Source: EURLEX
Language: en
Format: md

**COMVIISSION** **OF THE EUROPEAN** **COMMUNITIES**

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                             COM(93)525 final

                              Brussels, 27 October 1993

 «sa
ÉlÉ REPORT ON THE COMPETITIVENESS OF THE EUROPEAN

                   TEXTILE AND CLOTHING INDUSTRY

               fCommunIcat Ion from the Commission to tho

                 Council and the European Parliament)
«Eft [11 ]

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                           SUMMARY

       In response to the request made by the Council in its resolution of
       17 June 1992, the Commission has drafted a report on the competitiveness of
       the European textile and clothing industry. It consists of:

       - a foreword and conclusions summing up the competitive position of the
         industry and the measures taken by the Community to strengthen It. This
         could be the policy paper intended primarily for the Ministers. It is
         followed by six chapters:

       - an introduction describing the background to the report;

       - an account of the underlying developments in the industry from 1988 to
         1992, i.e. falling production and (since 1991) consumption, an extremely
         marked decline in employment and investment at its lowest level since
         1982. Imports rising almost twice as fast as exports (to the detriment
         of intra-Community production). Turnover increasing and then stabilizing
         and value added remaining stable (two trends reflecting the industrial
         strategies based on subcontracting and relocation);

       - an assessment of the international competitiveness of the textile and
         clothing industry, which is deteriorating, as confirmed by the loss of
         market share taken by exports from the Community in the industrialized
         countries and the sharp increase in the trade deficit in clothing; on
         the other hand, the Community still has a trade surplus in textiles. One
         point to note is the severe imbalance with the leading Asian exporters,
         most of whose markets remain closed;

       - an analysis of the factors determining international competitiveness.

         The adverse impact of the depreciation of the dollar has been partly
         offset by the devaluations since September 1992. Labour costs are a
         decisive factor, particularly in the downstream sectors. They are
         extremely high in most Member States and the gap with the Community's
         competitors, apart from the NICs, is widening. Capital productivity,
         labour productivity, job skills and the complex factors affecting
         competitiveness (particularly quality and flexibility) are some of the
         strengths of the Community industry. However, it still suffers from
         various distortions of international competition;

       - a description of the industrial strategies adopted in response to these
         problems. Four main trends can be Identified: modernization,
         relocation, specialization and flexibility. Some businesses have been
         restructured, others are lagging behind-,

       - a description of the measures taken by the Community, both internally and
         externally. These must be continued and stepped up.

       Finally, an addendum examines the impact of the openlng-up of trade with the
       countries of Central and Eastern Europe on the Portuguese textile industry.

2) " /A

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**C O N T E N T S**

**Summary**

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Overview and conclusions

1. Introduction

2. Recent developments in industrial structures

2.1 General context

2.2 Basic developments from 1988 to 1992

2.3 Trends in 1993

3. Assessment of international competitiveness

3.1 General context

3.2 Exports
3.3 Imports

3.4 Balance of trade

3.5 Differences between product categories

4. Analysis of the factors determining international competitiveness
4.1 Exchange rates

4.2 Labour costs

4.3 Capital productivity
4.4 Labour productivity

4.5 Human resources

4.6 Raw material, energy and environmental costs
4.7 Complex factors affecting competitiveness
4.8 Distortion of international competition

5. Industrial strategies

6. Community measures
6.1 Commercial policy

6.1.1 MFA

6.1.2 Fraud prevention
6.1.3 Uruguay Round
6.1.4 Generalized System of Preferences
6.1.5 Export promotion
6.2 Single market
6.2.1 Community rules on outward processing traffic
6.2.2 Protection of intellectual property rights

6.2.3 Protection of the environment

6.3 Competition policy
6.4 Support for modernization and conversion
6.4.1 Research and technological development
6.4.2 Training

6.4.3 Diversification and conversion

6.4.4 Information and communication

Addendum Repercussions of the openlng-up to Central and Eastern Europe
       for the Portuguese textile industry

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_**/it**_

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                     - 1 
               Overview and conclusions

In response to the request made by the Council in Its resolution of
17 June 1992 (OJ No C 178, 15.7.1992), the Commission Is submitting this
report on the competitiveness of the European textile and clothing industry,
which will be updated in 1993 once the data are available.

The Commission is convinced that the efforts to bolster the competitiveness
of the industry must be continued to support the adjustment process. It
expects the Council to give its political assessment of the problems facing
the industry and to send a clear signal as regards the directions to be

taken.

1. The situation of the Industry

With a turnover of ECU 180 billion and a workforce of some 2.7 million, the
textile and clothing industry occupies a key position in the Community's
industrial base. In the 1990s the industry has been hit hard by the general
economic recession, falling production and lower consumption. Certain
regions heavily dependent on the industry have been particularly affected.
These difficulties have forced the industry to shut down production capacity
and to relocate it to non-Community countries. These decisions have resulted
in lower production, fewer Jobs, reduced investment and the replacement of
products made in the Community by low-price imports.

Particularly heavy Job losses have ensued (434 000 in four years or almost
70% of all job losses in manufacturing industry) and the rate grew faster
still in 1991 and 1992, as a result of falling production, increased
imports, improved labour productivity in the wake of restructuring and
automation, and industrial strategies geared towards greater

internat ionalizat ion.

The recent decline in consumption is attributable partly to the downturn in
household demand but also partly to the contraction of certain industrial
users, such as the car and building industries. In response to the
saturated European clothing market, consumers have also become much more
demanding as regards value for money.

This slowdown in activity and investment continued and even intensified in

the first half of 1993.

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_**/It**_

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                     - 2 
In this gloomy climate within the Community, the balance of trade has
deteriorated relentlessly since 1985, the last year of trade surplus.
Between 1988 and 1991 the deficit doubled to ECU 12.4 billion. Only a very
slight improvement followed in 1992, triggered by more favourable export
trends and the stabilization of imports. However, the textile sector - which
is one of the early stages in the chain, is highly capital intensive and
requires considerable know-how - still made a surplus of ECU 2.1 billion In

1992.

Amongst the positive indicators which partly offset these generally negative
trends, attention should be drawn to the increase in turnover between 1988
and 1992 (up by 6.8% at constant prices), although this too has levelled off
over the last two years, plus the productivity improvements of 3% a year
since 1985 and the stability in value added, which is attributable primarily
to the growth on the clothing side. These trends reflect the development of
industrial strategies based on relocation and a shift to high value added

activit ies.

Of course, these general trends mask big differences from one branch of the
industry to another and between the Member States.

2. Assessment of International competitiveness

On a world market in textiles and clothing marked by frequent distortions of
competition of all kinds, analysis of International trade trends suggests a
loss of competitiveness throughout the Community industry, albeit with
differences from one branch to another. Two trends are particularly
revealing:

- the poor performance of the Community's exports on the markets In
  industrialized countries, where they have lost market share;

- imports have grown almost twice as fast as exports. Imports now account
  for 40% of intra-Community demand in the clothing industry In volume

  terms.

As subcontracting in non-Community countries has gained ground, exports of
textile products from the Community have been redirected, primarily towards
the Mediterranean countries (which took approximately one quarter of the
Community's exports in 1992), Central and Eastern Europe and a number of
countries in the Far East. On the import side, China took first place, with
8.3% of imports of textile and clothing products from outside the EC In
1992. Turkey, Morocco, Tunisia, India, Poland and Indonesia saw their share

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                     - 3 
of imports into the Community decline, while Hong Kong, South Korea and
Taiwan increased theirs. Looking at the various blocs of countries, imports
from Central and Eastern Europe rose by 15.6% per year in volume terms
between 1988 and 1992, while imports from the MFA countries grew by 8.5%.

Another point to note is the Community's particularly large deficits,
especially with the leading Asian exporters which are often unfettered by
free competition and resort to dubious practices such as dumping, double
pricing, subsidization, copying designs and models and non-compliance with
international labour standards.

3. Factors determining competitiveness

While analysis of trade patterns reveals the general weaknesses of the
Community textile and clothing industry, evaluation of the factors
determining competitiveness can pinpoint the causes of firms' performances.
However, any diagnosis of this industry must take account not only of the
extremely varied product range, with the level and intensity of competition
depending on the sophistication of the product and on the value for money,
but also of the fact that the industry is made up of firms of all kinds.

One factor with a definite impact on the international competitiveness of
the industry is the exchange rate for European currencies, particularly
against the US dollar. The falling dollar eroded the competitiveness of the
European textile and clothing industry, notably in the form of loss of
market share and imports, as illustrated by the flow of exports to countries
in the dollar zone. The slight recovery of the dollar since 1992 combined
with recent fluctuations in the exchange rate could, however, provide some
compensation for part of the Community industry.

Of ail the individual factors determining competitiveness, labour costs
remain a decisive factor for a large proportion of the industry,
particularly the clothing sector, where they can account for up to 40% of
production costs. In the most modern spinning and weaving firms, however,
wage costs play a far smaller part. Although relatively low compared with
other sectors of industry, most European countries now have the highest
labour costs and they are still rising. The gap between total wage costs
(including social security contributions) in the Community and In its main
rivals, including the industrialized countries, has widened considerably
since 1988. In 1993 the average hourly wage cost in the spinning and
weaving sector in the Community was $14 (with a range from 1 to 6 between
the Member States) compared with not more than $11.6 in the USA for the same
types of task.

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_**- A -**_

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Labour productivity has risen constantly in recent years, strengthening the
Community's superiority in this area. The Important part played by small
firms in the Community's industrial base is one factor which contributes to
high productivity levels and flexibility. However, the productivity gaps in
favour of Community producers are not enough to compensate for the higher
wage costs which lead to unit labour costs far greater than their
compet itors'.

Although, on the whole, Europe still has amongst the most modern production
plant in the world, it must be stressed that there are big differences
between the Member States, as some have made more progress with
restructuring than others. However, the sharp reduction in capital
investment over the last two years could, if it continues, threaten this
relatively stronger position. Also, the low capacity utilization rate
compared with the Community's competitors (e.g. 76% in the EC compared with
97% in Taiwan and 84% in the USA for spinning and weaving) is a considerable
competitive disadvantage.

A large proportion of the European industry already has a series of key
assets which largely compensate for its disadvantages on the cost front. In
particular, it has the capacity to provide a rapid, flexible response to
needs on the market, plus creativity and the full range of services
associated with production. Also, the costs of extra-Community transactions
and the added risks posed by the distance from suppliers set limits to
internationalization of production. Since the completion of the single
European market, the gap has widened further.

Finally, the quality of the human resources available in the Community is
high compared with its rivals, although considerable differences remain
between the Member States and some aspects could be improved. This applies
not only to activities involving new technologies and the reorganization of
production systems but also to fields where management plays a vital role.
Workforce skills must be considered a key factor in the adjustment process
and call for continuous training geared to changes in the industry.

4. Industrial strategies

In response to the difficult economic climate and to their structural
weaknesses, firms have been restructuring on four main fronts: relocation
of some production to countries with more attractive production costs or
better general conditions; new methods of organization, both of production
and of relations with suppliers and distributors; automation and
technological development; shift to new top-of-the-range products which are
less sensitive to price.

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                     _ 5 
Each firm's strategy depends on its position in the chain and its size,
competitiveness and markets. However, some general trends can be
identified, for example a preference for automation and flexible production
In the upstream sectors and for relocation of highly labour-intensive
downstream activities, particularly making-up operations. Relocation has
been a rapidly growing phenomenon in recent years and is likely to continue.
It started in very high-wage countries such as Germany and the Netherlands
and subsequently spread to Belgium and France followed, more recently, by
Italy. According to a recent survey, approximately L 40%, by value, OF
production under the control of large and medium-sized enterprises had been
relocated by 1992. Imports generated by outward processing traffic
accounted for just 9% of all imports, but this figure is underestimated
because some of the imports from subcontractors take the form of direct
imports. Most high value added activities such as Invention, design,
logistics, marketing and sales, of course, remain in the Community.

5. Community measures

In line with the Commission communication of 25 October 1991 and the Council

resolution of 17 June 1992, the Commission has promoted a series of measures
to make the textile and clothing industry more competitive. They can be
divided into two pakages:

(a) External measures

- On commercial policy, in addition to the extension of MFA IV for one year
  and of the bilateral agreements for two years with the option of a
  further one-year extension by tacit agreement, virtually without granting
  any new advantages but replacing the national quotas by new Community
  limits, the new integrated computerized licence management system (SIGL)
  introduced with the cooperation of the Member States and the task force
  set up, with the support of the industry, to ensure more effective fraud
  prevention (TAFI) are particularly noteworthy. Amongst the measures taken
  on joint management and monitoring of the agreements, it must be possible
  to draw on effective national statistical systems for the fundamentally
  important question of application of the safeguard clause. Despite the
  difficulties, it is essential that the Member states submit the
  statistics by the dates set.

  Results have been achieved by the measures to combat dumping and unlawful
  subsidization (with 21 measures in force and 7 Investigations In progress
  to prevent dumping and one measure in force against subsidization). In
  this context, the procedures must be speeded up (the Commission will
  submit a proposal to this end in the near future), the requisite

  resources must be allocated to this task and the council must find a

  compromise on the decision-making process without delay.

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  The action taken by the Community in the future will depend heavily on
  the decisions taken in the Uruguay Round, which is now in the final stage
  of the negotiations. The results of the Uruguay Round must include
  gradual opening-up of the markets in non-Community countries, based on
  stricter rules and discipline. The Commission considers that this could
  provide a lasting framework to help the European Industry to adjust.

  These Uruguay Round negotiations will also influence the decisions to be
  taken on revision of the Generalized System of Preferences, particularly

  the discussions on the social clause.

(b) internal measures

- The textile and clothing industry will benefit from completion of the
  internal market, in the form of lower costs, shorter delays for Intra  Communlty transactions, closer relations between producers and
  distributors and more uniform conditions of competition. Greater
  transparency and stricter control of State aid should in turn consolidate
  the competitiveness of European firms. Of course, steps will have to be
  taken to ensure that non-Community rivals apply the same rules.

  To support European creativity, the Commission has proposed legal
  protection for industrial designs and greater protection against
  counterfeiting. On counterfeiting in particular, the Commission's
  proposal directly empowers the customs authorities to decide on requests
  to Impound suspected counterfeit goods, which will simplify and speed up
  the procedures. It also extends the range of rights protected and
  encourages the Member States to Impose severe penalties. This reform
  incorporates all the suggestions made by the industry on this subject.

  Completion of the internal market has created a need to replace the
  national quotas by Community quotas. This also applies to products
  manufactured in non-Community countries from semi-fini shed products made
  in Europe and subsequently re-Imported into the Community (outward
  processing). The Commission has proposed a review of the current
  discipline on this subject In order to adapt it to the new situation and
  to create common conditions for all producers in the Community benefiting

  from it.

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                   - 7 
Support for modernization and conversion by the European industry is
provided primarily by the Structural Funds and the research and
development programmes.
Although textiles and clothing, as processing industries, are normally
downstream from the innovation process, they have successfully fitted in
with the objectives of the Community's RTD programmes. In the next
Framework Programme too the generic multi-sectoral approach will enable
them to benefit from a series of activities to make industry more
competitive (on generic technologies, information and communication
technologies, materials, etc.), from a new mechanism planned to improve
the take-up of the Community's research results by small firms and from
the specific measures to Improve dissemination of research findings.

In 1993 the Commission approved the national programmes to implement the
diversification and conversion measures provided for by the RETEX scheme
in regions depending heavily on the textile industry (for which the
Community budget for 1993-97 will be ECU 500 million). Projects
receiving support under this programme have already been completed in

most Member States.

As regards training, the two sides of industry regularly exchange views
with the Commission on various aspects of the employment problems facing
the industry. In addition to the development of basic programmes such as
FORCE, EUROFORM and NOW, it must also be remembered that an initiative is
being prepared under the new Objective 4 for the Structural Funds with a
view to providing training tailored to the new requirements and to
softening the impact of industrial change, in terms of job losses.

Under the European growth initiative, on 14 June 1993 the council of
Ministers adopted a programme of Community measures to intensify and
ensure the continuity of enterprise policy, in particular SMEs, in the
Community.

