Apparel benefitting from US-China trade war
Apparel benefitting from US-China trade war
Bangladesh’s garment sector is turning into a beneficiary of the US-China trade war as American retailers are placing more work orders, but other sectors, such as jute and leather goods, are yet to see an uptick in fortunes.
Though China is by far the world’s biggest exporter of manufactured goods, some factory owners over the past decade began moving production to other developing countries such as Bangladesh, Cambodia and Vietnam, said a recent report of The Financial Times.
This was in search of cheaper wages and a hedge against the political and economic risks that come from reliance on one country.
“Factory owners and US buyers say the trade war will intensify this shift,” said the London-based news organisation.
The observation proved true as local garment manufacturers acknowledged receiving more work orders from the
US.
Take, for instance, the case of Viyellatex Group, a leading exporter that mainly ships to European countries.
Three American buyers, who had folded their business in Bangladesh two years ago, are set to place bulk orders, said David Hasanat, chairman and managing director of Viyellatex Group, while withholding the retailers’ identities.
These three are not the only ones as many other US-based clothing retailers are now queuing up at his factory as China has already turned expensive for them, he said, adding that the trade war has been the impetus needed to re-route the buyers to Bangladesh.
Three out of every 10 buyers Hasanat now serves are from the US — a development of six months. The year-on-year growth of Viyellatex Group’s American buyers is 25 percent.
The number will increase further if the Trump administration finally scraps the North American Free Trade Agreement (Nafta), Hasanat said.
Earlier, many Chinese garment companies set up factories in Mexico to avail the duty privilege under the Nafta. But now, apprehending the withdrawal of Nafta, the Chinese investors are pulling out from Mexico.
Bangladesh has also been benefitting in the purchase of cotton as prices decreased 10 percent after China imposed high duty on the import of the natural fibre from the US. China imports $1 billion worth of the white fibre from the US in a year.
Similarly, AK Azad, managing director of Ha-Meem Group, which exports 90 percent of his $550 million-worth production to the US, is expecting higher work orders from American retailers.
Though Vietnam is already benefitting on a massive scale from the US-China trade war, Bangladesh does have the scope to increase gains, especially in garment business.
“But, first of all we need to improve our production capacity,” he added.
Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association, said the kickbacks from the trade war might not be visible overnight. “However, the condition of work orders is better now from last year,” he said.
The value of last year’s global garment business also indicates a declining trend for China. Although China remained the largest apparel supplier globally, its share shrank to 34.9 percent from 36 percent.
Bangladesh’s share increased to 6.5 percent from 6.4 percent through exports worth $29 billion, according to data from World Trade Organisation.
However, the benefits are yet to come for other sectors. Jute goods have not benefitted yet from the trade war, said Enamul Haque Patwary, the immediate past president of Bangladesh Jute Goods Exporters’ Association.
Manufacturers and exporters said Bangladeshi leather and leather goods are yet to see a spike in orders.
The Trump administration has so far levied 25 percent tariffs on $50 billion of Chinese industrial goods and is considering imposing similar tariffs on another $200 billion of Chinese exports.
China immediately retaliated with a 25-percent tariff on imports of soy beans, other agricultural products and automobiles.