EU staff working paper assesses the European fashion industries
The EU Staff Working Document builds on the consultation process involving a broad cross section of the fashion industries’ stakeholders, including an informal High-Level Group on Fashion and an ad hoc working group. The document analyses the challenges and opportunities faced by the fashion industries and proposes possible political initiatives in both the short and long term, focusing on four main policy fields, namely investing in knowledge, skills, creativity and innovation; protecting the creative efforts of fashion companies while fostering the digital market; ensuring a level playing field in international trade; assuring the framework conditions necessary for sustainable growth in the fashion industry
The facts
The European fashion industry comprises of nearly 850000 companies, and the vast majority of which are SMEs small to medium size enterprises. It is evident that the European fashion industries from complex, strongly interlinked value chains, embracing design, manufacturing of materials and fashion goods such as textiles, clothing, footwear, leather and fur products, jewellery and accessories), it further entails their distribution and retail to final consumers. The value chains provide employment for over five million people or 3.7 % of the total non financial EU business economy based upon figures of 2009 (source: Study on the competitiveness of the EU fashion industries’, IDEA Consult, 2012). As these industrial sectors are in constant transformation and because these industries have to affront global competition, the European textile and clothing sectors shifted many of their labour intensive activities to countries with cheaper labour in the past decades. This shift contributed to the reduction in the number of companies and people active in fashion manufacturing. From 2004 – 2009, the total number of person employed in these sectors declined significantly from almost 2.9 million to 1.9 million, but in fashion distribution this trend was reversed by the creation of over 500000 jobs.
The challenges luring
As we all know, the globalised world is a challenge and it is almost impossible for Europe to compete with the emerging economies on price alone. The EU document points to the increasingly knowledge- and innovation based industry, higher value added products, processes and services, all to ensure that Europe’s position as global leader remains intact. The EU fashion industries have continued to find new ways and means to withstand by finding rewarding niches in mature markets, developing new brands and business models, investing in creativity and innovation, and all are catering to increasingly demanding consumers worldwide. The transformation is not yet accomplished and new market opportunities need to be explored.
The new opportunities
The paper concludes that the fashion landscape may now be changing again. New opportunities for European based companies are arising as a consequence of rising production and logistic cost in the emerging economies, their increasing focus on domestic markets, as well as the steadily increasing pace of fashion, which requires strict control of production and fast supply to the European market. The domestic market as well as the US and Switzerland remain the key markets for European fashion products. It is obvious that the EU market shows some uncertainty in consumer behaviour and a loss in dynamics, these can only partially be compensated by increased exports. On the other hand, countries outside the EU offer many new opportunities resulting from a rapid growth of the consumer base and even faster growing demand in the emerging markets, such as China, Russia, Brazil and India and they offer the EU fashion industry an opportunity to strengthen its position as a key player in the global market.
The influencing factors
There are also adverse factors to overcome such as skills shortages, mismatches and gaps, all leading to the disappearance of certain activities and knowhow from Europe. Existing trade and investment barriers in third countries make it more difficult for European products to reach new markets and establish distribution networks. Creativity and innovation efforts are hampered by illegal activities, such as intellectual property rights infringements. In the current economic situation, access to finance, a key to start-up, development and growth of business, remains a major difficulty to overcome.
The existing opportunities
The EU fashion industries contributed in 2009 3 % of the EU’s GDP. The stimulation of the long term competitiveness of the fashion industry is crucial. Under the current economic crises, longer and more severe than expected, it needs immediate action to help the European industry to face this difficult phase and to strengthen industrial growth and exports. Also the creation and maintenance of jobs and combating growing youth unemployment is one of the priorities in terms of the social challenges facing the EU. The EU document shows short term initiatives and long term initiatives, including the goals of EU Europe 2020 strategy and notably to smart, sustainable and inclusive growth.
The proposed measures
The investment in human capital and skills: The shortage of properly skilled workers is a key concern resulting from an ageing workforce, difficulties in attracting young people to some parts of fashion manufacturing, a mismatch between education systems and the industry’s needs and low mobility of industry workers. Moreover, many companies and the associated jobs are lost because of problems with succession, transfer and takeover of the businesses.
Whereas women represent around 45 % of total employment in the EU in general, the manufacturing of clothing ratio is 80 %. Also the workforce share of the 50+ age group is increasing and there is little to no interest from young people to fill the available jobs and this is of direct influence on the structural decline of manufacturing industries in Europe. If the EU fashion industries are to further evolve from labour intensive, low technologies industries to knowledge based industries, an occupational shift is needed. TextileFuture wishes to add that many companies and educational institutions have already taken the necessary initiatives to change the situation, some of them are rather successful, and all on its own and industrial private initiative. On the other hand, also the EU has made efforts in educational and vocational promotion of knowledge and in the future the accent might be on career pathways and opportunities in the fashion field, as well as promoting traditional skills and crafts using modern communication techniques leading to promote more and better internships an apprenticeships based on f air working and learning conditions with the aim to increase the attractiveness for young people.
The EU has already some new programmes under way, such as CIP the Competitiveness and Innovation Programme by launching “WORTH”, a pilot project stimulate market oriented support and advice to small manufacturers and craftsmen to develop new high value added products and services with the support of designers. In 2014 and in the framework of COSME, market replication projects will be focuses on the “last inch” before the market would be launched. These projects aim to achieve better R&D and innovation uptake and/or encourage the commercialisation of new products and services in fashion and design led consumer or personal goods. If the results are positive, the pilot will be transformed into a bigger initiative in the framework of COSME.
