Today, we are living in a global economy. A fair trade between the countries must serve the best interest of everybody. John Divine, Senior Investing Officer at US News and World Report describes the US economy in the light of tariff war ‘as Pandora is out of its box’.
Apparel industry will take a big hit in the light of US’s $200 billion in tariffs on China. Due to globalization, no country has the internal capability to match global efficiency for the production of goods and services.
Therefore, when we can avail ourselves of the global efficiency then it is comfortable for the people of a country to get something easily at a low cost. For example, due to the cheap labor cost in Bangladesh, a T-shirt is much cheaper in Europe than a burger. For the same reason, hi-tech telecom and internet services can cheaply be provided to the people of Bangladesh in a free trade economy. With an added tariff on Chinese goods and when it comes to apparel, the landed price for China-made goods will be higher compared to others. In that area, the next countries can compete to take as much as from those are lost by China.
Therefore, it is not difficult to understand with such a tariff on Chinese apparel the export and price of Bangladesh apparel are expected to increase.
At the same time, when Chinese garment factories will lose business then Chinese textile mills have surplus raw materials such as yarn, fabrics that will be sold in Bangladesh at a more competitive price as a result of competition among Chinese mills.
Therefore, there is a slight chance that the woven fabric mills and denim mills in Bangladesh may face a little more competition but with the transfer of fast fashion category, they may assume to be stronger.
If Chinese producers making for the US are hurt they will aggressively seek for new markets in Europe, Latin America, Australia, Far East Asia, etc. where suppliers from Bangladesh will experience a little more difficult.
Now question is that in the event of growing landing cost of the Chinese made apparel- will Bangladesh be able to catch those orders rebounded from China.
With no preparation Bangladesh would most likely start to daydream, however, substantially will not be able to get any benefit from there. Just look at the US business at present in Bangladesh. Walmart, Sears, JC Penny, GAP, Levi’s, Phillips Van Heussen, etc. all these businesses are being controlled from the business hub in India. Therefore, Indians are getting most of the benefits out of these US retailers.
Apart from these most of the US importers want to buy in a LDP (Landed Duty Paid). Bangladeshi exporters do not want to accept this payment system. It is true that they can go for secured payment under LC and shipping term FOB. But if we do not try to be competitive by accommodating customer’s term then we slowly lose the US market which consumes two-third of the world economy.
Bangladesh government and BGMEA must start negotiating with the US to qualify for FTA (Free Trade Agreement) and start preparing financial package so that our manufacturers can work under LDP/ Cash on Delivery as secured as FOB/ LC at sight.
Otherwise, there will still be an influx of US orders being controlled by Chinese and India importers. Those orders will have no price because most of the margins will be taken away by importers in their pocket.
Source: Textile Today.https://www.textiletoday.com.bd/impact-trade-battle-us-china-apparel-industry/