End of quotas a testing time for some prominent rag-trade heirs
MONEY TALKS AND it certainly has something to say about earlier widespread expectations that the United States would unilaterally reimpose new garment import quotas after the scheduled end of the quota system on January 1.
What many people failed to take into account is that the US garment industry's clout in Washington has weakened considerably in recent years. The chart shows you just what a rapid decline it has been, with domestic production now less than half of what it was 10 years ago.
Also not taken fully into account was the fact that the US retail industry now employs 55 times as many people as US garment makers do and retailers want garment quotas abolished. The prospect of lower prices and wider sourcing of apparel has great appeal to them.
It seems to be the retailers who are now winning the tussle in Washington, with one critical court decision already in their favour and with the White House backing away from its earlier support of the garment makers. The long-awaited end of this egregious trade barrier may finally be with us.
And this has enormous implications for garment makers in Asia. The table shows you the present standings from the Bering Strait to the Middle East. China dominates with more than 61 per cent of the garment exports from this region and the general reckoning is that the figure will go even higher with the abolition of quotas.
Notice, however, that huge as China's garment exports have become, they still account for little more than 10 per cent of total national exports. The countries that stand most exposed to shifts in demand are Bangladesh, with garments accounting for 65 per cent of its exports and Sri Lanka with 49 per cent.
India has escaped putting so many of its eggs in one basket and this is generally the story in the eastern part of the region too, with one very notable exception. We in Hong Kong have half our domestic exports tied up in garments and are officially Asia's second-biggest garment exporter.
This is very odd indeed when you remember that garment making is a low-wage business and we have the second-wealthiest economy in the region after Japan. By right, garment making should be no more important to us now than it is to Japan.
And it probably will be no more important to us within a few years. Our ranking in this table is because Hong Kong was a low-wage garment centre 30 years ago when quotas were adopted. We scooped up the lion's share of the quota allocations and have been loath to relinquish them.
Yes, I know we do not have many of these garment workshops left and perhaps, just maybe, our garment exports are actually mainland ones disguised. We shall not overly trouble ourselves with this, however, shall we? Let sleeping dogs lie.
But the point is that there will be no reason to disguise these exports in the future if the quota system is finally gone. They can have 'Made in China' tags sewn on to them and be shipped direct from mainland ports. This could have implications for our port business and even for the number of mainland business visitors. Will that bridge to Zhuhai be so necessary any longer?
More than that it has implications for quota holders in Hong Kong. They may not themselves have used these quotas to make and ship garments in recent years but they certainly have made money from renting the quotas to others. Scratch out one easy source of income for these people.
And it may have struck you, as it has me, that notable among their now grown-up children are some of our more vocal politicians and office holders in government, people who have long taken advantage of their easily gained wealth to proclaim that they are successful businessmen and understand business matters.
Oh, really? Well, now we shall have the test of it.