US Trade Body Rallies for Apparel from Bangladesh, Cambodia, India, Indonesia and Pakistan

IMPORT MARKET: US import market shares of certain major suppliers changed significantly during 2013–23.

• China was the largest supplier during the entire period, although its share of imports dropped by 16.4 percentage points (37.7% to 21.3%).
• Conversely, Vietnam was the second-largest supplier during 2013–23, and its share of US apparel imports rose by 7.8 percentage points (10.0% to 17.8%) over the same period.
• Jointly, the five profiled countries accounted for 21.3% of total US apparel imports in 2013, growing to 27.0% by 2023.

Drop in China’s market share: Several factors were behind the drop in China’s market share.

• First, sourcing from China became more expensive, in part because of rising wage rates.
• Also, early in the period, particularly between 2016 and 2018, US importers became increasingly aware of the importance of diversifying their sourcing away from China.
• US firms partially moved away from China as a response to trade tensions between the two countries that ultimately led to the imposition of tariffs in September 2019 under section 301 of the Trade Act of 1974.
• This shift was also prompted by the demand for China to address human rights violations reported in the Xinjiang Uyghur Autonomous Region (XUAR or Xinjiang), which led the US Congress to pass the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022 that establishes the rebuttable presumption that goods manufactured in the XUAR or by an entity on the UFLPA Entity List were produced wholly or in part with Uyghur forced labour and are therefore prohibited from US importation.

Diversification away from China offered opportunities for other suppliers.

• Many importers shifted sourcing to Vietnam, which benefits from a highly efficient system of supply chain management and large-scale production, combined with what some importers describe as a business-friendly environment.
• Some firms also note Vietnam’s economic and political stability gave the country an advantage over potential competitors in Asia.

Also benefiting from China’s drop in market share of US apparel imports were the five profiled countries. Of these countries, Bangladesh’s market share saw the largest increase.

• It grew from 6.0% in 2013 to 9.0% in 2023.
• Bangladesh’s increased market share stems from its large production capacity, an abundance of skilled low-cost labour and locally produced inputs, and flexibility to deliver in shorter time frames.
• India and Pakistan also saw increases in their shares of US apparel imports between 2013 and 2023.

India’s share rose from 4.0% to 5.8% and Pakistan’s from 1.9% to 2.6%.

• Concentrating on cotton-based apparel, both countries benefit from vertically integrated production and an abundant and skilled workforce.

US apparel imports from Cambodia also increased, rising from a share of 3.2% in 2013 to 4.3% in 2023.

• The country’s growth is attributed to its geographical proximity to China and Vietnam and foreign investment from established suppliers.

EXPORT COMPETITIVENESS IN THE GLOBAL APPAREL SECTOR

Using information gathered during the investigation and from the relevant literature, the Commission categorised the factors reported by stakeholders in the apparel sector into four broad determinants of export competitiveness:

1. cost,
2. product differentiation,
3. reliability of supply, and
4. social and environmental responsibility. That is, buyers looking to source from a particular country will consider a matrix of factors for a given product including production costs along with quality requirements and product diversity, reliability of suppliers for timely delivery, and compliance with social and environmental standards.

Industry representatives reported that cost—the price buyers pay their suppliers—plays a key role in sourcing decisions, although opinions vary regarding the importance of cost relative to other factors.

• A number of industry representatives and industry and subject matter experts indicate that cost remains the most significant factor, although some brands and retailers have reported that the importance of cost as a factor has declined in recent years, with other factors increasingly influencing sourcing decisions.
• According to research and industry sources, buyers and brands also use product differentiation to evaluate a supplier’s competitiveness. Factors such as existing product quality and product mix may necessitate higher costs to meet the buyer’s quality standards or product specifications.
• Depending on the product, target consumer, and identity of a brand or buyer, apparel buyers will place varying degrees of importance on product differentiation factors such as quality, specialisation, product mix, and full package offerings, which include design services, finishing, packaging, and logistics.

Reliability of apparel supply has become an increasingly important determinant of competitiveness. The emphasis on reliability has particularly grown in response to various recent disruptions to global apparel supply chains such as a global pandemic, geopolitical conflicts, and trade policy.

• Speed to market, a component of reliability, has long been important to sourcing decisions, but other factors, such as vertical integration, local production of inputs, sourcing diversification, and buyer-supplier relationships, gained prominence as buyers seek to decrease risk exposure in their supply chains.

Over the past decade, consumers and brands have become increasingly aware of and concerned about the social and environmental impacts of the apparel sector, according to various industry sources. Although emerging research suggests that compliance programmes concerning wages, social inclusion, and climate change mitigation may increase competitiveness, buyers and brands remain divided on the topic.

• Some brands and buyers believe social and environmental compliance to be a prerequisite in determining the competitiveness of a supplier, but other brands and buyers are largely skeptical of the producer and consumer commitment to such compliance.
• Similarly, some experts have questioned the commitment of brands and retailers and their willingness to pay for social and environmental responsibility initiatives. Thus, the relative importance, or “weight,” of such compliance in sourcing decisions remains a topic of active study and discussion within the industry.

COUNTRY-SPECIFIC FINDINGS

Bangladesh, Cambodia, India, Indonesia, and Pakistan are notable suppliers to the United States and also significant players in the global market.

• While China is still the largest source of US apparel imports, the five profiled countries all ranked among the top 10 suppliers in 2023.
• The five countries share some similarities in apparel products exported to the United States.
• Although broad cost comparisons are difficult to calculate across firms and countries, the five profiled countries reportedly have relatively low sourcing costs, including relatively low labour costs, with manufacturing wages in roughly the lowest third globally.
• Each country differs on other factors of competitiveness that make it attractive to US brands and retailers.

AUTHORS: This report was prepared principally by: Project Leader Alissa Tafti, Deputy Project Leaders Elizabeth Howlett and Junie Joseph, Principal Authors Erika Bethmann, Jonathan Coleman, Casey Eby, Christopher S Robinson, Grace Robinson, Mary Roop, Katherine Stubblefield.