Identifier
Created
Classification
Origin
06SANTIAGO2103
2006-10-06 18:11:00
UNCLASSIFIED
Embassy Santiago
Cable title:
CHILE - UPDATED STATISTICS FOR TEXTILES AND APPAREL SECTOR
how-toVZCZCXYZ0030 PP RUEHWEB DE RUEHSG #2103/01 2791811 ZNR UUUUU ZZH P 061811Z OCT 06 FM AMEMBASSY SANTIAGO TO RUEHC/SECSTATE WASHDC PRIORITY 0118 INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
UNCLAS SANTIAGO 002103
SIPDIS
SIPDIS
STATE FOR EB/TPP/ABT - THOMAS LERSTEN
COMMERCE FOR ITA/OTEXA - MARIA D'ANDREA
STATE PLEASE PASS TO USTR FOR ABIOLA HEYLIGER
E.O. 12958: N/A
TAGS: ECON ETRD KTEX CI
SUBJECT: CHILE - UPDATED STATISTICS FOR TEXTILES AND APPAREL SECTOR
REF: STATE 138090
UNCLAS SANTIAGO 002103
SIPDIS
SIPDIS
STATE FOR EB/TPP/ABT - THOMAS LERSTEN
COMMERCE FOR ITA/OTEXA - MARIA D'ANDREA
STATE PLEASE PASS TO USTR FOR ABIOLA HEYLIGER
E.O. 12958: N/A
TAGS: ECON ETRD KTEX CI
SUBJECT: CHILE - UPDATED STATISTICS FOR TEXTILES AND APPAREL SECTOR
REF: STATE 138090
1. Per reftel, Post provides the following data for textile and
apparel production in Chile in 2005.
TOTAL INDUSTRIAL PRODUCTION IN USD VALUE
-------------- --------------
2. Total industrial production for 2005 reached USD 19.4 billion,
and USD 10 billion for the first semester of 2006. According to
SOFOFA, Chile's Chamber of Commerce and Industry, industrial
production increased 1.5 percent in July 2006 over July 2005. Total
production for the first 7 months of 2006 grew 3.6 percent.
Industrial production represented 17.7 percent of Chile's total GDP
in 2005.
TOTAL TEXTILES AND APPAREL PRODUCTION IN USD VALUE
-------------- --------------
3. Textiles and apparel production totaled USD 694 million in 2005
and USD 262 million during the first half of 2006. The textile and
apparel production constituted 4 percent of Chile's total industrial
production in 2005.
TEXTILE AND APPAREL SHARE OF CHILE'S IMPORTS AND EXPORTS
-------------- --------------
4. Chile's total exports for 2005 were USD 38.9 billion of which
USD 14.4 billion were industrial exports. Textile and apparel
exports totaled only USD 193 million. Industrial exports
represented 37 percent of Chile's total exports for 2005. Textiles
and apparel represented only 1.3 percent of total industrial exports
and 0.5 percent of Chile's total exports. Chile's imports during
2005 totaled USD 32 billion; of that, USD 23.9 billion were
industrial imports. Textile and apparel imports totaled USD 1.5
billion in 2005 representing 6.2 percent of total industrial
imports. Industrial imports represented 75 percent of Chile's total
imports of which 4.7 percent were textiles and apparel.
5. For the first half of 2006, total exports were USD 26 billion of
which USD 8.1 billion were industrial exports. Textile exports were
only USD 93 million, equivalent to 0.4 percent of total exports.
During the same period, Chile imported USD 16.7 billion worth of
goods of which USD 13 billion were industrial imports. Textiles and
apparel accounted for USD 865 million representing 5.2 percent of
total imports.
EXPORTS IN TEXTILES AND APPAREL TO THE UNITED STATES
-------------- --------------
6. Total Chilean exports to the U.S. in 2005 were USD 6.5 billion
of which USD 2.9 billion were industrial exports. Total Chilean
imports from the U.S. in 2005 reached USD 4.7 billion, of which USD
4.6 billion were industrial products. According to Chilean Customs
Service data, Chile exported to the United States USD 2.7 million
worth of textile and apparel while imports from the United States to
Chile totaled USD 11.9 million in 2005.
TOTAL MANUFACTURING EMPLOYMENT
--------------
7. The manufacturing/industrial sector provided employment for
776,670 persons during 2005. There is no disaggregated available
data per sub-sector.
OTHER QUESTIONS
--------------
8. E/POL Specialist met with Mario Garcia, President of Chile's
Textile Institute, (INTECH) the association of the textiles, apparel
and shoes industries, in order to get answers to the following
questions:
-- Are Chile's producers receiving lower prices due to heightened
international competition?
According to Garcia prices have dropped considerably in order to
adjust to international competition. About 60 percent of Chile's
imports of textiles and apparels are coming from Asian countries,
predominantly China, at low, typically undervalued prices.
