Int. J. Technological Learning, Innovation and Development, Vol. 4, Nos. 1/2/3, 2011 67
Copyright © 2011 Inderscience Enterprises Ltd.
Upgrading and restructuring in the global apparel
value chain: why China and Asia are outperforming
Mexico and Central America
Stacey Frederick
Center on Globalization, Governance & Competitiveness,
Duke University, 2024 W. Main Street, Durham, NC 27705, USA
E-mail: stacey.frederick@duke.edu
Gary Gereffi*
Department of Sociology, Duke University,
Durham, NC 27708-0088, USA
E-mail: ggere@soc.duke.edu
*Corresponding author
Abstract: This article uses the global value chain approach to analyse the
upgrading trajectories of leading apparel exporters adapting to the end of textile
and apparel quotas and the economic recession. These events have been
coupled by the consolidation and reconfiguration of global supply chains.
China has been the big winner while other Asian suppliers are expanding their
roles, largely at the expense of regional suppliers. One key to Asia’s
competitive success vis-à-vis Mexico and Central America has been end market
diversification. Regional trade agreements (NAFTA; DR-CAFTA) have
provided the latter with preferential access to the US market and ties to brand
manufacturers, but they also created a reliance on US exports and have
hindered suppliers from developing regional linkages into textile production,
apparel design and branding. Growing apparel demand in emerging Asian
economies and a regionally integrated production network has allowed Chinese
apparel suppliers to upgrade and expand global market share.
Keywords: economic crisis; apparel quotas; Multi-Fibre Arrangement; MFA;
NAFTA; CAFTA; export diversification; production network; China; Mexico;
USA.
Reference to this paper should be made as follows: Frederick, S. and
Gereffi, G. (2011) ‘Upgrading and restructuring in the global apparel value
chain: why China and Asia are outperforming Mexico and Central America’,
Int. J. Technological Learning, Innovation and Development, Vol. 4,
Nos. 1/2/3, pp.67–95.
Biographical notes: Stacey Frederick is a Research Scientist at Duke
University’s Center on Globalization, Governance & Competitiveness, where
she conducts research using the value chain framework on topics ranging from
textiles and apparel to nanotechnology. She received her BS and PhD in Textile
Technology and Management from the College of Textiles at North Carolina
State University.
68 S. Frederick and G. Gereffi
Gary Gereffi is a Professor of Sociology and Director of the Center on
Globalization, Governance and Competitiveness at Duke University. He
received his PhD in Sociology from Yale University. His books include:
Manufacturing Miracles: Paths of Industrialization in Latin America and East
Asia (1990); Commodity Chains and Global Capitalism (1994); Free Trade
and Uneven Development: The North American Apparel Industry after NAFTA
(2002); The New Offshoring of Jobs and Global Development (2006); and
Global Value Chains in a Postcrisis World: A Development Perspective (2010).
His research interests deal with economic and social upgrading, value chain
governance and trends in contemporary global industries.
1 Introduction
The apparel industry has been one of the pillars of export-oriented industrialisation
throughout the world since the 1970s. In recent years, the industry has experienced
two shocks that have intensified international competition in this sector. The first
shock is regulatory: the Multi-Fibre Arrangement (MFA), which established quotas and
preferential tariffs on apparel and textile items imported by the USA, Canada, and many
European nations since the early 1970s, was phased out by the World Trade Organization
(WTO) between 1995 and 2005 via its Agreement on Textiles and Clothing (ATC). The
second crisis is economic: the global recession that began in 2008 has dampened demand
in the USA and other advanced industrial economies, leading to production slowdowns
and plant closures in most apparel-exporting economies.
Trade restrictions have contributed to the international fragmentation of the apparel
supply chain. The MFA/ATC system was designed to protect the domestic industries of
the USA and the European Union (EU) by limiting imports from highly competitive
suppliers. When the most competitive apparel exporters, Hong Kong, South Korea,
Taiwan, and later China, reached their maximum levels under the quota system, they set
up factories in less restricted nearby countries. The clothing assembly processes were
sub-contracted to low-wage developing countries throughout the Asian Pacific region and
elsewhere that had unused export quotas, such as Bangladesh, Sri Lanka, and Vietnam
(Gereffi, 1999).
