Autex Research Journal (2021)

APPAREL INDUSTRY IN THE EU – CHINA EXPORTS AND

CIRCULAR ECONOMY

Brîndușa Covaci

Zealandina Agency, Research Department, 71-75 Shelton Street, London, Greater London, United

Kingdom, zealandina.agency@gmail.com, +442038972233

Centre for Mountain Economy of the Romanian Academy – National Institute for Economic Research,

Calea 13 Septembrie 13, Bucharest

Abstract:

In the current social and economic world context, Chinese trade relations represent a

challenge for all partners. The paper provides an overview of bilateral trade, especially

export, between the European Union (EU) and China in the apparel and accessories

industry, most performance parts of the bilateral relations from the textile industry. The

research is highlighting the major trends of export relations for this industry during

2001-2019. The author presents the evolution of articles of apparel and accessories

exports in the EU and China, emphasizing the major tendencies for each of them.

Further are developed benchmarks of Romanian contribution to the relationship

between EU and China. The methods used present a multi-method approach, utilizing

primary and secondary research through exploratory data from official website

regarding apparel industry, as EU Statistics (EuroStat), International Trade Centre and

others. The main result of the paper shows that at the European level one of the most

important objectives for apparel industry is to assure for EU-China trade feasible barrier

export instruments in order to develop efficiently the bilateral exports.

Key words:

Apparel; Export relations; EU-China trade; Circular economy; Bilateral trade

 1. Introduction

Apparel industry is important for EU and China because creates new jobs, and a lot of

people from these countries have a correct chance in carrier beginning, especially

women. The industry contributes considerably to the unemployment eradication,

promoting the occupation rising in China, and the EU too. Speaking about luxury

fashion goods, speaking about usually range goods, this industry comes to meet one

of the most important human needs, respectively dressing people. In the last years,

EU-China relations are a result of common commercial policy of the EU and the rising

of the Chinese economy.

The decreasing of EU exports, in 2001-2019 period, affected the Romanian textile

industry export, especially articles of apparel and accessories sectors. Even Romanian

exports have a small growth in these sense, the rising is insignificant in rapport with

production. These happening because a lot of articles of apparel and accessories are

produces in Romania and commercialized by another EU country, as Italy, France,

Germany, etc. The common perception in EU is that the rising trade with China had

been negative for textiles and clothing, people preferring the Chinese products

because of their cheap prices. The only sector which resist in the textile and clothing

industry bilateral trade is the articles of apparel and accessories, especially fashion

industry. This, because the Chinese still put forward the European fashion industry,

more than American or others.

Articles of apparel and accessories exports analysis, between EU, implicit Romania,

and China is important because in the last period, for example the first semester of

2016, bilateral trade had been marked by significant rises of manufacturing, especially

textiles and clothing. Data for the first semester of 2016, comparatively with the same

period of 2015, presented by the European Commission: Directorate – General for

Trade1, shows that EU clothing industry exports in China, had raised by 18.6%, this

sector sharing 5.6% of total EU exports to China. Even exports from others sector, as

fuels and mining products, power generating machinery, non-electrical machinery, etc.

had decline in 2012-2015 period, the EU clothing industry exports to China has

increased by 65.55%, from 839 €M to 1389 €M in the analyzed period [1]. Between

2016 and 2019 the exports volumes from China to EU increased significantly with

25.27% (from 341742697 $M in 2016 to 428131103 $M in 2019).

Data about Chinese market clothing, especially fashion and luxury, show increasing

demand. With 1.3 billion peoples and rapid economic growth, China become highest

consumer for textile and clothing. [2]

2. Problem formulation

The aim of the research is to propose solutions for EU-China apparel trade relations.

The main objectives are connected by bilateral export development and trade barriers,

namely tariff (import), non-tariff (standards, financial information and sanitary and

phytosanitary) and investment (communications, transport and banking) are general

available for all trade Chinese relations. Regarding tariff barrier, World Trade

Organization postulates that imports are subject of tariff reduction.

