, technology and the industry. 

3. 

FACTORS  FOR IMPROVING  COMPETITIVENESS 

The steady loss of comparative  advantages  on labour costs, in comparison  with  low-wage 
countries,  has  triggered  adjustments  in  the  subcontracting  sector  in  Europe  to realign  the 
competitive advantages of its activities. 

The  greatest  successes  in  this  area  have  been  with  the  development  of  intangible 
investment  and industrial cooperation in particular. 

The  competitiveness  factors  related  with  intangible  investment  have  developed  in  step 
with  trends  on  the  markets  and  in  demand.  In  terms  of  flexibility  and  response, 
production  has  been  reorganized  by  using just-in-time  and  rapid-response  methods 
combined  with  all-round  vocational  training.  In  addition,  quality,  innovation,  know-

how and service have assumed growing importance in firms'  strategy. Use of  information 
technologies  appears  an extremely  important  means  of  improving  the competitiveness  of 
firms  in  this  sector,  including  subcontractors.  In  practice,  these  technologies  are  an 
appropriate  means  of  meeting  the  needs  imposed  on  firms  by  the  reorganization  of 
production, the changes in consumer behaviour  and, more generally, the development  and 
globalization of markets. For small subcontractors in particular, these technologies provide 
a  faster,  cheaper  means  of  organizing  contacts  and  reducing  some  of  the  handicaps  of 
distance,  making  it  easier  to  participate  in  activity  or  information  networks  and  in 
restructuring the industry. 

However,  to  develop  and  strengthen  these  factors  in  competitiveness  greater  efforts  are 
needed  on  dissemination  of  information  and  training.  The  first  thing  is  to  overcome  the 
psychological,  cultural  and  willingness  barriers  in order  to demonstrate  the  advantages  of 
the reforms  within firms  and to whet the appetite  for  training  on the part of workers and 
managers alike. Modern means of communication, with appropriate  assistance, would then 
allow specific  schemes tailored to finishers'  availability. 

Subcontractors  should  also be able to benefit  fully  from  the single European  market  or 
to  acquire  an  international  dimension.  Cooperation  between  firms  should  enable  them  to 
find  complementary  strengths  which  would  contribute  to more competitive  positioning  of 
subcontracting  activities  within  the  textile  and  clothing  industry,  by  developing  and 
consolidating  clusters  and  activity  and  information  networks,  organizing  ways  of 
harnessing know-how, promotion  measures and access to non-Union  markets. 

Moreover, successful  cooperation between manufacturers  and finishers  has shown that this 
area is also a major  means of strengthening  competitive  advantages  and  stability, not only 
for subcontracting but also for the industry as a whole. 

The measures taken by the Union as part of its general competitiveness  policy, the policies 
to support industrial adjustment  and a more offensive  commercial policy  should encourage 
the essential synergies and act as a catalyst for decentralized  moves and projects  at national 
and European levels. 

4. 

ACTION TO PROMOTE THE COMPETITIVENESS OF SUBCONTRACTING  IN  EUROPE 

4.1 

MULTISECTORAL  PROGRAMMES AND INSTRUMENTS 

Several of the Community  programmes  and instruments  under the existing policies can be 
used  by  subcontractors  to  support  the  action  taken  by  the  private  sector  to  improve  its 
competitiveness. 

A budget of ECU  141 billion, in  1992 prices, has been  allocated  to action financed  by the 
Structural  Funds  from  1994 to  1999  (to  which  ECU  4,724  billion  for  the  new  Member 
States  must  be  added).  Funding  can  be  provided  for  subcontracting  under  the  action 
programmes  for  industry  in  the  Community  support  frameworks  and  the  Member  States' 
single programming documents and under the Community  initiatives. 

In the  objective  1 regions  with  a heavy  concentration  of  textile  and  clothing  firms,  the 
existing industrial programmes offer  great potential, both in terms of resources and of the 
measures planned to improve industrial competitiveness. To this end, the follow-up to the 
programmes provides  an opportunity to make the action  on subcontracting  more  effective, 
by acting on the conclusions of this communication. 

