VZCZCXRO7270
RR RUEHFL RUEHNP
DE RUEHRO #2072/01 2681633
ZNR UUUUU ZZH
R 251633Z SEP 07
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC 9118
INFO RUEHFL/AMCONSUL FLORENCE 2662
RUEHMIL/AMCONSUL MILAN 8985
RUEHNP/AMCONSUL NAPLES 2800
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHBS/USEU BRUSSELS 4561

UNCLAS SECTION 01 OF 02 ROME 002072 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EEB/TPP/ABT GARY A. CLEMENTS 
COMMERCE FOR ITA/OTEXA MARIA D,ANDREA 
STATE PASS TO USTR FOR CAROYL MILLER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX CH IT
SUBJECT: 2006 ITALIAN TEXTILES AND APPAREL PRODUCTION DATA 
 
REF: A. STATE 114799 
 
     ¶B. 2006 ROME 3228 
 
¶1.  (U)  Italy is the EU's largest  manufacturer of textiles 
and apparel, accounting for almost a quarter of total EU 
textiles and apparel production.  Italian industrial 
production in fiscal year 2006 was valued at 345.1 billion 
dollars.  Textiles and apparel production made up 22.4 
billion dollars (6.5 percent) of Italy's total industrial 
production and 8.3 percent of Italy's total exports.  Of the 
34.1 billion dollars of textiles and apparel goods exported 
in 2006, 2.3 billion dollars (6.7 percent) was exported to 
the United States.  (Note.  The Italian fiscal year coincides 
with the calendar year.  The value of Italian textiles and 
apparel exports exceeds the value of textiles and apparel 
manufactured domestically because Italian firms are focusing 
on high value-added activities.  The value of export reflects 
the value of imported parts (e.g., collars and cuffs) and 
material plus the value of Italian assembly and finishing. 
End note.)  In the first half of 2007, Italy exported 1.1 
billion dollars of textiles and apparel to the United States, 
6.1 percent of total Italian textiles and apparel exports. 
 
¶2.  (U)  The value of Italian textiles and apparel exports 
grew by 3.9 percent in 2006, in line with the general 
recovery of Italian exports, but below the world average 
growth in textiles and apparel exports of nine percent. 
Higher prices for Italian textiles and apparel exports 
resulted in an increase in the value of textiles and apparel 
exports despite a two percent decrease in the quantity of 
goods exported in 2006. 
 
¶3.  (U)  The Italian textiles and apparel industries face 
stiff competition from East Asian countries, especially 
China.  From 1997 to 2006, Italy lost market shares in the 
silk, woman's apparel, children's apparel, scarf, and shawl 
sectors, while improving or defending its market share in 
leather goods, woolens, cotton, linen, and yarn sectors. 
 
Labor 
------ 
 
¶4.  (U)  In 2006, the textile and apparel industries employed 
760,000 people, 15.2 percent of the five million people in 
the Italian manufacturing sector.  Employment in the textiles 
and apparel sector dropped dramatically in the period 
2004/2005 from 869,000 to 783,000 units, with a further 
modest reduction in 2006. The reduction in the textiles and 
apparel workforce is the result of three trends in the 
industry: (i) a shift in textile and apparel manufacturing to 
niches with higher value added, (ii) a reduction of quantity 
of goods produced, and (iii) the outsourcing of parts of the 
manufacturing process to countries with lower labor costs. 
 
Prato: Case Study of an Industry in Crisis? 
--------------------------------------------- ----- 
 
¶5.  (U)  The Prato District (near Florence) is Europe's 
largest textile district.  In 2006, factories in Prato 
produced 4.46 billion euros worth of textiles and apparel, of 
which 2.39 billion euros worth were exported.  Both output 
and exports were down from their 2005 levels of 4.51 billion 
and 2.44 billion respectively, a contrast to the increase in 
Italy-wide production and export figures.  In a press 
interview on August 21st, 2007, the President of Prato 
Industrialists Association, Carlo Longo, cited four main 
reasons for Prato's relatively poor performance: (i) The 
continued presence of companies that perform the least 
value-added steps of the production process (other Italian 
companies have outsourced these processes), (ii) the relative 
small size of Prato textile companies, (iii) Chinese 
competition, and (iv) bureaucratic impediments to growth, 
including government inefficiency, lack of infrastructure, 
high water tariffs, and inefficient and costly waste 
treatment policies.  Longo said that Prato, which has lost 
about one fourth of its textile and apparel output in the 
last five years, should shift its focus to higher value-added 
goods in order to increase the value of its textile and 
apparel production. 
 
¶6.  (U)  Prato is also fighting stagnation by networking. 
For example, three Chinese businessmen recently inaugurated 
Euroingro, a 10,000 square meter showroom which will give 
wholesalers easy access to 120 companies with displays there. 
 Euroingro represents an attempt to increase cooperation 
 
ROME 00002072  002 OF 002 
 
 
between Prato textile manufacturers and Chinese apparel 
producers.  It also represents an attempt to fight 
counterfeiting, since all companies involved must sign a 
formal commitment to avoid the marketing of counterfeited or 
pirated products. 
 
¶7.  (U)  Prato's textiles and Apparels manufacturers have 
also launched a project called "Mode in Prato," a consortium 
aimed at providing joint material/styling research, 
marketing, and services to member companies, to be 
inaugurated in September 2007. The member firms (presently 
five textile manufacturers and five apparel producers 
including two Chinese-owned companies) will also be required 
to sign a commitment to avoid marketing counterfeited/pirated 
products. 
 
¶8.  (U)  In an additional attempt to improve Italian-Chinese 
trade cooperation, Giupel, the first and only Chinese-owned 
company to join Confindustria (The Italian Industrialists' 
Association) in Prato, is promoting the establishment of a 
60,000 square meter wholesale center near Shanghai dedicated 
to the sale of "Made in Italy" products.  The center, 
expected to open in 2008, will host up to 100 Italy-based 
firms and will provide Chinese personnel for promotional and 
marketing activities. 
SPOGLI