Analysis on Impact of TPP on The Malaysian Textile And Apparel Industry

 

·         In 2014, Malaysia’s total exports of textile, apparel and footwear was RM12.1 billion. Textiles exports was RM6.7 billion, apparel & clothing was RM4.9 billion and footwear was RM493 million.

 

·         Textiles, apparel and footwear exports contributed 3.7% to Malaysia’s total exports of manufactured goods to the United States which amounted to RM2.2 billion. Malaysia’s major export products to the US are:

o   Mens’ and Boys’ Shirt, not knitted/crocheted, of cotton (HS620520);

o   Jerseys, Pullovers and Cardigans, knitted/crocheted, of cotton (HS611020); and

o   T-shirts, singlets, and other vests, knitted/crocheted, of cotton (HS610910).

 

·         Malaysia currently rank number nine (9) in the list of top exporters to the US for woven mens’ shirt (HS620520) and number 22 in the list of exporters of knitted mens’ shirt (HS611020). However, in terms of total exports of textiles and apparel products to the US, Malaysia rank number 26.

 

·         Elimination/reduction of duty by TPP partners for textiles and apparel products will provide better market access to new matured markets such as Japan, Australia and Canada.

 

·         While the US tariff lines predominantly carry as high as 32% import duty and only 70% of the tariff lines are under EIF, Canada offers a better deal with majority (83.8%) of the offers are under EIF with lower import duty (maximum 18%). Therefore, it creates a good opportunity for Malaysian exporters to explore. 

Offers by Key TPP Partners 

·         72.9% textiles tariff lines constituting 36.44% of total exports to the US will see duty elimination upon entry into force (EIF). Without TPP, only 11% of tariffs or 0.9% of total exports are duty free. Two major products (dress shirts) are given duty free upon entry into force, an offer exclusively given by the US to Malaysia and Viet Nam only.

 

62052020A Men's or boys' shirts, not knitted or crocheted, of cotton, nesoi EX-OUT: dress shirts

19.70%

Dress shirts are defined as shirts that are classified in the following four USHTS ten digit lines: 6205202016, 6205202021, 6205202026, 6205202031, plus shirts that are otherwise classified under 62052020 and meet the following description: Men's or boys' shirts that are either long or short sleeved, have a top-stitched collar (whether or not button down) and a full front, button opening. If long sleeves, shall have either button cuff or fold-over cuffs that would require cuff-links or other closure device. Shirts may have one chest pocket, no other pockets are allowed. The garment shall not have knit collars, knit cuffs, knit waistbands, or any means of tightening at the bottom. No lining shall be present. The term lining does not include interlining or double layers of fabric required for cuffs, collars, plackets, yokes, pockets or embroidery. Shirts may have a back yoke, but no front yoke. Shirts shall be appropriate for wear on business or social occasions when some degree of formality is required.

 

·         86.82% textiles tariff lines constituting 89.55% of total exports to Canada will see duty elimination upon entry into force. Without TPP, only 40% of tariffs or 12.46% of total exports are duty free. Major products given duty free upon entry into force are women’s Jersey and pullover, women’s or girl’s cotton blouses, and handkerchief.

 

·         27.57% textiles tariff lines constituting 0.74% of total exports to Mexico will see duty elimination upon entry into force. Without TPP, only 12.67% of tariffs or 0.02% of total exports are duty free. Major products given duty free upon entry into force are nylon yarns and ties/bow ties.

 

·         13.25% textiles tariff lines constituting 2.53% of total exports to Peru will see duty elimination upon entry into force. Without TPP, only 6.52% of tariffs or 0.02% of total exports are duty free. Major product given duty free upon entry into force is wool tops.  

Yarn-Forward Rule (YFR)  

 

·     The Yarn Forward Rule is expected to benefit Malaysia in attracting investments into the sector especially in the upstream sub-sector where activities such as fibre and yarn spinning, dyeing and production of fabric are undertaken.

 

·     This rule will encourage fabric and apparel producers in TPP countries to source locally produced raw materials to produce finished goods for exports to other TPP countries.

 

·     It is also expected that more companies will consider Malaysia as choice location to establish integrated textile production mills and potentially relocation of textile mills to Malaysia from non-TPP countries.

 

·     Malaysia’s closest competitor in the apparel sub-sector is Viet Nam and Thailand which has exceeded Malaysia’s exports to the US by multiple folds. One of the main contributing factor is the low cost of labour in the countries and the abundance of low and semi-skilled labour. Labour intensive industry is definitely no longer Malaysia’s way forward.

 

·     Therefore, Malaysia has embarked on a mission under the 11th Malaysia Plan to elevate the textiles and apparel industry by focusing on the research, development and design (R&D&D) of technical and smart textiles as well as development of Labour Saving Devices (LSD). RM15 million has been allocated for the project.

