At 4th Global Textile Economic Forum on 23rd March 2007 in Beijing

Ladies and Gentlemen

It is a very great pleasure and honour to be invited to speak to you today at this most prestigious gathering. It is also a great pleasure to be back in your wonderful country. Whilst I have been to Hong Kong and elsewhere in the region in recent years, it is a terrible admission on my part that it is some 15 years since I was last here, as part of an historic delegation organised by the International Apparel Federation.

During that time employment and production in the apparel and textile industry in our respective countries has changed almost diametrically. Employment in the UK apparel and textile industry has fallen by 60% and production has fallen by 40%. The Chinese industry, however, has grown to such an extent that I understand that last year China exported $144billion of garments and textiles to all corners of the globe. The comparable figure for the UK would be $10bn. You employ some 19.6m people in your industry and the figure is anticipated to grow to some 23m in 2010. We employ currently some 165,000 and I expect it will be fewer in 2010.

Our situation perhaps is more easily explained and is, of course, mirrored in most other developed countries’ textile industries: the advent of globalisation and the phasing out of quotas leading to massive change in the purchasing decisions of major High Street shops
in the UK brought about by low cost supply. Yours is due to the staggering growth in your economy and the vastness of scale that you bring to the supply of goods in our and indeed many other consumer good sectors.

Against this background, I shall try to comment on what part the factors that you have highlighted for this Conference: “science and technology, brand and international co-operation” have, so far, played in this change over the last 15 years and whilst I doubt whether I shall be in a position to address you in another 15 years, I shall try to give you some of my thoughts on how these factors may affect the future.

But first, a little more background about the UK industry and how your key factors have impacted over the last 15 years when that last visit of mine took place and which, because of that, I am using as my base point. At that time we still produced a large number of men’s suits in the UK, many of them from British cloth. Today, with the notable exception of my friends in the bespoke tailoring sector centred in Savile Row in London, you would struggle to find a British made suit, jacket or trouser.

It is not much easier to find shirts and underwear either and the same would be true in the womenswear sector as well. However, we still have some wonderful British woollen fabric and even some cotton fabric, but we have no cotton or flax spinning. We do have some superb Scottish knitwear and Irish linen and some pockets of production in other sectors like carpets and shoes. We also have some great branded houses like Burberry and Paul Smith and also some very creative and quirky young designers who sadly have
very little money. As my earlier statistics showed, however, we are much smaller than we were and I believe we shall get smaller.

To link with your themes, science and technology has played only a limited part in this decline, apart from information technology which has made globalisation of our products so easy. As everyone knows, computers allow us virtually to see and touch the products almost as if they were next door, whereas they are probably thousands of miles away. In your case, I am sure that you have used science and technology to significant effect in making your industry more efficient. Investing in the most up to date machinery in clothing and textile production has, I am sure, contributed greatly to the huge growth in your production. I am not sure that new technology will appear over the next 15 years to continue to enhance your production levels. After all a machine can only go so fast before it leaves its operative behind, for when you are mainly using flexible fabric you still need to feed the material into the machine.

The speed and sophistication of communications will, however, continue to improve and indeed, in another 15 years, you may well have an avatar making this speech rather than a human being.

I have been accused many times of being a Luddite, a derogatory term describing inhabitants of my country who opposed the development of the Industrial Revolution in 19th Century Britain. This is not at all a fair description in my case, but I do still doubt
how much more of a role science and technology will play in our sector in the years ahead, other than in the area of communications to which I have referred.

I am afraid I just do not see vast progress in the field of automation of clothing production. One of the few advantages of growing old is that you have lived through the automated sewing systems that our Japanese friends masterminded 15 years ago. Of course it was a brilliant technological achievement to put a piece of fabric into one end of a series of machines and see a chef’s hat or pair of jogging trousers come out at the other end - but the space all this took up and more importantly the cost made the whole concept totally uncommercial. Even if there were to be a breakthrough in the automation of clothing production, I am sure the resulting new machinery would then be available worldwide and low wage cost countries would still have an advantage over the UK and other Western countries.

Neither do I envisage any great technical breakthrough in textiles generally, although I am sure that there will be new projects in the area of technical textiles, which seems to be viewed as the panacea for all our ills, but they will probably not amount to much of substance in quantitative terms. There is, after all, a maximum number of airbags that one can install in a car.

The major area where science and technology will play its part, in my view, is in sustainability, climate change, the preservation of natural resources and other such issues, which are somewhat broader than the clothing and textile industry, although I am sure

that we shall have to play our part. It is also in this area, as I shall come back to later that international co-operation could be so important.

Brands have, however, made an impact and moreover will continue to do so. For some time, we have all felt in the developed world that they would be our salvation. They would be our means of differentiating ourselves from mass production in the developing world. We would benefit from being able to use the label “Made in the UK” or “Made in Italy”. We would be able to add value, design, service, after care, as well as proximity to our own markets. After all, most of the major fashion brands in the world are European and American and the belief is that they will be so for many years to come.

Increasingly though, over the last 15 years, we have seen the question of where a particular brand was made become of far less consequence than the brand itself, eating into that added value concept advantage from the manufacturing point of view that we thought we had and would be able to maintain. At the same time, our friends in the developing world are learning very fast about design, service and added value – yet a further erosion of our position.