The paper lists also the many new opportunities arising for fashion industries, in particular from cross-sector initiatives exploiting the potential of new technologies and materials such as the use of nanomaterials or smart textiles. Also the European Technology Platform is praised. Also the availability of EU structural and other funds is stressed and collaboration between designers and material scientists and engineers with a view to developing and marketing new creative products and improved in-service properties, functionalities and sensorial appeal is promoted by the EU Commission. Also new electronic instruments such as cloud computing, social media, mobile applications, are under review to estimate the influence on the fashion industry.
More protection of International Patent Rights (IPR): Many IPR violations undermine the EU fashion industries’ competitive position and are happening in markets outside of the EU, mostly important potentials for EU fashion creations and/or countries where the IP of fashion creations are not adequately protected. At international level, priority is given to IPR provisions in bilateral trade agreements and that important technical issues are bilaterally raised with a number of countries. The Commission is currently developing COPIS (antiCOunterfeit and antiPiracy Information System) as an efficient surveying instrument for all customs actions related to IPR enforcement, including counterfeiting and piracy.
Also the Digital Single Market for the fashion industry has to be fully exploited and protection of fashion companies and consumers alike in the digital space are ensured. Online sales of the fashion industries account for over 12 % of total retail sales in Germany and 10 % in Great Britain, whereas in Italy and Spain they settle each at one percent only.
International trade, access to raw materials and promoting internationalisation: High tariffs, complex technical regulations introducing testing, conformity assessment or labelling requirements, burdensome customs procedures and barriers to setting up and developing distribution networks are among the adversary measures to hamper new export markets for the fashion industries. The Pan Euromed System might offer new possibilities in the Mediterranean area. An undistorted access at fair prices to raw materials the fashion industries do need has to be assured at EU level.
Existing EU regulatory dialogues in the fashion sector with China, Brazil and Russia can be reinforced, in the interests of promoting regulatory convergence and the Commission has already undertaken a study on standards comparison between the EU, Russia and Brazil in this sector and has launched a similar study regarding China. The possibility of establishing dialogues with other key partners such as India, USA, Turkey and Japan should be further explored, in order to exchange and promote good regulatory practice.
The feasibility of sharing the risk of existing export credit insurance schemes for SMEs could be tested, because one Euro at Community level could generate 40 Euro of export credit.
Sustainable and responsible growth within the right framework conditions: Legislative and regulatory environment are crucial for sustainable growth of the fashion industries and competitiveness proofing must be applied priority at EU and national levels. This involves working with both sides to help them understand their respective needs and expectations. Under the forthcoming financial instruments under COSME and Horizon 2020, the feasibility and EU added value of a loan guarantee fund for fashion business could be assessed. Further steps can also be taken to ensure that the current reform of State aid, certain State aid measures are well suited to the needs of SMEs such as aid for participation in fairs, limited compatible amount of aid not subject to notification (de minimis) and SME definition.
Labelling of textiles and footwear, including leather footwear is regulated at EU level, but no legislation so far covered labelling of leather and leather products and this has changed by now. On the regulatory front, freedom should be ensured to choose distributors and distribution formats as well as to prevent possible free riding between them, while promoting competition, both online and offline. The chances of CSR platforms in relevant business sectors such as the fashion industries could be focused on consumer engagement, and behaviour change, transparency disclosures, improved environmental performance, based on life cycle thinking, sustainable sourcing of primary materials, and restrictions on harmful substances. Additionally, the Commission will encourage the industry to develop a Code of good practices between producers and retailers, in full compliance with competition rules.
In the longer term, opportunities for fashion industry for growth and jobs could be explored as part of the research and innovation strategies for smart specialisation linked to cohesion policy support. The Commission could also support the development of “fashion tourism” products on a European scale, linking fashion, craft, culture and tourism and action could be taken linking and promoting fashion museums, factories, exhibitions, fairs, fashion weeks and shopping districts across the EU, involving also private partners and to be centred on certain themes, such as fashion and craft trains and targeting different groups.
Finally the Commission services will continue working with the industry on monitoring the challenges, opportunities and possible initiatives and, if necessary, continue to identify and address emerging initiatives. After two years, a review of these developments will be undertaken by the Commission services.
Virginia’s reflections
It is the right and the duty of each government to find the appropriate means and avenues to establish the adequate political framework to secure the growth of its economy and therefore also to assist certain important industrial sectors to ensure the future prospects. The proposed initiatives by the EU staff seem to be majorly coordinated with the relevant industries. The intensions are good and many of the proposed initiatives are already well under way. It is also the first time that the textile relevant sectors get real appropriate attention by the EU Commission. However, we still feel support is excellent when it is coordinated with the relevant industries and at Community level, but it is our observation that the bigger the entity entrusted with the fulfilment the more are existing diverging opinions about its usefulness. This is why we think that research and development and innovation can be facilitated by governmental means, but basically it is still the individual sector and company initiative that brings the right product at the right time and gives the necessary impulses for others to follow the same road. We reckon also that coordinated and joint research is leading probably to faster positive and marketable results. Therefore, such funding by the EU and companies is certainly commendable and the political framework in international trade and rights has to be defended. Nevertheless, we are also of the opinion that if there are too many sources of financial support there is also a risk inherent that the industrial sector is becoming lean in its own efforts to master the future. The textile relevant sectors are scattered in different regions and it is there where the nucleus of its future basis is given, especially what the attraction of youngsters and the influence on the educative system is also given. I have witnessed such positive effects in the area of North Rhine/Westphalia where the private initiative combined with state support has created some astonishing results. Also these initiatives were supported by EU funds and we think exactly the combination of private and governmental initiative brings the adequate results and in due time. They form part of what the promising future of the textile relevant industries might entail, because it is a tradition that these sectors know best what to undertake to persist in this globalised world and the adequate framework remains the domain of the governments and they need to understand the functional mechanism of the textile value chain and by crisscrossing frontiers!