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Challenges and opportunities for Bangladesh in USA market

Kings with one another vie, while the innocents die! Talking about most discussed and disputed issue in the last one year ‘US-China trade war’. The trade war is turning around daily and the business man’s keeping a sharp eye on what coming next! Over the past year, the US and China have imposed tariffs on one another’s goods worth of billions of dollars.

Challenges & opportunities BD in USA market

US President Donald Trump is pushing now for a comprehensive trade deal with China but remains open to an interim agreement. Top negotiators from both countries are due to meet next month (October) in a bid to strike a deal to end their long-running trade dispute.

In this scenario, the country like Bangladesh what’s getting or loosing from this giant’s contention?

Purbani Group Managing Director Shafiqul Islam said, “The outcome of the trade war is mixed. On the one hand, there is an increased risk for global customers to source from China. Therefore, there is a shift towards sourcing from other neutral sources such as Vietnam, India and Bangladesh. On the other hand, the trade war is giving fuel to uncertainty and protectionism which is regressive to the RMG trade.”

Present scenario of Bangladesh textile and apparel industry

In March, Asian Development Bank (ADB) Chief Economist Yasuyuki Sawada said in a seminar that Bangladesh merchandise exports will increase additional $400 million and its Gross Domestic Product (GDP) rise 0.19% by next one to two years if the prevailing international trade conflicts involving the US and China escalate.

But the reality is more than 200 factories closed down this year and almost 20,000 employed lost their jobs recently due to not getting enough orders from the buyers.

Usually, factories outgrow the dull season within June-July, but this year dull season extended to August-September. This is happening because regular brands and buyers are not confident enough to place new order in this worldwide unstable situation and there are some impacts of fast fashion also.

However, manufacturers are expecting more order from US-based buyers due to trade war, owners are traveling more to the USA and European countries nowadays.

“We all know that billion-dollar business is moving or will move in the coming days from China to the other countries due to this trade war. That doesn’t mean only Bangladesh will get this opportunity. There are many competitor countries like Vietnam, Ethiopia, etc. will get the same opportunity. Now the question is that, are we ready to grab this opportunity?”

Helal Mohammed Nuri, CEO of SIlver Line Group

Recently a team from Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has visited some South American countries like Brazil and tried to make some deal which is in a discussion. So, it is clear that Bangladesh garments industry is struggling and trying to get out of this situation.

In this critical situation, Bangladesh apparel makers should analyze all the global issues related to the sector as they can get benefit from these and survive strongly in this challenging period.

China’s share in USA market declining-a ray of hope for Bangladesh

China is the largest source of apparel products for the USA as it supplies more than 33 percent of the USA’s total apparel imports. Due to the trade war apparel import from China is declining. USA companies imported $14.47 billion worth of apparels from China, the still-top supplier in the year through July.

That is a 2.33% increase compared to a year earlier, according to the US Commerce Department’s Office of Textiles & Apparel’s (OTEXA) new data released on September 4. Though it is an increase, the analysts are considering it as tepid gains compared to last year as the U.S.-China trade war has influenced importers to diversify their sourcing to avoid risk and now higher prices.

China held a 32.26% market share in of U.S. apparel imports in value terms for the 12 months through July, an erosion of 3.6% in three and a half years, according to OTEXA. For the year through July 2018, China’s apparel market of U.S. apparel imports was 33.1%, compared to 33.7% for the year ended Dec. 31, 2017. Looking even further back, China’s market share at the end of 2016 was 34.59%, and 35.86% a year before that.

China market share U.S .apparel imports
Figure 1: China losing its share gradually in the USA market.

Shangu Group Chairman M.A. Taher said, “Due to the trade war between the US and China, Bangladesh textile and apparel industry is started to get benefits from this. Frankly speaking, I am seeing a lot of opportunities for Bangladesh textile and RMG industry.”

“In previous years, as an apparel manufacturer, we did not use to get a lot of orders from the US. Whereas, at present Bangladesh is getting a lot of orders from the US buyers. Which means the trade war between the US-China has given a boom for the Bangladesh textile and apparel industry,” he further said.

However, the reality is not the same for all the factories and a point is that all factories have no proper planning or strategy also capacity to utilize the opportunities arising from the trade war.

“We all know that billion-dollar business is moving or will move in the coming days from China to the other countries due to this trade war. That doesn’t mean only Bangladesh will get this opportunity. There are many competitor countries like Vietnam, Ethiopia, etc. will get the same opportunity. Now the question is that, are we ready to grab this opportunity?” said Helal Mohammed Nuri, CEO of Silver Line Group.

How can Bangladesh reap the benefits from a trade war?

In 2012, a report by McKinsey forecasted that as ready-made garments production in China declined, Bangladesh would be the next hot spot, and the market would triple in value by 2020.

According to Otexa data, Bangladesh’s export to the US market stood at $5.20 billion, up by 5.72% in January-November of 2018. While apparel export to the US market saw a 6% jump to $5 billion in the same period.

Now, Bangladesh is also the number one denim exporter to the EU and third-largest to the US market.

“China is the largest exporter but I can assure that Bangladesh will be benefited from the trade conflicts. Despite having a negative impact on the global trade, Bangladesh’s exports especially readymade garment products will grow further,” Commerce Minister Tipu Munshi said earlier to a daily newspaper.

But the question is how? The table of products list that are exported from Bangladesh and China may provide an answer to the question. Bangladesh’s top 16 items matched in the list of USA’s top 30 sources items from China whereas other 14 items are not matched.