To promote subcontracting, the Commission is promoting a series of
measures to optimize the production capacity and structures of small
firms in Europe and of main contractors in this field. These include
improving the confidential (BCC) and non-confidential (DC-net) partnersearch networks. These are in addition to programmes encouraging direct
contacts between businesses, such as the Interprise scheme, which allow

transnational inter-firm contacts on a sectoral basis.

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3)

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                   - 8 
The European Textile and Clothing Observatory proposed by the Commission
to keep closer track of the situation in the Community, in close
cooperation with the Industry, is fulfilling its mandate to conduct
economic analyses, to validate data and to provide information for
decision-makers in the private sector and public authorities. A report
on the situation of the industry in 1992 was submitted to the Council
meeting on industry on 4 May. To form a clearer picture of the prospects
for the industry, the Observatory recently completed on an extensive
forward analysis, taking account of the changes in relations between
producers and distributors and of the relocation phenomenon. The results
will be known In 1994. The Commission will keep the Council informed of
developments.

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                     - 9 
6. Conclusions

The analysis in this report highlights the differences in competitive
performance between the various branches of the textile and clothing
industry.

However, the entire industry has become less competitive over the last few
years, mainly due to:

- the deterioration in the cost factors affecting competitiveness,
  particularly labour costs;
- unfair competition on the international market;
- the difficulties with the modernization process and adaptation to
  technical change and new methods of organization in certain regions and
  branches of the industry.

However, it is not inevitable that the industry will lose direction. The
European textile and clothing industry has a future provided It succeeds in
exploiting its competitive advantages, with the backing of the support
measures adopted by the public authorities. Consequently, a lasting
recovery in the textile and clothing sector calls for a package of measures
built around a global approach to international competitiveness.

The priority must be to create conditions favouring economic recovery in the
Community and stabilization of the financial and foreign exchange markets,
particularly by attaining the objectives of economic and monetary union by

the deadlines set in Maastricht.

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                     - 10 
Although the recent revaluation of the dollar has had a positive Impact on
short-term competitiveness, targeted exchange rate policies will not be
enough to attain a sound long-term competitive base. Structural policies to
improve production conditions play a decisive role In this context.

Employment policies are now being reviewed in the light of the decline in
competitiveness and the persistent structural unemployment. The Commission
will set out its ideas and proposals on this subject in the White Paper on
growth, competitiveness and employment.

The policies introduced, with strong support from the Community, to
accompany the industrial change must be stepped up to bolster the textile
and clothing industry's greatest competitive strengths, following a
horizontal approach. In particular, they will make It possible:

- to strengthen RTD and innovation activities throughout the textile
  industry, in particular by taking fuller account in the Fourth (1994-98)
  Framework Programme of the specific nature of small firms and of their
  needs for the dissemination of new technologies;

- to make it easier for workers and managers to adapt to industrial change
  and to new production systems, with the aid of a new generation of
  training and conversion schemes under the new Objective 4 of the
  Structural Funds, to respond to firms' specific needs;

- to improve firms' know-how, with the aid of a new Community Initiative on
  industrial change and competitiveness to encourage the dissemination of
  know-how and technologies and, In particular, form networks of small
  subcontracting firms with a view to specific training and information

  schemes.

Extra resources will be available for the Community research programmes and
for the programmes adopted on the Community's initiative under the
Structural Funds. The measures to support diversification and conversion,
as provided for in the RETEX Programme, will be continued and stepped up.

In order to restore the competitiveness of the textile and clothing Industry
it is essential for the Uruguay Round to agree on a generally satisfactory
package of measures for the textile industry, i.e.:

- progressive integration of the textile industry in GATT which must take
  the form, in particular, of greater opening-up of non-Community markets;

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                - 11 
- tlghtening-up of the GATT rules and discipline, particularly of the
  anti-dumping, anti-subsidy and safeguard measures and greater protection
  for intellectual property;

- Improvements to the Community's commercial policy instruments, In the
  form of greater transparency and efficiency.

Reinforcement of the mechanisms for direct cooperation between the Industry
and the Commission is desirable, particularly on the following points:

- identification and follow-up of solutions to make the industry more
  competitive. The first step could be to target the work done by the
  European Textile and Clothing Observatory on selected phenomena such as
  subcontracting and purchases of semi-finished products outside the
  Community. In addition, a framework for broad cooperation could be
  created by organizing round tables bringing together the European and
  national representatives of the industry, distributors, consumers and
  trade unions;

- promotion of exports to non-Community countries, particularly to the new
  markets which will open up in the wake of the Uruguay Round;

  in the context of the TAFI, intensification of the constructive dialogue
  already started with the industry by setting up an ad hoc task force;

- provision of full, regularly updated information in order to combat
  non-tariff barriers more effectively. This will strengthen the
  Commission's position in its negotiations with non-Community countries;

- analysis of the situation of the industry to enable the Commission to
  ensure more effective application to the agreements.

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                     - 12 
                  1* Introduction

Based on a communication from the Commission (COM (91) 399 final), on
17 June 1992 the Council adopted a resolution describing the measures to be
taken to improve the competitiveness of the textile and clothing Industry
(OJ No C 178, 15.7.1992). This called upon the Member States and the
Commission to adopt and propose such measures and upon the Commission,
amongst other things, "to submit to it regular reports on developments in
the competitiveness of the textile and clothing industry within the
Community".

This communication, based on the 1988-92 data and the figures already
available for 1993, marks the response to the Council's request and paints a
comprehensive picture of the competitiveness of the industry. It also
describes recent developments In the structure of the Industry and trade and
reviews the industrial strategies applied in this sector and the support
measures taken at Community level to follow up the communication from the

Commission and the Council resolution.

This should provide the Council with the information which it requested on
the situation of the industry and enable it to monitor the action taken by
the Community in this field.

Naturally, the Community institutions must also consider the future and the
need to step up or supplement the measures already taken. The Commission is
convinced that the efforts to bolster the competitiveness of the Industry
must be continued to support the adjustment process.

The Commission suggests that the Council should hold a preliminary debate at
its meeting on 18 November 1993 to give its political assessment of the
situation in the European textile and clothing industry and on the
developments described in this report.

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                     - 13 
         2. Recent developments In Industrial structures

2.1 General context

With a workforce of around 2 636 000 (2 753 000 including chemical fibres
and the five new Lander), a value added of ECU 65 billion and a turnover of
ECU 180 billion, the textile and clothing industry still occupies a key
position in the Community's industrial base.

With 9% of all Jobs in industry, it remains one of the most important
industries in the Community in terms of employment. In some regions, where
over 40% of the Jobs depend on it, all economic activities remain highly
vulnerable to the changes in the textile and clothing industry. Textiles
and clothing generate 5.3% of the total value added in the Community and are
important markets for other sectors (e.g. mechanical engineering, the
chemical industry, etc.). They are also recognized as a rich source of
know-how and creativity in the Community.

Between 1988 and 1992 the textile and clothing industry operated in a
context marked by the following features:

A climate of economic recession

After the Gulf crisis in 1991, the hopes of recovery faded as the Western
economies, with the exception of the USA, fell into a steady decline which
lasted the whole of 1992 and has deepened this year.

The distinctive features of this recession as compared with earlier ones
are, indisputably, the high unemployment and the Member States' heavy budget
deficits, heightened by serious monetary and financial problems.

Contraction of demand

Demographic factors (lower birth rate combined with ageing of the
population) plus the reduction in the share of the family budget spent on
textiles, accentuated by the general economic recession, produced a decline
in final consumption in 1992. Moreover, distributors and consumers have
become more versatile and more demanding, particularly in respect of value
for money.

Industrial demand too has suffered the consequences of the downturn in other

sectors.

Fierce international competition and increasing internationalization

The European textile and clothing industry remains vulnerable to low-price
imports made possible by extremely low wages and also by questionable
trading practices and social conditions in many exporting countries.
Difficult access to many real, or potential, markets likewise seriously
curbs exports from the Community.

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                     - 14 
The expansion of trade has been accompanied by internationalization and
relocation of production which has become one of the predominant response
strategies of firms in the Community. The increases In turnover and in
exports from the Community stand in marked contrast to the sharp reduction
in production within the EC.

2.2 Basic developments from 1988 to 1992

Since 1988, activity in the textile and clothing industry in the Community
has been marked by a sharp, growing decline In the volume of employment,
production, investment and, more recently, consumption (see Annex 1).

Alongside these negative trends, firms' turnover has grown, while their

value added has levelled off.

Nevertheless, the data available up to the first few months of 1993 show
that the current recession is longer and deeper than the usual cycles and
that no change of tide is imminent in the short term.

In its report to the May 1993 Council meeting on industry, the European
Textile and Clothing Observatory provided a detailed analysis of the
situation in the industry In the EC. In the light of this report and of
more recent information, five basic developments since 1988* can be
highlighted:

 (i) The industry has shed 434 000 Jobs in the Community (down by 14%),
     153 000 of them in 1992 alone (twice the average annual rate In the
     '80s). Almost 70% of the Job losses In manufacturing Industry over
     the last four years were In the textile and clothing industry (see
     Annex 2). There were big differences from one Member State to
     another, as illustrated by Annex 2a.

     At the same time, over 2 000 textile and clothing firms closed down
     last year.

 (ii) Production was down by 4.7% in the textile sector and by 6.4% for
     clothing, more than in the rest of manufacturing industry despite
     the increase in apparent consumption up to the early '90s, most of
     which was swallowed up by imports (see Annexes 3 to 5).

     Sector-by-sector analysis of production trends since 1988 shows
     falls in every sector except wool, carpets and industrial textiles,
     although in 1992 the problems gradually spread to every sector. The
     biggest falls in production were with cotton spinning and weaving
     (down by 17%) and woven clothing (down by 12%).

  1988 was chosen as the reference year partly for statistical reasons
  (foreign trade series) and partly for convenience for medium-term
  analyses.

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                     - 15 
     Annexes 6 and 7 also show that the trends varied widely from one

     Member State to another.

(Mi) After several years of sustained growth which increased the supply
     capacity of the industry, Investment in both the textile and
     clothing sectors was 32% and 25% lower respectively, at constant
     prices, in 1992 than in 1998.

     Last year investment in the textile industry was at its lowest since
     1982 in volume terms. The biggest cuts were in the cotton industry
     which is one of the most modern sectors in Europe but also suffers
     from substantial overcapacity worldwide.

     As a result of the oversupply, stock levels rose sharply,
     particularly in the third quarter of 1990, prompting most firms to
     pursue a moderate pricing policy.

 (iv) Apparent consumption in the Community rose until 1990 In the textile
     sector and until 1991 on the clothing side. Then the general
     economic recession led to a sharp fall in final consumption and in

     intermediate demand from the downstream industries. Consumer

     spending on textiles and clothing fell by 1.6% between 1991 and
     1992, while retail sales of clothing were down by 5.3%.

     Demand trends by end-use over the last four years confirmed the fall
     in sales of clothing, which accounted for no more than 45% of final
     consumption in 1992. This was offset by an increase in industrial

     textiles.

     in the light of the situation on the market, imports grew very
     slowly in 1992. However, they had grown extremely rapidly between
     1988 and 1991 as Community producers lost market share. Exports have
     grown steadily without, however, managing to stabilize the trade

     deficit which has widened from ECU 5.6 billion to ECU 12 billion in

     four years.

     Producer prices grew slower than consumer prices apart from In 1992
     when the rates were fairly similar. The gap between the trends for
     these two prices was widest when average import prices were falling
     fastest (between 1988 and 1990), particularly for textiles.

(v) Nevertheless, this generally gloomy picture must be tempered by the
     more encouraging trends in turnover and value added.

```

```
4)

```

```
                     - 16 
     The former rose by 4% in the textiles sector and 12% in clothing
     over this four-year period at constant prices, although It has
     stabilized since 1990. The latter (in firms employing over 20
     workers) varied, falling by 1.7% in the textile sector but
     increasing by 3.2% on the clothing side. Nevertheless, in relation
     to production, value added grew from 33% to 35% in both sectors.

     These trends confirm that the development of industrial strategies
     based on relocation has partly compensated for the contraction of
     local production, particularly In the clothing industry. It also
     signifies a marked change in activity throughout the industry,
     albeit with greater differences than in the past between the
     strategic objectives of the textile and clothing sectors.

2.3 Trends in 1993

The figures available for the first five months of this year show that the
downturn in activity has been even sharper than in 1992, with production
down by 8% in both the textile and clothing sectors (see Annex 2).

In view of the renewed fall in final consumption and of the weakness of the
confidence indicators, production could fall to its lowest ebb in the last
20 years.

No area of activity has been spared, not even the carpet or non-woven
sectors, not only because of the falling demand for clothing but also
because of the downturn in sectors such as the building and car industries.

```

```
                     - 17 
         3. Assessment of international competitiveness

3.1 General context

Assessment of international competitiveness by analysing trade trends is a
key instrument for diagnosing the textile and clothing industry. Between
1988 and 1992 the Community economy, which was already very open to
international trade in this sector by world standards, became even more so.
Both import penetration in relation to apparent consumption and exports'
share of production grew strongly over these four years. Consequently, the
international division of labour will play an increasingly decisive role in
textile and clothing firms' strategy.

However, the conditions in which the Community market was steadily opened up
distinctly aggravated certain Imbalances:

 (i) the trade deficit with non-Community countries in this sector
     deteriorated as imports grew faster than exports;
(ii) to a large extent this import growth replaced intra-Community
     production, leading to a decline in production and jobs in the
     industry in absolute terms.

Imports from outside the Community grew by an average of 8% a year by
volume, compared with Just 4.6% for exports, between 1988 and 1992 (see
Annex 8). This gap widened the Community's trade deficit in textiles and
clothing, particularly in 1990 and 1991. In 1991 the deficit with nonCommunity countries reached the new record of ECU 12.4 billion (see
Annex 9).

```

```
                     - 18 
In 1992 the deficit shrank slightly to ECU 12.2 billion as a result of the
slowdown in imports triggered by the stagnant demand within the Community
combined with the improved terms of trade.

Between 1988 and 1992 the gap between total demand, which grew by an average
of 1.6% a year, and production, which fell by some 0.8% a year, widened for
```

**`all finished textile products. This gap was filled`** _**by**_ **`imports, some of which`**
```
replaced intra-Community production. The upstream sectors (spinning, weaving
and fabrics) were hit not only by falling total demand, as they lost outlets
in the Community (down by an annual average of 4.4%) but also by fiercer
competition from imports.

Another point to stress is that the greater opening-up to non-Community
countries has been accompanied by remarkably dynamic Intra-Community trade,
which has grown by an average of 5% a year. Between 1988 and 1992
intra-Community trade's share of sales rose from 64% to 66% reflecting, to a
certain extent, the impact of completion of the internal market.

The general trends mentioned mask significant differences in competitive
performance on the different markets, as is clear from the more detailed
analysis below.

3.2 Exports

While exports to all the free market industrialized countries (USA, EFTA and
Japan) in 1992 were slightly down on 1988, exports to all other countries
continued to grow at a remarkable rate, by 9.6% a year In volume terms for
textiles and 16% for clothing (see Annex 10).

```

```
                     - 19 
Consequently, industrialized countries' share of ail exports from the
Community fell, by volume, from 56.3% to 44.5% for textiles and from 80% to
70.8% for clothing.

The poor performance by exports from the Community on the markets in the
developed countries between 1988 and 1992 is reflected by the decline in
Community products' share of developed countries' total imports (see Annex
12). For example, the market share of textile and clothing products from the

EC fell from 12.4% to 8.8% in the USA and from 67.2% to 66.5% in the EFTA

countries, while in Japan their market share has been falling sharply since
1990 (from 24% to 16.2%). The developing countries benefited from these

losses of market share.

These trends indicate a genuine loss of international competitiveness. The
reasons are analysed in Chapter 4. [1] This could have serious implications if

this trend were to continue in the future. The industrialized countries are

the traditional markets for exports from the Community (the USA, Switzerland
and Austria are the three leading customers). Generally, these exports take
the form of middle- to top-of-the-range products.

