The unprecedented shift in US foreign policy following the election of Donald Trump as the President has contributed to further volatility on the political economy with particular implications for Sri Lanka vis-a-vis the US potential retraction from the African Growth And Opportunity Act (AGOA). If GSP plus is compromised, the potential loss of rival economic benefits such as provisions of AGOA would create considerable dent in Sri Lankan export market.

Sri Lankan apparel companies have begun operating in Ethiopia and Kenya to gain duty free access to the US market under the provisions of AGOA. In 2015, Iran agreed on a long-term deal on its nuclear program with the group of world powers. Under the accord, Iran agreed to limit its sensitive nuclear activities and allow international inspectors in return for the lifting of economic sanctions.

However, President Trump’s administration announced that US will leave the deal indicating that Washington will begin to reinstate sanctions. In addition to sanctions imposed by US on Iran in August, 2018, the remaining sanctions will be imposed in November this year. Accordingly, port operators, ship builders, petroleum related transactions and transactions of foreign financial institutions with central bank of Iran will be mainly affected.

A McKinsey and Germany's RWTH Aachen University study states, Western countries sourcing from across Asia will shift production to neighboring countries. Western companies expect more than half of the clothes they source to come from "nearshoring" by 2025. British fashion brands like Burberry and others moved some of their production back to England as the tag ‘Made in England’ became attractive to luxury buyers after an import boom in the 1990 and early 2000. Hugo Boss, the German fashion label, has started selling a ‘Made in Germany’ collection, produced completely in Metzingen, the company's corporate seat.

A McKinsey and Germany's RWTH Aachen University study states, Western countries sourcing from across Asia will shift production to neighboring countries. Western companies expect more than half of the clothes they source to come from "nearshoring" by 2025.

Resurgence of domestic markets

British fashion brands like Burberry and others moved some of their production back to England as the tag ‘Made in England’ became attractive to luxury buyers after an import boom in the 1990 and early 2000. Hugo Boss, the German fashion label, has started selling a ‘Made in Germany’ collection, produced completely in Metzingen, the company's corporate seat.

However, this strategy is not attractive for low-priced and mid-range clothing producers who have to constantly compromise between low production cost and a short time to market. These producers, in recent years had moved their production to cheaper countries such as Vietnam and Bangladesh; in 2017, China's share of apparel imports dropped both in the European Union and the US.

Failure to respond to consumer demand may result in huge volumes of unsold clothing. Producers must treat short lead times as the No. 1 priority. Fast fashion is giving way to ultra-fast fashion, as practiced by online retailers such as Boohoo, Asos and Lesara. This doesn't work well with shipping from Asia: Delivery to big Western markets takes about 30 days by sea.

Need to focus on quick delivery

Eventually, producers in China, Vietnam and Bangladesh will need to concentrate on delivering quickly to markets in their immediate neighborhood, creating capacity shortage for Western buyers.

As McKinsey states cheaper freight and lower duties make it less expensive to produce a pair of basic jeans in Mexico than in China for the US market and in Turkey for the German market. But Bangladesh still significantly undercuts Turkey for the European market and matches Mexico's costs for the US and moving production home -- to the US and Germany -- is still a non-starter; it increases cost by 17 per cent in the US and by 144 per cent in Germany.

But as lead times gain importance, shortening them compensates for some of the labor cost disadvantages by increasing the share of clothes sold at full price. Raising it by 6.1 per cent for a garment that takes 60 minutes to produce would justify the transfer of production from China to the US.

Automation to reduce costs in Western countries

Automation can drive down the cost in Western countries. Now, sewing a pair of jeans takes an average 19 minutes, more than half of the total production time. McKinsey and RWTH Aachen figure robotics can cut that time by 40 to 90 per cent. At another important step, distressing jeans, technology exists to cut the time necessary from about 20 minutes to 90 seconds: Levi's does it with lasers.

Almost 82 per cent of sourcing managers surveyed by McKinsey say production of simple garments will be fully automated by 2025. If they're right, production is coming back -- but jobs aren't. And China isn't likely to fritter away its current advantage even as it becomes more expensive: Chinese garment companies are building factories in cheap labor countries closer to Europe such as Ethiopia. With these caveats, it's likely that buyers of mass market clothes, not just expensive designer threads, will be dressing in garments from geographically closer countries soon.

The Zimbabwe Clothing Manufacturers’ Association (ZCMA) intends to employ 35,000 people in textile sector in next five years. In its bid to achieve target, ZCMA is striving to revive old garment and textile units in the country. The garment and textile industry of Zimbabwe had declined mainly owing to influx of imported products and outdated machines. Besides, the industry never got any funding for retooling.

According to Jeremy Youmans, Chairman, ZCMA, there are still lot of resources available in Zimbabwe and the country’s textile sector can create lot of jobs through value addition. He urged the government to implement ‘local content policy’ to enhance the growth of local industries. Raj Modi, Industry and Commerce Deputy Minister, assured Youmans that the government will not only help the textile and garment industries in the country regain their old glory, but also will execute policies to encourage industrialisation.

Tran Tuan An, Vietnam’s Minister of Industry and Trade; and Cecilia Cecilia Malmström, European Commissioner for Trade issued a joint statement on October 19, 2018 in Brussels following their meeting on the sidelines of the 12th Asia-Europe Meeting Summit (ASEM 12) The Vietnamese government and the European Commission (EC) pledged to implement the Europe-Vietnam Free Trade Agreement (EVFTA) and the Investment Protection Agreement (IPA) in a timely and effective manner.