Bangladesh’s top 16 items matched in the list of USA’s top 30 sources items from China
HS Code Products Description Value (In US$ Mn)
1. 6203.42 Men’s or boys’ trousers, bib and brace overalls, breeches and shorts of cotton, not knitted or crocheted 1420.91
2. 6204.62 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of cotton, not knitted or crocheted 734.67
3. 6205.20 Men’s or boys’ shirts of cotton, not knitted or crocheted 569.05
4. 6110.20 Sweaters, pullovers, sweatshirts, vests and similar articles of cotton, knitted or crocheted 310.66
5. 6109.10 T-shirts, singlets, tank tops and similar garments of cotton, knitted or crocheted 197.47
6. 6203.43 Men’s or boys’ trousers, bib and brace overalls, breeches and shorts of synthetic fibers, not knitted or crocheted 183.39
7. 6108.21 Women’s or girls’ briefs and panties of cotton, knitted or crocheted 129.49
8. 6110.30 Sweaters, pullovers, sweatshirts, vests and similar articles of manmade fibers, knitted or crocheted 115.16
9. 6209.20 Babies’ garments and clothing accessories of cotton, not knitted or crocheted 100.78
10. 6212.10 Brassieres, whether or not knitted or crocheted 80.79
11. 6111.20 Babies’ garments and clothing accessories of cotton, knitted or crocheted 79.06
12. 6201.93 Men’s or boys’ anoraks, ski-jackets, windbreakers and similar articles of manmade fibers, not knitted or crocheted 75.74
13. 6104.62 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of cotton, knitted or crocheted 74.26
14. 6206.30 Women’s or girls’ blouses, shirts and shirt-blouses of cotton, not knitted or crocheted 65.85
15. 6107.11 Men’s or boys’ underpants and briefs of cotton, knitted or crocheted 65.56
16. 6205.30 Men’s or boys’ shirts of manmade fibers, not knitted or crocheted 63.33
17. 6105.10 Men’s or boys’ shirts of cotton, knitted or crocheted 61.62
18. 6202.93 Women’s or girls’ anoraks, ski-jackets, windbreakers and similar articles of manmade fibers, not knitted or crocheted 57.60
19. 6103.43 Men’s or boys’ trousers, bib and brace overalls, breeches and shorts of synthetic fibers, knitted or crocheted 53.68
20. 6103.42 Men’s or boys’ trousers, bib and brace overalls, breeches and shorts of cotton, knitted or crocheted 53.59
21. 6201.92 Men’s or boys’ anoraks, ski-jackets, windbreakers and similar articles of cotton, not knitted or crocheted 50.01
22. 6210.40 Men’s or boys’ garments, impregnated, coated, covered or laminated with plastics, rubber or other materials, nesoi, not knitted or crocheted 49.19
23. 6202.92 Women’s or girls’ anoraks, ski-jackets, windbreakers and similar articles of cotton, not knitted or crocheted 45.60
24. 6204.63 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of synthetic fibers, not knitted or crocheted 34.02
25. 6206.40 Women’s or girls’ blouses, shirts and shirt-blouses of manmade fibers, not knitted or crocheted 33.71
26. 6108.22 Women’s or girls’ briefs and panties of manmade fibers, knitted or crocheted 29.25
27. 6211.42 Women’s or girls’ garments nesoi, of cotton, not knitted or crocheted 22.30
28. 6204.69 Women’s or girls’ trousers, bib and brace overalls, breeches and shorts of textile materials nesoi, not knitted or crocheted 22.19
29. 6108.31 Women’s or girls’ nightdresses and pajamas of cotton, knitted or crocheted 21.76
30. 6210.50 Women’s or girls’ garments, impregnated, coated, covered or laminated with plastics, rubber or other materials, nesoi, not knitted or crocheted 21.57

If we look carefully to the products range that USA used to import from China and Bangladesh than it will be clear in which products Bangladesh is competing with China in the USA market. At the same time, the product list shows where Bangladeshi apparel makers should focus. Bangladeshi apparel manufacturers can be the gainer if they diversify their product into these 14 items also.

Engr. Anisul Hoque Ansari, Sr. General Manager (Operations), Hameem Group, highlighted some ways to reap the benefits of this trade war. These are:

  • Look forward to fashion styles for those China and Vietnam were the first choice from US retailers. Build up the capacity of making garments by adopting advanced technologies, AI in MIS, Machinery and manufacturing controls.
  • Building Strong regional connectivity and logistic infrastructure to take speed orders.
  • Build facilities and infrastructure for making yarn other than importing yarn, to get the benefit of a price drop of cotton, steel and soybean from the US.
  • Most importantly, improve in the ease of doing business index, such as allowing currency other than Dollar in opening Letter of Credit which can ease cross-border trade.

That means industry need product diversification urgently. Alarming issue is factories extended their sewing lines or production facility double, triple to produce basic products in the last few years. But now factories need to build their facility for many new items also if they want to grab the USA market.

“Giant factories have grown in a direction previously, but if we really get new buyers from the USA, we have to ensure one-stop service to grab the business. Most importantly we have to bring something new which will help us to grab the new market which is moving from China,” Sharafat Hussain Sohail, Deputy Manager, Marketing & Merchandising of Masco Group said shortly.

Another point is that due to fast fashion, global brands, including USA retailers are more sensitive now about lead time where still Bangladeshi companies need more or less 30 days (depends on product type). Manufacturers need to ensure just time delivery within short lead time.

In fine, Bangladesh textile and apparel manufacturers need to take proper strategy analyzing the trade war scenario to grab the upcoming opportunities. The government should come forward to ensure all infrastructural facility and confirm ease of doing business.

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