Euratex
(Source: Euratex)
The industrial conditions have worsened in such a way that there is no business case to invest in Europe or buy products produced or processed in the EU. Following the European Council summit and its conclusions on the measures to tackle the energy crisis, the European textiles industry is extremely concerned about the fast loss of competitiveness of Europe, as voiced by Euratex.
The chain of factors determining this sharp decline in its competitiveness is 2-fold. First, the energy cost in Europe is more than 6 times higher than in the USA, China, and neighboring countries. At present, many textiles and clothing (T&C) companies are producing at net loss or have shut down production.
Secondly, while the EU is passive and extremely slow in articulating a credible and effective response to the energy crisis, the main international competitors and trade partners (China, India and the USA respectively) have developed comprehensive state-aid frameworks for their domestic industry despite not being affected by this crisis at all. The latest example is the US$369 billion scheme of the Inflation Reduction Act rolled out by the Biden administration in the USA.
Recent trade data already indicate a loss of global competitiveness: imports to the EU have grown tremendously in 2022 (+35% year-to-date). It is also evident that the surge in imports goes in parallel with the surge of natural gas price. It is expected that energy prices will remain high and volatile, opening the door for imports to gain substantial market shares in the EU.
The market situation has eased, but gas prices are still extremely high. This suggests that the current loss of competitiveness of the EU manufacturing will not be recovered even with lower energy prices, unless measures are taken to correct the unlevel playing field.If the status quo is maintained, not only the EU will not be able to recover its competitive position on the global business stage, but it will also fail its plans to reach zero-net emissions and achieve circularity.
The main structural component of the EU manufacturing are SMEs: these are economic actors that are particularly exposed to the current crisis as they do not have the financial leverage to absorb the impact of energy prices for much longer. For this reason, urgent EU action is needed to ensure their survival.
The European Apparel and Textile Confederation (Euratex), Brussels/Belgium, has therefore called on the EU political leaders to take action on 3 points. Firstly, to adopt a comprehensive approach at EU level: energy, state-aid and trade policy must be brought together in a single strategy with concrete emergency solutions and with a clear SME dimension. Next, a meaningful price cap on natural gas wholesales should be adopted, that should be ideally no higher than €80/MWh. In parallel, it should also be ensured that electricity prices are brought to a sustainable price level. Finally, the European position on state-aid should be changed. An ambitious plan of investments and state-aid in green technologies to support the industrial transition should be rolled out.
Such a plan, however, should not be conceived as a retaliation against necessary and like-minded trade partners, according to Euratex. Access to finance and markets must be safeguarded for all those actors who are capable and willing to invest in Europe, on the basis of reciprocity. In these challenging times for geopolitical stability, ensuring strong trade ties with traditional allies and partners is of utmost importance. The roll-out of an investment and state aid plan should not interfere, but rather support, the dialogue with the USA (and other partners) and the deepening of trade and investment partnership.
The chain of factors determining this sharp decline in its competitiveness is 2-fold. First, the energy cost in Europe is more than 6 times higher than in the USA, China, and neighboring countries. At present, many textiles and clothing (T&C) companies are producing at net loss or have shut down production.
Secondly, while the EU is passive and extremely slow in articulating a credible and effective response to the energy crisis, the main international competitors and trade partners (China, India and the USA respectively) have developed comprehensive state-aid frameworks for their domestic industry despite not being affected by this crisis at all. The latest example is the US$369 billion scheme of the Inflation Reduction Act rolled out by the Biden administration in the USA.
Recent trade data already indicate a loss of global competitiveness: imports to the EU have grown tremendously in 2022 (+35% year-to-date). It is also evident that the surge in imports goes in parallel with the surge of natural gas price. It is expected that energy prices will remain high and volatile, opening the door for imports to gain substantial market shares in the EU.
The market situation has eased, but gas prices are still extremely high. This suggests that the current loss of competitiveness of the EU manufacturing will not be recovered even with lower energy prices, unless measures are taken to correct the unlevel playing field.If the status quo is maintained, not only the EU will not be able to recover its competitive position on the global business stage, but it will also fail its plans to reach zero-net emissions and achieve circularity.
The main structural component of the EU manufacturing are SMEs: these are economic actors that are particularly exposed to the current crisis as they do not have the financial leverage to absorb the impact of energy prices for much longer. For this reason, urgent EU action is needed to ensure their survival.
The European Apparel and Textile Confederation (Euratex), Brussels/Belgium, has therefore called on the EU political leaders to take action on 3 points. Firstly, to adopt a comprehensive approach at EU level: energy, state-aid and trade policy must be brought together in a single strategy with concrete emergency solutions and with a clear SME dimension. Next, a meaningful price cap on natural gas wholesales should be adopted, that should be ideally no higher than €80/MWh. In parallel, it should also be ensured that electricity prices are brought to a sustainable price level. Finally, the European position on state-aid should be changed. An ambitious plan of investments and state-aid in green technologies to support the industrial transition should be rolled out.
Such a plan, however, should not be conceived as a retaliation against necessary and like-minded trade partners, according to Euratex. Access to finance and markets must be safeguarded for all those actors who are capable and willing to invest in Europe, on the basis of reciprocity. In these challenging times for geopolitical stability, ensuring strong trade ties with traditional allies and partners is of utmost importance. The roll-out of an investment and state aid plan should not interfere, but rather support, the dialogue with the USA (and other partners) and the deepening of trade and investment partnership.