In the case of the objective  2 regions, the Member States will be submitting the new  1997-
1999 programmes  to  the  Commission  for  approval  soon.  Consequently,  this  would  give 
the  competitiveness  of 
objective 2  regions  an  opportunity 
subcontracting 
(for  which  a  Community  contribution  of 
in 
ECU 8 billion, in  1992 prices, is planned). 

include  action  on 

their  programmes 

to 

The Community initiatives consist, in particular,  of: 

PME,  which  was  allocated  a  budget  of  ECU  1  billion  for  1994  to  1999  to 
encourage  small  businesses  to  adapt  to  the  requirements  of  the  single  market  and 
international  competition; 

the RETEX programme for modernization  and conversion of regions dependent on 
the  textile  and  clothing  industry  which  has  a budget  of  522  million  ECU  for  the 
period  1994-1997. The extension of this programme to  1999 is being considered . 

ADAPT,  with  a budget  of  ECU  1.4  billion  (in  1994  prices)  for  1994  to  1999,  to 
encourage  the  workforce  to  adapt  to  industrial  changes  by  means  of  innovatory 
transnational projects.  An additional ECU  170 million is planned  to finance  action 
on  the  information  society,  an  area  of  particular  interest  for  developing  relations 
between manufacturers  and subcontractors. 

Furthermore  ,  the  LEONARDO  programme  worth  620  million  ECU,  aims  to  promote 
quality  and  innovative  capacity  in  the  area  of  professional  training  on  a  trans-national 
basis, supporting pilot projects, exchange programmes, studies and analyses. 

In  addition,  the  financing  from  the  European  Social  Fund  takes  account  of  the  special 
difficulties  which  small businesses  have  in improving  their  staffs  qualifications  and  with 
in-house training  in general.  Encouragement  has been  given  to improve the quality  of the 
outside training available and to develop distant learning methods in order to provide more 
efficient,  more  flexible  training.  Between  1994  and  1999  some  ECU 6 billion  from  the 
Social  Fund  could  go  towards  promotion  of  a  more  systematic  approach  to  continuing 
vocational training. 

The  action  for  the  new  objective  4  in  turn  offers  a  more  effective  response  to 
subcontracting  firms'  training  needs.  In  particular,  objective 4  encourages  diagnosis  of 
firms'  needs  for  training  and  requalification  in  their  specific  environment  and  provides  a 
means of defining  a strategy  to organize training  and run continuing  training  schemes.  To 
this  end,  it  also encourages  action  on  transfers  of  technology  and  professional  experience 
from big businesses to their small  suppliers. 

In  the  fourth  framework  programme  on  research  and  technological  development, 
more has been done to make it easier for  small businesses to participate  in the  Community 
research  programmes  and  to  gain  access  to  the  results.In  particular,  in  the  field  of 
Industrial  Technology  and  Materials  (Brite Euram IH) more  than  60 research  projects  are 
underway,  most  involving  SMEs  within  the  sector.  A  targeted  research  programme2 
consisting of networks of R&D projects in the textile/clothing  sector is in progress. 

Various  other  financial  instruments  (EIB  global  loans,  the  "PME  facility"  interest-rate 
subsidy  mechanism  and the European  Investment  Fund)  are available  to support  action by 
small businesses in various  fields. 

Finally,  measures  have  been  taken  to  promote  cooperation  between  small  businesses, 
such  as  the  BC-Net  and  BRE  networks  for  seeking  potential  partners  and  the 
Europartenariat  and  INTERPRISE programmes  for  direct  contacts  as well  as  local  inter 
regional initiatives like subcontracting promotion centres. 

The  Council  approved  in  1995  a  special  budget  line  of  400M  ECU  to  support  the 
modernisation  and  restructuring  of  the  Portuguese  textile  and  clothing  industry  This 
programme  will  be  implemented  over  the  period  1995-1999  and  incorporates  measures 
which will help the subcontracting sector become more competitive. 

4.2 

COMMUNITY ACTION IN SUPPORT OF SUBCONTRACTING 

The  action  taken  in  support  of  subcontracting  has  been  concerned  principally  with 
creating a favourable environment for subcontracting  in the context of the single market 
and 
information  and  communication  between  manufacturers  and 
subcontractors. 

improving 

4.2.1  Creating a favourable environment for  subcontracting 

(a) 

Statistics programmes  to improve information on subcontracting 

The object  of this exercise is to supply  regular information  on trends  in subcontracting.  It 
is  coordinated  by  Eurostat  in  collaboration  with  the  national  statistics  institutes  and  the 
relevant trade organizations. 