The causes of EU apparel export decline, especially Romanian, in bilateral trade with

China are multiple and variated. The challenge of the paper is to propose some

solutions for increasing EU and Romanian apparel export in relation with China and

developing fashion production centre in EU and Romania for Chinese demand. The

apparel export EU, respectively Romania, in China is influenced by some factors that

should be solved. General barriers, applicable to all the countries exporting to China

are tariff restrictions, especially for products imported from countries where China does
not a specific trade agreement, non-tariff obstacles. Specific for EU, issues to be

covered by an agreement with China, topics will be practices standardization disarray

of customs administration, safety of the products until they reach their destination,

incoherence of barrier fiches, lack transparency of the licensing procedure, Chinese

laws and procedures referring to international standards, low level of Intellectual

Property Rights. Considering that China represent a strong opportunity export market

for EU products, especially clothing industry, the European Commission and

governments of the community area are interested in resolving the foregoing reminded

problems, especially enactments of the EU-China Investment Agreement. In this

sense, EU is trying to develop special bilateral trade relations, and soon will be finalized

the comprehensive investment agreement between EU and China. The agreement is

focused on market access opportunity for both partners, developing common

regulatory for environment and transparency, simplifying the licensing and procedure

authorization, and special settlements for labour market. [3]

Officials, and the rest of the EU and Chinese public and private community, consider

that for developing bilateral commerce, both have to become more business friendly

by liquidating trade barriers [4].

Special for apparel Romanian exports to China, specific for luxury clothing industry,

the most important problems remain the market size and the Chinese preferences for

brands coming from another EU country. In this regard should be mentioned that EU

fashion exports to China are dominated by brands from Italy, France, Germany,

Poland, etc. Thereby, high-end market brands accepted by Chinese are coming from

Italy (Giorgio Armani, Ermenegildo Zegna and Salvatore Ferragamo), France (Cerutti

1881, Chanel, Dior), Germany (Hugo Boss) and United Kingdom (Dunhill) and the
middle/low-end brands are coming from Germany (Adidas), Netherland (Tommy

Hilfiger), Spain (Zara) and Sweden (H&M). [2]

Considering that Chinese consumer market and preferences are quickly transforming

[7], luxury being the target, Romanian apparel retailers should promote connections

with the European brands mentioned [5]. Therefore, a strong objective for Romanian

clothing industry is to be in line with the European fashion luxury market. Insufficient

support from the Romanian government represent another barrier to apparel exports

in China. Solutions will be presented in this paper, application of these remaining at

the desideratum level.

3. Experimental

3.1. Methods

The paper develops and assesses the apparel bilateral trade between EU and China

from 2001 to 2019 in the context of world export. The accessories of apparel and

accessories industry holds more than 3% from world export. Taking into account

apparel industry analysis, the paper offers a current and future situation picture of this

sector. The research is exploratory and statistics calculus oriented. In order to cover

the dynamics of the apparel industry, the methods used present a multi-method

approach, utilizing primary and secondary research through exploratory data from

official website regarding apparel industry, as EU Statistics (EuroStat), International

Trade Centre which is support platform for the United Nations (UN), World Trade

Organization (WTO) and United Nations Conference on Trade and Development

(UNCTAD). Based on statistical calculus, the paper offers a longitudinal view on

apparel industry in trade relation between EU, especially Romania, and China, offering

new ways of bilateral commerce development. In principal, the analysis for the
quantitative part of the paper is univariate, supplemented by bivariate for the qualitative

one. In addition, with these types of research, in the paper have been used a variety

of secondary sources – particularly journals, books and reports on the apparel industry.

The author collect information from the reminded websites, selecting the comparative

analysis trade relations (export and import) for EU and Romanian data with China.

Collected data has been processed in Excel and SPSS, establishing the percentages

and the main tendencies. The method of data analysis was exploratory, selecting,

comparing and collecting the information from the reminded websites. The author used

simple descriptive statistics in order to establish the central tendencies of the analyzed

data. As quantitative analysis, the author used time-series in order to perform the main

tendencies during the analyzed period.

3.2. Data

Data for total trade shows that in 2001-2015 period world exports grew up by 166.65%

(10189588633 $M - million), while EU loses 6.9% (2923011551 $M) in decline from

39.7% (2426948507 $M) to 32.8% (5349960058 $M). In 2016-2019 period, world

export increased with 17.46% and in the EU with 17.45%. EU is one of the most

powerful region of the world which constantly fails in imposing at the international trade.

