Useful Papers

Production

The decline in developed countries' production activity is most prominent in the production of high volume, low value items. The production of these products has moved to developing regions, in particular China, India and Vietnam, to take advantage of cheaper labour and environmental costs. The majority of the world's middle quality branded goods is produced in developing countries under a franchise or licensing agreement from developed suppliers. The difference between input costs makes it worth suppliers in developing countries while to invest time and effort to work with low cost manufacturers in developed countries to create a product that meets their specific requirements.

For additional information the leather good's value chain and developing countries' participation:

http://www.inti.gov.ar/cadenasdevalor/ApparelUNIDOnew2Feb03.pdf

http://www.unido.org/userfiles/hartmany/06IDR_ch6-062002.pdf

www.unido.org/userfiles/hartmany/06IDR_ch6-062002.pdf

Consumption

Leather goods are classified as "luxury" products, and by definition a relationship exits between per capita income levels and consumers' demand for leather products. The demand for leather and leather products is elastic as it moves in line with the performance of the global economy. Therefore circumstances that depress economic growth such as a hike in oil prices, raising interest rates, inflation and growing unemployment will negatively affect consumers' demand for leather and related-product markets.

For more information about Europe's consumption patters:

http://www.unc.edu/depts/europe/conferences/04/global/papers/Abernathy_Volpe_Weil%20v2.pdf

Trade

Trade has a "North-South" pattern. The developed world, the EU (15) countries, Japan and the United States are the largest importers of leather products, while the largest exporters are Asian countries, typically China. In 2005 trade statistics support this view as the largest regional net importers of leather goods tend to be developed regions such as the EU 25 and NAFTA, while East Asia and South East Asia are net exporters. This trade pattern is caused by the market's supply and demand side characteristics. On the supply-side retailers in developed countries are lowering their costs to remain competitive. Sellers in developed countries have outsourced production activities such as tanning leather and manufacturing leather products to developing countries to take advantage of less severe environmental regulations and cheaper labour, respectively, which reduces production costs. Consumers' demand for leather products is affected by their level of disposable income. Developed countries tend to have a larger GDP per capita than developed countries and this income tends to be more equitably distributed among the population. This implies that the absolute demand for leather products is greater, but also, the market for leather products is broad based in developed compared to developing countries.

For comprehensive trade statistics refer to

http://www.intracen.org/leatherline/trade_statistics.htm

For information about the United States' market

www.usaid.gov/locations/sub-saharan_africa/publications/docs/pubslist05.pdf

Comprehensive information on the EU:

http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=584

http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=585

http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=583

http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=3777

Regulations: Non-Tariff Barriers

Countries use tariffs barriers and non-tariffs barriers to protect their domestic producers' markets from imported goods. Tariffs increase the price of imported goods compared to domestic goods, thereby giving domestic producers a relative price advantage. Developing countries argue that developed countries' tariff peaks are disproportionately applied to labour intensive products that tend to be their high priority export products. This claim is supported by empirical evidence.

Non-tariff barriers potential to hinder exporters' ability to sell their products into foreign markets is greater than tariff barriers. Non-tariff barriers increase a producer's costs throughout the supply chain due to the complexity of the processes that he/she must adhere too and the bureaucratic cost of ensuring that procedures are documented. On average, producers in developing countries face greater supply side constraints than their developed counterparts and as a result NTB tend to have a disproportionate negative affect on developing countries' ability to compete in international markets. Collective organisation and the pooling of resources among SADC's farmers/ producers could be an effective strategy to reduce the burden of ensuring that activities along the supply chain meet regulatory standards. Small-scale producers could also form associations that approach the government and the private sector to help them address complex issues concerning traceability regulation. 

For general tariff information:

http://www.thedti.gov.za/econdb/raportt/HsATar41.html http://www.tdctrade.com/main/industries/t2_2_19.htm

For more information detailed tariff information refer to:

EU        http://export-help.cec.eu.int/ or the Central Customs Administration in Rotterdam, the Netherlands (or at Customs of any other EU member state) or from the Internet site http://europa.eu.int/comm/taxation_customs/dds/cgi-bin/tarchap?Lang=EN

Japan   http://www.apectariff.org.tdb.cgi/ff3235/apeccgi.cgi?JP

USA       http://www.usitc.gov/tata/hts/bychapter/index.htm  or the United States International Trade Commission at http://www.usitc.gov/,

For Non-tariff barrier information refer to:

Japan    http://www.apecsec.org.sg/  

EU        http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=432 and

http://www.cbi.nl/marketinfo/cbi/?action=showDetails&id=1080

USA    http://www.fas.usda.gov/ and http://www.le.fws.gov/

Way Forward

On Leather products has the potential to be a viable sector for SADC's manufactures (a)

leather products are easily transportable as they are not perishable or bulky (b) SADC's conversion rate of slaughtered animals to hides is below average representing surplus capacity (c) activities throughout the value chain range from simple to complex activities require a different mix of capital to labour. The sector can sustain a broad range of business activities from small-scale processing at the farm gate (raw skins and hides) to medium/ large scale industry that is capital intensive ( tanneries) or labour intensive (manufacturing).

Over the past five years the demand for leather products has grown. Over the long-run SADC's producers should tap into industry associations resources to investigate what type of market they wish to supply and then decide what type suits this market's requirements. Based on trade data there seems to be two broad based alternatives that should be investigated further. Supplying high quality no frills goods to the regional market and producing exotic goods for international markets that incorporate African cultural heritage into their design. The demand for exotic leather products, such as cushion covers, lampshades, picture frames, is experiencing rapid growth, driven by the expansion of the home decorating market. SADC's producers should explore tapping into the resources of the "Made in Africa" project to produce non-traditional leather goods made out of exotic leather

For case studies about Africa's star performers:

http://www.unido.org/file-storage/download/?file_id=10205

http://www.intracen.org/leatherline/Docs/leatherbridge.pdf

http://www.unido.org/file-storage/download/?file_id=21182

http://www.nu.ac.za/csds/Publications/rr55.pdf

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