(b) 

Practical guide to the legal aspects of subcontracting 

the 
improve  contractual  relations  between  manufacturers  and  subcontractors, 
To 
Commission  has published  a practical  guide outlining  the main  legal  issues  arising  in this 
connection  and examining  the legislation  in force  in the Member  States on  subcontracting 
relations.  The  guide  will  be  updated  to  take  account  of  legislative  developments  in 
Member States and to extend the comparative analysis to Austria, Finland and Sweden. 

The targeted  research  project(Tofa/  Quality Textiles)gxou^  the projects  in 4 clusters:  "Advance 
Processing  Machinery",  "Innovation  in Processing  Techniques",  "Modelling  and  Planning", 
"Monitoring  and  Control". 

(c) 

Code of practice 

In  collaboration  with  UNICE  (Union  of  Industrial  and  Employers'  Confederations  of 
Europe)  and  trade  associations,  in  order  to  improve  relationships  between  manufacturers 
and  purchasers,  the  Commission  has  started  the elaboration  of  a Code  of  Practice  setting 
out standards of good practice in quality, certification  and periods for payment. 

4.2.2 

Improving 
subcontractors 

information 

and  communication  between  manufacturers 

and 

(a)  Multilingual sectoral terminology 

A preliminary  series of glossaries of multilingual  sectoral terminology  has been  published 
to  deal  with  language  problems  connected  with  international  subcontracting.  These  are 
now  being  brought  up  to  date,  with  the  cooperation  of  workers  and  employers  to  take 
account of the technical advances in the sector and the development of the single market. 

(b) 

Networking of data bases on subcontracting 

In  1994 the Commission  launched the SCAN (Subcontracting Assistance Network)  project 
to  improve  the  accessibility,  regularity  and  quality  of  information  on  subcontracts  by 
means of  interconnection  and interoperability  of  subcontracting  exchanges  and data bases 
in Europe. 

(c) 

Directory of intermediary agencies for  subcontracting 

This Directory was published for the first time in  1992 and updated in  1994.  It provides an 
overview of all agencies representing undertakings interested in subcontracting. 

4.3 

PROMOTION  OF  THE  COMPETITIVENESS  OF  SUBCONTRACTING  IN  THE  TEXTILE  AND 
CLOTHING INDUSTRY 

In response to the conclusions of the forum on subcontracting in the clothing industry, held 
in  Brussels  in  March  1994,  the  Commission,  in  cooperation  with  the  two  sides  of  the 
industry  and  with  technical  support  from  independent  experts,  has  promoted  a  series  of 
studies  to  assess  the  impact  and  feasibility  of  certain  support  measures  to  make  the 
industry more competitive. 

The  general  lines  of  action  considered  were  tested  in  the  field  by  five  round  tables  in 
Belgium, France, Greece, Italy and Portugal.  These covered four  fields: 

(a) 

Information 

In essence,  the  action  envisaged  forms  part  of  the  Commission's  general  programme.  In 
addition, a user guide to European Union financing  programmes targeted, in particular, 
on small businesses in this sector, was published recently. 

10 

(b) 

Cooperation between manufacturers and subcontractors 

Improvement  of 
the  channels  of  communication  between  manufacturers  and 
subcontractors  is  broadly  considered  a  key  means  of  promoting  competitiveness  and 
further  progress in the situation of subcontractors.  It helps to bring this sector out of its 
isolation. 

The work  done so far has focused  on technical relations, particularly  on three means of 
communication: 

the  manufacturer's  technical  file,  which  should  offer  a  clear,  comprehensible 
definition of the characteristics of the product to be made; 

technical  glossaries  bringing  together  the  corresponding  terms  in  different 
languages; 

electronic  data  interchange  (EDI)  covering  the  broader  needs  for  the  firms' 
activities. 

These  instruments  were  considered  useful  by  the  undertakings  questioned  and  by 
representatives  of  the  industry,  who  stressed  the  support  which  they  would  lend  for 
creating an environment conducive to participation in the single market. 

(c) 

Training 

In the clothing  industry,  several  areas of training  have been identified  and  studied  with 
regard  to  the  qualifications  required  in  the  light  of  developments  in  the  international 
environment, on the markets and in the situation of the industry.3 
Particular attention must be paid to the qualifications  on business management strategies, 
on  logistics  and  flow  management,  on  international  relations  and  human  relations 
(motivation,  communication,  etc.),  and  the  flexibility  and  versatility  of  the  entire 
workforce. 

