Fashion Trade Between US and Italy Term Paper

Pages: 5 (1604 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Economics

International Trade

Economics: Trade between U.S. And Italy

The purpose of this paper is to examine the fashion trade between the United States and Italy. Further to discuss the economy, economic relations, labor, agriculture and foreign relations of Italy. Finally this work will explore the strengths, weaknesses, advantages and disadvantages of exporting and importing textiles to and from each one the other.

Italy, located on a peninsula extending into the central Mediterranean Sea in Southern Europe is only slightly larger than Arizona. Italy does not have much in the way of natural resources and imports a great deal of its' food. The most important natural resources in Italy are its offshore natural gas reserve in the Po Valley and offshore Adriatic. Italy imports most of the resources in the way of raw material needed for manufacturing as well as importing 80% of energy sources for the country. The processing and manufacturing of goods is Italy's economic strong point with major industries being that of precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, fashion and clothing.

I. Overview of Italian Market:

Italy's imports decreased faster than exports which produced an $8.5 billion surplus for the country. The norms that have been specified by the Economic and Monetary Union (EMU) has been reached for Italy and according to the report:

GDP growth decreased from 2001 to 2002 from 1.8% to 0.4%. In 2002 GDP grew by a margin of 0.4% and was expected to increase 0.9% in 2003, and by 1.8% in 2004, supported by a modest recovery in economic demand."

Italy's largest industry is that of ready-made garments. The main customers are the countries of France, Switzerland, Japan and the United States. The textile and clothing export trade has been going through quantitive restrained stages in exports since the 1950's. Recently the trade pattern has shifted. Whereas France and Italy were the leaders in the textile industry for more than a century Italy's aggregate share has decreased during the current year points to moderate acceleration in all the main variables. The exports and imports for Italy seem to be recovering. Central and Eastern Europe and the Far East account for a growing share of Italy's foreign trade. Exports in goods are expected to gain at the growth rate of 1.8% in real terms catching the updraft of the expansion in world trades.

A gap exists between import and export volumes however; this should be compensation for due to the newly improved trade and current account deficit which is pretty much unchanged across the board. Italy's trade, due to global trends has shifted and is focused more toward regions that are emergent in the market. Italy's trade inevitably continues to feel the affect of the disparities in trade due to distance and trade barriers. Italy's exports dropped in 2003 and is accounted to the drop in sales to the EU in 4.6% and to North America in the amount of 13.7% / Imports diminished from these regions as well, by 18% and 14% respectively.

Export of consumer goods has been contracted for the first part of 2004. A marked upturn during the first four months of 2004 in relation to the exports of Italy to the European Union 3.4% and is higher than to any of the other regions.

Textiles and clothing declined by 7% during the first four months of 2004 and was among the sectors experiencing the most in decline. The intermediate goods of yarns and textiles have gained. There are those who express concern in relation to the pressurized competition of the Italian market the factor of quality that has long held the Italian market is becoming an area that is not nearly as distinct as once was with the "gap in between diminishing." Geographical diversification has seen the rise of many new firms manufacturing sector accounts for 79% of unemployment. Due to the internationalism of production and Italy not taking notice. Italian exports being replaced in some markets. Firms that are employing and producing abroad are securing the strength of their competitiveness and guarding jobs in Italy.

Strengths and Weaknessses Identified:

Italian economy is still finding it difficult to draw investors on a larger inflow of 'foreign domestic investment' due to Italy's "entire industrial system ahs been penalized by the high costs of intermediate services produced in sectors where privatization and liberalization have not yet generated an adequate degree of competition, in part owing to the restrictions placed on foreign producers. (Autorita Garante della Concorrenza e del Mercato, Relazione annuale, 22 June 2004) Italy's major export countries are the EU (France Germany, UK, Spain) Central and Eastern Europe (Russia) Switzerland, North Africa, U.S., Mercosur, South and Central Asia, East Asia, China, Japan, DAES (Hong Kong, Malaysia, Singapore, South Korea, Taiwan and Thailand), Oceania, and New Eu Members. Italy's has kept its' prices stable but is being cut by the competition. Both Italy and the U.S. exports are continuing to lose world market share. According to the report Italy has also "upgraded their supply towards goods that have a higher unit value and for which demand is less elastic to prices. "Exporters on the lower end have thus been forced to exit markets and the number of first time exporter dimished as the euro made export trade less remunerative explaning why Italy's share of world exports" has performed better in terms of value than that of volume.

There are many more of larger than smaller firms on the average in the industrial market sector while is a fragmented market. There may be and indeed it seems likely that the Italian market products have been replaced by foreign affiliates products. Italian firms tends to establish an international presence. If the United States doesn't sign the Textile and Clothing Safeguard Petitions then millions of workers in the textile and clothing manufacturing industry will lose they jobs because the work will be moved to China after January 1, 2005 quotas expire. China has taken the textile and home furnishings import market in the categories removed 2 1/2 years from the quota, in the amount of 70%. Nearly 30 countries are at risk of losing their textile and clothing imports and stood up at the WTO meetings to protest support for the governments taking of actions to stop the losess of jobs, caused by Chinas flooding of the market after the expiration of the quotas. GAFTT, the Global Alliance for Fair Textile Trade (GAFTT) is urging the U.S. To approve the Testile and Clothing Safeguard Petition filed by the U.S. Industry. According to GAFTT, the U.S. has a "special responsibility to prevent China from hurting the export sectors from dozen of countries around the world. The BKMEA (Bangladesh Knitwear manufacturers and Exporters Association) also has asked the U.S. To cooperate. Further the STEA (Swaziland Textile Exporters Association.

The bilateral economic relationship between the United States and Italy is strong and growing. The United States and Italy work together cooperatively on economic issues of major proportions within the realm of the G-8 countries. According to the report Italy is one of the United States key trade partners. During the year of 2002 the United States was the fifth-largest foreign supplier for the market in Italy and the largest supplier that is located ourside of the European Union. During the year 2002 the total trade between the United States and Italy was 34.4 billion with a $14.2 billion U.S. trade deficit with Italy by the United States. Changes that are significant are taking place in the way trade is comprised between Italy and the U.S. The U.S. imported $24.3 billion from Italy in 2002 and exported 10.1 billion to Italy in U.S. goods. By the end of 2001 the United States had by direct investment input 23.9 billion into Italy's foreign investment market.

Italy's barriers… [END OF PREVIEW]

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