The rapid growth of textile exports to Central and Eastern Europe, including
the Republics of the former Soviet Union, and to certain developing
countries is largely attributable to the extremely marked expansion of
subcontracting in recent years. This entails exporting fabrics to be made up
locally and subsequently re imported onto the Community market after
processing.

The Mediterranean countries remain the leading export market for textiles
from the Community (with 23% of the Community's exports In 1992). However,
Central and Eastern Europe and the ASEAN countries recorded the highest
growth rates, particularly In 1992. Naturally, the extremely rapid export
growth to Central and Eastern Europe also reflects the far-reaching changes
In economic relations with these countries since 1990, which has taken their
share of textile exports from the Community from 8.7% in 1988 to 15% in

1992.

Clothing exports to Central and Eastern Europe have also been growing
extremely rapidly, not only due to the expansion of subcontracting in the
case of semi-finished clothing but also in the wake of the steady opening-up
of markets which were once almost completely sealed off. Exports of clothing
to the developing countries have also grown from a very low base. This has
been encouraged by unilateral liberalization measures in certain countries.
However, these have not been consolidated and therefore remain shaky.
Generally, the protectionist trade policies pursued by most developing

countries continue to block access to their markets.

  In view of the generally competitive markets In the industrialized
  countries and the relatively stable conditions of access to them,
  movements In relative shares of imports to those markets are considered a
  good indicator of international competitiveness.

```

```
                     - 20 
3.3 Imports

The loss of competitiveness on the part of European industry revealed by the
analysis of export trends is further confirmed by import growth. However,
major disparities were found between the textile and clothing sectors. For
example, imports of textiles from non-Community countries rose by 5.3% a
year while imports of clothing were up by 13.8% a year by volume (see
Annex 13).

In 1992 Switzerland, Austria and the USA, in that order, remained the
Community's three leading suppliers of textile products. However, the
industrialized countries' combined share of the Community market fell from
43.4% to 40.2% between 1988 and 1992, while Central and Eastern Europe and
the developing countries, particularly in Southern Asia, strengthened their
positions on the Community market. India, China, Pakistan and Indonesia are
now amongst the Community's leading suppliers of yarn and fabrics (see
Annex 11).

The developing countries and Central and Eastern Europe now account for over
95% of all imports of clothing into the Community in volume terms (and 91%
in terms of value). Within this group, however, the situation changed
significantly between 1988 and 1992. For example, China has become the
leading exporter to the European Community (with a market share of almost
9%). Turkey, Morocco, Tunisia, India, Poland and Indonesia have also made
significant gains. On the other hand, Hong Kong, the leading supplier in
1988, has slipped back to third place, while South Korea and Taiwan too have
become less competitive. In essence, these changes indicate that the
comparative advantage has shifted away from the countries where wages have
now risen to close to the Community minimum.

The very marked acceleration in imports, particularly of clothing, from
Central and Eastern Europe and the developing countries between 1988 and
1992 is attributable to a combination of four factors, which are analysed in
greater detail in Chapters 4 and 5:

 (i) aggravation of the structural disadvantages of most producers in the
     Community from the point of view of industrial competitiveness;

 (ii) the appreciation of most European currencies against the US dollar
     up to September 1992;

(iii) the changes in economic relations with the former Soviet Union and
     Central and Eastern Europe, as reflected, in particular, by
     bilateral agreements which have substantially liberalized trade;

 (iv) the adoption of restructuring strategies based on relocation of
     labour-intensive activities with a view to cutting production costs,
     particularly in the clothing sector.

```

```
                     - 21 
3.4 Balance of trade

In the textile sector, the European Community still recorded a trade surplus
of ECU 2.1 billion in 1992 (see Annex 9). The Community's traditional
deficit with Asia was worse in 1992 than in 1988. By contrast, the surplus
in trade in textile products with Central and Eastern Europe and the
Mediterranean countries has almost doubled since 1988, as subcontracting has
grown. Between 1988 and 1992 the surplus with the industrialized countries
contracted by 26%, the sharpest reductions being in the surplus with EFTA
(down by 37%) and Japan (down by 57%).

Increased imports of clothing from developing countries and Central and
Eastern Europe were largely to blame for the deterioration of the trade
deficit in this area to ECU 14.3 billion in 1992. Although declining since
1990, the balance of trade in clothing with the industrialized countries
remains in surplus, but not by enough to bridge the deficit with other nonCommunity countries.

One point which must be stressed is the very unusual pattern of trade with
certain non-Community countries which remain almost completely closed to
imports from the European Community (with the exception of Hong Kong and
Macao which are free ports), yet are very big exporters to the Community.

Not one of the 13 countries listed in Annex 14 (Turkey, China, Hong Kong,
Taiwan, South Korea, Macao, Pakistan, India, Indonesia, Thailand, the
Philippines, Brazil and Malaysia) imports from the Community even a third of
the value which It exports. Together they account for a deficit of

ECU 18 billion.

3.5 Differences between product categories

The average values of textile and clothing imports and exports vary widely
(see Annex 15). On average, textile products exported from the Community to
non-Community countries cost 73% more than products imported from the same
countries. In the case of clothing, the difference is 122%. [2] Between 1988

and 1992 this difference widened.

  Taking Intra-Community trade as the reference level, the average price
  differences shrink to 21% for textiles and 66% for clothing because of
  the more varied nature of trade patterns between the Member States, where
  bottom-, middle- and top-of-the-range products are all traded freely.

```

```
                   - 22 
More detailed analysis based on MFA categories offers the explanation that
the Community specializes in the most expensive varieties of the same type
of product. This is the fruit of a selective strategy targeted on the topof-the-range products on the market. However, this cannot nullify the role
played by price In competition since, as a general rule, the smaller the
price difference between the imported and exported varieties of the same
category, the further the balance of trade in the category concerned tilts
in favour of the Community.

Analysis by stage of manufacture reveals that the EC has a large deficit in
clothing but a relatively small deficit in the upstream sectors (apart from
knitted fabric) and in household textiles (see Annex 16). The Community has
a surplus or an even balance of trade In knitted fabric and finished textile
products (except household textiles). Looking at the individual types of
fibre, the EC is competitive in wool textiles, maintains an even balance
with silk but is In an extremely fragile position in the cotton sector and
with all varieties of made-up goods (see Annex 17).

The direct import penetration rate rose to 39% of final consumption of
clothing in 1992 (compared with 27% In 1988) [3] and by a relatively smaller
amount for fabrics (27% in 1992 compared with 21% in 1988). However, it must
be noted that the upstream sectors are vulnerable to the increase in imports
downstream since a very large proportion (78% to 95%) of their production is
sold on the internal market.

Since 1988, import penetration has increased in every sector except chemical
fibres (see Annex 18). Although exports' share of total production has also
increased in most of the branches considered, international competitiveness
has generally declined. The balance of trade in every product category
except knitted fabric and miscellaneous textiles has deteriorated.

  4. Analysis of the factors determining International competitiveness

Chapter 3 identified some of the general trends in the competitiveness of
the European textile and clothing industry compared with its leading rivals
over the last five years. The explanation for these trends lies In the
factors determining the cost and general quality of the product placed on
the market. Most of these factors concern the productive side (costs,
productivity, etc.), others organization of production and distribution as a
whole and yet others foreign trade practices and policies.

3 Imports account for over 50% of intra-Community consumption of many
  clothing products: T-shirts, shirts, suits, knitwear, etc.

```

```
                     - 23 
4.1 Exchange rates

Movements in the exchange rate for European currencies, particularly against
the US dollar, have a definite impact on the international competitiveness
of the European textile and clothing industry. Already over 50% of all
textile and clothing imports from outside the EC come from countries which
normally price their exports In dollars: the USA and Canada, but also Latin

America and almost all Asia.

Moreover, the vast majority of raw materials of animal or plant origin are
imported and depend on world prices, which are likewise quoted in dollars.

As regards the position of European currencies vis-à-vis the dollar, the
period covered by this report can be divided Into two: before and after
September 1992, the date marking the start of the monetary problems still
shaking the European Monetary System.

Before September 1992, all the European currencies except the drachma
appreciated in value against the dollar, to the net detriment of the
international competitiveness of the Community industry (see Annex 19). In
practice, the beneficial effects of this revaluation on the prices of raw
materials and imported intermediate products are more than counterbalanced
by the adverse effects on the cost of internal factors of production which
account for a far higher share of the total costs. All this must be seen in
the context of an industry very open to International competition.

There Is a strong correlation between the EC's trade deficit in textiles and
clothing and the exchange rate between the ECU and the dollar (see Annex
20). Similarly, the falling share of exports from the EC in imports to the
USA suggests the impact of the monetary factor.

Since September 1992 and up to August 1993 (the latest data available), all
European currencies fell against the dollar, which could possibly boost
international competitiveness. However, these gains will not be spread
evenly throughout the Community. The countries with currencies shadowing the
DM registered a less marked devaluation and will also have to withstand the
increased competitiveness of their rivals within the Community which
devalued very heavily (by between 20 and 40%).

```

```
(5)

```

```
                    - 24 
If the turbulence within the EMS persists, businesses will face extra costs
for their intra-Community transactions, as they will be forced to cover
themselves against possible changes in the parity of their currency not only
against the dollar but also against other currencies in the EMS. These extra
costs could amount to up to 2.5% of the total cost of a delivery.

4.2 Labour costs

The proportion of the total production costs attributable to labour costs
(direct wages, other payments to workers and employers' social security
contributions) depends directly on the labour intensity of the technology
employed and on wage levels. It is normally very low (7 to 12% in the
industrialized countries) in spinning mills which use highly automated
production processes. At the other end of the scale, in Industrialized
countries labour costs can account for 40% of the total cost of making-up
activities (assembly and finishing) requiring long manual production lines.

Annex 21 reveals enormous differences In average wages, both within the
Community and between the Community and non-Community countries. The data
refer to spinning and weaving. The figures available for maklng-up
activities show similar disparities, albeit on a smaller scale.

Gaps like these cannot be attributed primarily to special economic
conditions or to employment practices too far removed from European
standards, notably child labour and the absence of trade union freedoms, but
must be put down more to structural factors:

(I) the generally higher skill levels of the European workforce which
     must be reflected by higher productivity (see Section 4.4);

(II) the low level of industrialization and abundant supply of unskilled
     labour for primary activities in the developing countries and the
     surplus manpower released by industries in the midst of
     restructuring in Central and Eastern Europe.

Between 1988 and 1992 the labour cost gap, expressed in dollars, widened
between most Member States and their rivals, both in the industrialized
world (USA) and In Asia or North Africa. Only the recently industrialized
countries in the middle of the wage scale (Taiwan, Turkey, Korea and Hong
Kong) recorded bigger wage increases than most EC countries.

In the medium term, the NICs in Asia and some countries in Central and
Eastern Europe could probably fit into the current intra-Community wage
scale of 1 to 6. This phenomenon implies changes in the International
division of labour as these countries, particularly the NICs, become more
competitive on more sophisticated branches of the market and relocate
production in response to the competition from countries with lower wages.

```

```
                     - 25 
Based on the data in Annex 22, real wages have risen extremely fast
throughout the Community except in Italy and the United Kingdom, despite the
deteriorating labour market and the contracting final demand. The
fundamental explanation for this trend lies in inadequate operation of the
labour market in the form, in particular, of the rigidity of wages to cuts,
in this respect, it is important to note the diverging behaviour of real
wages in the Community and in the USA, where they have remained virtually
constant throughout the same period.

Higher inflation in the Community than in the USA or Japan also led to
faster growing nominal wages. By contrast, the devaluation of certain
currencies since September 1992 could play an important part in bridging the
gap in wage growth.

Employers' social security contributions vary widely within the Community
(see Annex 23). Although reductions in certain countries could help with the
approximation of labour costs, a broader package of measures is needed to
produce an effective solution to the competitiveness problems posed by this

factor.

4.3 Capital productivity

The productivity of production plant is a key factor in international
competitiveness. In the textile industry, the upstream sectors (spinning and
weaving) are the most heavily dependent on capital productivity for their
competitiveness, since they are relatively capital-intensive by the
standards of this industry. [4] This factor depends on both:

(a) modernization of production plant, which is dictated by the quality
     and pace of capital investment; and
(b) the capacity utilization rate which, In turn, depends to a large
     extent on organization of the production system and on the
     institutional and cultural conditions for employment.

(a) Capital investment

In the 1980s the upstream stages of the textile industry underwent a genuine
technological revolution which substantially improved their productivity.
Today, investment per job can be as high as ECU 3 million for the most
efficient plant for spinning (open-end rotors) and cotton weaving
(shuttleless looms).

  However, the upstream sectors of the textile industry can be considered
  moderately capital intensive by the standards of all manufacturing
  industry.

```

```
                    - 26 
Annexes 25 and 26 illustrate the equipment available and Investments in such
plant since 1983.

Over the last ten years, the EC's share of all purchases of spinning and
cotton-weaving equipment worldwide has been 10% and 25% respectively.

This Is twice the EC's share of capacity Installed worldwide and therefore
signifies an extremely high plant modernization rate.

Worldwide, investment displayed a fairly cyclical pattern, with extended
growth in all geographical areas from 1983 to 1988 followed by a sharp
slowdown sparing only the Asian countries, which experienced only a modest
slowdown in spinning but continued to build up substantial new weaving
capacity.

In 1992 plant purchases revived in the wool and cotton weaving Industries in
most regions but fell substantially In the cotton spinning sector, even In
Asia. In 1992 the EC's position in the cotton industry in relation to its
leading rivals weakened, except in the case of open-end operations.

Years of heavy investment in the Community have been followed by a slowdown,
starting in 1990, due to three main factors:

 (i) a sharp increase in interest rates, where a very wide gap has now
     opened up compared with the rates charged in the USA and Japan (see
     Annex 26) adding to the European Industry's traditional handicap in
     terms of the cost of capital;

 (il) a tangible deterioration in the prospective return on investments as
     a result of the falling demand since 1991 and of the losses of
     market;

(ill) a cyclical phenomenon related to the lack of new technological
     breakthroughs after the wave in the 1980s with the introduction of
     automation and computer-aided manufacturing.

Despite this recent slowdown In investment, the Community wool and cotton
industries remain amongst the most modern in the world, as Indicated by the
plant modernization rate (proportion of plant purchases over the last ten
years in relation to installed capacity).

However, country-by-country analysis reveals very big differences within the
Community, not only in the plant modernization rate but also In the level of
investment per Job (see Annexes 27 and 28).

```

```
                   - 27 
(b) Capacity utilization rate

Generally, producers in the Community make less intensive use of their
production plant than their non-Community rivals. For example, in Taiwan
spinning and weaving plant is in operation for 97.2% of the maximum
possible, compared with 84% in the USA and the Community average of not more
than 76%.

This disparity reflects the more rigid organization of work in Europe and
the generally shorter working hours (see Annex 29) compared with the USA,
Japan and most NICs.

Increasingly, practices such as these are perceived as a competitive
disadvantage for the European industry. Accordingly, over the last five
years, virtually every Community Member State has been moving towards more
intensive utilization of production plant without, however, increasing
working hours which are still even being reduced, except In Spain, Portugal
and Greece.

This new trend can be attributed to the introduction of organizational
systems allowing more flexible work and shorter delays between successive
production runs.

4.4 Labour productivity

Apparent labour productivity, measured in terms of value added per employee,
has been rising by an annual average of 3.2% throughout the industry.

This is hardly surprising, despite the falling production, In view of the
heavy Job losses reported In the sector combined with the trend to
concentrate high value-added activities In the Community.

However, big differences In productivity levels persist within the
Community, reflecting the differences in wage levels and average Investment
(see Annex 30). The countries with the highest wages have also been making
the fastest progress with restructuring production plant, so that the gains
in productivity partly compensate for their disadvantage on wages.

The key aspect in connection with competitiveness is, however, international
comparison of the real productivity levels for the average worker doing
similar jobs.

```

```
                     - 28 
The figures in Annex 31, which show the productivity indexes based on expert
opinion, [5] show that the advantage held by certain Community countries on
this point is too slim to compensate for their higher wage costs.

As a result, when it comes to unit labour costs, the Community countries are
at a distinct disadvantage over non-Community countries, apart from Japan in
the case of weaving and spinning (see Annex 32).