Generally, the qualifications  required by subcontracting firms are no different  from those 
required  by  the  industry  as  a  whole.  Nevertheless,  there  are  certain  specific  problems 
connected  with  the  limited  availability  of  staff  and  lack  of  time,  insufficient 
information, fragmentation  and other difficulties  which  entrepreneurs  experienced  in 
attending or releasing their staff to attend training courses. 

A first step in this area would, therefore, be the development of awareness campaigns to 
demonstrate the benefits  of training and, generally, of firms' adaptability, in  conjunction 
with ways of restoring the competitive advantages essential to their future. 

The  next  essential  step  would  then  be  to  offer  training  geared  to  subcontractors* 
specific problems, tailored to the conditions in which such firms operate (distant learning 
and in-house training) and at an acceptable cost. 

Study on employment and qualification needs in the European clothing industry,  sponsored  by the 
Commission and conducted by the Institut Français de la Mode (IFM). 

11 

The Community  and national  training programmes offer  opportunities to make progress in 
these  fields.  Nevertheless, proper synergies  must be developed between  the  Commission, 
the  national  authorities,  representatives  of  both  sides  of  the  industry  and  the  firms 
themselves in order to take the action necessary. 

(d) 

Promotion 

The partners' thoughts on activities to promote  subcontracting  centre principally  on events 
such  as  fairs.  The  feasibility  study  sponsored  by  the  Commission,  in  collaboration  with 
the  two  sides  of  the  industry,  stressed  the  importance  of  developing  effective  promotion 
instruments and also a wide variety of needs and opinions, particularly on the possible 
establishment of a European subcontracting fair for the textile and clothing industry. 

Firms'  interest  in  this  type  of  promotion  depends,  naturally,  on  the  predominant  thrust  of 
their marketing strategies (national, Community or international market). 

Trade fairs  specifically  on subcontracting  already exist in France, Italy  and, more recently, 
Greece.  A  similar  event  has  been  announced  in  Spain.  Clearly,  it  is  up  to  the  private 
sector  to  establish  and  develop  events  of  this  type.  The  Commission  supports  the 
coordinating efforts  made by the industry in this field  and, in particular, the establishment 
of a computerized  network for collaboration between subcontracting  fairs in Europe. 

The  Commission  is  also  considering  the  possibility  of  supporting  the  "inverted  trade 
shows" between  purchasers  and  subcontractors.  Furthermore,  promotion  activities  should 
include  participation  by  these  firms  in  fairs  organised  in  the  framework  of  different 
activities in the textile and clothing industry. 

Nevertheless,  it  must  be  borne  in  mind  that  participation  in  such  fairs  is  limited  in 
comparison  with  the  number  of  subcontracting  firms  in  operation.  Further  thought  is 
therefore  needed  on  other  means  of  promoting  subcontracting,  which  would  be  more 
permanent,  open  to  a  larger  number  of  businesses  and  capable  of  harnessing  the 
advantages of the European  dimension. 

12 

5. 

CONCLUSIONS 

European  subcontractors  are at the heart  of the textile  and clothing  industry.  They 
face  crucial  challenges.  Their  growth  and  greater  competitiveness  will  shape  the 
future  of the entire industry. 

Experience  shows  that  firms'  efforts  to  adapt  allows  subcontracting  to  remain 
competitively  placed  in  the context  of the  European  textile  and  clothing  industry, 
particularly  if  they  continue  to  develop  means  of  offering  greater  quality, 
innovation, reliability and  flexibility. 

Various  programmes  and  multisectoral  instruments  under  the  national  and 
Community  policies  could  be  used  by  subcontracting  firms. 
It  would  be 
particularly  important  to secure greater participation  by small  firms  in  programmes 
and  action  to  support  the  efforts  to  improve  competitiveness  associated  with 
intangible  investment  (quality,  innovation,  training,  etc.).  However,  in  view  of 
certain characteristics of subcontracting  (very diversified,  fragmented  activities  and 
cultural  and  psychological  barriers),  further  efforts  must  be  made  on  awareness-
raising and information  by the trade associations and public authorities. 

subcontractors 

cooperation  between 

International 
to  harness  potential 
complementary  strengths  on  both  the  Community  and  export  markets  should  be 
considered  carefully  by  the  industry  and  encouraged  and  supported  by  the  public 
authorities.  Partnership agreements between  operators  in the textile and clothing 
industry,  particularly  between  manufacturers  and  subcontractors,  should  likewise 
be encouraged. 

