Question: With a little less than nine months to go before quotas are lifted, what should manufacturers and retailers be doing to prepare themselves for 2005?
Kevin M. Burke, President and CEO, AAFA
"At this stage, they should already be doing it. For the remainder of this year, they should closely watch the trade statistics and quota counts to make sure their product is not caught in embargo situation which are expected to be particularly troublesome as there is no carry forward nor any clear direction how the transition will be managed. They should also remain flexible to accommodate evolving Washington policies with respect to Chinese safeguards, Vietnamese quotas, trade preference programs and free trade agreements."
Allen Edelson, President, Fashion Sources Inc.
"Retailers don't really need to do anything. They are sitting in the catbird seat. Suppliers worldwide constantly solicit major U.S. retailers. There is a smorgasbord of sellers willing to do virtually anything in order to develop business with these major retailers. Manufacturers (those who either finance raw materials and use contract labor or own a factory), on the other hand, need to have a clear picture and comprehensive understanding of their core competencies. What do they bring to the table? Can they bring creative fashion, quick cycle times, the ability to effectively service replenishment programs, etc.? Fast cycle times and reliable quality will, in many cases, be the nucleus of their success. If they have not already done so, they must focus resolutely on these two challenges. Once they have determined their own relevancy, they need to identify those customers who require their talents and tenaciously market their abilities to them."
Brenda A. Jacobs, Sidley Austin Brown & Wood LLP
"One would assume global thinking manufacturers and retailers should be starting to breathe easier. But the reality is that U.S. Customs is stepping up preventive measures against the possibility of 'shenanigans,' more quotas than ever are threatening to fill up before the year's end, and domestic industry groups, previously coming apart at the seams over objectives, tactics and leadership, are trying to stitch together the impression their support is essential for any presidential contender to win. Clearly, this is not the time to relax. Importers need to ensure that their views are heard on all the issues - from 2004 product availability to the downsides of quotas on China, to the benefits of flexible free trade agreements. They also should make clear that their support for candidates also is up for grabs, because protectionist measures and promises made in 2004 could compromise business options not only in 2005, but for years to come."
Peter Harding, Partner, The Context Group
"The transition to a quota-free environment is likely to be chaotic, beginning in the fourth quarter of 2004 as quota shortages will result in order cancellations and shipments being held in customs. Early 2005 will see a huge surge in Chinese imports to establish the maximum base level for the quotas that will inevitably be imposed under the WTO-accession agreement, and these new quotas will lead in turn to more shipping problems in late 2005. While China will be a much bigger factor, it is critical for importers to develop a strategically-sound sourcing portfolio that balances cost, risk, lead-time and flexibility among geographical regions. Within this portfolio importers must consolidate their sourcing into key locations and suppliers, enabling closer collaboration with fewer suppliers and replacing agents with their own sourcing offices."