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Cablegate: French Textile and Apparel Industry

VZCZCXRO7657
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #4176/01 2780951
ZNR UUUUU ZZH
R 050951Z OCT 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 0659
RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 PARIS 004176

SIPDIS

SENSITIVE
SIPDIS

STATE ALSO FOR EEB/TPP/ABT Gary Clements
COMMERCE FOR ITA/OTEXA Maria d'Andrea
STATE PASS USTR Carol Miller

E.O. 12958: N/A
TAGS: ETRD ECON FR
SUBJECT: French Textile and Apparel Industry


NOT FOR INTERNET DISTRIBUTION

Ref.: State 114799

Summary
-------
1. (U) Per reftel request, the Federation of the French Textile and
Apparel Industry (UIT - Union des Industries Textiles) provided us
with an update on developments in 2006 and initial estimates for
sector performance in 2007. In 2006, the French textile sector
experienced growth in household consumption, exports and overall
turnover, and significantly increased research and development
through the use of France's recently-created "competitiveness
clusters." However employment suffered an important decline and the
rise in energy costs, raw materials and dyes negatively impacted the
margins of French companies. End summary.

Production/Consumption
----------------------
2. (U) In 2006, French textile production experienced a 5 percent
setback in volume terms, compared to the previous year. The
turnover of French textile/apparel firms, on the other hand, grew by
one percent during the same period, reaching 18.2 billion USD (14.5
billion euros). Household consumption increased by 3 percent in
volume and 1 percent in value to 35.9 billion USD (29.3 billion
euros).

Trade
-----
3. (U) Between 2005 and 2006, the French textile trade balance
deteriorated by 5 percent, leading to a deficit of 5.25 billion USD
(4.2 billion euros), despite a 2 percent boost in French exports (to
8.4 billion euros, or USD 10.5 billion). This is the first increase
in textile exports since 2000. France exports mostly to the EU
(Belgium, Italy, Spain, Germany and the UK). However, Tunisia,
Morocco and the United States also feature among its top ten
customers. France exported USD 302.5 million (241 million euros) in
textiles to the United States, its 10th largest customer.

4. (U) Imports followed the same upward trend, increasing by 3
percent to 15.8 billion USD (12.6 billion euros). Imports from EU
countries (especially from Italy and Belgium) declined, while those
from third countries (China, India, Bangladesh and Tunisia) grew by
7 percent.

Prices and Employment
---------------------
5. (U) In 2006 consumer prices in the textile/apparel sector
increased by 0.2 percent. During the same year, employment declined
by 7 percent to 86,070 employees, due in part to increasing
productivity and restructuring.

Outlook for 2007: More innovation and clusters
--------------------------------------------- -
6. (U) The UIT is upbeat for 2007 as consumption continued to grow
during the first quarter of the year. Technical textiles are
experiencing sustained growth, driven in part by French
"competitiveness clusters," as are exports to emerging countries
such as Russia, Thailand, South Korea and Saudi Arabia. As part of
its industrial policy to promote innovation, the GOF has established
67 clusters known as "competitiveness poles" throughout France to
create greater synergies between private and public funding,
especially in support of SMEs. Three clusters have been developed
in the textile sector in northern and southeastern France. They
bring together 100 companies working on some 93 projects, together
with the French Institute of Textile and Clothing, and some 20
universities and research centers. The UIT has partnered with the
French Agency for Innovation (OSEO) and the GOF, which respectively
earmarked 8 million euros (10.04 million USD) and one million euros
(1.25 million USD) for the textile clusters in 2006.

7. (U) France also expects to reap the benefits of its
participation in the European technological platform of
Textile/Clothing (controlled by EURATEX in Brussels) to accelerate
industry adaptation to evolving market conditions. The UIT shares a
representative office in Shanghai with counterparts from Germany,
Austria and Switzerland. The associations may expand this
cooperation to Moscow soon.

8. (U) Severe competition from China and the appreciation of the
euro against the dollar, the yen and Asian currencies linked to the
dollar, are among factors that constrain sectoral growth. Last
July, French Prime Minister Francois Fillon spoke in favor of
extension of the of the EU's China textile quotas due to expire at
the end of 2007. Regardless of whether quotas (or some sort of
successor arrangements) are maintained, the UIT is banking on new
technologies and technical textiles used in planes, trains, cars,

PARIS 00004176 002 OF 002


buildings and similar applications to widen its customer base,
particularly in emerging countries and North America.


Stapleton

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