Recently, however, we have seen signs of the consumer becoming more concerned again about not only where the product was made but moreover the conditions of production. We read every day about investigations into factories in developing countries where the products of great brands are being sourced. What impact is this having on these brands and what will it do to the production realities of life? Is it really likely that we are
suddenly going to see a re-opening of factories making branded clothing in mainland Europe? I think it very unlikely. How then will this perception that the consumer cares more about where things are made affect a brand and what does it mean to you here?

Well, let me share a few thoughts, which are very inconclusive but maybe they will stimulate some debate on some of these questions on brands.

I mentioned earlier Savile Row. It is quintessentially British. Yet one of the leading tailors in the Street, Kilgours, has much of its bespoke production based in China. Many residents of the Row are now not bespoke tailors, or even “made to measure”, a far less exclusive trade. Indeed, some of the residents of the Row also sell “off the shelf” products to High Street retailers. Is this brand extension for them or brand destruction? As they, arguably, move downwards, do they meet new Chinese brands on the way up? Is our differentation argument being destroyed at the same time as you, here in China, add value to mass production, your costs increase and the world moves on to, for example, Africa, for new low cost production. Moreover, whilst all this is taking place, Burberry, one of the UK’s most successful brands, has been castigated in the British press for its decision to close one of its factories in the UK that has been making polo shirts. Burberry has two other factories that are still making raincoats and other tailored products in the UK and indeed has maintained its UK production much longer than most others. If they wish to continue to develop a luxury brand they can clearly not do so based on UK production alone. On the other hand, is this possible further move away from British production going to damage their brand or will it make no difference? Clearly with critics
like Prince Charles lobbying to keep the factory open, it is posing a number of questions for them.

Many of the major retailers in the UK are competing with each other at present to demonstrate which of them can appear to be the “greenest”. They all realise that this is “flavour of the month” with consumers and I suspect that they are doing this more for profit than for any altruistic reasons. One retailer is vowing to become “carbon neutral”, although nobody is clear how that will happen or what it really means, although I am sure that the impact of transporting goods across the world must come into it. Another has vowed to include a label on all its products (and I should emphasise that in both these examples they are not just talking about clothing and textiles), which will inform the consumer how much carbon dioxide emission has resulted from the making of the product concerned.

Ethical credentials as I have said are becoming more and more important. Is the consumer prepared to pay the extra price for this privilege when it comes to clothing, there being some evidence that they will do so in the UK for food, or will it just be an extra on cost for the supplier whether in China or the UK ?

It will be the retailers who will be the ones to certify that the product they have supplied is “carbon neutral”, or to have done the calculations as to how much carbon dioxide was emitted in production and, knowing UK retailers, I suspect that the supplier/manufacturer
will be the one who pays for the extra costs to meet the retailers’ requirements which, of course, will not lead to any price increase.

These retail brands are also all dealing with the problems of corporate governance regarding their sourcing. Despite all the codes of conduct that exist, they still cannot police the working conditions in their own supply base with any degree of certainty. Only very recently the mighty Levi Strauss had to leave the Ethical Trading Initiative in the UK, because of disagreements on the implementation of the ETI Code which is probably the best known in the UK.

Nor can the retailers feel totally comfortable about the intellectual property safeguards available for their brands or the products that they source. Their brands are in danger of being damaged by fakes and, indeed, by parallel sourced products.

And what of your brands whilst we are wrestling with all these problems? You will no doubt become increasingly unhappy at not owning the value chain. You are the “cut make and trim” world leaders, but where the real profit and value added exists you are presently not at the table. Of course, you can invest overseas and create joint ventures in the way that international companies have done in China. You can develop more of your internal brands to cater for your enormous and growing population, who will become more acquisitive as your economy continues to grow much faster than most other countries’ in the world. Do not forget that the US industry for years just catered for its domestic market and did not export much overseas. I suspect, however, that in the world
stakes the brand scenario will not change dramatically, although you will no doubt disagree, and the European and US brands will still be in the ascendancy in 15 years’ time.

So we come to your final theme, “international co-operation”, and how that may help, at least, to share some of these problems and indeed many others that I just do not have time to mention today. You are to be applauded for this gathering today and I have much enjoyed meeting my friends from CNGA in London. The recent inaugral meeting between representatives of the Chinese, the EU’s, the Japanese and the US indutries in Tokyo is similarly very positive. Yet, sadly, your great country is still not represented in all the world bodies for clothing and textiles. Whilst these organisations may be accused by some of being “talking shops”, that is not always such a bad thing when you have the sort of problems with which we all have to deal.

We all know what happened a couple of years ago with the infamous “bra wars” and we also have major differences between us on intellectual property, social legislation, pricing, anti-dumping etc. I am not suggesting that membership of these organisations would solve these problems but, let us face it, we all need each other in this increasingly integrated world that we live in, with all the issues I have touched on today and many others that affect not only how our industry operates in the future, but how we all live together on a planet where natural resources as essential as water are under such threat. As somebody famous once remarked in the UK, “jaw jaw” is better than “war war”.

International co-operation is essential to try, at least, to understand why we behave as we do, but also so that we can continue to develop to the benefit of all our peoples.
I am sure I have talked for too long and only scratched the surface of many of the issues raised by your agenda. I look forward to hearing other contributions and joining in the debate. Thank you.

By John Wilson, Director of the British Clothing Industry Association