material_fitness - Economist.com...

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Economist.com file:///I:/Material%20fitness.htm 1 of 4 7/7/2008 1:09 AM ROPI Economist.com About sponsorship Italian textiles and China Material fitness Feb 23rd 2006 | BIELLA, CARPI AND MILAN From The Economist print edition ROPI How Europe's leading home for makers of clothing and shoes is adapting to low-cost competition from China THINK of an Italian mid-market clothing brand with global presence, and the chances are you might think of Benetton, based near Treviso. Fifteen years ago, almost 90% of Benetton's colourful clothes were produced in its home market. Today Italian makers supply less than 30% and this will fall to 10% over the next few years. Benetton opened an office in Hong Kong early last year, partly in order to keep an eye on the Chinese suppliers upon whom it increasingly relies. This is the harsh reality of competition in the global textiles and clothing industry. Last year marked the emergence of China as its dominant force. Only tariffs had kept it at bay before then, and threats of trade wars quickly led to some of them being renewed. This week, Peter Mandelson, Europe's trade commissioner, added shoes to his possible list for new tariffs. But no one should be fooled by such measures. It is only a matter of time before China's low labour costs and growing production skills crush competitors in western economies. Nowhere is that threat more potent than in Italy. For generations its economy has relied on dense networks of firms, most of them small and middling family concerns, that clustered together and created wealth by mid-level manufacturing of goods such as clothing and shoes. They supplied not just the high-end fashion labels and designers, but also used the “Made in Italy” tag as a powerful marketing tool. Their success led to attention from economists such as Michael Porter, who noted the role of clusters and promoted them elsewhere as a way to jump start stalled or fledgling economies.
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Economist.com file:///I:/Material%20fitness.htm 2 of 4 7/7/2008 1:09 AM Today the impact of Chinese competition is becoming clearer. A long-term decline that saw the gradual erosion of jobs has accelerated, harming the economy. Italy has almost 600,000 jobs in textiles and clothing, about one-third of the sector's total in the old 15-country European Union and one-quarter of it in the enlarged, 25-nation, European club. The sector has been a major exporter and the generator of a large positive contribution to Italy's trading account. Both employment and that financial contribution are now declining. More specifically, the textiles, clothing and footwear industries are dividing, as competition brings out the best in some companies and others fail to adapt. The best have ripped up their business models and ruthlessly shifted production to wherever it makes sense—some in eastern Europe, others in China itself—in order to concentrate on strengths such as design and marketing where the Chinese can be matched or beaten. Others are struggling to stay alive. Competition from China has also revealed a
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material_fitness - Economist.com...

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