2006 ITALIAN TEXTILES AND APPAREL PRODUCTION DATA

UNCLAS SECTION 01 OF 02 ROME 002072

SIPDIS

SIPDIS

DEPT FOR EEB/TPP/ABT GARY A. CLEMENTS
COMMERCE FOR ITA/OTEXA MARIA D,ANDREA
STATE PASS TO USTR FOR CAROYL MILLER

E.O. 12958: N/A
TAGS: ECON ETRD KTEX CH IT
SUBJECT: 2006 ITALIAN TEXTILES AND APPAREL PRODUCTION DATA

REF: A. STATE 114799


B. 2006 ROME 3228


1. (U) Italy is the EU's largest manufacturer of textiles
and apparel, accounting for almost a quarter of total EU
textiles and apparel production. Italian industrial
production in fiscal year 2006 was valued at 345.1 billion
dollars. Textiles and apparel production made up 22.4
billion dollars (6.5 percent) of Italy's total industrial
production and 8.3 percent of Italy's total exports. Of the
34.1 billion dollars of textiles and apparel goods exported
in 2006, 2.3 billion dollars (6.7 percent) was exported to
the United States. (Note. The Italian fiscal year coincides
with the calendar year. The value of Italian textiles and
apparel exports exceeds the value of textiles and apparel
manufactured domestically because Italian firms are focusing
on high value-added activities. The value of export reflects
the value of imported parts (e.g., collars and cuffs) and
material plus the value of Italian assembly and finishing.
End note.) In the first half of 2007, Italy exported 1.1
billion dollars of textiles and apparel to the United States,
6.1 percent of total Italian textiles and apparel exports.


2. (U) The value of Italian textiles and apparel exports
grew by 3.9 percent in 2006, in line with the general
recovery of Italian exports, but below the world average
growth in textiles and apparel exports of nine percent.
Higher prices for Italian textiles and apparel exports
resulted in an increase in the value of textiles and apparel
exports despite a two percent decrease in the quantity of
goods exported in 2006.


3. (U) The Italian textiles and apparel industries face
stiff competition from East Asian countries, especially
China. From 1997 to 2006, Italy lost market shares in the
silk, woman's apparel, children's apparel, scarf, and shawl
sectors, while improving or defending its market share in
leather goods, woolens, cotton, linen, and yarn sectors.

Labor
--------------


4. (U) In 2006, the textile and apparel industries employed
760,000 people, 15.2 percent of the five million people in
the Italian manufacturing sector. Employment in the textiles
and apparel sector dropped dramatically in the period
2004/2005 from 869,000 to 783,000 units, with a further
modest reduction in 2006. The reduction in the textiles and
apparel workforce is the result of three trends in the
industry: (i) a shift in textile and apparel manufacturing to
niches with higher value added, (ii) a reduction of quantity
of goods produced, and (iii) the outsourcing of parts of the
manufacturing process to countries with lower labor costs.

Prato: Case Study of an Industry in Crisis?
-------------- --------------


5. (U) The Prato District (near Florence) is Europe's
largest textile district. In 2006, factories in Prato
produced 4.46 billion euros worth of textiles and apparel, of
which 2.39 billion euros worth were exported. Both output
and exports were down from their 2005 levels of 4.51 billion
and 2.44 billion respectively, a contrast to the increase in
Italy-wide production and export figures. In a press
interview on August 21st, 2007, the President of Prato
Industrialists Association, Carlo Longo, cited four main
reasons for Prato's relatively poor performance: (i) The
continued presence of companies that perform the least
value-added steps of the production process (other Italian
companies have outsourced these processes),(ii) the relative
small size of Prato textile companies, (iii) Chinese
competition, and (iv) bureaucratic impediments to growth,
including government inefficiency, lack of infrastructure,
high water tariffs, and inefficient and costly waste
treatment policies. Longo said that Prato, which has lost
about one fourth of its textile and apparel output in the
last five years, should shift its focus to higher value-added
goods in order to increase the value of its textile and
apparel production.


6. (U) Prato is also fighting stagnation by networking.
For example, three Chinese businessmen recently inaugurated
Euroingro, a 10,000 square meter showroom which will give
wholesalers easy access to 120 companies with displays there.
Euroingro represents an attempt to increase cooperation

ROME 00002072 002 OF 002


between Prato textile manufacturers and Chinese apparel
producers. It also represents an attempt to fight
counterfeiting, since all companies involved must sign a
formal commitment to avoid the marketing of counterfeited or
pirated products.


7. (U) Prato's textiles and Apparels manufacturers have
also launched a project called "Mode in Prato," a consortium
aimed at providing joint material/styling research,
marketing, and services to member companies, to be
inaugurated in September 2007. The member firms (presently
five textile manufacturers and five apparel producers
including two Chinese-owned companies) will also be required
to sign a commitment to avoid marketing counterfeited/pirated
products.


8. (U) In an additional attempt to improve Italian-Chinese
trade cooperation, Giupel, the first and only Chinese-owned
company to join Confindustria (The Italian Industrialists'
Association) in Prato, is promoting the establishment of a
60,000 square meter wholesale center near Shanghai dedicated
to the sale of "Made in Italy" products. The center,
expected to open in 2008, will host up to 100 Italy-based
firms and will provide Chinese personnel for promotional and
marketing activities.
SPOGLI