The high price to be paid for cheap cotton

Date: 27/11/1997

By Mark Turner

"EUROPEAN textile producers are a lot less strong than carmakers and other industries," sighs Giordano Zucchi, chief of the Zucchi/Bassetti group, adding: "The textile importers are also strong."

If his company, Italy and France's number one producer of textiles, is to win the battles it faces over the next six months, it may have to do some serious toughening up itself.

Earlier this year, EU politicians shocked the industry by rejecting European Commission advice to impose permanent anti-dumping duties on cotton from India, Turkey, Egypt, Indonesia, Pakistan and China.

With the Commission now investigating alleged foreign dumping for the third time, the political heavyweights are already gearing up to crush the EU producers' claims once more.

If they succeed, it would be a blow to European law itself, according to Zucchi. "We have amply proven that the six countries under inquiry set export prices below those of their domestic markets, which amounts to dumping," he says.

"That is possible because they apply very high customs duties (60-80%) and also import prohibitions. We therefore consider the Council of Ministers' conduct to be illegal, and because of that we have resorted to the Court of First Instance in Luxembourg."

Zucchi has a fight on his hands. European importers - led by UK-based Broome and Wellington and trade body EuroCommerce - consumers represented by BEUC, and politicians from EU trader countries all strongly reject the producers' claims.

According to Zucchi's opponents, European textile producers are merely trying to compensate for high wages and a lack of competitivity; and it is consumers who are the losers.

Zucchi, who through such brands as Christian Dior, Pierre Cardin and Descamps feels he understands consumers' needs, rejects this out of hand. "We are open to competition," he says. "We have always worked under these conditions and have managed to make profits and grow for the past 20 to 30 years. If labour is cheaper, it is normal that products have an advantageous price. European textile producers are already specialised in the quality end of the market, and have left space for exporting countries.

"But foreign producers receive a large amount of help from the state, which changes the form of the market. Any artificial distortion of free trade which does not respect the rules will be paid for dearly by labour, producers, distributors, consumers and also the exporting countries, who will find themselves with overproduction and economic inefficiencies when there is a complete liberalisation of trade."

What detractors of the anti-dumping mechanism do not realise, he says, is that allowing in artificially cheap foreign products could eventually undermine the entire European market.

If European producers are squeezed out, service levels will decline.

"European distributors and consumers need to have suppliers nearby who can guarantee quick responses to their needs, quality, research and product evolution," says Zucchi.

Consumers, furthermore, are unaware of the indirect environmental damage they are causing by buying cheap foreign cloth.

"We have spent billions of lire on cleaning up our production process, whereas in China and Turkey they just dump waste into the river. People do not know this; and although we do run information campaigns it costs a lot of money," explains Zucchi, who adds that foreign companies also copy European designs and use child labour.

"Even the textile finishers, who feel they are damaged by the application of laws, will realise the damage they are causing when dumping practices are tolerated," he insists.

"Perhaps we have not managed to help European finishers understand that when we succeeded in applying anti-dumping duties on bed linen, by respecting the law, it created more work for their companies and their workers.

"It would be useful if these people could have a strategic vision. Otherwise, they risk destroying the entire textile chain, and the knowledge which has made Europe the cradle of dressing and lifestyle culture."

Zucchi accepts that European producers do face some tough times ahead. "We are convinced that the sector must reduce a little," he concedes, but still believes that they could have a long and rosy future.

The Zucchi Group for example, through Jalla in France, has just started selling to China: the textile producer's equivalent of exporting vodka to Russia.

But the sector's success will be at least partly dependent on fair and equitable rules for all. "The real question is whether the European Union is willing to represent the interests of those who cry out the loudest and do not respect the law," says Zucchi.

"Those who oppose the anti-dumping procedure can be compared to people who defend car radio thieves by claiming that they give consumers the chance to buy radios at a lower price," he concludes.

Interview with Giordano Zucchi, chief of the Zucchi/Bassetti textiles group.