The steady erosion of the productivity advantages stems partly from the
particularly rapid spread of new production technologies at international
level. Over the last few years certain non-Community countries have acquired
particularly efficient modern production plant, in some cases at a faster
rate than the Community.

Consequently, higher labour productivity cannot be achieved by modern plant
alone. It also depends on the dynamism of the industrial base and on the
quality of the human resources available.

In industries where economies of scale are of minor importance, small firms
are a driving force towards higher productivity by virtue of their
flexibility to adapt to change and their lower overheads. A recent study [6 ]
found that small firms achieved the highest productivity in most
Member States. In the clothing sector, medium-sized firms employing between
100 and 200 workers had the highest productivity, whereas in the textile,
knitwear and simple made-up goods sectors very small firms achieved the
highest productivity per employee.

The predominant trend in the textile and clothing industry throughout the
1980s in every Community Member State has been towards smaller firms,
particularly at the production stage. In 1988, small and very small firms
employed 41% of the total workforce in the textile industry and 57% In
clothing and generated 47% of the total turnover in both these sectors.
However, this category of firms, which is far more widespread in the
Community industry than in non-Community countries (whether the USA or
NICs), is particularly sensitive to relocation which tends to destroy local

networks of subcontractors.

5 Source: Werner International.

6 Com!text!I, "Structure de l'industrie textile-habillement en Europe: Rôle
  des petites et micro-entreprises", bulletin 1993/4.

```

```
                    - 29 
4.5 Human resources

Human resources and skills are the basic source of productivity improvements
and flexibility for the economy and Individual firms alike. But they can
also seriously slow down the dissemination of technological innovations, of
new production processes and new organizational methods should skills prove
unsuitable or insufficient.

It is generally considered that the Community's competitive advantages over
non-Community countries lie In the superior quality of its human resources
rather than in its modern production plant. However, training standards,
management and even awareness of the problem vary markedly between the
various regions of the Community.

Talks between employers and trade unions are endeavouring to propose
adequate responses to today's major problems and challenges. Although the
information on training needs, particularly In the made-up goods sector, is
still inadequate, it is already clear that:

(a) Training tailored to the new needs generated by industrial change is
     not always available:

     * new production technologies call for continuous training;

    * reorganization of production and distribution systems calls for
       new sk i11 s ;

     * greater competitiveness calls for greater efforts on
       flexibility, reliability, quality and know-how. It also implies
       integration of skills at all levels In management functions.
       Many of these are "horizontal" skills.

(b) The unattractiveness of the sector makes it more difficult to
     recruit certain skills.

(c) The large proportion of female workers (78% in the clothing
     industry) and the big regional disparities in vocational training
     are two unique features which make this sector more vulnerable.
     Better dissemination of know-how and experience is essential In this
     respect.

(d) The heavy Job-shedding in the industry calls for general training
     schemes.

Workforce skills must, therefore, be considered a key factor in flexibility
and adaptation and, increasingly, in access to employment.

```

```
                     - 30 
4.6 Raw material, energy and environmental costs

Raw material prices, quoted in dollars, have been failing very sharply since
1990 (see Annex 31). However, this is unlikely to improve European
producers' competitive position since their competitors will also benefit
from it. On the other hand, the revaluation of most Community currencies in
relation to the dollar will have given Community producers, particularly in
the upstream sectors, certain competitive advantages over their rivals In
the dollar region (or in countries which have devalued their currencies).

Although synthetic fibres and cotton are traded as commodities on world
markets, some producers nevertheless pay substantially lower prices. This
applies in particular to Taiwan In the case of polyester and to Pakistan and
India in the case of cotton, as a result of double pricing practices which
have been denounced repeatedly.

The Impact of electricity prices varies, but is greatest in the finishing
sector. Very substantial differences have been reported, not only In
comparison with certain non-Community countries (particularly the USA where
electricity prices are far lower) but also within the Community. Italian,
Spanish and Portuguese producers, for example, have to pay twice as much as
their French or Dutch counterparts. Completion of the internal energy
market will no doubt narrow the existing gaps and lower the average price in
the Community.

The cost of compliance with national environmental standards already
accounts for a large proportion of total production costs, particularly for
dyeing and finishing. In Germany, for example, environmental costs already
amount to 9.2% of the total while in most other EC countries the figure is
close to 5% (see Annex 32). The Community's new environmental protection
policy should bring these figures closer together. However, environmental
costs are virtually negligible in the vast majority of the developing
countries and of Central and Eastern Europe.

4.7 Complex factors affecting competitiveness

In addition to these quantitative criteria, the International division of
labour reflects two other types of factor which, on the whole, favour
continuation of certain production activities In the Community:

- first, there are a series of barriers to internationalization of

  production, particularly in the form of the costs and risks incurred by

  customers;

```

```
                     - 31 
- second, there are the complex factors, I.e. the key factors determining
  success which are hard to quantify but largely compensate for local cost
  disadvantages.

(a) The main added costs generated by internationalization of sourcing
     and subcontracting are: [7 ]

       transport costs;
       administrative costs for customs clearance;

       costs to cover revaluation of the dollar (purchases for future
       delivery, currency option, etc.);
       the costs of issuing letters of credit;
       financial costs due to the fairly strict terms of payment
       normally demanded by non-European suppliers;
       quality control costs, If this task is performed by specialist
       undertakings.

Taking account of all these costs, but excluding customs duties and quotas,
since completion of the internal market on 1 January 1993 Community
producers hold an average advantage of 7% over their competitors close to
the Community and of 11% over those further away.

Added to these costs,there are also the risks inherent in extra-Community

transactions due to:

     the deterioration in quality which sometimes follows over-hasty
     changes of supplier;

     the transfer of the firm's own know-how to the subcontractor or to

     competitors which are also customers of the same subcontractor;
     the added cost, or even Impossibility, of delivery due to import
     quotas;
     the loss of networks of specific know-how available on a traditional
     European market.

(b) The complex factors most quoted by the firms are:

       the sophistication and quality of the product;
       the reliability of the supplier;
       the ability to accept small orders (short circuiting);
       local availability of high-quality yarn or fabric;
       technical know-how;
       flexibility of production;
       delivery t ime;
       the possibility to repeat orders.

European suppliers are considered to offer their customers better conditions
on all these counts than their non-Community competitors.

  Institut Français de la Mode (IFM) "A competitive analysis of finished
  textile and clothing products: imported versus European manufactured
  items", 1992.

```

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(6)

```

```
                     - 32 
Annex 33 clearly shows that although Asian countries offer more generous
retail margins, they cannot satisfy the demand for small orders (short
circuiting) or for moderate to high quality. Instead, they therefore hold
the competitive advantage in manufacturing relatively standard basic
products, such as household linen, simple made-up goods, yarns and fabrics
or bottom-of-the-range clothing. Against this, the Mediterranean countries
and Eastern Europe continue to offer advantageous conditions both In terms
of retail margin and quality criteria, particularly in the case of clothing

One final point to note is the strong position of NICs with regard to
quality and technical know-how. In the near future, this could strengthen
their competitive position on the markets in top-of-the-range products.
This trend Is reinforced by the system of quantitative quotas which
encourages producers to upgrade their products in each category.

```

```
                     - 33 
4.8 Distortion of International competition

All kinds of distortion of competition are widespread on the world market in
textiles and clothing. Very few countries can claim to practice no form of
protectionism or of direct promotion of their exports.

The European Community too imposes tariffs and applies import quotas
negotiated bilaterally with the leading exporting countries. The duties
imposed by the Community are amongst the lowest in the world on textiles. A
large number of exemptions and suspensions are also allowed In application
of the Generalized System of Preferences and several preferential
agreements. The rapid growth of imports In recent years raises questions
about who really benefits from the system and the advisability of
maintaining it in the textile sector. [8 ]

The tariff and non-tariff barriers set up in many non-Community countries,
particularly developing countries and NICs, distort the patterns of trade
and put Community producers and exporters at a serious disadvantage.
Usually, in practice barriers of this kind constitute veritable bans on
access to the market, either because of their level or due to the arbitrary
way in which they are applied.

Import duties of up to 100% are common, particularly in Asia and Latin
America. In most cases, the more elaborate the product the higher the
tariff in order to encourage local production of products with a higher
added value (clothing). Some countries, such as the Philippines, Taiwan or
Korea in the recent past, have cut their customs duties, but, for want of
consolidation under the GATT rules, can still raise them again to suit their
political requirements. The textile and clothing industry is one of the
most heavily protected sectors. This Is because the importance of local
industries to the industrial base puts them in an extremely strong position
to exert pressure on the authorities. In many Asian countries (India,
Pakistan, Indonesia, China, etc.) textiles and clothing is considered a
strategic industry and an extremely important hard currency earner.

The USA, the Community's leading market for exports of textiles and its
third market for clothing, also imposes high import duties, with maximums
ranging from 15% to as high as 42%, particularly for woollen fabrics and
clothing. The Commission expects a considerable reduction in these peaks as
the USA strictly implements the Tokyo agreement.

8 The USA does not apply the GSP in the textile and clothing sector.

```

```
                     - 34 
The commonest non-tariff barriers include import bans, exchange controls and
local distribution systems. As well as restricting Imports, these barriers
also play an important indirect role in promoting exports. In particular,
the protection extended to local producers on their home market enables them
to charge prices which are normally higher than the world market rate.

Several means of artificially enhancing the competitiveness of exports are
commonly used:

- production and export subsidies;

- dumping (particularly in the upstream sectors of the Industry);

- double pricing of raw materials.

Copying of designs and models is another source of distortion of
competition, in that this fairly widespread practice on most non-Community
markets denies the firm holding the trademark the chance to reap the full
commercial benefits from exercising the trademark or exploiting a specific
innovation. This practice seriously damages the interests of European firms
which hold a distinct competitive advantage in branded goods.

At the moment all these practices and policies relating to International
trade in textiles and clothing militate distinctly against the interests of
the Community's industry, which rightly recognizes them as one of the
adverse factors to blame for its loss of competitiveness. Integration of
the Industry into the GATT rules and disciplines could help to create a more
evenly balanced international environment.

```

```
                   - 35 
               5. Industrial strategies

5.1 Over the last twenty years textile firms in the Community have faced
two major challenges:

- competition from products from low-wage countries;

- weak capacity for long-term growth in final demand.

They have been forced to meet these challenges by restructuring their
methods of organization, technologies, etc. at various times, depending on
their position in the chain and their location. Clothing firms in high-wage
countries such as Germany or the Netherlands were the first to be hit and,
consequently, to respond. The upstream branches reacted later, in response
to the loss of home markets in the wake of the thinning-out of the clothing
industry and to the emergence of Integrated sectors In certain developing
countries, encouraged by the availability of raw materials and investment
aid. Today, countries such as Portugal or Greece still need to restructure
In response to challenges of this type, but have hardly started the process.

Consequently, the textile and clothing industry in the Community presents a
very varied and, at times, contrasting picture with a juxtaposition of firms
in different stages of a restructuring process, of which the broad lines are
nevertheless becoming clear. More specifically, four major strategies can
be identified for the restructuring of the European textile industry:

 (i) modernization of production plant;

 (ii) relocation to lower-wage countries;

(ill) specialization in specific markets or products, with the adoption of
     a product strategy;

 (lv) change of organization and methods to encourage globalization and
     flexibility.

Naturally, these four methods of restructuring are by no means incompatible
but are often combined in firms' choices of strategy.

5.2 The textile industry has undergone extensive technical modernization.
Considerable progress has been made with automation, allowing savings on
labour costs and, at the same time, transforming the production system,
which has become more capital intensive, particularly at the spinning and
weaving stages.

Some even say that these technological changes have reversed the trend and
returned the comparative advantage to firms in the most industrialized
countries, which could benefit from more direct access to the technological
innovations ( particularly by Joining "clusters" bringing together the
industries producing the plant and materials) and have a reserve of more
skilled human resources.

```

```
                     - 36 
However, before new advantages such as these are converted into more
balanced patterns of trade, other factors must also enter into play (a more
favourable exchange rate, fairer terms of international trade and more
flexible employment).

Although the clothing industry has also benefited from technological
innovations, particularly computer-aided design (CAD), it remains
labour-intensive, particularly the making-up operations. This makes it more
difficult to reduce the wage disadvantage by modernizing production plant.

5.3 Clothing firms' relocation strategy has taken the form of international
subcontracting: [9] fabrics or semi-finished clothing are delivered to
producers in low-wage countries, which perform generally highly
labour-intensive but simple tasks such as making-up and finishing and then
return the finished product to the firm which placed the order.

This practice has led to the disintegration of the original production
units, which now retain only a very small core of workers employed, however,
for activities offering high added value or of strategic importance:
product development, quality control, small production runs and customer
services. In other cases, most frequently In France or Italy, relocation
implies a thinning-out of the local networks of subcontractors who
traditionally offered the advantages of flexibility and cost control. [10] In
some low-wage regions of Portugal or Greece, subcontractors who
traditionally worked for customers in other Community countries have been
replaced by producers from countries with even lower wages (the Maghreb
countries or Central and Eastern Europe).

A recent survey of a sample of over 200 large or medium-sized subcontractors
found that production under their control in other countries rose from 30%
of the value of their own production in 1988 to 40% in 1992. [11] The same
survey concluded that this trend was likely to continue in the years ahead
as the improved performance of the firms which have embarked on this path

forces their rivals to follow suit.

9 Direct investment is virtually non-existent In this sector, where
  technology and capital play a minor role.
10 Subcontractors employ an estimated 500 000 workers in the Community.
11 Schaeffer "Outward Processing Trade in the EC Clothing Industry",
  European Textile and Clothing Observatory, 1993. In this study, the
  countries to which production has been relocated include the low-wage
  countries in the Community.

```

```
                     - 37 
Originally relocation was targeted on the production of long runs of simple
products. Today it is gaining ground for short production runs and more
complex products. A series of factors encourage further development of this
strategy in the clothing industry, including the widening wage gap, the
impact of the telecommunications revolution, the sustained heavy pressure on
production costs on a market in recession and the increasing Involvement of
the distribution chains in directly productive activities.

Relocation is also on the increase in other branches of the Industry, albeit
on a more modest scale, principally in the form of direct Investment
alongside subcontracting and direct purchases of finished fabrics or
unbleached cloth. Apart from the advantage of lower wage costs, other
objectives also come into play, such as to establish a presence on markets
currently closed to imports in order to satisfy local demand, to follow the
relocation of clothing production or to avoid certain environmental
constraints which are considered too heavy a burden.

The discipline imposed by the Community on outward processing traffic (OPT)
aims at ensuring that the Community maintains a very firm base in the
upstream branches of the textile Industry. In order to qualify for more
favourable tariffs (which can even go as far as exemption in the case of the
countries of Central and Eastern Europe) or for an extra quota, OPT
operators in the Community must, in principle, use fabrics originating in
the Community. However, the steady liberalization of trade with the
countries most commonly involved in OPT (the countries with preferential
arrangements and Central and Eastern Europe) could loosen the control
allowed by this discipline in the future.

5.4 Product differentiation is achieved by:

- the spread of the fashion factor to stimulate repeated purchases in
  consecutive seasons;

- the fragmentation of the markets into quality and price ranges;

- the response to the new social, environmental and Industrial
  requirements.

In this way, product differentiation contributes not only to stimulating
final demand but also, above all, to reducing the price elasticity of
demand, thereby improving the profit margins of the leaders in pace-setting
niche markets. It therefore implies the choice of a specific type of market
defined in the light of the brand image.

Differentiation strategies are well suited to large or medium-sized clothing
manufacturers which rely on local subcontracting networks and are able to
adapt rapidly to consumer trends. However, this solution is not the only
way in so far as relocation enables producers or distributors based in the
Community successfully to pursue strategies based on volume not
differentiation. Recent trends seem to call into question the traditional
strategy of brand image differentiation and, instead, put the emphasis on
the price criterion in consumer choice.

