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Mary Vane of DuPont Textiles & Interiors discusses future in 2005
and beyond.
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By Devin Steele
CHARLOTTE, NC — Mary K. Vane of DuPont Textiles & Interiors (DTI) recently gave Southern Textile Association (STA) members a glimpse of a quota-less world in the not-so-distant future.
The picture she presented appeared disheartening — but not hopeless, if domestic textile and apparel companies are developing a “breakaway strategy” to differentiate themselves in an even-more-cutthroat environment.
“I don’t think that incremental changes in our businesses are going to be enough to keep our businesses thriving,” Vane, DTI’s director of international trade and business development, said during STA’s Winter Technical Conference here. “We need a repositioning strategy.”
Defining her presentation on global competitiveness for U.S. textiles as a “call to action,” Vane offered a number of tactics companies can employ to ensure future competitiveness. But, first, she reviewed a number of trends before providing a peek into the near future.
“Probably the most frequently asked question I get is ‘what’s going to happen in 2005, when all the quotas are removed?’ ” she said.
Vane reminded the 200 or so attendees that, under World Trade Organization rules, quotas are being gradually eliminated over a 10-year period, with Jan. 1, 2005 marking the end of the phaseout.
In answering the previously posed question, she looked at examples of two products that already have had their quotas removed, on Jan. 1, 2002. For the first 10 months of 2002, imports of knit fabrics and textile luggage increased 29 percent and 28 percent (in kilograms), respectively.
That quota elimination also affected the price of those products, she said, noting that knitted fabric fell from $714 per kilogram to $5.83 and textile luggage slipped from $8.06 to $5.89.
“Perhaps that’s an indicator of what you might see when all the rest of the quotas are lifted,” she said.
In envisioning a quota-less world, Vane first noted that quotas have artificially distributed the textile and apparel industry around the world. When those quotas are removed, however, business is going to flow to those countries — about 20 or so — that are the most effective and efficient, she said.
As this business shifts, an extreme imbalance between supply and demand will be created, which will deflate price.
“That business is going to shift not in 2005 but in 2004, because the quotas will be removed and the goods will hit the ports on Jan. 1, 2005,” she said. “That means you back up the length of time that goods are going to be off the boat, that goods are going to be produced, that textiles are going to be made, that products will be designed and ordered. So I think fairly early on in 2004, you’ll start to see the effect of this, which means we don’t have the luxury of time. We really could be less than 12 months away from seeing an impact here.”
Vane added that the result of quota removal is that consumers will win, at least according to most economists. “The consumer will have a wider choice of goods, the best quality and the lower cost,” she said.
A major concern of Vane, she said, is that the economies of so many developing countries are dependent on textiles and apparel. For instance, Pakistan relies heavily on the production of textiles and apparel, which account for 75 percent of its exports, she reported. So countries that are hurt by quota removal as China emerges as the big winner post-2005 will need government subsidies in order to be sustained.
“When those subsidies occur, you’re going to have some unnatural market forces at work,” she said. “You’ll probably have a lot of dumping going on, which is going to unsettle our prices even more.”
Such a scenario would occur in an environment where, already, price deflation has occurred, she noted. In fact, prices today are slightly lower than they were a decade ago, she said.
Vane reminded listeners that competitive shields in the form of duties will still exist in 2005 and beyond, however.
“These duties come down bit by bit and they’ve been coming down over a 10-year period,” she said. “Your duty on fabrics is still going to be about 7.5 percent on average. And the duty on apparel on average is still going to be about 17 percent. That competitive buffer is getting slimmer, but it’s still your buffer.”
She added, however, that duties will probably be driven down even further in the next round of WTO negotiations, but that further decline would also be gradual.
Vane concluded by offering a few strategies of how companies can reposition themselves in this global environment. For one, she said, companies need to create a reason to buy their products.
“We have to excite them,” she said. “We have to emphasis value and not just price. A lot of these ideas are ones that DuPont is engaged in. We committed to introducing 25 new products over a five-year period and that innovation, staying ahead of the crowd, is absolutely going to be essential to survival. And I don’t think it’s just innovation in product designs, but it’s also innovation in marketing approaches, as well in exciting the consumer.”
Also, getting away from commodity products and creating a finer market segmentation also will help, she said, as will emphasizing brand identity and brand demand, developing new methodologies and processes and striving for continuous improvement.
Companies also need to play on their strengths, which include being close to market and being able to deliver quickly, she said.
“It’s not just being able to shift production runs, but it’s also being able to deliver samples so that you get the order in the first place,” Vane said. “This is an area where often we lose the business because we can’t deliver the samples fast enough, so there’s an issue of speed both in product development as well as speed in the production runs.”
Vane also encouraged audience members to consider adopting Six Sigma, the highly developed process that helps companies focus on developing and delivering near-perfect products and services.
Another strength U.S. manufacturers should use to their advantage relates to distribution and services, she said. “This is an area where we absolutely can win and should win,” she said. “We do know our consumers and customers and we should know how to service them better than anybody else in the world.”
As customer bases expand outside the U.S., companies should also explore novel ways of financing because many foreign customers aren’t used to dealing with financing in traditional manners, she said.
Finally, Vane said, information is an asset for businesses and they should leverage their knowledge of their customers to their advantage.
“That is a tangible asset that you can use in a partnership,” she said. “And perhaps this global environment suggests that we have innovative, global alliances, where we marry our competencies to the competencies of other firms. I don’t think it’s necessary that we do everything ourselves.”