Therefore profitability for the industry has decreased in light of
what Garcia calls "unfair competition." At the same time, the
energy crisis, mainly caused by the shortage of natural gas from
Argentina, has increased the cost for the industry between 10-20
percent. All this together with the strong appreciation of the peso
has prompted a serious re-structuring of the industrial sector in
general.
-- Have U.S. and EU restrictions on certain exports of textiles and
apparel from China affected Chilean export prospects for host
country manufacturers?
In general terms, the U.S.-Chile Free Trade Agreement (FTA) has
created a preferential access to the U.S. textile and apparel
market, providing great benefits for the sector. According to
Garcia, since the implementation of the FTA (January 2004),Chile's
sales to the U.S. have increased about 50 percent, due to the
immediate tariff elimination for most of the sector negotiated under
the FTA. However, U.S. and EU restrictions on China's textiles and
apparel prompted China to look for alternative markets. China's
four to five percent increase in their share of the Chilean textile
and apparel domestic market has hurt local producers.
-- Has Chile implemented, or is it considering implementing
safeguards or other measures to reduce growth of imports of Chinese
textile and apparel products into the country?
During the 1980's economic crisis in Chile, productive sectors were
strongly affected by the sudden peso depreciation, the opening of
the economy, and trade liberalization. Most companies in the
textiles and apparel industry went bankrupt. To support the
re-structuring of the textile and apparel industry the GOC, through
the National Committee for Analysis of Economic Distortions, imposed
a tariff surcharge between 10 to 15 percent for all sensitive
products in the textile and apparel industry. This affected mainly
imports from Korea, Brazil, Argentina and Colombia. This surcharge
was applied from 1983 to 1993. The sector was able to grow again.
However since 1991, the sector has been facing what Garcia terms
unfair competition from Asian countries that are exporting their
undervalued products. About two years ago, the Chilean National
Customs Service, at the request of INTECH, formed a joint committee
to analyze cases of undervalued products in order to penalize those
imports. INTECH has requested the GOC on several occasions to
initiate an investigation for safeguards, but according to Garcia,
there is no political will to do so.
Garcia believes the Chile-China FTA signed in November 2005, and
recently ratified by the Chilean Congress, will provide for the
implementation and oversight of proper regulation to protect Chilean
textile and apparel producers from unfair Chinese competition. The
chapter on dispute resolutions and the Regulatory Joint Commission
provide mechanisms to channel the industry's claims and concerns.
-- Has increased global competition affected local labor conditions
by causing employers to reduce wages, seek flexibility from
government required minimum wages, or adversely affected union
organizing?
Except for one company that reduced by 10 percent some of the
benefits - not wages - offered to its workers, the industry has not
decreased wages. Nor have wages been increased. Wages in the
sector have remained the same for the last 5 years, with yearly
adjustments for CPI.
-- Will Chile remain competitive in textile and apparel given more
competition?
According to Garcia, competition itself is not the main problem. It
is unfair competition in which countries undervalue their product
making fair competition impossible, the strong appreciation of the
peso, and the high cost of energy.
KELLY
SIPDIS
SIPDIS
STATE FOR EB/TPP/ABT - THOMAS LERSTEN
COMMERCE FOR ITA/OTEXA - MARIA D'ANDREA
STATE PLEASE PASS TO USTR FOR ABIOLA HEYLIGER
E.O. 12958: N/A
TAGS: ECON ETRD KTEX CI
SUBJECT: CHILE - UPDATED STATISTICS FOR TEXTILES AND APPAREL SECTOR
REF: STATE 138090
1. Per reftel, Post provides the following data for textile and
apparel production in Chile in 2005.
TOTAL INDUSTRIAL PRODUCTION IN USD VALUE
-------------- --------------
2. Total industrial production for 2005 reached USD 19.4 billion,
and USD 10 billion for the first semester of 2006. According to
SOFOFA, Chile's Chamber of Commerce and Industry, industrial
production increased 1.5 percent in July 2006 over July 2005. Total
production for the first 7 months of 2006 grew 3.6 percent.
Industrial production represented 17.7 percent of Chile's total GDP
in 2005.
TOTAL TEXTILES AND APPAREL PRODUCTION IN USD VALUE
-------------- --------------
3. Textiles and apparel production totaled USD 694 million in 2005
and USD 262 million during the first half of 2006. The textile and
apparel production constituted 4 percent of Chile's total industrial
production in 2005.
TEXTILE AND APPAREL SHARE OF CHILE'S IMPORTS AND EXPORTS
-------------- --------------
4. Chile's total exports for 2005 were USD 38.9 billion of which
USD 14.4 billion were industrial exports. Textile and apparel
exports totaled only USD 193 million. Industrial exports
represented 37 percent of Chile's total exports for 2005. Textiles
and apparel represented only 1.3 percent of total industrial exports
and 0.5 percent of Chile's total exports. Chile's imports during
2005 totaled USD 32 billion; of that, USD 23.9 billion were
industrial imports. Textile and apparel imports totaled USD 1.5
billion in 2005 representing 6.2 percent of total industrial
imports. Industrial imports represented 75 percent of Chile's total
imports of which 4.7 percent were textiles and apparel.