Further efforts  must  be made to promote  coordination  of action  and synergies  at 
regional, national and European  levels.  The Commission can play a promoting and 
coordinating  role.  However,  the  effectiveness  of  this  process  will  depend  on  the 
participation  of  subcontracting  firms.  Sometimes  it  has proved  difficult  to ensure 
that  they  are  represented,  because  of  the  highly  varied  fragmented  nature  of  their 
activities.  Under  these  circumstances,  the  Commission  proposes  organizing  a 
permanent  Group  on  subcontracting  in  the  textile  and  clothing  industry, 
bringing  together  European  and  national  representatives  of  the  industry  and  of  the 
trade  unions.  This  Group  will  examine  developments  and  priorities  in  the  sector, 
impact  on 
with  particular  attention 
competitiveness  and  employement,  the  impact  and  effectiveness  of  individual 
measures,  programmes  and  multisectoral  instruments,  means  of  increasing  the 
involvement  of  small  firms  in  particular  and  the  need  for  any  supplementary 
support  measures  targeted  on  the  specific  requirements  of  subcontractors  in  the 
textile and clothing  industry. 

the  economic  situation  and 

the 

to 

1 2> 

TABLE 1 

Employment in subcontracting in Europe  (1992) 

Belgium 

Germany 

Ireland 

Greece 

Italy 

Spain 

Netherlands 

France 

Portugal 

United 
Kingdom 

Denmark 

Total 

46 000 

188 000 

7 000 

14 000 

304 000 

139 000 

18000 

116000 

98 000 

141 000 

8000 

1 080 0002 

35 000 

230 000 

15 000 

60 000 

370 000 

180 000 

15 000 

180 000 

130 000 

230 000 

10 000 

1 455 0002 

5000 

40 000 

5000 

35 000  : 

195 000  . 

-90 000 

6  000 

90 000 

60  000 

120 000 

3000 

650 0002 

No of jobs 

Textiles' 

Clothing 

of which 
subcontracting 
in the clothing 
sector 

Source:  Mercer  Management  Consulting 
1. 
2. 

Knitwear  and hosiery  are  included  under  clothing. 
Excluding  undeclared  or clandestine jobs. 

TABLE 2 

Clandestine employment in the clothing industry1  (1992) 

Belgium 

Germany 

Ireland 

Greece 

Italy 

Spain 

Netherlands 

France 

Portugal 

No of jobs 

7 000 

6 000 

2 000 

12 000 

39 000 

20 000 

10 000 

20 000 

20 000 

Source:  Mercer  Management  Consulting 
1. 

Estimates  by  Mercer  Management  Consulting  for  which  the  European  Commission  is not  responsible. 

United 
Kingdom 
14 000 

Denmark 

Total 

150 000 

TABLE 3 
Breakdown of subcontracting jobs  in Europe 

Total  workforce:  650 000* 

Italy 
United  Kingdom 
France 
Spain 
Portugal 
Germany 
Greece 
Netherlands 
Belgium 
Ireland 
Denmark 

30% 
18% 
14% 
14% 
9% 
6% 
5% 
1% 
1% 
1% 
1% 

Source:  Mercer  Management  Consulting 

* Excluding undeclared  or clandestine  workers 

TABLE 4 
Breakdown by size of establishment  and number  of jobs  in subcontracting* 
(1992) 

France 

Portugal 

Germany 

Noof 
establishments 

Noof 
employees 

10 
50 
150 
300 
800 
800 
5 500 
7  600 

5  000 
10 000 
15 000 
15 000 
16 000 
8  000 
20  000 
90  000 

Noof 
establishments 
5 
35 
70 
210 
320 

3  500 
4  140 

500 + 
200-500 
100-200 
50-100 
20-50 
10 20 
0-10 

Total 

Noof 
employees 

Noof 
establishments 

Noof 
employees 

2  000 
8  000 
9  000 
13 000 
10 000 

18 000 
60  000 

6 

15 
150 
550 

1 500 
2  168 

2000 

2000 
10 000 
16 000 

10 000  ] 
j 
40 000  j 

Source: 

