Free trade, tariffs and online sales: what is fashion facing in Europe?

Textile is concerned on European elections’ results. New representatives’ decisions on commerce liberalization decisions will have an impact on companies and industries of the sector in Europe. Within the issues currently on the table for the new European Parliament, and with an impact on textile, are the continuation of free trade agreements (FTA) of the European Union with third countries, the changes within tariffs system for non-european countries, and the stability of digital single market.  The dialogue with Morocco for the reduction of origin demands and traceability of products is also in European agenda on textile issues.  

In 2017, the sector had a volume of business of 181 billion euros if all data from 28 European Union members is combined, as stated by the European Textile and Apparel Confederation (Euratex), in an annual report of the sector. In parallel, Europe is one of the world’s biggest consume markets, with the United Kingdom, Germany, France or Italy as the engine of sector’s global sales.

In 2016, Eurostat published that each European home invested almost a 5% of its consumption expenditure in clothes and footwear, which supposed a total investment of 395.4 billion euros. In other terms, Eurostat calculated that each European citizen dedicated 800 annual euros to clothing and footwear. At the same time, clothes production in Europe grew a 0.9% in 2017, having two consecutive years of positive progress.

The European Union has bid to negociate bilateral agreements with countries, to encourage the free trade

In foreign trade, the two biggest agreements signed in the last legislature have been the agreement with Canada (CETA) and the treaty with Japan (JEFTA). Sources from the European Commission pointed that the European companies export 58,000 million euros in goods and 28,000 million euros in services to Japan. Thus, the agreement with Japan meant a drastic reduction of tariffs barriers to products’ exports from Europe to Japan.

One of the most important treaties of the legislature is the Canada Comprehensive Economic and Trade Agreement (CETA), the agreement signed by the European Union and Canada. The tariffs reduction emerged from the agreement, valid from 2017, supposed an increase of a 20% in the commerce between both territories, as well as a boost of commercial interexchange until 20,000 annual million euros.

The European Union is also under commercial treaties negotiations with Mexico, with implications on tariffs reductions, with the leather as one of the most important raw materials in that exchange. At the same time, the European Commission has also concluded agreements with South Korea, Moldova and Ukraine, and its keeping bilateral dialogues with Colombia and China.

Binding agreements as TPP, Ceta or Jefta have been aproved, as well as bilateral dialogues with China and Colombia 

In parallel, the European Union has also done a first gesture to resume the dialogue with the US on free trade issues. After the US withdrawal of Ttip negotiation with Donald Trump arrival to the presidency, the European Commission has started to maintain contacts again to resume the negotiations.

The European Parliament does not aprove this move, because it voted against the European executive to start negotiating again with the US to pass a free trade agreement between both territories.

However, the dialogue that has challenged the European textile sector is the one maintained in the paneuromediterranean convention, negotiated between the European Union and the African countries of the Mediterranean watershed. The main destination country of Spanish textile material exports is Morocco, one the main manufacturer countries, and where it is sustained a 25% of the total volume of business.

With the existing commercial model between both territories, the products that have done two of its industrial processes in Europe or the North of Africa have tariff rates advantages. Countries like Morocco are seeking to reduce the model to one process only and continuing to have tariff benefits, which will allow them to work with Asian raw material and abandon the European market.

GSP, a European commercial bridge

The European Union also performs actions to promote the imports from third countries. Under the argument of helping underdeveloped countries, the European Union excludes from tariff rates payments to some countries from the African and Asian continents, from approximately 50 years ago.

The standard application means the reduction of two thirds of tariffs, partially or totally. Within the countries benefiting from this measure are countries like Vietnam, India, Kenya or Indonesia, among others.

Countries like Myanmar or Bangladesh enjoy free trade policies with Europe, despite not respecting human rights  

Countries with good government, according to the European Union, are also enjoying this application. In this case, they are free of two third of the total tariffs rates. In this group, countries like Bolivia, Philippines or Sri Lanka are in.  

However, the biggest group is formed by countries that have free duties access to the European market. All kind of products can aplly to this measurs, except arms and ammunition, in a group known as EBA (everything but arms).

The European Commission has started the process to expel Cambodia from tariff advantages system, after the national government had won an election with harassment on the opposition. Besides, the European executive warned that was taking into consideration to implement the same procedure to Myanmar, due to the ethnic crusade to rohinyá’s population.

A single market for the ecommerce

The online commerce is Europe has also been on the spotlight of the European Union recently. Juncker’s executive has promoted a digital single market policy, to encourage the price unification of online products within the whole Europe, in order to help countries’ companies to open to other European markets.

In fact, the European Commission highlights that only the 7% of SME’s sell in other countries within the territory. The fight against geographical block has been the main measure to boost the European digital single market and lighten the cross-border package shipment.

Companies like Nike, which was fined with 12.5 million euros, or Guess, with a penalty of 40 million, were sanctioned by the European Commission for violating the principle of digital single market, and limit the cross-border sales to certain products. Guess, for instance, commercialized products, with a 10% more expensive price in countries as Hungary or Poland, in comparison with other member states.