As US apparel makers shift sourcing central, South American countries will benefit

With buyers looking to diversify their sourcing portfolio, apparel exports by Pakistan, Bangladesh and Cambodia have already surpassed pre-COVID levels. As seen from US Office of Textile and Apparel (OTEXA) import data, in 2021, China’s apparel exports to the US increased just 0.45 per cent to 11.13 billion. Conversely, export volumes from Cambodia, Pakistan and India grew significantly The whole sourcing landscape has changed, points out Sheng Lu, Associate Professor, Department of Fashion and Apparel Studies, University of Delaware. Many companies shifted their priorities from price to products, leading to a 60.6 per cent drop in market shares of the top five suppliers to the US.

Pakistan’s share on the rise

Pakistan’s apparel shipments to the US jumped 49 per cent to 895 million SME in 2021 compared to 599 million SME in 2019. In fact both India and Pakistan registered the largest increase in share of US apparel market during 2021. While Pakistan registered 11.4 increase in share and holds 3.04 per cent of US apparel export market. India’s share grew 11.3 per cent year on year making up 4.35 per cent of US apparel export market.

Pakistan’s share in the global apparel exports has been steadily increasing since 2018. It has also emerged the most competitively priced apparel supplier to the US on a price per unit basis in 2021. Yet, Pakistan lags behind China in terms of the actual size of imports. The sheer size of China’s installed supplier base makes it difficult for manufacturers to diversify the entire production elsewhere.

El Salvador, Honduras record a dip in exports

Apparel exports from El Salvador and Honduras to the US declined in 2021 despite the government’s recent push on nearshoring. El Salvador exported apparels worth $656 million during the year, a 12 per cent dip from 2019 while apparel exports by Honduras dipped 14 per cent to $872 million during the period, shows GlobalData.

Sheng Lu believes, it would take longer for apparel exports from these two countries to recover the effects of pandemic. In 2021, their exports to the US grew 28 per cent and 33 per cent year-on-year (by quantity), suggesting a sound recovery. Robert Antoshak, Industry Consultant adds, the US government has been assisting countries like Honduras and El Salvador to attract more investment to rebuild their clothing sectors. However, it will take some time for these initiatives to fructify.

Xinjiang cotton bill to benefit Central American countries

In 2021, China accounted for 15.4 per cent of US apparel imports. Of this, nearly one-third constituted non-cotton apparel items. US fashion companies imported 2,662m SME more clothing from China in 2021 than a year ago. However, the newly enforced Uyghur Forced Labor Presentation Act will change market scenario in 2022. Enforcement of the new law will make it tough for US fashion companies to source much from China.

Moreover US fashion brands and retailers will have to reconsider sourcing from China due with US Customs prohibiting import of goods made with raw materials from Xinjiang, western buyers have no choice but to diversify sourcing, adds Antoshak. This scenario will benefit apparel associations in Mexico who should seize this opportunity by catering to the growing demand for raw material and supplies, says Guillermo Romero, Executive President, APIMEX (Asociación de Empresas Proveedoras Industriales de México.

Antoshak notes, in order to benefit from present opportunities, apparel sourcing hubs located close to the US, need to position themselves correctly as ideal investment destinations and major suppliers. Countries in Central and South America can benefit on account of their close proximity to the US. They can also gain from lower carbon emissions resulting from shipping distances, adds Antoshak.