As a result, during the MFA the main end markets (USA and EU-15) tended to
remain fixed, but which LDCs supplied these high-income economies varied with MFA
quota rules. Apparel exporters’ maintained ties with key US and European markets based
on the quotas they were allocated. The key issue was entry into the apparel GVC through
access to quotas; once a country was in the chain, the main upgrading strategy involved
shifting from assembly to full-package production. There was also some product
upgrading (shift to higher end products) and process upgrading comprised of machinery
and logistics investments to increase productivity and speed to market.
This system was upended by the demise of MFA and the global economic recession.
The elimination of quotas and safeguards coincided with the economic crisis
(2008–2009) resulting in a consolidation among a limited number of large apparel
exporters, while many smaller exporters were cut out of the chain. There was also
significant downgrading or backsliding among Mexico and the Central American Free
Trade Agreement (CAFTA) countries, due to their inability to meet Asian competition.
The last two years have reinforced many of the trends occurring after the phase-out of
Upgrading and restructuring in the global apparel value chain 69
quotas. China, Bangladesh, Vietnam, and Indonesia are increasing their market shares in
North America and the EU, primarily at the expense of near-sourcing options such as
Mexico and the Central American and Caribbean suppliers to the USA.
To highlight dynamics of the structure of global apparel production in the post-quota
and crisis era, we will zero in on a comparison of China versus Mexico − two large
exporters that are engaged in head-to-head competition for the US apparel market and
have experienced contrasting developments over the last 15 years/post-quota. While the
next section of this article will show that consolidation at the level of leading apparel
suppliers has indeed increased, the key to the different competitive dynamics of China
and Mexico lies with distinct national strategies of development and very different
patterns of regional integration, which will be the focus of the latter part of the article.
2 Leading exporters and shifting global geography in the apparel value
chain
This section will highlight the country export picture over the 1995–2009 timeframe to
identify the most and least successful apparel exporters in the post-MFA market. Overall,
there has been consolidation on the supply side, as seen by the increasing concentration
of the top 15 apparel exporters’ share of total export trade. In 1995, the top 15 exporters
accounted for 79% of all trade, and by 2009 this increased to nearly 87%; among the top
five exporters for each year, concentration increased even more sharply from 59.5% in
1995 to 71.8% in 2009 (see Table 1). Table 2 shows the main export market destinations
for the top ten apparel exporting countries in 2009. For all top countries, the EU-15 and
the USA were two of the top three export destinations.
The main apparel exporting countries can be placed into the following categories:
1 Increasing or steady global market share
• China − The clear winner in the global apparel export race during the past 15
years. Between 1995 and 2009, China’s share of global apparel exports
increased from 22% to 41%, representing an increase in value from $32.9 billion
to $122.4 billion.
• Growth suppliers − Overall, these countries have increased global market share
since the early 1990s and through the economic crisis: Bangladesh, India,
Vietnam, Indonesia, Sri Lanka, Pakistan, and to a lesser extent, Cambodia.
• Steady suppliers − EU-15, Turkey, Tunisia, and Morocco. These countries
increased export values until the effects of the economic crisis were felt in 2009,
but managed to maintain relatively stable global market shares through the quota
phase-out and recession.
2 Decreasing global market share
• Decline with quota phase-out − These countries experienced declines during the
MFA/ATC quota phase-out (1995–2005) that have continued during the crisis:
USA, Canada, Mexico, DR-CAFTA, Thailand, Romania, and Poland.
• Past-prime suppliers − These countries were once leading apparel exporters, but
their global market shares have been decreasing since the early 1990s:
Hong Kong, South Korea, Taiwan, and the Philippines.
