Japanese Textile Industry and Future Regime of World Textile Trade
By----Mr.Kunio Yagi, Secretary General of Japan Textile Federation
Ladies and Gentlemen,
Today, I would like to speak about two subjects, namely the present situation of the Japanese textile industry, and the dominance of the Chinese textile industry in recent global textile trade and future regime of the world textile trade.
Regarding the present situation of the Japanese textile industry, I will talk about:
1) Current situation of Japan's textile industry and its foreign trade,
2) Structural reform of the Japanese textile industry and new report on the "Vision of Japan's Textile Industry and Policies for the Industry", and
3) Characteristics and technical advantages of the industry.
After that, I will talk about the situation in view of the present dominance of the Chinese textile industry as well as the prospect of a new order for international textile trade.
Please understand that what I will say here today is fully based on my personal opinions, and is not necessarily the official view of the Japan Textile Federation.
1. Present situation of Japanese textile industry
Firstly, I would like to explain the present situation of the Japanese textile industry.
(1) Both the number of establishments and the number of employees involved in the Japanese textile industry have reduced to less than half of their early-80s level. During the past 20 years, we experienced a decrease in exports and a sharp increase in imports because of the appreciation of the yen after the Plaza Accord of 1985, which caused our foreign trade to plunge into a huge net deficit and accelerated hollowing out in the textile industry. To cope with this situation, enterprises took desperate measures such as "selection and concentration", which downsized loss-making businesses and gave priority to their strong areas, relocating factories overseas, shifting their businesses to high-quality and/or differentiated products, shifting to producing non-apparel products, scrap & build of production capacity, bankruptcies, closures and withdrawals of small and medium-sized businesses, and rationalization in distribution systems.
(2) Even so, Japan's textile industry's presence in the economy remains quite large. It represents as much as 7% of the total manufacturing industry, with around 610 thousand employees. It occupies 13% of the business establishments in the total manufacturing industry, and the shipment is 6,600 billion yen, accounting for 2.3% of the value of goods shipped by the total manufacturing industry. Also, we have formed textile manufacturing regions in many areas of our country, and they have substantial influence, particularly on local economies.
(3) Looking at the current situation of Japan's foreign trade in textiles, we continue to have an enormous import surplus. In the year 2003, Japan imported textile products to the value of 25.1 billion yen, but exports amounted to only 7.8 billion yen. Import penetration is such that more than 90% of cotton products and as much as 55% of man-made fiber products are now imported. Specifically, imports from China have been increasing sharply and now amount to 80% of the total imports.
(4) Now I will move on to talk about the transition in the production capacity. Regarding the capacity to produce man-made fiber in 2004, China has grown to occupy a third of the world total, accounting for 14.3 million tons, compared with 1.7 million tons capacity in Japan. Japan has been lagging far behind Korea, which has a capacity of approximately 3 million tons, Taiwan with 3.8 million tons and other major man-made fiber producing countries such as the USA, India and Indonesia.
Also in the apparel industry in particular, it is said that the number of industrial sewing machines in operation in Japan has decreased to approximately 200,000 units, while China has more than 7 million. The reason for this is that production bases of the Japanese apparel industry, excluding those for high quality products, have been transferred to countries like China, where an extensive and cheap labor force is available.
2. Structural reforms in Japanese textile industry and new report on the "Vision of Japan's Textile Industry"
(1) In recent years, we have been making efforts to compete with Korea and Taiwan, and China, the textile giants, through producing higher quality and differentiated products, downsizing of and withdrawal from basic products, and plant relocations to ASEAN nations and Chinese coastal areas.
(2) The latest version of a report on the "Vision of Japan's Textile Industry and Policies for the Industry", which is revised every five years, was released in July, 2003. The report indicates the problems at each production stage and specifies the overall strategies to be implemented from now on. These strategies can be summarized as follows:
1) To promote further reforms in the structure of the industry,
2) To encourage exports as well as improvements in the textile trade environment,
3) To emphasize research and development in technology and design, and
4) To create excellent human resources.