```

```
                     - 38 
5.5 New organizational strategies aim at positioning the firm at the most
profitable stages of the circuit, in terms of generation of added value, and
to give It a high capacity to respond to fluctuations in demand.

In the clothing industry, production costs often account for less than half
of the consumer price. Consequently, the biggest margins are downstream, in
the distribution circuit. Globalization strategies aim at improving the
firm's position in the chain, by integrating a series of activities from
design right through to the retail trade and focusing on the activities with
the highest added value. Today this same concept is applied by producers,
who have gradually added distribution activities, and by distributors who
have moved further back along the chain to secure certain supplies meeting
their precise specifications.

Integration of production and distribution activities facilitates the
adoption of quick response methods and short circuiting. Global
undertakings must, therefore, remain flexible to avoid excessive stocks or
excessive delays in restocking points of sale.

5.6 This Juxtaposition, within the Community, of strategies at different
stages of development explains the widely contrasting forms of competition
which producers In the Community must face. For the sake of simplification,
a distinction could be drawn between two types of competition:

 (i) The first is based mainly on the most sophisticated products, where
     Community producers must compete against the other industrialized
     countries as well as the rivals emerging in the NICs for certain
     made-up products. This includes top-of-the-range clothing, finished
     fabrics with high added value, Industrial fabrics, etc. If they are
     to succeed in this field, producers in the Community must play to
     their strengths of creativity, innovation, services and proximity to
     the most profitable consumer markets. Differentiation and
     adaptability will play the major part in determining their
     competitive position.

 (ii) The second type of competition concerns relatively homogeneous basic
     products such as cotton yarn/synthetic fibres, unbleached or
     bleached cloth and the vast majority of non-differentiated household
     textiles and middle- to bottom-of-the-range clothing. Community
     producers' competitors come from the low-wage countries. In this
     case, competition is based primarily on price, even though
     ultimately value for money (taking account of delivery times,
     finishing, etc.) determines the siting of production.

These two types of competition create a kind of "duality" with modern and
traditional firms existing side by side within the Community, sometimes with
diverging interests, particularly with regard to foreign trade and
competition policy. Traditional firms must also restructure In order to
make the industry as a whole more competitive at international level.

```

```
                     - 39 
                6. Community measures

6.1 Commercial policy

6.1.1 MFA and bilateral EC agreements

In accordance with the negotiating directives received from the Council on
6 October 1992, in December 1992 the Commission successfully negotiated a
one-year extension of the MFA, which was going to expire at the end of 1992,
without any change in its provisions, and an extension for two years (plus a
tacit renewal for a third year If necessary) of each of the existing
bilateral textile agreements.

The Community's textile agreements under the MFA or within certain
preferential relationships with other countries are the main political
instrument to defend the European textile and clothing industry against
low-cost imports disrupting the markets and to give the industry the
possibility to re-establish its competitiveness. These agreements cover a
wide range of possibilities for consultation with partner countries which
have not always been fully utilized in the past.

Their most important components are certain quotas on Imports Including
correct management thereof and the negotiation of new quantitative
restrictions when justified by the economic situation of the Community's
industry.

Following the completion of the single market leaving only Community quotas
in existence, the Commission, in cooperation with the national licensing
authorities, has established an integrated computerized system for the
coordination of quota management (SIGL). After a transitional period of
provisional arrangements the Community system has become fully operational.

Regarding the application of the safeguard clause, timely trade statistics,
but also information on other economic Indicators must be constantly
available. Member states must urgently Improve their statistical reporting
systems to make such data available within the required deadlines, since
otherwise it will be Impossible for the Commission to manage the Community's
textile policy efficiently. Only on this basis will the Commission be able,
with a view to conducting an efficient textile trade policy in the context
of the single market, to monitor the industry's economic situation and to
initiate, if necessary, consultations with third countries with a view to
restraining imports if the conditions for such action are fulfilled.

6.1.2 Control and fraud prevention activities

Policy measures extending or limiting trade (e.g. the Community's
Generalized System of Preferences or the quantitative restrictions of the
EC's bilateral textile agreements) could encourage certain economic
operators to seek unduly to exploit certain provisions or to circumvent
them, as the case may be. Such activities also distort competition and
undermine the competitiveness of the European industry.

```

```
(7)

```

```
                     - 40 
In addition to ensuring the Member States' licensing authorities and customs
administrations apply the appropriate controls on textile imports,
Member States also provide mutual assistance in the customs field, [12] in
particular by exchanging information and by taking joint action under the
coordination of the Commission. For this purpose the Commission has made
available a computerized information network (SCENT), which has recently
been extended through the Customs Information System (CIS).

In order further to intensify the efforts of the competent authorities in
the Community to put an end to those fraudulent practices, the Commission,
with the help of the European Parliament and the Member States, launched the
textile ant I-fraud initiative (TAFI) and cofinanced the establishment of an

anti-fraud task force, to be managed by the industry, to detect anomalous
imports. Through this new initiative, and also in cooperation with third
countries, the Commission intends to support the activities of both the
Community textile industry and the competent authorities in the
Member States in combating fraud.

On the basis of systematic surveillance and analysis of trade flows and
intensified efforts to discover and trace fraudulent transactions, the
collection of evidence of fraud will also be facilitated by additional
missions to third countries. When clear evidence of evasion of quantitative
limits is available the Commission, in agreement with the Member States,
will open the necessary consultation with third countries in order to deduct
the fraudulent imports from the quotas of the countries of true origin. The
Commission intends to increase the effectiveness of this action by
strengthening both the procedures and the resources.

6.1.3 Uruguay Round

Within the GATT and the ongoing Uruguay Round negotiations the Commission is
trying to make progress in opening up the markets of the Community's trading
partners and reducing unfair trading practices in world trade in textiles.
Acceptance of a textile package based on the Dunkel text will be assessed in
the light of satisfactory progress in the other areas of the negotiations

relevant to trade in textiles.

In view of the complexity and interdependence of economic and political
factors which are relevant for developments in international economic
activities and trade, the following priorities have been identified for most
urgent further action:

12 Council Regulation (EEC) No 1468/81 of 19 May 1981 (0J No L 144,
  2.6.1981, p. 1).

```

```
                     - 41 
Market access

The analysis of competitiveness in Chapter 2, but also the Uruguay Round
negotiations, have clearly underlined the major importance of, and need for,
mutual market access between world trading partners. Therefore, the

reduction of tariff and non-tariff barriers has become the centre of

negotiations. There is no more Justification for comprehensive protection
of highly competitive and continuously growing and exporting textile and
clothing industries in many countries, particularly in newly industrialized
countries (NICs), but also in certain developing countries.

Therefore the Commission will continue to insist on a real and effective

reduction of barriers to textile markets in developed as well as developing
countries. The Community's objective must be to achieve reasonable economic
results. On such a basis It would be possible also to accept the gradual
integration of the textile sector into GATT. Purely superficial reductions
from very high tariff levels do not ensure improved market access.

The main objective, therefore, remains the harmonization of tariffs In all
major textile exporting and importing countries. The Community proposal
tries to find a compromise by establishing two sets of maximum duty rates
for certain product categories, one set to be applied to advanced countries

and the second to other countries.

Once the Uruguay Round has been concluded, another aspect relevant to

international trade in textiles will be the harmonization of the rules of

origin planned within the framework of the Customs Cooperation Council. The
Community's priority must be to maintain at least the present level of
processing required in the EC.

Ant I-dumping and anti-subsidy measures

Depending on the progress In the Improvement of real market access, dumping
and subsidization may take on a new perspective. While dumping practices in
open markets generally lose ground, subsidization could increase. Both
practices are covered by the Uruguay Round negotiations In order to Improve
the existing GATT rules and competitive conditions on worId markets.

The improvements in the antI-dumping and antl-subsidy provisions to be
proposed by the Commission, particularly those concerning a reduction of the
deadlines for investigation, will respond to the specific needs of the

textile sector.

Currently there are 21 anti-dumping measures and one ant I-subsidy measure in
force in the textile sector against 12 third countries, while seven
investigations are in progress.

```

```
                     - 42 
Trade-related aspects of intellectual property rights (TRIPS)

The spread of industrialization beyond the traditional centres of
manufacturing has created a situation in which questions of transfer and
protection of intellectual property have become vastly more important than
ever before. The European textile and clothing Industry today Is suffering
from piracy all over the world. It was therefore In the Community's
interest that intellectual property was introduced in the GATT Uruguay
Round. In this context the TRIPS negotiations have produced a draft
agreement as a basis for the introduction and application of the necessary
legislation in the most important textile trading countries. Moreover at
the Community's request the TRIPS provisions contain an obligation for all
parties to ensure through industrial design law or through copyright that
requirements for securing protection for textile designs, in particular in
regard to any cost, examination or publication, do no unreasonably impair
the opportunity to seek and obtain such protection (Section 4,
Article 25-2).

Already at present, on the basis of specific cases of violation of
intellectual property rights, consultations could be held with most of the
Community's textile trading partners and measures could be envisaged in the
framework of existing bilateral textile agreements.

6.1.4 Generalized System of Preferences (GSP)

The new ten-year scheme announced by the Commission in its communication of
6 July 1990 to the Council (COM(90)329 final) has been postponed from one
year to the next because of the uncertainty concerning the outcome of the
Uruguay Round. This has led to a freeze on the annual GSP arrangements,
starting in 1990 and lasting until 1993.

At its meeting on 28 April 1993 the Commission examined a memorandum on the
GSP for 1994. It concluded that It was preferable to postpone introduction
of the new ten-year scheme once again until 1 January 1995 since Uruguay
Round negotiations will not be concluded until the end of 1993, making It
impossible to start to implement the results until 1994 at best.

For 1994 the Commission is thinking in terms of Inclusion of a minimum
package of changes to allow readjustment and simplification, without
changing the basic mechanisms of the GSP.

The Commission's proposal for 1994 includes updating the reference
statistics, taking account of the changes in the sensitiveness of the
products and in Individual countries' competitiveness and applying the
differentiation mechanisms to the most competitive countries.

```

```
                    - 43 
In the near future the Commission will have to start to examine the new

ten-year GSP scheme including, inter alia, the insertion of special
arrangements to take account of the impact of the social and environmental
aspects on competition. The review of the specific mechanisms applicable to
textile and clothing products will have to take account of the changes in
international competition since the last review and of the prospects after
the Uruguay Round negotiations. It will also have to be based on an
assessment of the real benefits which the system offers to exporting
countries.

6-1-5 Export promotion

With increasing competition from imports and improved access to textiles and
clothing markets, particularly to those countries with large and rapidly
growing markets, it seems important to support the efforts of the European
industry to develop its exports to those markets outside the Community. The
initiatives taken by the Member States but also by the European Parliament
should be further improved. In 1991 the Commission launched an export
promotion scheme (EXPROM) seeking to develop new markets for EC textile
products.

A large part of the ECU 680 000 budget for EXPROM was used to support a
range of initiatives in the textile and clothing sectors designed to help
Community exports exploit opportunities In new markets as well as promoting
a distinct Community image. Working together with the relevant European
industrial federations, several analyses investigating the potential of new
markets were commissioned and a variety of exploratory missions and trade
fairs were supported in those markets already identified as offering
opportunities for EC exports.

6.2 Single market

6.2.1 Community rules on outward processing traffic

In the context of the new Initiatives and strategies of enterprises In the
textile and clothing industry, transfrontier subcontracting, I.e. outward
processing traffic (OPT), has become of major importance (see Chapters 3 and
5). In product areas which are not subject to quantitative Import
restrictions in the Community, all operators In the EC industry have equal
opportunities to carry out OPT. However, where specific OPT quotas have
been established, Community Regulation No 636/82 [13] granting additional
quantitative access to OPT operators in categories under restriction, the
benefit has, in principle, been reserved for the Community's clothing
industry.

13 Official Journal No L 76, 20 March 1982, p. 1.

```

```
                     - 44 
The establishment of Community OPT quotas on 1 January 1993 requires
elimination of the disparities in the interpretation of Regulation 636/82
between the Member States. To this end, the Commission has proposed
amendments to the Regulation which will harmonize application throughout the
Community. [14 ]

The Commission's proposed amendment (COM(93)259 final) to this Regulation is
not intended to establish a new policy approach to OPT imports but, on the
basis of compromises between the Member States' currently different
interpretations, aims at defining clear common lines for the implementation
of this Regulation in the Community. At the same time it tries to reflect
the wishes and needs of the European clothing industry in its efforts to
improve its international competitiveness as well as to be consistent with
the Community's overall textile trade policy.

6.2.2 Protection of intellectual property rights

The basic importance of the creation of new trademarks (labels), models and
designs in the field of textile fashion for the competitiveness of the
Community's textile and clothing industry has become increasingly evident.
A suitable system of registration and legal protection of industrial
designs, not only in the Community but also at international level, and
effective application thereof to textile trade worldwide is therefore

needed.

The Commission, in anticipation of the results of the Uruguay Round in this
field and as a clear signal to other participants in world trade, has
proposed two pieces of internal EC legislation:

- rules laying down measures to prohibit the release for free circulation
  in the Community of counterfeit goods, including illegally copied designs
  and models (amendment of Regulation 3842/86), [15 ]

- Community Regulation on the legal protection of industrial designs. [16 ]

These proposals take particular account of the specific situation in the
textile and clothing market, e.g. the quick change of fashion, the multitude
of designs and models and the small and medium size of most of the
enterprises.

14 Commission communication to the Council: Implications of the internal
  market for commercial policy in the textile and clothing sectors,
  SEC(92)896 final, 1 June 1992, p. 2.
15 COM(93)329 final, 13 July 1993.
16 C0M(93)342 final. 28 July 1993.

```

```
                     - 45 
6.2.3 Protection of the environment

Environment policy, depending on the sector of industry concerned and on
existing consumer preferences, can either be an advantage or a disadvantage
to the competitiveness of an industry:

- there could be advantages for industries offering environmental
  protection technologies, goods and services or ecologically sound
  consumer products,

- but at the same time there could be disadvantages for industries which
  have to bear higher environmental costs for production than their
  competitors in other countries with lower environmental standards or
  suffer from non-acceptance by consumers of ecologically sound products.

The situation in the Community's textile and clothing industry seems to be
different in the individual lines of production as well as Member States,
but it still lacks transparency. It is evident that the Community has to
continue its efforts to harmonize its environmental policy if certain
distortions in intra-Community competition are to be avoided.

Very few of the textile-exporting developing countries have already
established environmental standards. In assessing their conditions of
international competitiveness. Community producers have to take differences
in the degree of enforcement of such standards increasingly into account.
This is one of the reasons why the Commission supports the view that as soon
as possible after completion of the Uruguay Round work in international
trade organizations should also cover the environmental aspects.

Another important part of the environmental aspect is systematic information
of consumers will make them aware of the advantages of ecologically sound
products and develop their willingness to give them preference. This aspect
Is Included in the Fifth Action Programme on the Environment, [17] but also
taken into account by the initiatives concerning the eco-label.
Regulation 880/92 [18] on eco-labels and Regulation 1836/93 [19] allow voluntary
participation by companies In the industrial sector in a Community
eco-management and audit scheme.

17 "Towards sustainable development", OJ No C 138, 17.5.1993.
18 OJ No L 99, 11.4.1992.

19 OJ No L 168, 10.7.1993.

```

```
                    - 46 
6.3 Competition policy

There is a danger that the current economic context in the textile and
clothing industry could prompt the authorities to take more measures to save
firms In order to soften the social and regional impact of the difficulties
facing firms. Far from solving the problems, these measures hamper and
needlessly delay proper operation of the adjustment mechanisms, thereby
adding to the economic and social costs.

To avoid aggravation of the overcapacity In certain subsectors, it is
essential for firms to have a legal framework ensuring compliance with the
rules on competition.

Aid may be granted to textile and clothing firms on the basis of schemes
```

**`authorized`** _**by**_ **`the Commission for regional development purposes, to promote`**
```
R&D, to protect the environment, to support small firms, etc., while
observing the general guidelines laid down in the following specific
frameworks:

(a) Aid to the synthetic fibres industry Is controlled by the code on
     aid to this industry which entered into force In 1977 and was last
     renewed and amended in December 1992. [20 ]

     Under this system, the Commission must be notified of all aid
     covered by this code and will make its authorization of aid
     conditional on a "significant reduction" In the production capacity
     of the assisted company.

20 OJ No C 346, 30.12.1992.