5. For the first half of 2006, total exports were USD 26 billion of
which USD 8.1 billion were industrial exports. Textile exports were
only USD 93 million, equivalent to 0.4 percent of total exports.
During the same period, Chile imported USD 16.7 billion worth of
goods of which USD 13 billion were industrial imports. Textiles and
apparel accounted for USD 865 million representing 5.2 percent of
total imports.
EXPORTS IN TEXTILES AND APPAREL TO THE UNITED STATES
-------------- --------------
6. Total Chilean exports to the U.S. in 2005 were USD 6.5 billion
of which USD 2.9 billion were industrial exports. Total Chilean
imports from the U.S. in 2005 reached USD 4.7 billion, of which USD
4.6 billion were industrial products. According to Chilean Customs
Service data, Chile exported to the United States USD 2.7 million
worth of textile and apparel while imports from the United States to
Chile totaled USD 11.9 million in 2005.
TOTAL MANUFACTURING EMPLOYMENT
--------------
7. The manufacturing/industrial sector provided employment for
776,670 persons during 2005. There is no disaggregated available
data per sub-sector.
OTHER QUESTIONS
--------------
8. E/POL Specialist met with Mario Garcia, President of Chile's
Textile Institute, (INTECH) the association of the textiles, apparel
and shoes industries, in order to get answers to the following
questions:
-- Are Chile's producers receiving lower prices due to heightened
international competition?
According to Garcia prices have dropped considerably in order to
adjust to international competition. About 60 percent of Chile's
imports of textiles and apparels are coming from Asian countries,
predominantly China, at low, typically undervalued prices.
Therefore profitability for the industry has decreased in light of
what Garcia calls "unfair competition." At the same time, the
energy crisis, mainly caused by the shortage of natural gas from
Argentina, has increased the cost for the industry between 10-20
percent. All this together with the strong appreciation of the peso
has prompted a serious re-structuring of the industrial sector in
general.
-- Have U.S. and EU restrictions on certain exports of textiles and
apparel from China affected Chilean export prospects for host
country manufacturers?
In general terms, the U.S.-Chile Free Trade Agreement (FTA) has
created a preferential access to the U.S. textile and apparel
market, providing great benefits for the sector. According to
Garcia, since the implementation of the FTA (January 2004),Chile's
sales to the U.S. have increased about 50 percent, due to the
immediate tariff elimination for most of the sector negotiated under
the FTA. However, U.S. and EU restrictions on China's textiles and
apparel prompted China to look for alternative markets. China's
four to five percent increase in their share of the Chilean textile
and apparel domestic market has hurt local producers.
-- Has Chile implemented, or is it considering implementing
safeguards or other measures to reduce growth of imports of Chinese
textile and apparel products into the country?
During the 1980's economic crisis in Chile, productive sectors were
strongly affected by the sudden peso depreciation, the opening of
the economy, and trade liberalization. Most companies in the
textiles and apparel industry went bankrupt. To support the
re-structuring of the textile and apparel industry the GOC, through
the National Committee for Analysis of Economic Distortions, imposed
a tariff surcharge between 10 to 15 percent for all sensitive
products in the textile and apparel industry. This affected mainly
imports from Korea, Brazil, Argentina and Colombia. This surcharge
was applied from 1983 to 1993. The sector was able to grow again.
However since 1991, the sector has been facing what Garcia terms
unfair competition from Asian countries that are exporting their
undervalued products. About two years ago, the Chilean National
Customs Service, at the request of INTECH, formed a joint committee
to analyze cases of undervalued products in order to penalize those
imports. INTECH has requested the GOC on several occasions to
initiate an investigation for safeguards, but according to Garcia,
there is no political will to do so.
Garcia believes the Chile-China FTA signed in November 2005, and
recently ratified by the Chilean Congress, will provide for the
implementation and oversight of proper regulation to protect Chilean
textile and apparel producers from unfair Chinese competition. The
chapter on dispute resolutions and the Regulatory Joint Commission
provide mechanisms to channel the industry's claims and concerns.
-- Has increased global competition affected local labor conditions
by causing employers to reduce wages, seek flexibility from
government required minimum wages, or adversely affected union
organizing?
Except for one company that reduced by 10 percent some of the
benefits - not wages - offered to its workers, the industry has not
decreased wages. Nor have wages been increased. Wages in the
sector have remained the same for the last 5 years, with yearly
adjustments for CPI.
-- Will Chile remain competitive in textile and apparel given more
competition?
According to Garcia, competition itself is not the main problem. It
is unfair competition in which countries undervalue their product
making fair competition impossible, the strong appreciation of the
peso, and the high cost of energy.
KELLY