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Fashion industry wary of China FTA

National Business Review, New Zealand

Fashion industry wary of China FTA

Sees export opportunities in US FTA, expansion of transTasman trade

11 July 2005

A new study shows relatively high levels of confidence within the New Zealand fashion industry, despite concerns about the impending China FTA and a lack of skilled industry workers.

Commissioned by Fashion Industry New Zealand Inc (FINZ), the independent study showed fashion and apparel related businesses view the country’s impending Free Trade Agreement with China as a significant threat to local industry.

Sixty-three per cent of those surveyed indicated a high degree of concern that the FTA will increase the competitiveness of Chinese made garments in the domestic market. Only 22 per cent see export opportunities arising from the FTA.

"Getting good product placement in China would be a difficult marketing job and the logistics involved are challenging. China is huge and the overall costs associated with penetrating this market are prohibitive for many of New Zealand’s fashion and apparel businesses - particularly those that manufacture locally," said Geoff Merz, an Auckland-based customs agent and director of Merz & Associates Ltd.

The concerns do not reflect a lack of export nous.

More than half of those surveyed are currently exporting and display a strong focus on high-end niche markets, with one in three identifying themselves primarily as ‘designers’.

Australia a developed trade market

In terms of international trade, however, the focus remains close to home, with the long term priority for 88 per cent being to increase export sales to Australia.

"The pioneering has already been done. Australia is now viewed as an extension of the domestic market and still holds the greatest potential for New Zealand’s apparel exporters," said Susie Walker, design and marketing manager for Hart Manufacturing.

"Australia is very accessible. We speak the same language, enjoy a parallel lifestyle and share very similar demographics. Market information is easy to obtain, the retail environment and terms of trade are virtually the same, and our close proximity allows for immediate communication and distribution."

US a positive

Comparable to attitudes about Australia and in contrast to attitudes towards towards a China FTA, 54 per cent view trade negotiations with the US as holding significant export potential.

According to DHL Express general manager, Phil Rountree, these findings were also evident in the recent DHL Export Barometer - a large-scale evaluation of export confidence within New Zealand.

Production skills a problem

One problem confronting the industry is the lack of skilled, informed workers, far too many of whom are being turned out with a focus on design rather than production.

"In the long-term, the majority of those surveyed want to continue manufacturing in New Zealand and believe that the country’s short-run apparel manufacturing infrastructure needs to be protected and strengthened," said FINZ CEO, Mapihi Opai.

But too few secondary school leavers are aware of non-design related positions within the industry, or see them providing viable career paths, something that may be the industry’s greatest weakness.

Technical skill shortages, in particular, affect even the industry’s biggest players.

"We really struggle with it and have to do all of our training in-house. There are a lot of technical requirements associated with production, especially when you’re manufacturing offshore. In some cases it’s a bit like learning a whole new language, so you need people with good communications skills and a really methodical approach to the job," said Chrissy Conyngham, design director for Pumpkin Patch Ltd, which produces more than 15 million garments annually.

The tertiary sector also attracts some criticism in the study, with 65 per cent of those surveyed indicating a high degree of concern that the curriculums of many fashion schools are not satisfactorily aligned with industry needs and that the system fails to adequately prepare graduates for the realities of the workplace.

"They seem to take a very creative approach to design, but I worry about the lack of commercial grounding. There is a place in the industry for some of these graduates, but not for the numbers currently being produced," says Ms Conyngham, who heads Pumpkin Patch’s 30-strong design and support team.

"What we’re doing is interpreting international fashion trends and delivering them with a unique New Zealand twist to fit the market, which is no less creative and no less rewarding."

According to FINZ CEO, Mapihi Opai, these are issues that still need to be addressed collectively by all sectors of the apparel industry.

"However," she said, "when you consider that this was labeled a ‘sunset industry’ little over a decade ago, it’s clear that significant achievements have already been made and we’re confident that more can be made yet."

Overall confidence good

The study shows that the industry remains optimistic in its outlook, with 62 per cent of those surveyed strongly emphasising the need for New Zealand apparel businesses to focus on finding ways of capitalising on export opportunities rather than dwelling on the negative aspects of free trade.