```

```
                    - 47 
(b) The specific aid to the textile and clothing industry was defined in
     the 1971 communication from the Commission to the Member States on
     aid to the textile industry [21] and defined in greater detail in the
     1977 letter. [22 ]

A more rigorous competition policy will also call for a greater effort to
improve the transparency of aid to textile firms. To this end, the
Commission has urged the Member States to improve the notification
procedures, operating on a standardized basis, and to establish an annual
report on the aid granted by the Member States to vulnerable industries in
crisis (including textiles and synthetic fibres). Closer collaboration
between the national authorities and the Commission is necessary to enable
the Commission to evaluate the sectoral impact of non-sectoral aid, which
has not yet been the case.

The Commission departments concerned have begun to consider restriction of
regional aid for highly capital-intensive investments since their
contribution to regional development Is sometimes not enough to compensate
for the possible distortion of competition.

6.4 Support for modernization and conversion

6.4.1 Research and technological development

Textile and clothing firms are usually downstream from the technological
innovation process. They benefit from the process by adapting their needs
(flexibility, productivity, durability and quality plus cost-effectiveness)
to the progress made in the sectors with the know-how and resources required
to develop generic technologies.

21 Document SG(71)363 final (July 1971).
22 Document SG(77)D/1990 of 4 February 1977 and the Annex thereto (Doc.
  SEC(77)317 of 25 January 1977).

```

```
                     - 48 
Continuous adaptation to innovations in information technologies, materials
or production methods is a fundamental component of the competitiveness of
textile firms. However, the textile industry itself, particularly firms
developing innovatory solutions specifically for this industry, continue to
play a vital role. These firms must play a decisive role In the Innovation
process by capitalizing on their advantageous position based on experience,
creativity and a thorough knowledge of the needs of the Industry.

Consequently, the European textile and clothing industry depends on rapid
adaptation to generic technologies and on a specific innovation programme
which, in recent years, has enabled it to promote, in particular:

 (i) the development of more flexible production systems capable of

     responding to the new strategic requirements stemming from short     circuiting;
 (ii) application of technological progress for quality control (for
     example, automatic fault detection);
(iii) environmental protection, in conjunction with the objectives of
     improving quality and making more rational use of resources;
 (iv) application of new materials and processes for a wide range of
     end-uses, particularly for clothing and industrial textiles;
 (v) use of emerging technologies displaying considerable potential
     (biotechnology and optoelectronics).

Development of generic technologies and of specific solutions and subsequent
application thereof to the priorities of the textile and clothing Industry
call for parallel coordinated efforts to disseminate and demonstrate
research findings and know-how. Particular attention must be paid to
training staff in new techniques and to making development of the training
needed an integral part of the RTD projects.

The Third Framework Programme for Community RTD Includes a series of
activities to satisfy the need to take up the results of applied research.
Firms and research institutions in the textile Industry have benefited
directly from these, particularly from BRITE/EURAM (the programme to support
research into industrial technologies and advanced materials), and from the
multidisciplinary schemes targeted on small businesses, such as the CRAFT
(Cooperative Research Action for Technology) pilot projects and the
BRITE/EURAM feasibility awards.

```

```
                     - 49 
In recent years, there has been a marked improvement in participation in
BRITE/EURAM by the textile and clothing industry, as a result of closer
cooperation between the various branches of the industry and upstream
sectors and a better flow of information between the industry and the
research centres, allowing clearer identification of the priorities and of
the research objectives. The Commission has organized Information and
awareness campaigns to support these efforts.

For the period from 1994 to 1998, the Commission has submitted its proposal
for the Fourth Framework Programme for Community RTD, with a total budget of
ECU 13.1 billion. The proposal is for the Community's RTD activities to
concentrate more on generic technologies for widespread use In all sectors
of activity. The joint research on information and communications
technologies, industrial technologies, materials or biotechnologies, for
example, will have spin-offs for many branches of industry, including
textiles and clothing, and help to improve their international
competitiveness.

The activities to encourage the use of new technologies by small firms will
be stepped up in the Fourth Framework Programme. The proposal puts the
accent of the dissemination activities on small firms and propose a
completely new financial instrument specially designed to encourage small
firms to take up the findings of Community research. This new instrument
will be added to the measures already in force to ensure more effective
participation by small firms in the Community's RTD activities.

6.4.2 Training

The Commission's current guidelines on human resources policy are making a
significant contribution to solving the problems described in Chapter 4.

Starting in 1994, the Community, in partnership with the national
authorities, will implement a series of measures under the new objective 4
of the Structural Funds aiming at:

 (i) predicting the new medium-term requirements and ensuring adequate
     training;
(ii) reducing the impact of industrial change In terms of job losses and
     improving workers' chances of keeping their Job or of finding

     another.

```

```
                     - 50 
The action to be taken in this area will include a number of novel features

compared with the other activities financed by the Structural Funds:

- it will apply to the entire Community, not Just the assisted regions;
  it will be open to all sectors of activity, with no priority sectors-,
- priority will be given to workers and managers who are in employment but
  are likely to be affected by industrial change;
- it will take the form of a few types of action responding to priority
  objectives (for example, training schemes on the introduction of flexible
  manufacturing systems, computer links between customers placing orders
  and small subcontracting firms or environmental technology).

The Community must be selective and concentrate on a limited number of
fields in which industrial change has the greatest Impact on
competitiveness. Priority will have to be given to activities offering major
benefits in terms of strengthening Industrial competitiveness:

(a) training schemes on key skills for the new systems for organizing
     production;
(b) transnational action;

(c) activities giving priority to small firms.

In order to take greater account of the changes in employment, Job profiles
and real needs for training, the Commission has started talks to enable
employers, trade unions and the Commission to share their ideas. A
programme of activities and discussions with the two sides of Industry has
been focusing on four priorities*.

- vocational training (the need for statistics and know-how on employment
  and training In the textile and clothing Industry; involvement in
  programmes run by the public authorities, such as the "EuroquaiIfication"
  scheme and exchanges of information and views on projects in the industry
  receiving support under the NOW, EUR0F0RM, FORCE and COMETT programmes);

- Jobs for women (draft Joint opinion on access to vocational training for
  women and discussions on teleworking and undeclared employment);
- the RETEX regional round tables (to study the problems caused by
  conversion of the textile and clothing industry both Inside and outside
  the Community);
- the social clauses in trade agreements, particularly In the GSP.

6.4.3 Diversification and conversion

The process of adapting the textile and clothing industry to the new
conditions on the market, as described in Chapter 5, entails substantial
social costs, particularly In regions heavily dependent on the industry.
Diversification of the industrial base in such regions is becoming more

```

```
                     - 51 
necessary than ever. However, the backwardness or general decline in
industrial activity makes such diversification difficult in a very large
proportion of the textile regions in the Community.

Consequently, the uneven levels of regional development within the Community
curb industrial change and add to the social costs of the inevitable
restructuring.

The Structural Funds provide substantial support for the recovery programme
in the regions hardest hit by the changes in the textile and clothing
industry.

First, the Community support frameworks help to improve the general
conditions for development in the least favoured regions and for modernizing
their economic base, in line with the priorities agreed between the national
authorities and the Commission. Textile and clothing firms In some Member
States have been granted aid up to certain limits set on the basis of the
rules in force on competition policy.

In addition, in 1992 the Commission adopted a new Community programme
(RETEX) which is now being put into operation In most Member States. The
objective is to speed up diversification of production in regions heavily
dependent on the textile and clothing industry and to make It easier for
viable firms in all branches of industry to adapt.

To this end, RETEX puts the emphasis on improving the know-how available in
firms, cooperation between undertakings in the same region or branch, the
establishment of local management and advisory teams, the use of new
technologies to improve quality and easier access to financial markets.

The RETEX programme aims at diversification of the economy In the assisted
(objective 1, 2 and 5b) regions of the Community which satisfy set criteria,
as regards dependence on the sector. Regions hit by heavy Job losses In the
sector but not considered assisted regions are therefore excluded.

The Commission has published a green paper on the new generation of
Community initiative programmes to be implemented between 1994 and 1999.
This document emphasizes the need to respond to industrial change with a
package of measures to support modernization of the manufacturing base,
particularly to adapt human resources, throughout the Community.

A new horizontal Community initiative tailored specifically to the needs of
the industry and with more flexible geographical coverage could make a
significant extra contribution to attaining the diversification and
conversion objectives of RETEX.

```

```
                     - 52 
6.4. Information and communication

The Commission intends to continue the schemes to improve the flow of
information, communications, cooperation and the dissemination of
experience, by developing an effective policy for providing services for

businesses.

Four general areas for support have been defined:

1. Provide fuller information, particularly economic and structural
  statistics and analyses of potential scenarios. To this end, the
  Commission has started a pilot project, in the form of the European
  Textile and Clothing Observatory, in cooperation with the industry. The
  Commission is also taking measures, In coordination with the
  Member States (the national statistical institutes) to analyse the
  structure of the market and trends In this sector, with particular
  emphasis on subcontracting.

2. Support studies to provide a fuller understanding of the structure of the
  industry and/or conduct pilot projects, provided they lead to practical
  proposals (skills required in the clothing industry, subcontracting in
  the Community, etc.).

3. Encourage coordination of information and exchanges of experience by
  networking centres of excellence or regional observatories. Closer
  cooperation and partnerships are being prepared in key sectors of
  subcontracting, with the aid of BC-Net, the Business Cooperation Centre,
  Europarténariat and the Interprise programme.

4. Promote communication with the aid of a standardized data interchange
  language: specific programmes (STAR, telematics systems, etc.) or the
  Community action programme on Trade Electronic Data Interchange Systems
  (TEDIS) to support the Industry's work on EDI.

```

```
                     - 53 
                    ADDENDUM

    Repercussions of the opening-up to Central and Eastern Europe
            for the Portuguese textile industry

At the Council meeting on general affairs on 30 September 1991 at which the
mandate for negotiations with Poland, Hungary and Czechoslovakia was
discussed, the Commission undertook to assess the consequences of the
gradual opening-up of the Community market to textiles from these three
countries for the Portuguese textile industry.

It must be remembered that, because of their status as state-trading
countries, up until 1989 trade in textiles with all these countries was
severely limited by the quantitative restrictions imposed by the bilateral
agreements. To encourage economic recovery in Central and Eastern Europe,
the textile quotas for Hungary, Poland and Czechoslovakia were increased in
1990/91 and those for Romania and Bulgaria in 1991/92. The quotas
specifically for outward processing traffic (OPT) were improved early in
1991. The association agreements concluded in late 1992 included
significant increases in the OPT quotas for the first three countries and,
in the course of 1993, for Romania.

In the new Protocols which entered into force in 1993, except in the case of
Bulgaria, for which no date has yet been fixed, the Community committed
itself to phase out the quantitative restrictions within five years. A
start has also been made on dismantling the customs duties, on a reciprocal

basis.

The liberalization of trade with Central and Eastern Europe Is only Just
beginning to have an effect. It is therefore too early for a full
assessment of the consequences. The Commission will keep a vigilant watch
on developments and will keep the Council informed. The latest data
available at this juncture reveal the following trends:

1. Since 1988, trade in textiles between the EC and Central and Eastern
  Europe has grown extremely dynamically. Up to 1992 exports of textiles
  from the EC rose by an average of 22% per year (in terms of quantity) and
  exports of clothing by 41%. Imports of textiles rose by 13% and of
  clothing by 21%.

  The EC's balance of trade with these countries shows a surplus of
  48 000 tonnes for textiles and a deficit of 93 000 tonnes for clothing.

2. The pattern of OPT trade has changed particularly rapidly as firms in the
  Community are keen to take advantage of Central and Eastern European
  countries' considerably lower labour costs for highly labour-intensive
  activities. Imports of clothing covered by OPT arrangements rose from
  Just 26 000 tonnes in 1988 (or 46% of all imports) to 73 000 tonnes (62%)

  in 1992.

```

```
                    - 54 
  This trend also explains the rapid growth in exports of fabrics from the
  Community, a large proportion of which are intended for local making-up
  operations and subsequent reimportation into the EC.

3. Trade with Central and Eastern Europe is shared extremely unevenly within
  the EC. Germany takes 45% of the textiles Imported into the EC from
  Central and Eastern Europe and 57% of the clothing. It also claims 54%
  and 39% respectively of all the EC's exports to Central and Eastern
  Europe. Italy, the Benelux countries and France also take large shares.

  Portugal's direct trade with Central and Eastern Europe In both
  directions is virtually negligible.

4. The main impact of the opening-up of trade with Central and Eastern
  Europe on the Portuguese textile Industry will be greater competition on
  the Community market. A large proportion of the products supplied by
  Portugal compete directly with the exports from Central and Eastern
  Europe, often on the basis of subcontracting arrangements.

  The Community market takes 75% of all Portugal's exports of textiles and
  clothing (ECU 3 billion out of ECU 4 billion). Any contraction of this
  market could have serious consequences for Portugal's entire economy.
  The textile and clothing Industry accounts for approximately 25% of all
  industrial employment in Portugal and 30% of its exports of goods.

5. The data available so far provide no evidence that the opening-up to
  Central and Eastern Europe has had any significant impact on Portugal's
  traditional patterns of trade on the single market. Between 1988 and
  1992 Portugal's sales rose steadily by an average of 9.5% per year In the
  case of textiles and 14.3% for clothing (see Annex 36).

  Portugal has even strengthened its competitive position within the
  Community; Its share of all the EC's Imports (both Intra-Community and
  extra-Community) rose from 3.2% In 1988 to 3,7% in 1992, although its
  position on the EFTA and US markets deteriorated slightly. In 1992 all
  the Central and Eastern European countries' combined share of EC imports
  was roughly equivalent to Portugal's (3.6%).

6. As in all the rest of the Community, production in the Portuguese textile
  and clothing industry contracted sharply In 1992. Output in the textile
  sector (including knitwear) was down by 8% compared with 1991 and 4.4%
  lower than in 1988. Clothing production fell by 2.5% in 1992 but is
  still 2.4% higher than In 1988.

  This situation occurred despite the continued, albeit slower, growth of
  deliveries on the Community market (5.7% for textiles and 4% for
  clothing). Fundamentally, the Portuguese Industry's current difficulties
  are attributable to the contraction in demand and to the fiercer external

  competition on Its national market.

```

```
Annex 1 :

Annex 2:

Annex 2a

Annex

Annex

Annex

Annex 6:

Annex 7

Annex 8:

Annex 9:

Annex 9a

Annex 10

Annex 11:

Annex 12:

Annex 13:

Annex 14;

Annex 15:

Annex 16;

Annex 17;

Annex 18

Annex 19:

Annex 20:

Annex 21 :

Annex 22:

Annex 23

Annex 24:

Annex 25

Annex 26

Annex 27

Annex 28

Annex 29:

Annex 30;

Annex 31

Annex 32

Annex 33:

Annex 34

Annex 35

Annex 36:

```

```
           ANNEXES

EC: basic structural data 1988-1992

EC: employment 1988-1992
Employment trends In the Member States 1988-1992
EC: production index trends 1980-1992

EC: volume trends 1988-1992 - Textiles

EC: volume trends 1988-1992 - Clothing
EC: textile and clothing production (1980-1992)
Production index trends by Member State
EC foreign trade with non-Community countries
(by volume) 1988/92 - Textiles and clothing
EC foreign trade with non-Community countries
(by value) 1988/92 - Textiles and clothing
EC: foreign trade 1990-1992
Average annual growth rates for exports from the EC
(% by volume)
The EC's ten leading partners
EC's share of textile and clothing exports to the EFTA

countr ies

EC's share of textile and clothing exports to Japan and

the USA

Average annual growth rates for imports Into the EC
(% by volume)
EC trade In textiles and clothing - 1992
Average prices of products traded - Textiles and
clothing
Production and foreign trade by stage of production:

1992

Production and foreign trade by branch
Production and foreign trade trends by stage of
production 1988-1992
Movement of the dollar against Community currencies
EC's share of textile and clothing imports In the USA
Trade deficit and exchange rates
Labour costs in spinning and weaving
Wage, exchange rate and price trends (1988/93)
(spinning and weaving)
Social security contributions as a percentage of
labour costs in 1993 (spinning and weaving)
Spinning plant - deliveries in 1983-92 as a percentage of
plant installed In 1991
Weaving plant - deliveries in 1983-92 as a percentage of
plant installed in 1991

Interest rates in 1992

Modernization rate in the European cotton industry
(open-end rotors and splndleless looms)
Investment per employee in 1991-1992 - textile Industry
Normal operator hours
Value added per employee in 1992
Productivity index 1993

Unit labour cost index 1993

Raw material prices
Environmental costs in dyeing and finishing
Competitive analysis of supplying countries
Exports from Portugal and the countries of Central and
Eastern Europe to the EC

```

_**zl<**_
```
s

```

Annex 1

# EC: Basic Structural Data 1992/1988

1988= 100

115

105

**95**

85

75

65

Employment Turnover

Source: OETH.CIRFS.Eurostat

Invest. Production App. consumption

**^ ^**

100

-700

Manufact. Ind.