Some European specialists postulate that 2004, 2007 and 2013 integration waves

disturb the EU development “fly”. Others, assumes that the new waves give a new

breath in developing the economy of the first EU countries members. The future history

will display rightlessness of these postulates. In the meantime, with the first position in

the world and emerging countries, China accession is visible and relevant. This country

changed definitely the economic path of the world history. Its rates rising about 10%

(2015757713 $M), from 4.4% (266098209 $M) in 2001 to 14% (2281855922 $M) in
2015, placed China from the sixth position in 2001 to the first position in 2015, in the

233 countries world export top. In the context of EU decreasing, Romania have a good

situation in world export top, rising from 53 to 42 position, with 0.2% (49220054 $M) in

the 2001-2015 period, from 0.2% (11384994 $M) in 2001 to 0.4% in 2015 (60605048

$M). In the EU export top, Romania rising its position from 18 in 2001 to 16 in 2015. In

the beginning of the period (2001/2002) Romania increasing in world export for 22%,

but in the end (2014/2015) a decreasing of -13% shown a dramatically reducing in its

world commerce mapping.6 Data keep its trends for 2016-2019 period.

Total trade with goods for EU with other regions/countries present bilateral trade EU-

China in top of the commerce and investment ascension, over the relation with USA,

India.

Bilateral trade EU-China shows that Chinese imports from EU raises from 36418691

$M (2001) to 209324993 $M (2015), meaning about 474.77%, under the Chinese

imports media of 590.47%. Between 2016 and 2019, Chinese imports from EU

increased with 32.87%.

Data for apparel industry, in the HS codification (Harmonized Standards), is referring

to the group 61 ”Articles of apparel and accessories, knit or crochet” and 62 ”Articles

of apparel and accessories, not knit or crochet”. These groups are dedicated to clothing

textile and industry, especially fashion industry. As mentioned above these two groups

share about 3% in the world export. From 2001 to 2015, the apparel industry decreases

in world export about -8%. The most important cause of this decreasing is

overproduction of apparel industry.

In 2001-2015 period, the articles of apparel and accessories, knit or crochet (61 group),

attends constantly the 16 position in the world export top. Related to the world export

volume in 2001, the apparel industry has a value of 82069502 $M, meaning 1.7%.
Related to the world export volume from 2015, world export rate had decrease to 1.4%,

meaning 224547280 $M. In the period 2016-2019 world export volume for this group

increased, meaning that has been reinvigorated. Data show that this increase was in

value of 13.93% (from 214913997 $M in 2016 to 244859479 $M in 2019).

The 62 group articles of apparel and accessories, not knit or crochet, decrease in world

export top from 13 position (2001) to 15 (2015). Still, in rates increase from 1.3%

(102790822 $M in 2001) to 1.4% (225093735 $M in 2015). In 2016-2019 period, world

export for this group increased with 11.23% (from 214162175 $M in 2016 to

238223061 $M in 2019). EU decreasing in world export from 31.6% (32443665 $M) to

26.5% (47941877 $M). In 2016-2019 period EU increased world export for this group

with 19.84% (from 60339068 $M in 2016 to 72310458 $M in 2019).

4. Results and discussion

4.1 EU-China trade development. Evidences from apparel industry

According to problem formulation, results are connected to the main tendencies in

bilateral EU-China trades and to barriers are tariff (import), non-tariff (standards,

financial information and sanitary and phytosanitary) and investment (communications,

transport and banking) barriers are general available for all trade Chinese relations.

The main results regarding tendencies for the HS group 61 EU-China relations, shows

that in the EU top exported countries to China, Romania decrease its position from 15th

position to 18th. Still, Romania has raises its export about 1151.83% from 103760 $M

in 2001 to 1298895 $M in 2015. Between 2016 and 2019, Romania increase its export

to China with 2.51% (from 1359056 $M in 2016 to 1393246 $M in 2019). In

percentages, Romania strengthened European exports, being on 12th position in top

of EU exporters to China. But, comparatively with other EU countries, like Poland or

Slovakia, Romania must work hard on intrinsic export strategy. Even the values of the

trade had increase, because of the world export boom, the rates had decrease. The

same situation is encountered to EU and Romanian level, different from China level.

