China syndrome

16 May 2004

With inflation receding, China is being accused as the main culprit for the underperforming Turkish economy. Turkish shoe makers, in particular, are agitating for new quotas, stiffer import duties and control over 'false' invoices on Chinese goods that deprive the state of essential revenue and value added tax. Few consider their own low productivity or the mega local taxes forfeited on footwear that tripped blatantly across the border to Russia with the tax-free luggage trade. To be sure, China, once a sleeping dragon and a workhouse, is now more like a fire-breathing engine of global growth. But mature sectors, such as finished leather and fashion garments, compete head-on with China using technology, high productivity and quality, branding and cutting edge marketing strategy. Producers who cite rice-bowl wages and government subsidies as obstacles to fair trade are frequently underperformers. They will chant the same refrain when another new market emerges that also needs subsidies, tax breaks and a leg-up the global ladder. Free trade is rarely fair trade. Ercan Ulutas used to be an underperforming children's footwear producer. But he ploughed money back into his business, Ozcan Bebe, and made quality a priority. Recently, he moved to a 3,200 sq m single-storey factory to maximise operating and marketing performance. 'It is impossible to monitor quality efficiently when production is spread over two or three floors', he explained. Ulutas credits most of his export skills to Dutch producer van Gastel (makers of Brakkies and Bunnies) who provide ongoing technology and training to many Turkish footwear makers. 'Producers had our all-leather export collection ready seventeen days early to ship to Holland and we landed orders and sold all our models before Sino competitors arrived', van Gastel's Turkish agent, Cathal Walsh, said. Italy increasingly outsources footwear production, due to high manufacturing costs locally. 'Türkiye has great workmanship and is close to Italy', a spokesman for the Ars Arpel School for bags and shoes said. 'But most Turkish producers don't see the potential.'

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