Making the Cut?
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developing countries. However, since the beginning of the 2000s, demand in major end markets has stagnated and import penetration levels in developed countries had already reached very high levels (Palpacuer et al. 2005). This trend recently has accelerated due to the global economic crisis. Kaplinsky (2005) points out that these developments have a decisive impact on developing countries with potentially severe implications for late clothing industrializers. The previous period of export growth by newly industrialized economies (NIEs) was primarily at the cost of domestic producers in developed countries and all NIEs could simultaneously increase their exports to the U.S. and the EU markets. Today, however, the growth of clothing exports from a few developing countries is largely at the cost of clothing producers in other developing countries (Morris 2006b). The heightened competition between developing countries has been reinforced by overcapacity in the global clothing industry due to the MFA phaseout and related to the entry of large developing countries such as China and India into clothing exporting (Kaplinsky/Morris 2008). The decline in unit prices of U.S. and EU-15 clothing imports underlines this heightened competition. In this context, it has become difficult for suppliers to capture margins and upgrade through participation in global clothing value chains (Palpacuare et al. 2005). With regard to asymmetric market and power structures, rents in the global clothing value chain do not derive from manufacturing but from design, branding, marketing, research and development (R&D), and retailing (Gereffi 1994), which are the core competencies of buyers and protected by high entry barriers. By controlling these high-rent activities buyers yield significant power over other actors in the chain. Power at the buyers’ level has further increased due to consolidation among retailers resulting from mergers and acquisitions and the emergence of large discount chains and specialty clothing stores (Morris and Barnes 2009). These asymmetric market and power structures further impede the capture of gains and upgrading of suppliers to higher-value and higher-rent activities within global clothing value chains. However, new global developments may signal a partial shift in competitive and power structures in global clothing value chains. First, some intermediaries and first-tier suppliers, in particular global trading houses and transnational producers, have captured high value-added activities and control far-flung manufacturing networks, which potentially signals a shift in the governance structure of global clothing value chains (Appelbaum 2008). Second, global demand structures may change as import demand for clothing in the United States, the EU, and Japan might stagnate while demand will increase in fast-growing emerging countries as well as in regional and domestic markets. This may also lead to changing governance structures as the role of traditional buyers may decline while developing countries’ buyers may increase in importance. It will be central to understand sourcing policies and power structures within clothing value chains of these new buyers and associated entry and upgrading possibilities. Third, there is insecurity about China’s future as a competitor to LIC clothing exporters. In the 2000s China at least partly upgraded its production to higher-value products, which was reversed, however, in the context of the global economic crisis. It is not clear how fast China will move into higher value-added products again in the post-crisis environment. Such a development would increase space for LIC clothing exporters, at least in the lowvalue basics market segment.