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DE RUEHLI #2571/01 2771623
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R 041623Z OCT 07 ZDS
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC 6335
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING
RUEHHK/AMCONSUL HONG KONG
RUEHKO/AMEMBASSY TOKYO
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 LISBON 002571 
 
SIPDIS 
 
C O R R E C T E D  C O P Y (ADDRESSEES ADDED) 
 
SIPDIS 
 
STATE FOR EEB/TPP/ABT GARY CLEMENTS 
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA 
USTR FOR CAROYL MILLER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX PO
SUBJECT: PORTUGAL: 2006 TEXTILE AND APPAREL SECTOR OVERVIEW 
 
REF: STATE 114799 
 
LISBON 00002571  001.2 OF 002 
 
 
SECTOR OVERVIEW 
--------------- 
¶1. SUMMARY: In 2006, the Textile/Apparel sector represented 
Portugal's largest industrial/manufacturing sector, 
accounting for 11.8% of industrial/manufacturing exports, 
primarily to Spain, Italy, France, Germany and the United 
Kingdom. Textile/Apparel manufacturers are concentrated in 
the north of the country and employ approx. 230,000 laborers, 
down 4.7% from 2005. Over the last decade, the industry has 
seen a steady decline in production and employment due to 
global competition, market liberalization and reduced Asian 
quota policies within the European Union (EU), of which 
Portugal is a member. END SUMMARY. 
 
2006 ECONOMIC STRUCTURE AND STATISTICS 
-------------------------------------- 
¶2. SOURCES: The 2007 Economist Intelligence Unit (EIU) 
Report; Ministerio da Economia e da Inovacao - Gabinete de 
Estrategia e Estudos (GEE); Instituto Nacional de Estatistica 
(INE); Associacao Textil e Vestuario de Portugal (ATP); 
Instituto das Empresas para os Mercados Externos (ICEP); 
Centro de Estudos Texteis Aplicados (CENESTAP); EUROSTAT; 
Associacao Nacional das Industrias de Vestuario e Confeccao 
(ANIVEC); The European Apparel and Textile Organization 
(EURATEX). 
 
- GDP in USD: 194.9 billion 
 
- Real GDP Growth: 1.3% 
 
- Origins of GDP: 
 
      Retail, Services Other 54.6% 
      Agriculture/Fishing 2.8% 
      Energy (Electricity, Gas and Water) 2.8% 
      Industry/Manufacturing 15.7% 
      Construction 6.3% 
      Restaurants and Tourism 17.8% 
 
- National Labor Force: 5.16 million 
 
- Industry/Manufacturing Labor Force (incl. Energy): 1.59 
million 
 
- Textile/Apparel Labor Force: 230,000 
 
- Textile/Apparel Companies in Business: approx. 3,000 
 
- Textile/Apparel Imports in USD: 3.83 billion 
 
- Textile/Apparel Percent of Industry Imports: 6.4% (down 
3.2% from 2005) 
 
- Textile/Apparel Exports in USD: 5.39 billion 
 
- Textile/Apparel Percent of Industry Exports: 11.8% (down 
12% from 2005) 
 
- Textile/Apparel Imports from US in USD: 158.1 million 
 
- Textile/Apparel Exports to US in USD: 340.7 million 
 
- Principal Destinations for All Exports: 
 
      EU-25 77.2% 
      - Spain 28.4% 
      - Germany 13.1% 
      - France 12.4% 
      - UK 7.1% 
      - Italy 4.1% 
      - Other EU 34.9% 
 
- Principal Origins for All Imports: 
 
      EU-25 75.5% 
      - Spain 30.5% 
      - Germany 13.8% 
      - France 8.4% 
      - Italy 5.8% 
      - UK 4.3% 
      - Other EU 37.2% 
 
ADDITIONAL INFORMATION 
---------------------- 
¶3. QUESTION: Are host country producers receiving lower 
 
LISBON 00002571  002.2 OF 002 
 
 
prices due to heightened international competition? 
 
ANSWER: In 2006, heightened international competition caused 
by the 2005 liberalization of the international textile and 
apparel market, and the European Union,s decision not to 
impose quotas on select Chinese imports, negatively impacted 
Portuguese producer prices. According to INE, apparel and 
footwear products cost on average 17% less in 2006 than in 
¶2005. Many Portuguese producers, mostly small- and 
medium-sized enterprises, made little or no profits and over 
a dozen were forced to close. 
 
¶4. QUESTION: Have U.S. and EU restrictions on certain exports 
of textiles and apparel from China, effective through 
2007/2008, affected export prospects for host country 
manufacturers? 
 
ANSWER. In 2006, the European Commission adopted anti-dumping 
measures that imposed high duties on select Chinese imports, 
including textiles. While these measures were supposed to 
safeguard European Union producers, many have complained that 
the Chinese avoided these duties by purposely mislabeling 
imported goods. 
 
¶5. QUESTION: Has the host government implemented, or is it 
considering implementing, safeguards or other measures to 
reduce growth of imports of Chinese textile and apparel 
products into the host country? Does the host government have 
policies or programs in place to deal with any dislocated 
workers in the sector resulting from increased competition? 
 
ANSWER: In 2006, the National Assembly recommended a proposal 
to the government to rejuvenate the struggling textile and 
apparel industry, but to date, the GOP has not introduced any 
new laws. The proposal called for the promotion of innovative 
and new technologies; the creation of professional 
development programs for industry employees and 
entrepreneurs; more linkages between SMEs and 
universities/professional training institutes; the adoption 
of measures that require bilateral and multilateral 
commercial agreements to include unemployment benefit 
measures; the creation of programs to combat clandestine, 
illegal or underage employment; the establishment of support 
funds to bail-out struggling businesses; the creation of 
banking programs that guarantee loans to already-established 
and new producers; the promotion of regional diversification 
programs that spread manufacturers throughout Portugal as 
opposed to just in the North; and the creation of incentives 
for companies that manufacture culturally significant 
national products. 
 
¶6. QUESTION: Has increased global competition affected local 
labor conditions by causing employers to reduce wages, seek 
flexibility from government required minimum wages, or 
adversely affected union organizing? 
 
ANSWER: Although the GOP approved several small changes to 
the labor laws in 2007, no move has been made to alter the 
current labor structure which bars employers from altering 
employment terms and fines them for dismissing laborers. 
 
¶7. QUESTION: Overall, if not already addressed, does post 
think that the host country can be competitive in textiles 
and apparel exports given heightened global competition? 
 
ANSWER: No longer able to compete based on relatively cheap 
labor in a quota-free world, textile manufacturers must work 
to make the labor laws more flexible in addition to employing 
innovative technology. Post predicts that the textile sector 
will continue to shrink. 
 
Hoffman