Mercer  Management  Consulting 
* Excluding  undeclared  or clandestine  workers 

A' 

TABLE 5 

Overriding factors  in subcontracting in Europe' 
(percentage  of jobs) 

Costs 
Response  and 
flexibility 
Marginal  work 
Service 
Expertise  and 
know-how 

<> 

Portugal 

Greece 

Belgium 

Ireland 

Netherlands 

France 

Denmark 

Germany 

Spain 

65% 
15% 

-
-
20% 

60% 
30% 

5% 
-
5% 

40% 
30% 

5% 
15% 
10% 

40% 
20% 

5% 
25% 
10% 

40% 
40% 

-
20% 
~ 

30% 
30% 

10% 
20% 
10% 

-
80% 

-
20% 
-

5% 
55% 

5% 
25% 
10% 

30% 
40% 

10% 
10% 
10% 

Italy 

30% 
30% 

10% 
10% 
20% 

United 
Kingdom 
20% 
25% 

European 
average 
32% 
33% 

-
50 %2 
5% 

6% 
16% 
13% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

100% 

1. 
2. 

Including  clandestine work,  which is divided  between costs and response  and  flexibility 
A large proportion  of jobs downstream  from  services have been included  under costs. 

Source: 

Mercer  Management  Consulting 

TABLE 6 
Primary problems  mentioned by subcontractors 

Germany 

Belgium 

Denmark 

Spain 

France 

United 
Kingdom 

Greece 

Ireland 

Italy 

Netherlands 

Portugal 

Payment  delays/risk 

Imprecise  orders 

Development  of 
customer  portfolio 

Lack of protection  in 
the event of any 
downturn  in  activity 
Lack of  contract 

^ 

Lack  of aid  for 
modernization 

Social  legislation 

Language  problems 

O 

^9 

O 

O 

e 

• 

0 
0 

O 

O 

o 

o 

O 
o 

^p 

O 
o 

e 

^ 

© 

^A 

^p 

^m 

^ 

• 

^ 

e 

A 

O 

e 

Q 

^% 

• 

Problems  frequently  mentioned  in the surveys 
9 
Source: Mercer Management  Consulting  questionnaire 

Financial Sheet 

Budgetary line B5-4110 Industrial Competition policy of the European Union 

1. 

TITLE OF THE ACTION: PROMOTION OF THE COMPETITIVENESS OF THE 

SUBCONTRACTING TEXTILE AND CLOTHING 
INDUSTRY 

2. 

3. 

CONCERNED BUDGET LINE: B5-4110 

LEGAL BASIS:  Communication from the Commission to the Council on the 

implementation of a Community action programme in favour of 
the competitiveness of the European industry 
COM(95)319. 

4. 

DESCRIPTION OF ACTION : 

4.1.  General objective: 
of the action 

To support the efforts of improving 
the competitiveness of subcontracting in textile/clothing 
in areas of information, training, co-operation, 
promotion. The action is included in the framework of the 
action programme on the competitiveness of the 
European industry. 

4.2.Period covered by the action:  3 years, i.e.  1996/1997/1998. 

5. 

CLASSIFICATION OF RECEIPTS AND EXPENDITURE 

5.1.  DNO 

5.2. CD 

5.3. Types of receipts aimed at 

No purpose 

6. 

TYPE OF RECEIPTS AND  EXPENDITURE 

subsidy for  co-financing together with other sources from  the public  or private 
sector: Co-financing  of initiatives undertaken by the public sector as well as 
by professional  associations. 

Others: The Commission has the intention to ask for the realisation of 
operational tools (e.g. technical file of production) that will be at the 
disposition of the economic operators. 

1  <r 

7.  FINANCIAL IMPACT 

7.1. Mode of calculation for cost of the action for  1996 fiscal year (connection 

between individual costs and the total cost) 
4 pilot project related to 4 areas quoted beneath 

7.2. Breaking down by elements of action 

Breaking down 

Budget 96 

CE in MioEcus 
APB97 

Technical file of  fabrication 
Promotion of specialised  fairs 
Diagnosis  finishers 
Projects  for management  training 
TOTAL 

0,075 

0,075 
0,15 

Var. 
in% 

0,13 

0,12 

0,25 

66,7 

^3 

8. 

