The impact of trade policies on the South African clothing and textile industry : a focus on import quotas on Chinese goods
Thesis (MBA)--University of Stellenbosch, 2011.
The South African clothing and textile industry has historically benefited from import substitution industrialisation which protected the industry through tariff and non-tariff barriers from foreign competition. Factors such as the impact of globalisation, our accession to the World Trade Organisation and the associated effects on trade liberalisation changed South Africa‟s trade policy to move towards export lead growth at the threshold of South Africa‟s democracy, which paved the way for increased imports from foreign countries. The opening up of the South African economy to foreign competition negatively impacted on the competitiveness of these industries. The clothing and textile industry has been plagued by various challenges, amongst others, cheap imports especially from China (often illegal), South Africa‟s accelerated tariff reduction programme and currency fluctuations (especially the appreciation of the Rand), which culminated in factory closures and huge job losses. South Africa has since 1994 developed unstructured and uncoordinated sectoral responses to these challenges in the absence of a comprehensive industrial policy. The government‟s response to deal with the challenges facing the clothing and textile industry was to re-impose protectionist measures via import quotas on certain categories of products from China. These measures were intended to protect the industry and provide it with breathing space to reposition itself and regain its competitiveness, retain existing jobs and create additional jobs. The quest to regain global competitiveness should be founded on a combination of measures (e.g. the legislative and institutional environment, infrastructure, skilled workforce, innovation and networking) designed to satisfy consumer tastes and preferences that aims to improve the potential for growth in the medium to long-term. The objective of this research report was to assess whether the introduction of import quotas on Chinese goods positively contributed to the South African clothing and textile industry in regaining a measure of competitiveness and growth. The basis of the study is informed by a series of personal interviews with the key industry stakeholders which focused on examining the state of the industry, especially the impact of import quotas of certain categories of Chinese goods. The results revealed that the impact of import quotas on Chinese goods failed to provide any significant benefits to the clothing and textile industry since: (i) although there was a reduction in imports from China into South Africa in the quota categories, importers merely sourced their products from other low cost countries (e.g. Pakistan, Vietnam, Mauritius); (ii) there was no significant increase in local output and purchases; and (iii) there was no significant reduction in the number of jobs lost and none created during this period. These results although supported by business and other academic literature are contested by both labour and government. One conclusion was that a comprehensive approach should be pursued to arrest the challenges faced by the clothing and textile industry to reposition itself within the global environment to regain its competitiveness. This requires the active participation of all industry stakeholders and the implementation of appropriate strategies and tactics which is sequenced and coordinated to enhance their collective outcomes.