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The global fashion business journal

Dec 7, 20199:47am

If world trade falls, what is going to happen to fashion?

The World Trade Organization’s (WTO) World Trade Outlook Indicator registered in February its lowest level since March 2010.

Feb 25, 2019 — 10:19am
I. P. Gestal / P. Riaño
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If world trade falls, what is going to happen to fashion?

 

 

Global trade slows down and fashion holds the breath. In the middle of a trade war between the two greatest world powers and with protectionist actions from Europe to Latin America, the perspectives for global trade are freezing. Fashion, one of the most globalized sectors of the planet and one that depends on international trade from supply to distribution, is one of those that has more at stake. If trade falls, what future holds for fashion?

 

The World Trade Organization’s (WTO) World Trade Outlook Indicator recorded in February its lowest level in nine years, since March 2010. Six out of seven components of the indicator stepped back in February: only the volume of goods was maintained above the trend.

 

In September, the WTO already reduced its growth forecast for 2019 on world trade down 3.7%, compared to the 3.9% expected in 2018, on the occasion of the increase of trade tensions.

 

 

 

 

“This sustained loss of momentum highlights the urgency of reducing trade tensions, which together with continued political risks and financial volatility could foreshadow a broader economic downturn,” underlined the organism.

 

In this scenario, fashion is one of the sectors that has the most to lose. Textile and clothing represent 4% of the world’s trade and its largest supplier (China) and client (United States) are precisely the main figures of the trade war.

 

Historically, every time global trade has moved back, so have done fashion exports. In fact, even when trade has barely stagnated, the impact on textile and clothing has been negative.

 

 

 

 

According to the latest available data, corresponding to 2017, textile exports were up 5.4%, while clothing exports grew by 5.1%. Global trade, on its part, doubled that pace, with an advance of 10.4%. That was the first time since 2012 that the total evolution performed better to that registered by fashion goods.

 

In the last thirty years, global exports have closed five fiscal years in a downward trend. The first one, in 1998, hardy had any impact on fashion trade: while total exports fell by 1.6%, clothing ones increased by 4.7%.

 

 

 

Then, the sector was not as globalized as it is today: China entered the WTO in 2001 and the Multifibre Agreement expired in 2005. In fact, clothing exports rose to 185.96 billion dollars, in contrast with 471.59 billion from 2017.

 

The other four times that global trade stepped back, they followed the same pattern: in 2001, exports as a whole fell by 4%, and fashion by 1.7%; in 2009, the global drop by 22.3% and fashion by 12.8% and, in 2015, the former fell by 12.9% and clothing by 5.7%. Last time it happened was in 2016, when global trade drop by 3% and clothing exports by 1.6%.

 

 

 

 

 

 

The trade war focuses on fashion

Fashion is also more exposed than other sectors to the trade war, because its two main players, China and the United States, are also strategic partners for the sector.

 

China, the world’s largest clothing exporter, has not increased its sales abroad for three years, registering drops of 6% in 2015 and 9% in 2016, while it closed 2017 flat. The Asian giant went from taking 18.2% of fashion sales abroad in 2000 to represent 35% in 2017.

 

Today, the world’s clothing factory is one of the main figures of the trade war, in which it has more to lose than its rival, the United States. The presidents of both countries are currently in negotiations after signing a ninety-day truce in December.

 

United States is, on the other hand, the world’s largest clothing customer, only behind the European Union. The first world power accounted for 18.2% of the sector’s global imports, after increasing them by 3% last year.

 

 The European Union, where protectionist measures are also emerging, is another big global player in the fashion trade. The Community market represents 28.6% of the global exports of the sector and 20.3% of imports, and both have remained upwards in the last two years.

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