East European full reintegration into the world economy had already started during the eighties, but the end of the decade and the beginning of the nineties saw a sudden spurt in that direction. This has taken the form not only of a swift trade reorientation towards the West, especially the EU, but also of new forms of inward foreign direct investment (FDI), subcontracting and cooperation agreements with Western enterprises. As a consequence, Eastern Europe has become deeply involved in the larger process of globalisation of production characterizing the international economy, where firms' operations are becoming much more complex and pervasive than traditional arms-length trade and traditional international investment, including both international production and sourcing. Therewith the process of transition to the market appears to be more and more intertwined with Western firms' strategies. It is then of some interest to analyse the extent of such relocation, its various forms and the possible impact on both the relocating and the host countries. International relocation can be analysed from different points of view. The perspective of the present paper is to concentrate on one of the most important trade partners of Eastern Europe - Italy - and on two industrial sectors in which the latter is specialised in production and exports - textiles and clothing, which are also of paramount importance in Eastern Europe's exports. A few data on production, employment, investment and foreign trade may suffice to show the enormous importance of these industries for Italy. In 1993 this country produced almost 40% of the entire EU production of textiles, including knitwear. The other major EU countries followed rather distanced: France (17% - including household textiles), Germany (16%) and the UK (11%). The correspondig employment for Italy was 30% of the EU total, taking into account also the firms with less than 20 employees. The second most important country - Germany - employed just half of that amount. Finally investment, both total and per head employed, reveals a similar pattern, these two countries being followed by France and the UK. The ranking is similar in the clothing industry. In 1993 Italy represented 41% of total EU production, 24% of total employment (including firms with less than 20 employees) and headed the investment ranking, both in absolute terms and on a per capita employed basis. It should be added, in this respect, the particular consumption habits of Italians, who devote to clothing a much higher share of their total consumer spending than the other European nationals. -2-
The importance of the internal market is only paralleled by the place of the two sectors in Italian foreign trade. During the last few years Italy has been the second or third world exporter both of textiles and of clothing products, if one excludes Hong Kong due to the paramount importance of its reexports. She is the first Western supplier of the G7 markets for clothing and first on a par with Germany for textiles. The industry presents the second, and growing, largest positive trade balance in Italian foreign trade. The two sectors together represent 11% of her total exports, but a much lesser share of her imports (5%). However imports tend to grow faster than exports. A growing number of competitors is gaining market shares in the EU, at the expense of the traditional leaders like Italy and Germany. Import penetration, which has roughly doubled in the last ten years, is but one of the factors that, starting from the late eighties, is exerting growing pressure on the whole industry at a EU level. Production is falling and labour productivity rising much faster than in average manufacturing. The result for the EU has been 639,000 jobs lost in 1988-94, equal to almost 30% of all job losses in the manufacturing industry. Italy was also hit, although less than other European countries for the reasons indicated later. What is the...
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