9. 

- 

DISPOSITIONS FOR ANTT-FRAUD FORESEEN (AND RESULTS OF 
THEIR  IMPLEMENTATION) 
Contract 
ELEMENTS OF ANALYSIS  COSTS-EFFICIENCY 

9.1. Specific  quantitative objectives, population aimed at 

Specific  objectives  : the Commission envisage to finance 4 pilot projects in order 
to improve the attractiveness of intellectual investments in the small and medium 
size firms of the sector by the creation of a favourable environment  for 
subcontracting in textile and clothing. These firms, isolated from their economic 
environment have neither the capacity, nor the time necessary to participate in 
multi sectoral actions. The measures aim the improvement of a) their relations with 
the finishers  b) entrepreneurs' information  of the solvency and the perspectives of 
their firms, c) the promotion and evaluation of the participation at fairs and at 
similar manifestations  and d) the improvement of the level of management  training 
of finishers through the logistics adapted to their level of knowledge and time. 

-  Population aimed at : 

9.2. 

The subcontracting firms of the European union. 
Justification  of the action 

-  Necessity of Community budget intervention 

For reasons of cultural and economic compartmentalisation, the 

subcontracting firms have difficulties  to start this kind 
of action and to utilise the Community means 

-  Choice of intervention mode 
* advantages compared to alternative measures (comparative advantages) 

Decrease the costs of the starting up of the envisaged actions. 
* analysis of  similar actions, possibly  carried out at Community or 
national level 
It has been noted that a series of Community actions have not attracted the 
interest of small and medium sized firms, in particular not the subcontracting 
firms. In most of the cases these actions are expensive and are not adapted to 
the specific  needs of their structure (size, lack of management structure,  staff 
training etc.). 
-  Main  uncertainties that could affect the specific results of the action. 

The non mobilisation of the subcontracting small and medium sized  firms 
in order to use these tools. 

9.3. Follow up and assessment of the action 

- 

Indicators of performance 

* indicators of output (measure of activities displayed) 

* indicators of the impact according the objectives 
Increased use of the actions foreseen  in the Community programmes, 

among the small and medium sized  firms. 

2 o 

-Modes  and periodicity of the planned assessment 
Unit m/E/4 has the intention to assess the situation in 1998. 
—Valuation of obtained results 
The envisaged assessment here beneath leads to a written report and a 
re-assessment of the situation. 

10.  Administrative expenditures (part A of section III of General Budget). 

The effective  mobilisation of necessary administrative resources will result from 
the annual decision of the Commission on the allocation of resources, including 
in particular supplementary staff and capital that have been granted by the budget 
authority. 

10.1  Impact on the number of jobs:  NONE. 

Type of 
employment 

staff  to 
allocate 
to the 
adminis 
tration of the 
action 
permanent 
employment 

temporary 
employment 

of which 

duration 

3 years 

by appeal to 
supplement 
tary  resources 

by use of 
existing 
resources 
within the 
DG 
yes 

1  A 

1 A 
IB 

Temporary 
civil  servants 
or  officials 
Other 
resources 
Total 
For the supplementary  resources, indicate according to which pace their disposal would be 
necessary. 

2 persons 

1 person 

3 years 

3 years 

yes 

yes 

no 

no 

no 

no 

no 

10.2  Global financial  impact of supplementary  human resources :NONE. 

Sums 

Mode of calculation 

Civil  servants 
Temporary  officials 
Other resources 

Total 

1 

j 

The sums state the total cost of supplementary  employment for the total duration the action 
if this one is at a determined duration, for  12 month if the duration is undetermined. 

10.3  Increase of other expenditures following  the running of the action 
SUMS 
BUDGETARY LINE 

MODE OF CALCULATION 

A0-2500 

32.000 ECU* 

meeting expenses 

Two meetings a year of 
the Working group of 20, 
experts from  professional 
associations from  member 
states 
. 
(2X16.000 ECU) 

* These sums correspond to expenditures for  12 month 

z-*\ 

ISSN 0254-1475 

COM(96) 210  final 

DOCUMENTS 

EN 

10  08 

Catalogue number  :  CB-C0-96-223-EN-C 

ISBN 92-78-04022-3 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg 

Z. ^