Trends in global production and trade

This report examines key trends in global production and trade in the Footwear industry. Our focus is on the competitiveness of emerging economies ('low-cost countries', LCCs) as global source countries.

As to the composition of Footwear, we distinguish between (a) casual shoes, (b) sports shoes, and (c) boots.

The study is based on an analysis of cross-border trade flows. Flows of cross-border trade reflect the views of investors and traders on the ability of source countries to supply international markets.

Between 2002 and 2006, world exports of Footwear grew at an average annual rate of 10.6 percent.

With exports from emerging economies growing at slightly higher rate (11.2 percent), their share of world exports increased from 76.4 percent in 2002 to 78.2 percent in 2006.

Chart 1B shows the importance and dynamics of LCCs as locations of global production by industry segment:

► In terms of world export share, LCCs are a slightly more important as source countries for casual shoes than for boots and sports shoes.

► Over time, LCCs have gained more ground in boots (3.4 percentage points) and sports shoes (2.2) than in casual shoes (0.5).

According to Chart 1C, Asia is the dominant low-cost source region for Footwear, accounting for a relatively stable share of 85 percent of world low-cost exports.

The geographical reach of a product's supply chain reflects the tradeoff of users between (a) accessing the most competitive source of supply worldwide, and (b) the benefits of proximity to end-product markets.

In this study, we measure the reach of supply chains by examining the extent  to which imports from LCCs cross regional borders (as reflected in the relative size of intra and extra-regional import flows).

In this regard, Charts 2A and 2B reflect the significance of Asia's advantage as a low-cost source region for Footwear ― resulting in globalised supply chains in exports to non-Asian markets.

Chart 3A lists the ten leading low-cost source countries for Footwear products. With a world export share of 51.4 percent in 2006, China is by far the leading source country, being followed by Vietnam (7.7), Romania (3.0), Brazil (2.9), and Indonesia (2.9).

Since 2002, the share of the Top-5 source countries in world low-cost exports increased by 3.0 percentage points to about 87 percent in 2006. This points to a tendency of concentration in favour of today's leading source countries in the export of Footwear from emerging economies.

Between 2002 and 2006, China's share of world low-cost exports increased by 3.7 percentage points to 65.7 percent in 2006 (in large part since 2004).

Reflecting its large share of world low-cost exports, China holds more or less equally strong positions in all product categories.

Between 2002 and 2006, Vietnam's share of world low-cost exports increased by 1.9 percentage points to 9.9 percent in 2006 (although stagnating since 2004).

Relative to other LCCs, Vietnam's advantage lies in sports shoes. Since 2002, the country has strengthened its relative position in boots.

While rising from 2002 to 2003, Romania's share of world low-cost exports has since declined to 3.8 percent in 2006.

Since 2002, Romania has built an advantage over other LCCs in sports shoes. In addition, Romania has strengthened its relative position in boots.

Between 2002 and 2006, Brazil's share of world low-cost exports declined by 0.8 percentage points to 3.6 percent in 2006 (with a downward trend since 2004).

Since 2001, Romania has built up an advantage over other low-cost countries in sports shoes, while losing ground to other countries in mainly boots.

Between 2002 and 2006, Indonesia's share of world low-cost exports declined by 1.7 percentage points to 3.6 percent in 2006.

Relative to other LCCs, Indonesia's advantage lies in sports shoes. Since 2002, the country has lost considerable ground in boots.

Emerging economies are today the origin of more than three quarters of world Footwear exports.

Reflecting the superior competitiveness of source countries such as China and Vietnam, supply chains in the Footwear industry are organised mainly on global basis.

Based on our assessment of low-cost export flows between 2002 and 2006, we expect the following trends to shape global production and trade in Footwear in the short to medium term:

► Given their current share of world exports, LCCs are unlikely to significantly expand their overall share of global markets.

► Leading source countries, such as China and Vietnam, continue to increase their combined share of world low-cost exports (at the expense of smaller ones).

► Given the competitive strength of China, the success of other low-cost source countries depends on their ability to develop an advantage in selected areas of activity.