Since the expiration of international textile quotas at the beginning of this year, China, India and some other textile producing countries have increased their textile and apparel exports, threatening the exports of smaller producers. Egypt, is fighting to retain its share of the international market and maybe even expand it.
China's Threat
Even before the textile quotas were phased out in January 2005, Egypt’s textile and apparel exports did not compare with China’s. “It’s almost a world apart,” says Dan Magder, a Washington-based economic policy advisor and author of a new study on Egyptian textile and apparel exports, sponsored by the Institute for the International Economics.
“A country like Egypt in 2003 was exporting about 700-million dollars worth of clothing to the world. China was exporting about 60 times more and that’s before the trading rules have changed. So now, China has even more ability to export,” says Mr. Magder.
China's exports in apparel have grown by more than 50 percent in the first half of this year, capturing more than a half of the world’s market. Other countries with low-cost production have also profited from the removal of textile trade barriers. India’s exports have increased by about 36 percent, Sri Lanka’s and Turkey’s by about 26 percent and Jordan’s by about 24 percent.
Still, Clyde Prestowitz, President of the Economic Strategy Institute in Washington, says China has many advantages over other textile producing countries.
“What makes China powerful in textiles is, number one, most textiles are made of synthetic fiber, not wool or cotton. And synthetic fiber production is an industrial process, requiring capital and labor and land, essentially," says Mr. Prestowitz.
"And the Chinese have low-cost labor and they have good infrastructure. They have not only low-cost labor, but [also] reasonably skilled labor. And the Chinese government has a variety of programs to provide investment incentives, tax breaks and that sort of thing to induce investment.” And so clothing manufacturers from all over the world have been investing in China, says Mr. Prestowitz.
Egypt's Potential
But Egyptian textile and apparel producers have had more incentive to sell at home than abroad. Due to their country’s high tariffs on textile imports, Egyptians have been able to keep the prices of their own products artificially high. Furthermore, local buyers have been less demanding in terms of quality and fashion than foreign buyers. Egypt exports bed linen, towels, underwear and other cotton products that don’t go out of fashion. Although Egypt’s share of the global textile market may be small compared to China, Turkey or India, analyst Dan Magder says cotton products are among its most important exports.
“They account for about 20 percent of all exports from Egypt, which makes it the second largest actor in Egypt, just behind minerals. And textiles and apparel account for about 30 percent of the employment in the manufacturing sector in Egypt. So these are very, very important industries for Egyp,” says Mr. Magder.
Egypt's Efforts to Survive Against Competition
Despite stiff competition, Egypt is trying to increase its share of the global textile and apparel market. According to Dan Magder, the country produces some of the world’s best cotton. But, he adds, to increase its exports to the United States and the European Union, two of the world’s largest textile markets, Egypt must adapt its production and management operations.
“Egypt needs to try to professionalize its management, focus more on the marketing aspects, try to understand the market needs and what customers are looking for, and then look back at their own companies, their manufacturing capabilities," says Mr. Magder. "Do they have the equipment? Do they have the people trained? Do they have the ability to produce products that people really want to buy.”
Efforts Pay Off
Mr. Magder notes that last year, in preparation for the removal of textile quotas, Egypt implemented a number of measures to boost its economy. He says these measures have encouraged foreign investment, especially in Egypt’s cotton industry. For example, the government pushed through customs reforms, proposed income and corporate tax reforms, reduced energy subsidies and privatized several enterprises. And what may be the most significant step toward increasing cotton exports, Egypt signed an agreement with the United States and Israel last year, creating qualified industrial zones, or QIZs, which have helped open U-S markets to Egyptian products.
“A company may be located in a particular qualifying industrial zone in Egypt," explains Ned Saums, Director for Middle East Affairs at the Office of the United States Trade Representative. “As a private sector company, it can ship and work with any country in the world. But if it is part of a qualifying industrial zone, it has the option under the Q-I-Z program that when it trades with the United States and ships its goods under that program, and if they [i.e., the goods] meet the qualifying criteria for the product, they have to include input from Israel and they have to have a certain amount of value added in the zone, then they can be shipped to the United States with duty-free benefits.”
Some observers say Egypt’s efforts have begun to pay off. The country’s exports of ready-made clothing to the United States are projected to exceed one billion dollars by the end of this year, compared to 850 million dollars in 2004. And they are expected to increase next year. Some reports also say that new government economic policies and the qualified industrial zones have attracted new foreign clothing companies and 13 already operating in Egypt have doubled or tripled their business this year. (
Most analysts say countries such as China and India could push smaller textile producers out of the global textile market. But Egypt is challenging this trend.
This story was first broadcast on the English news program, “VOA News Now.” For other “Focus” reports, Click Here.
