Women’s Wear Daily
04.19.2014
fashion-features
fashion-features

China Restrained but Undaunted

Despite political threats and fresh quotas, China is poised to strengthen its lead as the top U.S. supplier of textiles and apparel.

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Zane pointed out that the quotas provided by the latest agreement are in some cases four times greater than the 2004 quotas, and Chinese factories are able to buy quota more cheaply than in years past, he said. Quota in China can be traded like a commodity between firms.

"So new quota is less expensive than old quota, so to say, and, if China was competitive with old quota, you can imagine that they continue to be competitive with new quota," said Zane.

The availability of quota in China also complicates sourcing within the country.

"The costs are a factor; another factor is practicality," said Mark Jaeger, senior vice president and general counsel at Jockey International. "It's not as easy to move production to contractors that have not been allocated quota. It's made it stickier to transfer business amongst customers in China."

Many doing business in China simply deal with additional costs from quotas as best they can.

"As a collection, when you're doing production and you're working closely with a retailer, there are certain categories that you must price-average with certain quota conditions to satisfy the customer's needs," said Robert Rosen, chief executive officer of La Rose Inc., which produces the Bob Mackie Studio line.

This mean accepting lower profits on some categories to keep the business in China and the retailers happy.

"It's all about working for the retailer, and making the retailing community comfortable and profitable, and because of that, we are forced to do this," said Rosen.

The new arrangement with China is an improvement for importers over the chaos of sourcing last year. Before the deal was reached, importers doing business in the country faced the looming possibility of temporary safeguard quotas being imposed by the U.S. government — they were — and filling them before orders that were already placed could be brought to the U.S. market.

"The whole thing with China is predictability," said Tom Haugen, president of Li & Fung USA. "If you need something, it's not a big deal to pay more money for it as long as you know you're going to get it."

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