Fashion sustainability is accelerating with the introduction of new bills in the United States and France. These legislations aim to create a fairer competitive environment and establish new manufacturing centres, notably in the West, thereby reducing dependence on China’s potent but environmentally harmful supply chain. However, this move could further fuel the ongoing global trade war given the significant changes it is likely to force onto the fashion industry.
The Americas Trade and Investment Act in the U.S is a sweeping bill that seeks to establish a regional trade hub in both the U.S. and Latin America in an effort to reduce reliance on Chinese manufacturing, citing it as a matter of “national security interest”. The act symbolizes explicit retaliation against China’s perceived trading behaviour and seeks to challenge perceived unfair practices such as ‘subsidized trade’, ‘environmental degradation’ and ‘theft of intellectual property rights.’ A direct effort to reduce dependence on the Chinese supply chain would require a whopping $70 billion in grants and loans. The fashion industry is expected to be the main beneficiary with a cool $14 billion of this kitty being set aside for incentives for textiles and apparel firms that use or produce circular manufacturing.
In France, there are simultaneous efforts to reform the fast fashion sector, which is primarily led by China. Bill 2129 proposes amendments to the Environmental Code that would compel fast fashion entities to either overhaul their operating models to become more sustainable or face fines as high as 50 percent of the revenue earned per item. These penalties could potentially drive the industry out of France or create a windfall of revenue from penalties. Fast fashion giants like Zara and H&M, known to manufacture at least half of their products in China, now find themselves caught in the crossfire with China’s Shein being the primary target of the French bill.
The French Assembly has also extended the bill’s jurisdiction to cover marketplaces. This has brought attention to China’s Temu, a marketplace that has seen tremendous growth. Depending on the interpretation of the term ‘marketplace,’ this new legislatory move could also concern Amazon where 50 percent of top sellers and up to 75 percent of new vendors are Chinese.
Cumulatively, the proposed bills in both countries could compromise at least 15 percent of China’s textile supply chain revenue. This has drawn the attention of economic policy analysts who are now curious and concerned about what retaliation from China might look like for the global fashion industry.
Pundits predict China could resort to holding the global supply chain hostage by preventing textile raw materials from leaving its ports, thereby creating a worldwide shortage. Furthermore, the country could enforce retaliatory tariffs in unexpected sectors, such as the consumer goods or retail space. These measures could be very selective to maximize impact. For instance, luxury clothing and accessories from France, Italy, the U.S., and the UK could be targeted, potentially delivering a severe blow to these countries’ economies.
However, export controls rarely succeed as previous attempts to restrict exports have been systematically challenged and ruled against in the World Trade Organization dispute settlement system. Moreover, China might hesitate to impose export restrictions given its current economic fragility. Restrictions would hamper its industries leading to huge financial setbacks and job cuts, which could incite internal unrest.
In conclusion, the introduction of the Americas Trade and Investment Act in the U.S and Bill 2129 in France represent a significant development in efforts towards fashion sustainability. The legislation places a spotlight on China’s massive, but environmentally detrimental manufacturing network. Even though these legislative changes aim to foster equitable global trade and eco-friendly fashion industry practices, the potential for intensifying the existing global trade war is evident. The fashion sector, and indeed the entire global economy, will now have to brace themselves and prepare strategies to manage a likely retaliatory response from China.