Annex 2

###### **EC: Employment 1988 -1992**

-18.6% -2.8% 8 -10.5% -14.1%

_*UtMUMtMWM'J*»M**U>**>*>*>*_

0.4%
-24

-84

_Ji*iA_

Electronics Shipbuilding

Steel

Unit: Changes 1988/1992 in thousands and in perc

Sources: OETH/Eurostat/DG III-E4

Automobile Textile/Clothing

**ANNEX** **2a**

**Employment trends** **in the** **textile** **and** **clothing**

**industry** **in the** **Member States 1988** **- 92**

1992

**79.495**

**926**

**20.337**

**425.733**

**79.642**

**294.550**

**332.472**

**21.131**

**718.123**

**30.418**

**263.833**

**369.882**

**2.636.542**

Percentage change

1992/88

**- 8.5**

**- 1.7**

**-18.1**

**-11.3**

**-17.4**

**-15.0**

**-15.5**

**- 6.2**

**-10.7**

**- 4.2**

**- 8.8**

**-25.1**

**-14.1**

Belgium

Luxembourg

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Netherlands

Portugal

United Kingdom

E.C

**Source : OETH**

1988

**86.878**

**942**

**24.821**

**479.881**

**96.378**

**346.617**

**393.370**

**22.521**

**804.473**

**31.755**

**289.179**

**493.999**

**3.070.814**

_**rï**_

**92** **93**

**projections**

**1985= 100**

**Source: Eurostat**

Annex 3

## EC: Production index trends

1980-1992

**84** **85** **86**

**•Textiles** **H6f-Clothing**

**•••Manuf.** **Ind.**

**1985= 100**
**120**

**115**

**110**

**105**

**100**

**1988**

Annex 4

# EC: Volume trends 1988-1992

#### **Textiles**

**1989** **1990** **1991** **1992**

**•^Production** **H3-App.** **Cons.** **»Production** **Manuf.** **Ind.**

**1993**

**projections**

**•f**
**-***

**Sources:** **Eurostat.CIRFS**

1985 = 100
130

120

110

100

1988

Annex 5

## EC: Volume trends 1988-1992

##### **Clothing**

1989 1990 1991 1992

         - B-Production n»App. Cons.          - Production Manuf. Ind.

1993

projections

Sources: Eurostat.CIRFS

**ANNEX6**

EC : TEXTILE AND CLOTHING PRODUCTION (1980 -1992)

1985 = 100

Country

Belgium/
Lux.

Denmark

Germany

Greece

Spain

France

Ireland

Italy

Netherlands

Portugal

United
Kingdom

EC 12

**Textiles (NACE** **43)**

(incl.knitwear)

Clothing

(NACE 453 + 454+ 456)

1980

107.3

79.5

122.2

132.1

126.1

106.1

99.1

104.1

135.1

92.6

109.6

1988

91.3

72.8

91.6

97.0

97.7

84.0

95.4

96.9

101.9

108.5

102.5

94.7

1980

95.0

85.6

105.4

104.6

104.4

112.4

114.3

102.5

101.0

87.5

101.7

103.4

1988

100.9

92.4

97.4

105.8

104.4

92.9

106.2

108.9

94.5

108.2

101.7

102.6

1991

104.5

87.4

99.8

90.7

99.5

83.8

118.9

114.4

98.0

112.3

85.6

101.2

1992

106.7

84.4

92.0

83.0

94.9

82.2

125.4

112.4

90.0

103.3

85.2

97.8

1992/1988

+ 5.7

  - 8.7

  - 5.5

-21.6

  - 9.1

-11.5

+ 18.1

+ 3.2

 - 4.8

  - 4.5

-16.2

-4.7

1991

128.7

68.7

86.2

92.8

97.8

72.2

79.2

95.7

120.9

114.0

88.3

90.6

1992

130.6

72.2

77.0

89.4

93.3

65.7

76.2

100.2

111.0

111.1

89.3

88.6

1992/1988

+ 43

 - 0.8

 - 16.0

 - 7.8

 - 4.5

 - 21.8

  - 20.1

+ 3.4

+ 8.9

+ 2.4

 - 12.5

  - 6.4

Source : Eurostat

«r*

% 1992/1988

40

20

-20

BLEU DK

Source: Eurostat

Annex 7

Production index trend by Member State

D H IRL NL UK EC

- Textiles

 - Clothing

**v**

Annex 8

EC foreign trade with non-Community countries

**(by volume)**
**1988/92**

Textiles

(000) Tons

2,600

2.400

2,200

2,000

1,800

**1,600**

**1,400**

**1,200**

**1988**

**(000) Tons**

**1,600**

**1,400** **h**

**1988**

**1989** **1990** **1991** **1992**

**Imports Exports**

                                        - I ^ ^

Clothing

**1989** **1990** **1991** **1992**

**Imports Exports**

**Source:** **EUROSTAT**
**"textile»Ckxhing-CrTCM(-S48)** **-** **CITC** **65** _**k\**_

Annex 9

EC foreign trade with non-Community countries

**(by value)**

1988/92

Textiles

Million ECU

15,000

9,000
1988

Million ECU

30,000

**5,000**
**1988**

1989 **1990**

Exports B Deficit I

1989 1990 1991

Imports S Surplus

Clothing

**1992**

**1991** **1992**

**Source:** **EUROSTAT**

**Textile*-CTTC** **65**
**Clothing-CTTC** **84** **(-848)**

**r** **<•**

:

**Imports EC** **(*)**

**Annex** **9 a**

EC: Foreign Trade 1990-1992

Exports EC (•)

**1990** **1991** **1992** **Pet.** **change**

**92791**

1990 1991 1992 Pet. change

92/91

Balance

1990 1991 1992

Textiles Tons

(excl. knitwear)

milBon ECU

Clothina Tons

find, knitwear)

milflon ECU

Total T + C Tons

million ECU

**Source: EUROSTAT**

Textiles » CITC 65
Clothing - CITC **84** (-848)

1.9 ; 1,446,608

-2.2 12,823

6.6; 243,290

4.2S

3.2 :

2.0 ;;

1,602,774

13,703

256,760

10,114

1,868,524

23,817

6.3

4.6

4.6

3.7

6.1

4.2 ;

-806,901

1,398

-806,237

-8,760

-1,612,138

-7,362

-801,190

1,211

-1,064,209

-13,641

-1,865,399

-12,430

-749,699 |

2,083

-1,114,624

-14,261

-1,864,323

                                                                           

-12,178

2,253,609

11,425

1,048,627

18,626

3,302,036

30,060

2,308,631

11,887

1,298,696

23,394

3,607,326

35,281

2,352,473

11,620

1,370,374

24,375

3,722,847

35,996

1,507,441

13,098

244,486

9,763

1,751,927

22,861

9,865

1,689,898

22,688

(*): **Extra-EC only**

- ^
**^**

ANNEX 10

Average annual growth rates for exports from the EC

(%, by volume)

Textiles

Clothing

TEX + CLOTH

88/92

4.8

- 0.7

1.2

-12.7

9.3

7.3

9.9

13.0

22.9

15.1

17.9

53.3

91/92

6.3

5.2

3.6

14.2

-7.8

0.5

-0.4

9.6

8.7

25.8

3.0

35.6

91/92

4.6

 - 3.8

 - 2.5

 - 8.5

 - 6.9

9.7

2.0

18.4

- 10.8

34.7

32.6

41.6

88/92

4.6

-0.4

0.1

-1.7

1.7

7.7

7.9

14.7

0.2

20.9

6.6

19.6

91/92

6.1

3.5

2.1

11.7

-7.7

1.3

-0.1

10.6

8.3

26.0

4.7

36.5

Destination

Extra-EC

Industrialized countries

EFTA

USA

Japan

Developing countries

of which :

Mediterranean rim

Latin America

Indian subcontinent

ASEAN

Far East

Central and Eastern

Europe

Source : EUROSTAT

Textiles = CITC 65

88/92

4.6

-0.3

-0.2

-0.2

0.6

7.8

7.7

14.9

0.0

21.1

5.9

16.5

Clothings CITC 84 (-848)

**A**

Annex 11

The EC's ten leading partners

(% by value)

IMPORTS

RNK TEXTILES CLOTHING

1988

1992

1992

ixTRAiei:

**(M.ECU)**

China
Turkey

Hong-Kong
Morocco

Tunisia

India

Poland

Indonesia

S. Korea

Austria

EXTRA?EC

**(M.ECU)**

Switzerland

Austria

USA

India

China
Turkey
Japan
Pakistan

Indonesia

S. Korea

1988

EXTRA-EC

**(M.ECU)**

Hong-Kong
**Turkey**
Yugoslavia

S. Korea

China

Morocco

Tunisia

India

Austria

Taiwan

23,882

9.8

4.9

4.6

4.5

4.2

2.5

2.4

2.4

2.2

2.0

1

2

**3**

**4**

**5**

**6**

**7**

8

9

10

EXTRA-EC

**(M.ECU)**

Switzerland

Austria

USA

China
Turkey
Japan
India

Pakistan

S. Korea

Taiwan

EXPORTS

9,700

13.0

9.2

8.6

6.9

6.9

6.8

6.5

4.0

3.2

2.8

11i620

10.9

9.3

8.6

7.6

7.2

6.5

5.6

4.7

4.1

3.0

RNK TEXTILES CLOTHING

1992

**35,995**

8.7

6.9

6.9

3.5

3.4

2.7

2.5

2.5

2.0

1.9

23V8i7

6.8

5.7

4.6

4.2

4.0

2.2

1.5

1.1

1.0

0.8

EXTRA-EC

**(M.ECU)**

USA

Austria

Switzerland

Poland
Japan
Tunisia

Morocco

Sweden
Hong-Kong
Hungary

10.5

8.0

7.4

5.7

5.0

4.9

4.8

3.9

3.0

2.8

1992

_'WÈÊÊÊsM_

**(M.ECU)**

Switzerland

Austria

USA

Sweden
Japan
Norway
Hong-Kong
Canary I.
Finland

**Tunisia**

1988

iXTRASËC

**{M.ECU)**

Switzerland

USA

Austria

Sweden
Japan
Norway
Finland
Canary I.
Canada
Hong-Kong

18,772

7.6

6.8

5.7

4.4

3.0

2.6

1.3

1.2

1.1

1.0

1

2

3

4

5

6

7

8

9

10

1988

iXTRAlEG!::

**(M.ECU)**

USA

Switzerland

Austria
Japan
Yugoslavia
Sweden

Finland

Tunisia

Morocco

Canada

10,891

12.9

9.1

8.7

6.9

6.6

5.3

3.3

3.2

3.2

2.5

Source: EUROSTAT '
Textiles (CTCI rev. 3) = 65
Clothing (CTCI rev.3) = 84 - 848

_**t>**_

**%**

**25**

**20**

**15**

**10**

**5**

**88**

Annex 12

EC's share of textile and clothing exports to the

EFTA countries

EC's **share of textile and clothing exports to**
**Japan and the USA**

**89** **90** **91** **92**

**TfC-CITC(65+S4448)**

**Sourca:** **OECD,** **Comtrad»**

_**I I**_

ANNEX 13

Average annual growth rates for imports into the EC

(%, by volume)

Textiles

Clothing

TEX + CLOTH

91/92

1.9

1.1

_**6.6**_

-9.1

-6.6

0.3

-5.3

-20.7

13.4

8.5

-11.0

22.0

88/92

13.8

9.6

1.8

27.3

-6.2

13.4

14.3

28.0

25.9

17.8

6.1

21.8

91/92

5.5

-0.8

0.2

- 2.6

-22.0

3.8

5.1

9.4

16.0

3.2

-4.1

31.5

88/92

8.0

4.1

3.0

5.6

2.2

8.5

7.4

-3.3

14.5

14.9

3.9

15.6

91/92

3.2

1.0

6.2

-8.4

-7.8

1.8

-0.1

-17.0

14.0

6.2

-7.0

25.7

Destination

Extra-EC

Industrialized countries

EFTA

USA

Japan

Developing countries

of which :

Mediterranean rim

Latin America

Indian subcontinent

ASEAN

Far East

Central and Eastern

Europe

88/92

5.3

3.7

3.0

3.9

3.0

5.3

1.6

-6.2

13.0

0.8

12.1

Source ; EUROSTAT, COMTRADE

_**<*1**_

**Annex 14**

**EC** **trade** **in** **textiles** **and** **clothing** **-** **1992**
**(000** **ECU)**

**Imports**

**4,309,280**
3,560,594
**2,093,451**
2,640,753

**1,382,877**
1,089,544
**1,300,038**

956,288
651,350
**787,156**
430,765

353,759
**292,893**

**Balance**

- 4,246,306
-3,170,268
**-2,071,386**
**-1,857,573**
**-1,337,241**
**-1,066,263**
**-1,016,926**

**-899,185**
**-611,666**
**-561,327**
**-427,935**
**-308,644**
**^228,229**

**China**
**Turkey**
**India**

**Hong-Kong**
**Indonesia**

**Pakistan**
**South Korea**
**Thailand**

**Malaysia**
**Taiwan**

**Macao**
**Philippines**
**Brazil**

**TOTAL**

**Source** **:** **Eurostat**

**Exports**

62 r 974
390,326
22,065
**783,180**
**45** **f** **636**
**23,281**
**283,112**
**57,103**
**39,684**
**225,829**

**2,830**
**45,115**

64,664

**2,045,799** **19,848,748** **-17,802,949**

**r** **1** **i**

ANNEX 15

Average prices of products traded - Textiles

**Import** **Export** **lntra-;EC**

Average prices of products traded - Clothing

40.00 T **7.00**

**Intra-EC**

_**T-i**_

ANNEX 16

Production and foreign trade by stage of production : 1992

(1000 tonnes)

Branches

Chemical fibres

Spinning

Woven goods & fabrics

Woven goods

Knitted fabric

Clothing

Made-up knitwear (*)

Made-up fabric

Textiles-final uses

Carpets

Household textiles

Industrial textiles

other textiles(**)

Total - final uses

Production

3,176.6

2,456.5

2,551.2

2,033.2

517.9

2,156.1

1,053.7

1,102.4

2,718.4

703.4

760.7

393.6

860.6

4,874.5

Exports

extra-EC

474.0

127.9

498.2

452.0

46.3

203.5

109.8

93.7

348.6

87.1

50.5

42.8

168.2

552.1

Imports

extra-EC

634.9

426.4

643.2

594.9

48.3

1,237.0

574.6

662.4

432.9

83.5

162.2

68.0

119.2

1,669.9

%

Imp/Cons

19.0

15.5

23.9

27.3

9.3

38.8

37.8

39.6

15.4

11.9

18.6

16.2

14.7

27.9

Consumption

3,337.3

2,755.0

2,696.2

2,176.2

520.0

3,189.6

1,518.5

1,671.1

2,802.7

699.8

872.4

418.8

811.6

5,992.3

Balance

 - 160.8

 - 298.5

 - 145.0

 - 142.9

2.0

1,033.6

- 464.8

- 568.7

84.3

+ 3.6

 - 111.7

 - 25.2

+ 49.0

%

Exp/Prod

14.9

5.2

19.5

8.9

9.4

10.4

8.5

12.8

12.4

_6.6_

10.9

19.5

11.3 | - 1,117.8

Source : CITH - CIRFS (*) including 'fully fashioned' knitwear (**) including non-woven goods

