PORTUGAL: 2006 TEXTILE AND APPAREL SECTOR OVERVIEW

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SIPDIS

C O R R E C T E D C O P Y (ADDRESSEES ADDED)

SIPDIS

STATE FOR EEB/TPP/ABT GARY CLEMENTS
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA
USTR FOR CAROYL MILLER

E.O. 12958: N/A
TAGS: ECON ETRD KTEX PO
SUBJECT: PORTUGAL: 2006 TEXTILE AND APPAREL SECTOR OVERVIEW

REF: STATE 114799

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SECTOR OVERVIEW
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1. SUMMARY: In 2006, the Textile/Apparel sector represented
Portugal's largest industrial/manufacturing sector,
accounting for 11.8% of industrial/manufacturing exports,
primarily to Spain, Italy, France, Germany and the United
Kingdom. Textile/Apparel manufacturers are concentrated in
the north of the country and employ approx. 230,000 laborers,
down 4.7% from 2005. Over the last decade, the industry has
seen a steady decline in production and employment due to
global competition, market liberalization and reduced Asian
quota policies within the European Union (EU),of which
Portugal is a member. END SUMMARY.

2006 ECONOMIC STRUCTURE AND STATISTICS
--------------

2. SOURCES: The 2007 Economist Intelligence Unit (EIU)
Report; Ministerio da Economia e da Inovacao - Gabinete de
Estrategia e Estudos (GEE); Instituto Nacional de Estatistica
(INE); Associacao Textil e Vestuario de Portugal (ATP);
Instituto das Empresas para os Mercados Externos (ICEP);
Centro de Estudos Texteis Aplicados (CENESTAP); EUROSTAT;
Associacao Nacional das Industrias de Vestuario e Confeccao
(ANIVEC); The European Apparel and Textile Organization
(EURATEX).

- GDP in USD: 194.9 billion

- Real GDP Growth: 1.3%

- Origins of GDP:

Retail, Services Other 54.6%
Agriculture/Fishing 2.8%
Energy (Electricity, Gas and Water) 2.8%
Industry/Manufacturing 15.7%
Construction 6.3%
Restaurants and Tourism 17.8%

- National Labor Force: 5.16 million

- Industry/Manufacturing Labor Force (incl. Energy): 1.59
million

- Textile/Apparel Labor Force: 230,000

- Textile/Apparel Companies in Business: approx. 3,000

- Textile/Apparel Imports in USD: 3.83 billion

- Textile/Apparel Percent of Industry Imports: 6.4% (down
3.2% from 2005)

- Textile/Apparel Exports in USD: 5.39 billion

- Textile/Apparel Percent of Industry Exports: 11.8% (down
12% from 2005)

- Textile/Apparel Imports from US in USD: 158.1 million

- Textile/Apparel Exports to US in USD: 340.7 million

- Principal Destinations for All Exports:

EU-25 77.2%
- Spain 28.4%
- Germany 13.1%
- France 12.4%
- UK 7.1%
- Italy 4.1%
- Other EU 34.9%

- Principal Origins for All Imports:

EU-25 75.5%
- Spain 30.5%
- Germany 13.8%
- France 8.4%
- Italy 5.8%
- UK 4.3%
- Other EU 37.2%

ADDITIONAL INFORMATION
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3. QUESTION: Are host country producers receiving lower

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prices due to heightened international competition?

ANSWER: In 2006, heightened international competition caused
by the 2005 liberalization of the international textile and
apparel market, and the European Union,s decision not to
impose quotas on select Chinese imports, negatively impacted
Portuguese producer prices. According to INE, apparel and
footwear products cost on average 17% less in 2006 than in

2005. Many Portuguese producers, mostly small- and
medium-sized enterprises, made little or no profits and over
a dozen were forced to close.


4. QUESTION: Have U.S. and EU restrictions on certain exports
of textiles and apparel from China, effective through
2007/2008, affected export prospects for host country
manufacturers?

ANSWER. In 2006, the European Commission adopted anti-dumping
measures that imposed high duties on select Chinese imports,
including textiles. While these measures were supposed to
safeguard European Union producers, many have complained that
the Chinese avoided these duties by purposely mislabeling
imported goods.


5. QUESTION: Has the host government implemented, or is it
considering implementing, safeguards or other measures to
reduce growth of imports of Chinese textile and apparel
products into the host country? Does the host government have
policies or programs in place to deal with any dislocated
workers in the sector resulting from increased competition?

ANSWER: In 2006, the National Assembly recommended a proposal
to the government to rejuvenate the struggling textile and
apparel industry, but to date, the GOP has not introduced any
new laws. The proposal called for the promotion of innovative
and new technologies; the creation of professional
development programs for industry employees and
entrepreneurs; more linkages between SMEs and
universities/professional training institutes; the adoption
of measures that require bilateral and multilateral
commercial agreements to include unemployment benefit
measures; the creation of programs to combat clandestine,
illegal or underage employment; the establishment of support
funds to bail-out struggling businesses; the creation of
banking programs that guarantee loans to already-established
and new producers; the promotion of regional diversification
programs that spread manufacturers throughout Portugal as
opposed to just in the North; and the creation of incentives
for companies that manufacture culturally significant
national products.


6. QUESTION: 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?

ANSWER: Although the GOP approved several small changes to
the labor laws in 2007, no move has been made to alter the
current labor structure which bars employers from altering
employment terms and fines them for dismissing laborers.


7. QUESTION: Overall, if not already addressed, does post
think that the host country can be competitive in textiles
and apparel exports given heightened global competition?

ANSWER: No longer able to compete based on relatively cheap
labor in a quota-free world, textile manufacturers must work
to make the labor laws more flexible in addition to employing
innovative technology. Post predicts that the textile sector
will continue to shrink.

Hoffman