It appeared in 2019 but its impact persisted all throughout 2021: the pandemic and its metastases were present in the decisions, performance and even the motivations of the textile sector, as in the entire industry.
hat balance do you do of such a challenging year to the textile industry?
We had the expectation that 2021 would be a little calmer – with the introduction of vaccination. However, it ended up being a year in which the pandemic wasn’t well solved – some constraints remain and with the new variables it may become even more complex – besides the difficulties experienced throughout the year. There was a break in supply chains, there were changes in energy and raw material prices… it was very challenging to the industry and whoever needs to maintain the entire productive chain. There were huge cost increases and many negotiation difficulties in passing these cost increases to the customers. The textile and clothing sector is trapped in between huge suppliers – as the ones in the energetic sector, which are “price makers” – and the big brands with great negotiation ability, which weakens their position.
These chain increases were not forecast so apparently there isn’t a logical reason for them to happen, right?
We were unable to anticipate them. Nonetheless, even if we had managed to do so we would have done very little. With the sharp decrease in demand there were several units that closed and whose opening, for example in the energetic sector, doesn’t happen overnight. On the one hand the pandemic changed the portfolio of the most sold products and on the other hand it led some products to fall sharply. One example: at the moment several boats are being built to transport containers. However, many boats were knocked down. Knocking down a boat takes a week but making one takes two to three years.
Is it also a matter of consumption?
There were great changes: home textiles present a growth of approximately 30%, knitwear around 10% and formal clothing is still below 2019 numbers, with negative values in the order of 20%. It is a sector that is recovering at different speeds. At the moment there are companies that produce automotive textiles that are in lay-off. We are facing a situation we knew nothing about: there is demand, there is an installed ability but a small component is missing: microchips and all the supply chain which is being severely impacted.
There is a virtuous side to it: may the supply chains that use the Asian Southeast be outdated?
There are two situations. One of them is that: realizing that we don’t have the complete industrial sectors in Europe evidenced our fragilities – the case of masks was a blatant example. It showed how shortsighted we were in not realizing that there are strategic components for the balanced functioning of the economy. However, we are failing to learn the lessons.
Didn’t the short-sidedness pass?
Unfortunately it hasn’t completely passed. We are still in a position in which we keep buying from Asia for a matter of 5 cents.
Is it manifested among entrepreneurs, political decision or all the parties involved?
We are all responsible. Starting forthwith as consumers: we worry little with the supply chain when we find a cheaper product. At the political decision level we can’t forbid a given importer to go and buy products in any area of the globe. The question has more to do with the Government’s strategic perception to understand in what ways they will convey global competitiveness to their countries’ economies. We are talking about strategic quotas. One example: a company that is exporting more than a certain amount of product to China is obliged to set up a factory in China otherwise it won’t be able to increase its exports. If Europe took some similar measures, there would be a strategic supply guarantee.
It would make the democracy purists’ hair rise…
We are talking about a strategic vision. If China has it – the vision must understand that if the imports of a product are high it’s because it is essential for the economy, so, a part must be produced in China – why not us? From the strategic perspective it makes all sense.
Is the European Commission doing everything they can, namely in the industrialization forefront?
There will only be reindustrialization if it incorporates some added value. Consider the case of the individual protective equipment: at the moment the majority of what is sold in Europe is again produced in Asia, as Asia has lower prices than the production in Europe. We are repeating the same mistake: the equipment exists in Europe but it is not being used. The transports are reducing this difference but producing in Asia is compensating again.
Doesn’t taxation solve this issue?
In what concerns electrical energy Europe defends that whoever produces through non-renewable energy sources and exports to Europe has to pay a tax corresponding to the cost of the licence of CO2 emission. Allowing those who produce outside Europe with disregard for the additional costs introduced for European producers is deterring investments to be done in Europe.
Is positive discrimination of European production another way?
It bring us back to the issue related to the taxation at the entrance of frontiers. If in Europe we are producing in a way that is sustainable we should create a set of rules stating what sustainable production is and whoever produces outside these regulations should be taxed. We should implement in textiles the same we have in the energy: a sustainability tax. If it is not so we run the risk of eliminating the textile and clothing industry from Europe, through the impracticability of sustainable production. On the other hand, and fortunately there are some consumers that already have a vision about the importance of the planet that some politicians still lack. Consider automotive vehicles: why does the government concede a fiscal incentive to buyers of electric cars? This vision must be generalized to the entire sustainable production.
Does Euratex have, at present, an important role?
The Union is doing a strategic plan for the clothing and textile of the next decade that shall be ready in the beginning of the next year, already with a delay. Euratex is the institution that has been negotiating and lobbying. There are two groups in Europe: the pro-environmental one and the pro-economic one. The first has a very reductive vision. The second defends the payment of a tax by people outside Europe that don’t produce in a sustainable way.
Internally the year is marked by the Recovery and Resilience Plan, but also by the non-approval of the State Budget for 2022. How do you comment from the companies’ point of view?
Everything that involves instability makes company management harder. The expectation is for the year to end with a rise in exports, when compared to 2019, which shows the ability the sector has to adapt itself. It is its biggest virtue even though we live in an adverse regulatory and legislative framework, namely in what concerns labour laws, where more rigidity was introduced. Everything goes towards the rigidification of the system, which is opposite to what is necessary to economic growth. We must understand that the economy doesn’t grow by decree but by the competitive degree. For example, the issue of minimum wage: its increase is not sustainable in productivity growth.
In the limit it may lead to job cuts…
It always does: it is studied that these raises ruin some companies; If the economy is growing unemployment is absorbed. In Portugal there is still an added risk: not having enough youngsters to replace retired people.
Lastly, is 2021 a positive year or an year to forget?
In the textile sector and considering exports and the creation of wealth 2021 ends up being positive. It could have been better but it is generally positive. The big issue is 2022: how will we face the new challenges? Is the sector ready? Yes: it will continue to be a year of growth.
He was elected president of ATP on the last day of the month of October of 2019. The former CEO of Adalberto group had a short-term challenge ahead: a decade that was as one of the most virtuous cycles of the national textile industry was coming to an end. Circular economy, sustainability, innovation, reindustrialization, digitalization, 4.0 industry were the buzzwords that were starting to consolidate and impact the future. Those were only the endogenous challenges: in the meantime COVID-19 pandemic arrived and everything became extremely difficult. At the end of a hybrid year, between lockdown and the reopening, a direct speech balance imposed.
Don’t you think that the government should provide more support to the textiles participation in international meetings, which are highly costly to Portuguese standards?
It should not only support more, as the co-funding is very small, but it should also go beyond and support the creation of new collections considering them as innovation. And these are proposals that ATP as already brought to the governments’ knowledge.
Do you think that the supports to the industry are enough considering the new pandemic threats?
In case of problems in the raw-materials supply, production or order losses the simplified lay-off regime should be applied in the same way it was used during the pandemic. ATP vividly opposed when this regime was prematurely removed last year.
How do you compare the challenges of the Portuguese Textile and Clothing Industry with those assumed by the European TCI?
Both Europe and Portugal have as main goal sustainable and competitive fashion.
What are Portugal’s specificities and how is it defending their interests with the European Union?
The textile and clothing industry has great importance in the Portuguese economic sector. It represents 18% of the transformation industry, which implies the country’s added responsibility.
On the one hand we acted close to Euratex, where ATP has been having an important role, namely in the definition of a strategy for Europe, where we had significant intervention. On the other hand, we were also close to our government that, in turn, will impact European organs.