The Vietnamese government is preparing plans to fulfill obligations under the free trade agreements while the EC supports the necessary reforms and adjustments through technical assistance. Both sides acknowledged the relevance of the trade and sustainable development chapter of the FTA and agreed to jointly promote initiatives in this field, including the ratification of the outstanding fundamental ILO conventions.

Textile firm Welspun India will continue to pursue its differentiation strategy based on branding, innovation and sustainability. The company reported a 21.38 per cent increase in consolidated net profit at Rs 121.69 crore for the September quarter. It had posted a net profit of Rs 100.25 crore in the July-September quarter a year ago.

Its total income, during the quarter under review, increased by 10.29 percent to Rs 1,797.79 crore as against Rs 1,629.93 crore in the corresponding quarter of the previous fiscal.The total expenses of the company increased to Rs 1,635.70 crore as against Rs 1,484.81 crore.

As per latest figures from the Vietnam Leather, Footwear and Handbag Association (LEFASO), Vietnam surpassed China as a supplier of footwear for Germany-based Adidas in 2017 in the multinational corporation’s years-long shift of sourcing. The country, in 2017, made 44 percent of Adidas’ footwear volume while Chinese factories produced 19 percent, declining from around 30 percent in 2012.

Adidas has been shifting sourcing from China to Vietnam over the past five years, and the Southeast Asian country boasted of a steady increase in orders placed by the company during the period. By September, Vietnam’s leather and shoe exports were estimated to have reached $11.9 billion, representing a year-on-year rise of 10.5 percent.

The nation has become the second-largest footwear exporter to the United States, with around 404 million pairs of shoes shipped to that market by September, only behind China.

Metalbottoni, the women’s brand has introduced a new range of denim accessories. The new Monster line includes new material solutions. The button, rivet and small plate range, which has always been the core of the Monster line, has been restyled. The line includes items made of non-metal material, using sustainable processes, of natural origin and 100 per cent biodegradable. These accessories are similar in appearance to traditional polyester, are interpreted in a responsible way and developed through a series of special and unique effects.

Leather Accessories line has an extended range of sustainable materials. The line of tags and rear waistband labels is enhanced through interpretations based on two new eco-friendly materials: recycled jacron and cork. The line Labora has new glossy and satin finishing for metal accessories.

The brand uses only BCI certified cotton for its in-house premium denim brand Never Denim. For Never Denim Metalbottoni has developed a series of jeans buttons and personalized rivets, all entirely produced according to the No Impact protocol. This means recycled raw materials, no use of chemical agents, processing and machinery that minimize the use of water and electricity.

Metalbottoni, founded in 1973, is dedicated to young women and offers accessible trend driven fashion through a network of over 200 single-brand stores in Norway, Sweden, Finland and Austria.

A textile and garment exhibition (VTG) will be held in Vietnam, November 21 to 24, 2018. The show is expected to attract more than 400 exhibitors from countries like Germany, Hong Kong, India, Japan, Korea, Malaysia, Portugal, Taiwan, Turkey and Vietnam.

Specialized seminars in the textile industry will be held during the exhibition with the participation of speakers from foreign associations and universities. Speakers will provide information from strategy to practical solutions to develop the textile industry. The Textile Export Promotion and Development Council (PDEXCIL) will lead the booths coming from India.

Companies such as Bao Lun, Rich Peace, Tajima and ZSK will display the latest embroidery machines. Heinz Walz, Epson, Grafica and Sulfet will introduce a variety of high quality printers. Beworth and Silk Road will bring the most advanced knitting machines. Maika will exhibit a CAD system. The exhibition will also feature famous brand names in sewing machines from Japan such as Brother, Hikari, Juki and Yamoto.

Vietnam’s export revenue in the first eight months of 2018 was up 15 per cent over the same period last year. In addition, the Vietnam-EU free trade agreement is expected to create ripple effect for the country’s textile and apparel industry.

Inditex CEO Pablo Isla has topped Harvard Business Review’s list of the best-performing chief executives in the world for the second year in a row. The ranking takes into account economic results and other elements of social responsibility. The other nine CEOs in the list include Jensen Huang, Nvidia; Bernard Arnault, LVMH, François-Henri Pinault, Kering; Elmar Degenhart, Continental; Marc Binioff, Salesforce; Jacques Aschenbroich, Valeo; Johan Thijs, KBC; Hisashi Ietsugu, Sysmex and Martin Bouygues, Bouygues.

As per the publication, if rankings were measured on financial returns alone, Isla would have come in 29th, compared with 18th a year ago. But the company’s strong performance in terms of corporate environmental, social, and governance (ESG), which makes up 20 per cent of each CEO’s ranking, helped him take the top spot.

H&M is the world’s leading user of sustainable cotton and manmade cellulosic materials including lyocell. H&M aims to use only recycled or other sustainably sourced materials by 2030. With its yearly and steady increased use of recycled or other sustainably sourced materials, the group not only pushes the demand for widely used materials such as organic cotton, but also influences the scalability of new sustainable materials.

Nike tops the list of recycled polyester users. C&A is the world’s biggest user of organic cotton. Ikea is the biggest user of recycled cotton. Inditex is the second largest user of lyocell and the fourth largest user of preferred manmade cellulosics). Target is the third largest user of recycled polyester and the fifth largest user of preferred down. The North Face is the second largest user of preferred down.

All these companies show a deep commitment to scaling their global value chains of preferred fiber and to benchmarking their progress against the industry. These companies have also made significant investments in developing the supply chain needed to achieve the necessary measures of scale in preferred fiber production. What’s important is the growth of the 100 per cent club, those who have converted completely from conventional fiber.