The globalization progress has been seriously challenged in recent years, which has severe impacts on the global supply chain. Recently, the US government accused the Xinjiang cotton industry of using forced labour and subsequently issued a withhold release order (WRO) on cotton products from Xinjiang, China. Dr Di Fan, Assistant Professor of ITC, was interviewed by Vogue Business on the impacts of this new customs measure on the global fashion supply chain.
Dr Fan stated that, “We have not seen a significant impact so far, and we do not see significant changes in future cotton prices in Xinjiang and internationally. “This is probably because the ban on all Xinjiang cotton is very difficult to execute. At best, US Customs can cut-off the direct connection between the US fashion companies and their Xinjiang suppliers. However, it’s very difficult, for both the US government and companies, to track whether textile products, such as curtains and garments, contain cotton materials from Xinjiang.”
Despite the absence of immediate impacts on cotton price, Dr Fan states that the measures will affect the global sourcing strategy of multinational fashion companies. “The ban can be viewed as a non-tariff trade barrier of Chinese products to the US market. It adds the risk of supply chain disruptions to the US companies who are sourcing from China.”
“To mitigate the risk, the companies might shift their cotton purchasing from China to domestic suppliers, or suppliers in Vietnam and Pakistan.” Dr Fan indicated that the fashion companies nowadays are facing increased political risks in their global operations. Thus, the companies need to rethink widely used business practices in an era of deglobalization. “The fashion companies should rethink the “just-in-time” and change their mind-set about minimal inventory. Safety stock is increasingly important nowadays to buffer for supply chain disruptions. Diversifying supply bases are effective to keep firms running when supply glitches occur in the suppliers located in a particular region”.
“The fashion companies should also increase their supply chain visibility by conducting audit and monitoring programs on their suppliers. Such programs are essential for maintaining an ethical fashion supply chain. The evidence collected is also useful for the companies to demonstrate their commitment to establish a sustainable supply for both the public and regulators.”
For the full story, please visit https://www.voguebusiness.com/sustainability/us-ban-cotton-xinjiang