Otherwise, EU decreasing in world export from 27.2% (22281988 $M in 2001) to 21.4%

(47941877 $M in 2015). In the 2016-2019 period EU world exports increased with

24.94% (51241201 $M in 2016 to 64021978 $M in 2019). The most competitive

countries are Germany, Italy and France which produces in east and selling in all the

world. In this period, Romania decreases in apparel world export from 0.8% (669139

$M) to 0.3% (777358 $M), having in 2015 position 36th in the world top exported

countries and 12 in EU. In 2016-2019 period Romania decreased in export volume

with 8.85% (from 757419 $M to 690367 $M). China has risen significantly, from 4.4%

(13455949 $M in 2001) to 14% (83842271 $M in 2015), being pole position for the

entire period. Instead, in the period 2016-2019, China decreased with 4.78% (from

75026959 $M in 2016 to 71440138 $M in 2019). [6]

For the HS group 62 EU-China relations, statistics shows that some countries are

leaders for apparel industry, namely Italy, Germany, France and Poland. Romania

decrease in world export from 2% (2065992 $M) to 1% (2269170 $M), in 2015 being

situated at 19th position on world and ninth position on EU level. In 2016-2019 period,

Romania decreased world export for this group with 7.84% (from 2161445 $M in 2016

to 1991829 $M in 2019). China, placed in the first position on the entire period, had

increase significantly the export rate from 18.4% (18952050 $M) in 2001 to 34.9%

(78506716 $M) in 2015. In 2016-2019 period, China decreased world export for this

group with 8.20% (from 72766739 $M in 2016 to 66798310 $M to 2019). [6]

With reference to tariff barrier, World Trade Organization postulates that imports are

subject of tariff reduction. In the same descending trend fits import tariff on apparels,
which lowered from 14-23% to 7-10% and import tariff on shoes, which goes down

from 22-24% to 12%. Still the quality of Chinese apparel industry imports could be

developed through more stable agreements in import duties and taxes related to

foreign trade and business7. Statistic keeps its trend in 2016-2019 period.

Standardization in China needs to update, especially in awarding certifications speed.

Certification in China, for all products including apparel, takes a lot of time and money,

which is why many foreign investors are discouraged. According to Xu [8], The

Seconded European Standardization Expert in China (SESEC) project proposes to

Chinese administration some solutions as “accelerate the pace of Chinese standards

go global and strengthen the foundation and ensure the sustainable development of

standardization”.

Financial information, especially financial education, represent one of the main

challenges in China. Considering internet censorship in China, financial information is

truncated and incomplete. This problem is solved only by exercising freedom of

information by the Chinese government. Otherwise, making and sharing promotional

materials are too expensive and no apparel company does not support these

investments.

Sanitary and phytosanitary obstacles of Chinese market are remarkable due to China's

important non-tariff barriers affecting apparel sector. Not the quality of the imported

products is the problem, but the non-predictability and lengthy of the application

process. Many of the applications data are interest to be lost by Chinese authorities. A

centralized database should resolve the applications of sanitary and phytosanitary

threat.

Communications, transport and banking are the major investment difficulties in China.

Potential investors are subject to communications and banking abuse, the information
slowly run affecting the businesses. In apparel industry the celerity of the information

is more than important. In the same time transport in some Chinese districts are

decelerate the apparel industry in China. Liberalization of the investment barrier would

be in Chinese interests.

As shown before, goods trade with USA is linear or in decline, while EU-China

significantly rises in the last time. European retailers are developing their businesses

in China, according to rising incomes and population increasing4. In this context, at the

European level one of the most important objectives is to assure for EU-China trade

relations sufficient defense instruments.

4.2 Evidences from Romanian apparel industry

To increase their chances of Romanian's products to enter the Chinese market, the

Romanian Centre for Trade and Investment Promotion (CRPCIS) conducted a study

to discover the categories of products that have export potential on Chinese market.

Thus it was observed that during the period 2005-2010, the main products exported by

Romania on the Chinese market were nuclear reactors, boilers, machinery, machinery

and electrical equipment, copper and copper articles, wood, charcoal and articles of

wood and apparel and clothing accessories, other than knitted or crocheted,

representing 60,1% of Romania's exports to China in 2010. It was found that there are

many Romanian products which have potential for exporting in China, and to promote

and develop the delivery of Romanian products in China and for an increase in the

market share of these products it should be considered among the priority products for

export and for reformulating the export strategy of Romania on that relationship. [9]

Among solutions for all the Chinese importers, specific for Romanian producers the

author, in accordance with Romania’s National Export Strategy (NES) for 2014-2020,

proposes clustering development and apparel companies financing.

In clustering, Romania has a strong activity on the international level. Romanian

clusters, of which 15 are major and built in by 17 enterprises, has in 2012 an average

turnover of 250 €M and exports in amount of 200 €M, enrolment being of 5000

employers. In 2012, apparel industry has shared more than 12% of the clustering

industry in Romania, being the most important. The textile is dominating the North-East

and South-East clusters, while the technic textile controls more Bucharest-Ilfov branch.

