Local players prepare for slimmer pickings

NATIONAL: Australian textile, clothing and footwear (TCF) manufacturers are bracing for a new threat from the East.

The State Council of China has announced a far-reaching program aimed at reviving its embattled TCF sector. Official figures indicated only one-third of Chinese textile and apparel manufacturers reported a profit last year, with two-thirds either in the red or on the verge of posting a loss.

Part of the government's new program would aim to boost TCF export growth through increased tax rebates, credit and financing support for small to medium enterprises and funding for technology and equipment upgrades.

Export rebates had already been increased from 14 per cent to 15 per cent this month, marking the third rise since August 2008. An increase of as little as one per cent could add several billion yuan's worth of total profits to Chinese textile and clothing manufacturers.

The move has reignited local debate on the level government support for Australian manufacturers. The Council of Textile and Fashion Industries of Australia (TFIA) said onshore players were already struggling to compete with the influx Chinese TCF imports - which were expected to rise under the Federal Government's scheduled tariff reductions.

Most TCF tariff lines would be at 5 per cent or lower from January 1, 2010.

"Given approximately 80 per cent of TCF product sold in Australia is imported from China, Australia's policy to reduce tariffs and phase out support while China is increasing rebates and investment is of major concern," TFIA executive director Jo Kellock said. "The rebates to Chinese TCF manufacturers make it difficult for Australian manufacturers to compete."

Kellock said she was concerned protection for local TCF firms would further diminish as the Federal Government approached a Free Trade Agreement with China. Although negotiations between the two were ongoing, criticisms had already been voiced about potential threats to onshore manufacturers.

"The Australian Government uses TCF as a defensive position in its Free Trade Agreements," Kellock said. "In other words, it wants market access for things like mining and agriculture at the cost of local manufacturing. China supports its industry intentionally as it is a wealth generator for them."

Victorian-headquartered manufacturer Canon Fashions said it already felt threatened by China's increased investment in technology and equipment upgrades. Director Roula Gavalas, who has been trading in the industry for over 23 years, said local businesses survived by providing value-added products for fashion designers.

"Our strength is more about design and technology than it is low cost," she said. "[China's investment] will make things more difficult for local manufacturers depending on which section of the market they service - if they have slim margins already, it might force them out of the game altogether."

Gavalas said increased competition had forced her to diversify the business, which included launching her own in-house brand Argyro Gavalas. Canon Fashions was also now directly targeting designer brands and private boutique labels with its unique cut, make and trim (CMT) services.

"We have specialised in handling small runs and quick turnarounds - both of which are not satisfied by the overseas suppliers," Gavalas said. "We liaise directly with the contractors and ensure all quality control and preparation for dispatch is done on our premises."

Queensland-based printing firm Colorscreen - which counted Nike, Coca-Cola Amatil, Brisbane Broncos and Australian Football League among its clients - believed China's support for its TCF sector could ultimately sound the death knell for local businesses. Director Brett Shepherd said many firms were already struggling to stay afloat with reduced demand and cheaper imports.

"I fear that with a reduction in tariffs and a reduction in TCF support, we won't be able to survive going forward," he said.

"At a time of global economic meltdown, our government seems to be committed to reducing tariffs and reducing support for an industry which employs thousands of workers."

Meanwhile, Australian retailers that imported goods from China said support for its trading partners couldn't have come at a better time. Retail Apparel Group CEO Gary Novis said the cost of imports had risen significantly as a result of devaluation in the Australian dollar.

"With the rebate, Chinese factories are getting back some money from the government for exporting," Novis said. "This makes it much easier for us to negotiate on price."

Retail Apparel Group operates menswear chains YD, Connor and Tarocash.