70 S. Frederick and G. Gereffi
Table 1 Top 15 global apparel exporters by year (see online version for colours)
Value (mil) Global share (%)
Country/region
‘95 ‘00 ‘05 ‘08 ‘09 ‘95 ‘00 ‘05 ‘08 ‘09
World 152,532 193,728 268,416 335,831 296,901
China 32,868 48,017 89,829 130,382 122,389 21.5 24.8 33.5 38.8 41.2
EU-15 37,857 33,984 47,757 60,065 51,614 24.8 17.5 17.8 17.9 17.4
Extra EU-15 12,006 11,486 14,405 19,513 15,436 7.9 5.9 5.4 5.8 5.2
Bangladesh 2,544 4,862 8,026 13,463 14,185 1.7 2.5 3.0 4.0 4.8
Turkey 5,261 6,710 12,922 15,765 13,079 3.4 3.5 4.8 4.7 4.4
India 4,233 5,131 9,468 12,215 11,876 2.8 2.6 3.5 3.6 4.0
Vietnam -- -- 4,737 9,541 9,393 -- -- 1.8 2.8 3.2
Indonesia 3,255 4,675 5,673 7,630 7,134 2.1 2.4 2.1 2.3 2.4
Mexico 2,871 8,924 6,683 4,634 3,923 1.9 4.6 2.5 1.4 1.3
Tunisia 2,400 2,645 3,476 4,489 3,787 1.6 1.4 1.3 1.3 1.3
Morocco 2,250 -- 3,326 4,462 3,597 1.5 -- 1.2 1.3 1.2
Sri Lanka -- -- 3,082 3,809 3,531 -- -- 1.1 1.1 1.2
Cambodia -- -- -- 4,042 3,472 -- -- -- 1.2 1.2
Thailand 2,706 3,672 3,860 4,201 3,469 1.8 1.9 1.4 1.3 1.2
Romania -- 2,737 5,172 4,216 3,223 -- 1.4 1.9 1.3 1.1
Pakistan -- -- -- -- 3,193 -- -- -- -- 1.1
Hong Kong 10,463 10,144 8,495 5,110 -- 6.9 5.2 3.2 1.5 --
USA 4,402 5,157 3,681 -- -- 2.9 2.7 1.4 -- --
South Korea 4,423 4,692 -- -- -- 2.9 2.4 -- -- --
Other Asia 2,998 3,059 -- -- -- 2.0 1.6 -- -- --
Philippines -- 2,599 -- -- -- -- 1.3 -- -- --
Poland 2,306 -- -- -- -- 1.5 -- -- -- --
Top 15 total 79.2 75.9 80.5 84.6 86.9
Notes: Apparel represented by HS 61 and 62 (HS1992); (--): indicates country not in top 15 in given year; retrieved 1/23/2011. Extra EU-15 is included to show that
EU-15 would still be the #2 exporter without intra EU-15 trade; however total EU-15 trade value and market share are used in the top 15 percentages.
Source: UN COMTRADE (2011)
Upgrading and restructuring in the global apparel value chain 71
Table 2 Top apparel exporters, shifts in end market destinations: 2000, 2005, 2008–2009
Export statistics to partner country/region
Value (mil) Export share (%) Share change Rank
Export country Partner
‘00 ‘05 ‘08 ‘09 ‘00 ‘05 ‘09 ‘00–09 ‘00 ‘05 ‘09
1 China World 48,017 89,829 130,382 122,389
EU-15 7,444 23,162 41,750 39,728 16 26 32 17 2 1 1
USA 6,514 17,802 25,178 25,367 14 20 21 7 3 2 2
Japan 14,195 17,447 20,382 20,262 30 19 17 –13 1 3 3
2 EU–15 World 33,984 47,757 60,065 51,614
Extra EU15 11,486 14,405 19,513 15,436 34 30 30 –4
EU-15 22,498 33,352 40,551 36,178 66 70 70 4 1 1 1
Switzerland 2,110 3,056 4,000 3,570 6 6 7 1 3 2 2
USA 2,317 2,236 2,129 1,443 7 5 3 –4 2 3 3
3 Bangladesh World 4,862 8,026 13,463 14,185
EU-15 2,481 4,801 7,823 8,108 51 60 57 6 1 1 1
USA 2,088 2,422 3,562 3,510 43 30 25 –18 2 2 2
Canada 101 360 530 619 2 4 4 2 3 3 3
4 Turkey World 6,710 12,922 15,765 13,079
EU-15 5,209 10,462 12,720 10,750 78 81 82 5 1 1 1
Poland 17 102 311 280 0 1 2 2 5 2
USA 1,108 992 422 269 17 8 2 –14 2 2 3
5 India World 5,131 9,468 12,215 11,876
EU-15 2,019 4,531 6,484 6,443 39 48 54 15 1 1 1
USA 1,998 3,284 3,316 3,054 39 35 26 –13 2 2 2
UAE 180 229 361 358 4 2 3 –1 4 4 3
Notes: Apparel represented by HS 61 and 62 (HS1992); exports represented by partner country imports. Retrieved 1/23/2011.
n/a: indicates data is not available for given year.
Source: UN COMTRADE (2011)