Therefore, apparel sector must be targeted support of supply centers, a national

fashion institute, a national office style, and a Romanian brands catalogue. Other

actions to encourage the apparel companies are information, training and consultancy

in the area of strategic skills required by managers in the sector; internal efforts to

increase direct exports (to switch from outsourcing “system”, with a gross annual

average / average increase of 5%) by encouraging companies to modernize apparel

creation (design) and retail (e.g. by creating a center for fashion and design and more

oriented e-business and e-commerce); current improving efficiency in the value chain,

especially in the storage, transport and logistics documentation, training and better

cooperation between manufacturers and service providers in the sector;

implementation of environmental management (ISO 14001), increased production

levels at an annual rate of 3.4% (2.4% in the leather footwear sub-sector); quantitative

growth of supply of raw materials by increasing production of fiber.

Important challenge in the apparel industry is to create a value chain which the

universities, research institutes and consulting firms to develop the market in a

strategical way.

Internationally, in order to promote export, it is proposed to attach Romanian producers

to international fairs, mainly in Paris, New York, Tokyo which the Chinese importers

stand in line; to encourage firms that obtain results / orders by participating in fairs,
granting facilities to later editions, like subsidizing showrooms and to support economic

missions abroad - contacts, appointments with customers from France, USA, China,

Russia. [10]

Regarding apparel companies financing are recommended to sustain the relations

between Romanian and EU apparel brands dealing with China. The Romanian

government has to finance local brands like APACA, which produces clothes for EU

brands dealing with China, namely Giorgio Armani, Hugo Boss, Versace, Boggi,

Patrizia Pepe, YSL, Ted Baker, Stefanel or H&M. Other example is Martelli Europe, a

firm established in Buzău by an Italian business man in the 2000, which producing

jeans and other clothing items for Prada and Diesel. The apparel industry in Moldova

is dominated by Rhapsody Conf from Botosani, which has contracts with Armani, Ralph

Lauren, Prada, Zara, Zenia, Margiela, Hugo Boss and Massimo Dutti.

These EU brands dealing with Romanian companies should be encouraged to

produces clothes, especially luxury fashion, in Romania because of the employees’

low costs and professionalism.

The apparel industry in the relation between UE and China is developing under the

auspices of idea that circular economy has become important for both policy making.

[11]

5. CONCLUSIONS AND PROPOSALS

The main conclusion of the paper show that at the European level one of the most

important objectives for apparel industry is to assure for EU-China trade feasible barrier

export instruments in order to develop the efficiently the bilateral exports. This can be

done by applying circular economy desiderata. A general solution for circular economy

applied in any industry, specific to apparel suppose that under current conditions, the
need to move from the linear economy model to the circular economy model is proves

to be a paramount necessity. Circular economy is a must in apparel industry, on one

hand, because of the urgent need for optimal use of resources, thus ensuring both the

reduction of dependence on primary resources, the creation of a higher number of jobs

than in non-renewable energy and energy industries, as well as environmental

protection and on the other hand, because the need to reintroduce used products into

the circuit, to avoid / reduce their transformation into waste and to ensure

implementation of that optimal waste management in which residual waste is reduced

to a minimum absolute - the waste of one industry to be the raw material of another

industry. [12]

In order to apply circular economy in the EU-China relation, companies from apparel

industry must [2], [13-15] differentiate their products; take advantage of the free trade,

zero tariff scheme agreement and integrate the industrial chain vertically and

horizontally to make the pipeline more effective and hence enjoy cost savings; in light

of the changes in market and fashion trends, pay more attention to non-cost factors

such as one-package buying, the application of Information and Communications

Technology (ICT) in design and pattern making, speeding up the supply of samples,

providing a variety of products and services, and enhance credit; make good use of

their proximity and accessibility to the market; update their product/process/quality

through advanced facilities, online systems, digital technology etc., and improve

management levels. Governments of exporting countries should take measures to •

Strengthen the infrastructure, enhance efficiency of transportation and communication,

and speed up customs clearance; • Conduct training and education programmes for

workers and managers; • Cooperate inter-regionally and intra-regionally; • Restructure

textile complexes, integrate the value chain horizontally and vertically, and reinforce

supporting industries; • Maintain political and economic stability [2], [13-16].

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