 

·     Additionally, collaboration with research and development institutions (SIRIM), universities (UiTM) and international research body (Fraunhofer Germany) are also being worked out carry out the task.

 

·     By focusing on the development of the upstream sub-sector, it is hoped that Malaysia will be able move up the value chain and will be able to produce high value and high quality technical and smart textiles for exports. 

TPP COuntries Tariff reduction schedule

 

Country

Range of MFN Import Duty (%)

Elimination at Entry Into Force

(%)

Less Than 5 Years

(%)

6 to 10 Years

(%)

More Than 10 Years

(%)

Canada

4.5-18

83.8

12.8

3.3

-

Mexico

5-30

17

-

75.6

7.4

Peru

9-17

13.3

-

11.3

75.5

US

0.4-32

73.7

7.0

3.6

15.7

Chile

6

87.6

3.3

9.1

-

Vietnam

3-100

98.7

0.3

0.4

0.5

Japan

2.4-9.8

98.8

-

1.2

-

New Zealand

5-10

81.7

5.5

12.7

-

Australia

5-10

81.8

18.2

-

-

Brunei

5-10

96.6

-

3.4

-

Singapore

0

100

-

-

-

Malaysia

2-30

99.2

-

0.8

-

Malaysian TC EXPORTS & IMPORTS with TPP Countries

Malaysian Textiles and Clothing trade with TPP countries in RM Billion

Products

Exports to TPP

(RM Billion)

Exports to ROW

(RM Billion)

2014

Jan – Sep. 2015

% of Exp. to TPP / ROW (2014)

2014

Jan – Sep. 2015

Apparel and Clothing Accessories

3.11

4.3

63.6%

4.89

4.2

Textiles

1.96

1.5

29.1%

6.73

5.11

TOTAL

5.07

5.8

43.6%

11.62

9.31

 

Products

Imports from TPP

(RM Billion)

Imports from ROW

(RM Billion)

2014

Jan – Sep.  2015

% of Imp. from TPP / ROW (2014)

2014

Jan – Sep. 2015

Apparel and Clothing Accessories

0.47

0.51

14.5%

3.24

5.03

Textiles

0.95

0.77

18.7%

5.08

4.76

TOTAL

1.42

1.28

17.0%

8.32

9.79

TEXTILES AND APPAREL TRADE WITH TOP THREE TPP COUNTRIES

 

NO. OF LINES

MFN RANGE

TOP 3 EXPORTS TO US (2014)

TOP 3 IMPORTS FROM US (2014)

PRODUCTS

VALUE

US MFN RATE

PRODUCTS

VALUE

MY MFN RATE

1,612

 

0.4% - 32%

1.      Mens’ or boys’ shirt, not knitted /crocheted, of cotton

 

2.      Jerseys, pullovers, cardigans and waistcoat, knitted /crocheted, of cotton

 

 

 

3.      T-shirts, singlets and other vests, knitted, of cotton

RM400.5 mil.

RM280 mil.

 

RM123.1 mil.

19.7%

 

16.5%

 

16.5%

1. Textiles fabric, felt & felt-lined woven fabric

 

2.   Other printed, plain weave cotton fabric

 

 

 3. Monofilament of polypropylene

RM21.8 mil. 

RM20.2 mil. 

 

RM15.4 mil.

Nil

 

10%

 

10%

NO. OF LINES

MFN RANGE

TOP 3 EXPORTS TO JAPAN (2014)

TOP 3 IMPORTS FROM JAPAN (2014)

PRODUCTS

VALUE

JAPAN MFN RATE

PRODUCTS

VALUE

MY MFN RATE

1,981

2.4%-9.8%

1.   Non-wovens of man-made filaments

 

 

2.   Gloves, mittens and mitts

 

 

3.   Yarn of combed wool

RM153.2 mil.

RM138.4 mil.

RM58.3 mil.

4.3%

 

7.4%

  2.7%

1. Unbleached, plain weave cotton

 

 

2.  Textured yarn of nylon

 

 

3.  Artificial filament tow

RM39.5 mil.

RM36.8 mil.

 RM35.1 mil.

10%

 

10%

Nil

NO. OF LINES

MFN RANGE

TOP 3 EXPORTS TO AUSTRALIA (2014)

TOP 3 IMPORTS FROM AUSTRALIA (2014)

PRODUCTS

VALUE

AUSTRALIA

MFN RATE

PRODUCTS

VALUE

MY MFN RATE

917

5 - 10%

1.    Gauze of other textile materials

 

2.    Garments, made of knitted fabric

3.    Other garments, knitted/crocheted of other textile materials

RM196.5 mil.

RM59.1 mil.

RM40.5 mil.

Nil

 10%

 

 10%

1.    Gauze of cotton

 

 

2.    Straining cloth of a kind used in oil presses

3.    Non-woven of man-mad filaments

RM2.3 mil.

 RM1.5 mil.

RM1.4 mil.

10%

 Nil

 

 20%

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