ANNEX 17

Production and foreign trade by branch

(1.000 tonnes)

Branch Prod. Exp. Imp. Cons. Imp/Cons Exp/Imp

**%**

lÊxiilesC*)

Cotton

Wool

Silk

ClPthineC**)

Cotton

Wool

Silk

Source : CITH

3095.6

1341.0

494.2

2082.2

787.9

904.5

861.6

62.7

97.0

893.0

170.9

190.8

40.0

226.8

95.8

17.2

28.6

26.5

2578.9

1420.6

490.1

1342.6

665.9

764.2

344.9

142.2

92.9

153.4

48.9

50.5

27.8

4.7

19.6

42.9

21.7

21.1

(*) Spinning and weaving (1992 figures)

(**) Knitwear and woven goods (1991 figures)

**7?**

ANNEX 18

Production and foreign trade trends by stage of production 1988 - 1992

1988 = 100 (by volume)

Branches

Chemical Tib res

Spinning

Woven goods & fabrics

Woven goods

Knitted fabric

Clothing (*)

Made-up knitwear

Made-up fabric

Textiles-final uses

Carpets

Household textiles

Industrial textiles

Other textiles(**)

Total - final uses

Production

103.8

90.7

91.6

88.7

104.9

94.2

101.2

88.3

98.8

116.1

86.2

94.9

141.7

96.7

Exports

extra-CE

62.5

106.5

138.0

139.3

126.8

113.6

115.8

111.2

117.3

104.7

100.0

135.9

127.5

115.9

Imports

extra-CE

97.5

103.6

119.7

117.4

157.3

155.9

176.7

141.4

142.4

126.7

157.2

135.2

140.9

152.2

Exp/Prod

60.1

118.2

150.0

156.3

120.3

120.5

114.3

125.0

118.5

90.5

115.8

143.4

89.9

120.2

Imp/Cons

86.0

113.1

132.0

133.2

147.6

142.1

147.7

138.0

140.0

106.3

168.6

139.6

139.0

143.8

Balance

(variation in 000 tonnes)

  - 268.5

  - 590.0

   - 321.3

   - 325.0

7.8

   1,648.0

   - 695.1

   - 952.8

91.2

   - 13.7

   - 164.4

   - 44.0

+ 1.7

  1,759.1

Consumption

113.1

91.8

91.0

87.9

106.5

109.8

119.4

102.4

101.6

118.9

93.3

96.6

101.5

105.9

Source : CITH - CIRFS (*) including 'fully fashioned' knitwear (**) including non-woven goods

```
              ANNEX 19

Movement of the dollar against Community currencies

```

**-20.00** **-10.00**

**Revaluation**

**0.00** **10.00**

**Change** **TI** **%**

[end 1991 'August 1993

**20.00** **30.00** **40.00**

**Devaluation**

**n** end 1988 L J end 1991

**50.00**

ScW# • k\fe*'Me< JMI-.

**?r**

T 0.95

4 0.9

4 0.85 <»

**o**
4 **0.8** w

4 **0.75**

**0.7**

#

```
                  ANNEX 20

   EC's share of textile and clothing imports .in the USA

```

14.00 T

12.00 -

10.00 

8.00 ••

6.00 

4.00 -

2.00 •

0.00

**1988** **1989** **1990** **1991**

J EC's share of US i«ports **ECU/US$**

**1992**

Trade d e f i c i t in t e x t i l e s and clothing and exchange rates

T 0.95

0.00

1992

1988 **1989** **1990**

EC deficit

1991

ECU/US$

**S** _Q\A£GL_ E u r o s t a t, Cou^tr^d*
_**H**_

25

**-4**

Annex 21
**Labour costs in spinning and weaving**

Latpour costs = Wages + Other costs paid to operators + social costs

**•**
**1988**

**• 1993**

**(a):** **1990-93**

**10** 15 20

**US$/hour**
Source: Werner Int.

ANNEX 22

Wage, exchange rate and price trends 1988/93

(Spinning and weaving)

% Change 1988/93 (*)

Nominal wages

(national currency)

+ 39.2

+ 43.3

+ 28.5

+ 35.3

+ 39.8

+ 36.7

+ 40.9

+ 33.3

+ 57.1

+127.8

+ 87.2

+ 47.5

+ 23.1

+ 30.5

Consumer

price

+ 15.6

+ 13.1

+ 13.0

+ 19.1

+ 33.7

+ 15.8

+ 30.4

+ 15.6

+ 39.4

+ 113.5

+ 65.8

+ 33.6

+ 21.3

+ 10.7

Exchange rate between

US $ & national

currency

   - 3.5

+ 2.0

    - 5.3

    - 5.1

+ 22.5

   - 2.1

+ 18.7

+ 8.8

+ 16.5

+ 66.7

+ 18.2

+ 13.5

0.0

   - 18.9

Wages in US $

+ 42.7

+ 41.3

+ 33.8

+ 40.4

+ 17.3

+ 38.8

+ 22.2

+ 24.5

+ 40.6

+ 61.1

+ 69.0

+ 34.0

+ 23.1

+ 49.4

Belgium

Denmark

Netherlands

Germany

Italy

France

United Kingdom

Ireland

Spain

Greece

Portugal

EC(**)

USA

Japan

Cost US $/hour

1993

21.5

21.3

20.9

20.6

16.2

15.1

10.3

9.2

8.0

7.2

3.7

13.9

11.6

22.3

Real wages

(national currency)

+ 23.6

+ 30.2

+ 15.5

+ 16.2

+ 6.1

+ 20.9

+ 10.5

+ 17.7

+ 17.7

+ 14.3

+ 21.4

+ 13.9

+ 1.8

+ 19.6

(*) Consumer price : Eurostat forecast; June 1993

Exchange rate : end August 1993

Wages in US $ : summer/autumn 1993 (including social security contributions)

(**) Weighted average per job in the textile industry

Source : Werner Int. - Eurostat

ANNEX 23

Social security contributions as a percentage of Labour costs in 1993
Spinning and weaving

Source : Werner I n s t i t u t e

^

Annex 24

SPINNING MACHINERY OETH/DG 111*4

Shipments in 1992 ae a %
of shipments in 1991

Spindles

**Proportion of instated capacities in 1991** **(%)**

**Spindle.**

Shipments in 1983-92 aa a % of installed capacities
(modernization rater

Spindles

Short
staples

8.3

15.5

18.4

36.8

56.2

15.4

24.5

18.7

Long
staples

811.3

118.7

132.5

126.3

292.6

55.4

100.6

106.1

**0-E**

**Rotors**

10.9

**3.3**

17.0

**6.1**

**0.4**

58.1

**4.2**

100.0

0-E

Rotors

101.4

59.1

71.6

124.9

131.0

84.6

73.1

85.6

Short

staples

66,4

91.6

63.6

87.5

68.3

134.1

103.4

72.7

O-E

Rotors

197.8

104.0

90.6

111.5

164.2

43.7

119.3

90.6

Long
st spies

21.5

19.3

26.0

24.6

40.4

52.1

40.3

27.7

NORTH AMERICA

SOUTH AMERICA

ASIA AND OCEANIA

EUROPE - EC

EUROPE - EFTA

EASTERN EUROPE + CIS

OTHERS

TOTAL

**SOURCE:** **ITMF**

**Short**

**staples**

8.4

6.1

62.2

5.0

0.5

9.4

8.4

**Long**
**staples**

**5.3**

**3.7**

41.8

36.0

**1.0**

**6.7**

**5.5**

100.0 100.0

Shipments in 1983-92 as a % of installed capacities in 1991
**150**

Annex 25

WEAVING MACHINERY OCTH/DOIH^

Shipments in 1992 es a %
of shipments in 1991

**Proportion of** **installed** **capacities in** **1991** **(%)**

**Looms**

Shipments in 1983-92 as a %
of installed capacities
|ri MMIW nils lion rate)

Shuttle-looms

0.0

79.1

56.0

3500.0

42.9

56.2

ShuMe-tooms

**4.1**

**9.0**

**71.3**

**2.0**

**5.1**

**8.5**

**100.0**

**shuttle**

**Filament**

**weaving**

Shuttle-less

looms

50.9

39.2

148.6

131.4

93.7

29.2

29.7

77.9

0.8

1.7

9.1

o.e

2.1

1.3

1.5

6.9

NORTH AMERICA

SOUTH AMERICA

ASIA AND OCEANIA

EUROPE - EC

EUROPE -EFTA

EASTERN EUROPE + CIS

OTHERS

TOTAL

**SOURCE:** **rmF**

**Shuttle-less**

**12.9**

**5.9**

**28.5**

**10.9**

**0.6**

**3B.8**

**4.4**

**100.0**

Shuttle-less

looms

109.1

111.0

107.0

81.8

39.4

118.9

88.5

107.0

**93.8**

**3.0**

**3.2**

**0.0**

**100.0**

Wool

weaving

1.8

12.3

39.8

23.4

0.6

17.5

4.6

100.0

Shipments in 1983-92 as a % of installed capacities in 1991

**S.** **America** **Ana** **A** **Oceania** **Europe-EC** **Europe-Efta** **East.** **Earope+Cù** **Olacn**

**Shuttle-less** **looms** **i l l —** **Looms** **with** **shuttle**

**^ S**

A N N E X 26

INTEREST RATES IN 1992

**0**

Source : Werner I n t .

**PERCENTAGE**

**5** **10** **15**

_**V**_

ANNEX 27

**MODERNIZATION RATE IN THE EUROPEAN COTTON INDUSTRY**

**(OPEN-END ROTORS AND SHUTTLE-LESS LOOMS** **[1]** **)**

Open-End (%) Shuttle-less Looms (%)

Belgium 119.8 116.0

Denmark 100.0 3.3

Germany 135.4 146.9

Greece 69.0 20.7

Spain 143.0 138.0

France 94.0 151.0

Ireland 60.0 19.1

Italy 179.3 236.0

Netherlands 98.5 35.4

Portugal 101.9 46.4

United Kingdom 80.9 100.2

E.C 124.9 136.0

World 85.6 77.9

Source : ITMF

'Deliveries in 1983-92 as a percentage of plant installed in 1991.

_**31**_

Annex 28

###### **Investment per Employee in 1991-1992 (ECU)** **Textile Industry (incl. Knitwear)**

1991

1992

2,000

1,000

B-L DK D (West)

NL F IRL

Source: OETH/DG III-E4

UK E

H P EC

A N N E X 29

###### NORMAL OPERATOR HOURS

**1991**

**0** **500** **1,000** **1,500** **2,000**

**TAIWAN**

**MOROCCO**

**TURKEY**

**BRAZIL**

**PORTUGAL**

**USA**

**JAPAN**

**GREECE**

**IRELAND**

**HUNGARY**

**SPAIN**

**UK**

**NETHERLANDS**

**FRANCE**

**GERMANY**

**ITALY**

**BELGIUM**

**DENMARK**

Source : Werner Int

**2,500**

_&_

AWEX 30

Source: _&€TH_

ANNEX 31

PRODUCTIVITY INDEX 1993

Primary Textile Industry Clothing Industry

Spinning & Weaving

France 75 75

Germany (W) 92 92

Greece 57 40

Italy 100 80

Portugal 50 55

Spain 78 60

UK 70 75

Brazil 70 45

Hungary 45 40

Japan 90 85

Morocco 35 50

Taiwan 60 70

Turkey 75 45

USA 73 100

Source : Werner International

**3?**

**ANNEX** **32**

**Unit labour cost index** **-1993**

**20** **40** **60** **80** **100** **120**

**Labour cost** **Index** **/** **Productivity index**

**Clothing •Spinning and weaving**

Source: Werner Int./ DG

**2***

```
A N N E X 33

```

_RAW MATERIAL PRICES_

**POLYESTER PRICES**

**US $ PER KG**

**1988**

**1989**

**1.91**

**1.89**

**1.85**

**1.51**

**1.31**

**1989**

**1.67**

**1.61**

**2.21**

**1.67**

**1990**

**1.96**

**1.92**

**1.67**

**1.61**

**1.12**

**1990**

**1.93**

**1.89**

**2.34**

**1.72**

1991

1.79

1.40

1.61

1.80

0.99

1991

1.80

1.80

1.87

1.45

1993

1993

1.29

1.33

1.79

1.59

WEST-GERMANY

ITALY

USA

JAPAN

TAIWAN

**2.04**

**2.01**

**1.69**

**1.75**

**1.61**

**COTTON**
**N-Eur.** **CIF** **PRICE US $ PER KG**

**1988**

EUROPE
USA

TURKEY
BRAZIL .

**1.48**

**1.58**

**1.31**

**1.26**

```
 Source : Cotton Outlook

                  A N N E X 34

```

_ENVIRONMENTAL COSTS IN DYEING &_ _FINISHING_

**AS%OHO!ALCOSIS**

**1992**

1992

1.81

M 7 .

1.64

1.75

1.05

1992

1.31

1.49

1.70

1.53

B

3.5

**CH**

**2.7**

**1.2**

**0.7**

**0.9**

**1.3**

**0.7**

**2**

**0.6**

**10.1**

NL

2.1

0.5

0.3

0.1

0.2

0.7

1.2

5.1

UK

2.3

0.5

0.7

0.3

0.6

0.1

4.5

A

0.8

0.7

0.4

0.1

0.4

0.9

0.4

0.5

4.2

WATER POLLUTION
AIR POLLUTION
LABOUR COST
ENERGY COST
OVERHEAD
MAINTENANCE
DEPRECIATION
OTH^R C [n] ST [c ]

j TOTAL COSTS

**SOURCE** **:AITIT**

**G**

**4.4**

**1.2**

**1**

**0.2**

**0.2**

**0.2**

**1.8**

**0.2**

**9.2**

**I**

**1.9**

**0.4**

**0.3**

**0.7**

**1.5**

**0.2**

**0.4**

**0.4**

**5.8**

**W**

**A N N E X** **35**

**COMPETITIVE ANALYSIS OF SUPPLYING COUNTRIES**

QUALITATIVE KEY SUCCESS FACTORS

Technical
know-how

(light
clothing and

knit wear)

+ +

+

+

+

+ +

s

Technical
know-how

(tailored)

+ +

s

+

s

- SUPPLYING
COUNTRIES

EC

MEDITERRANEAN

RIM

EASTERN
COUNTRIES

MAURITIUS

NICS

ASEAN

LESSER
DEVELOPED

ASIAN
COUNTRIES

ECONOMIC

FACTOR

Nel % rcinil
margin
allowed

54%

64%

64%

55%

55%

67%

67%

Minimum
delivery lead

lime

+ +  

+

+

s

s

   

Repeat order
possibility

+ +

+

+

Reliability

**+**

**+**

**+**

**s**

**+**

**-**

Yam or
fabric local
availability

+ +

+

   

a

+

s

s

Flexibility of
production

+ +

+ +

+

Small order
accepted

+ +

+ +

+ +

   

   

   

**Sophistication**
**index**

**121**

**93**

**HI**

**80**

**94**

**83**

**100**

**Quality**
**standards**

**+** **+**

**+**

**+**

**s**

**+** **+**

  

***** Respectively **quick response** **process** **/** **tradition»!** production process.

```
 Source : IFM, "A competitive analysis of finished textile and clothing products : imported versus uropean

      manufactured items" - 1992

```

ANNEX 36

**C**

o

o
**O**
**O**

**Exports from Portugal** and the countries **of Central**

**and Eastern Europe to the EC** **1988/92**

Exports to the EC - Textiles

Portugal

PECOs

Portugal

PECO (TTP)

PECO (total)

1989 1990 1991 1992

**Exports to the EC - Clothing**

1989 1990 1991 1992

**«I**
**C**
o

**o**
**o**
**o**

1988

120 T

100 +

40 +

20 4

0

1988

Source: Eurostat - Comext

_**<?'**_

BSN 0254-1475

**COM(93)** **525 final**

**EN** **10**

**Catalogue** **number : CB-CO-93-568-EN-C**

**ISBN 92-77-60242-2**

Office for Official Publications of the European Communities

L-2985 Luxembourg