For implementation of these strategies, the significance of prompt action is stressed in the report.
(3) I would like to report that instead of regarding China as a threat, the Japanese textile industry is turning its interest to how to work together with China for mutual prosperity. That is to say, we are seeing China as a huge market, and our interest is shifting to how to utilize the production bases and distribution channels in China, into which we have invested.
(4) For these purposes, the latest version of a report on the "Vision of Japan's Textile Industry and Policies for the Industry" suggests that the industry should further promote exports of the Japanese made textile and apparel products by producing higher quality and differentiated products.
3. Characteristics of the Japanese textile industry and its technical advantages
(1) Let me say that the Japanese technology in fiber and related areas is regarded as the best in the world. We take pride in this and feel aware that we should try to maintain our status by emphasizing research and development. We also need to take measures to protect intellectual property rights, and so on.
(2) I will now summarize the characteristics of the Japanese technology in fiber and textiles. First of all, we have made remarkable progress in the development of high-function fiber. Higher value-added products with fiber structure control and/or textile surface control by nano-technology, and various types of biodegradable fibers are the examples. Also, companies in spinning, weaving/knitting and dyeing sectors have come together to make use of new materials and produce various kinds of new textiles.
(3) Secondly, the Japanese textile industry has been developing new products continuously in various fields with its advanced processing technology, such as hygiene products including microbial control products, safety products including flame-retardant products, high functional products with cold protection, warmth retention and/or another excellent function for sportswear, and beauty and nutrition products.
(4) Besides, the Japanese textile industry has been developing so-called "super fibers" such as high-strength fibers and carbon fiber, and by utilizing such "super fibers", new products for new industrial applications such as geo-textiles for new construction methods in civil engineering and construction industries, materials for new energy, and materials for global environmental protection with recycling technologies are coming onto the market.
(5) Moreover, many Japanese textile companies, especially companies engaged in man-made fiber products, are challenging to enter into various kinds of chemical fields by utilizing high polymer chemistry originated from textile technology. These fields are various films, seawater desalination with membrane technologies, medical and pharmaceutical fields, and bio- and nano-technology fields.
4. Expansion of Chinese market shares in world textile exports and prospects for new future regime of world textile trade
(1) As aforementioned, China has shown remarkable development in recent textile production and trade in the world, and especially in recent 2 or 3 years, China has been only one winner in the industry. Now China is not only a superpower in the world textile industry, but is the textile giant.
(2) It should be taken notice that the following concerns are rising among related countries proportionately:
1) Chinese textile production and exports are growing prominently in the world. There is a possibility that Chinese prominent growth over the long term may trigger objections from other countries, as the exports from other countries have been on the decrease.
2) Chinese companies have flexible and multi-level energies and their remarkably speedy and prompt readiness for change of situations in the world textile trade, and many other countries, especially developing countries, can hardly follow China. In addition, weaker Chinese yuan and nearly unlimited young labour power support prominent growth of the Chinese textile industry.
3) Other textile exporting countries, especially developing countries, are mainly specialized in apparel manufacturing industry, since they do not have diversified and multi-level textile industries as China, and they are lack of readiness for rapid change of situations in the world textile trade.
4) Many textile exporting countries including developing countries are beginning to have a sense of crisis that only China will be benefited from the removal of quantitative restriction on imports by quota under ATC (the Agreement on Textiles and Clothing) by the EU and the USA effective 1st January 2005, judging from the market trends after the 3rd integration in 2002.
5) In the case of Japan, where there is no quantitative restriction on imports by quota and tariffs on textile products are the lowest in the world, the import penetration ratio of textiles and apparel on the volume basis are more than 70%, and 80% to 90% of the imports come from China. There is rising a concern among the USA and the EU that they will face to the same difficult situations as Japan after the removal of quantitative restriction on imports by quota at the end of 2004.
6) Furthermore, the US textile industry has requested the government to take protective measures including implementation of safeguard measures.