Global trade, European integration and the restructuring of Slovak clothing exports

The Slovak clothing sector seems to have a number of relative competitive strengths and limitations within this broader context of EU?ECE trade liberalisation and growth of clothing exports. In terms of strengths, three issues are key. First, like other ECE countries, Slovakia is achieving increasing access to EU markets for its relatively high-value products. These are more competitive in the EU market in terms of value than those from lower cost neighbouring states, such as Ukraine. Second, part of the competitive strength of the clothing production system in Slovakia (as elsewhere) is derived from the distinct regional agglomerations of textiles and clothing producers in two main regions, Trenlin and Prestov (see Smith, 2003). Much recent attention in economic geography has been focused on regional agglomeration and the competitive underpinnings of regional economic success (Scott, 1988, 1998; Storper, 1995, 1997). Together, the two main regional agglomerations of clothing producers in Slovakia embody many of the features of such industrial districts found in Western Europe and North America, including dense forms of local co-operation between firms. Co-operation and contracting between firms has enabled export oriented firms to respond flexibly to the uncertain and unpredictable demands from EU buyers. In addition, there is some evidence of firm upgrading in which managers have been able to develop more independent market access of their own brand clothing thus reducing their reliance on western buyers. However, as Smith (2003) has argued elsewhere, such agglomerations are also characterised by unequal power relations between Slovak manufacturers and EU buyers, between core contracting firms in such regions and other local producers who play a more marginal role, and between firms and their workers given that wage levels remain low in the clothing sector.There are also a number of strategic limits to the continued growth of the Slovak clothing export system. First, it is clear that producers face continuous costs pressures. Pressure for wage increases in a very low pay sector is apparent. Many firms have suggested that worker retention has become an issue because of low wages. Firms have sought out ways of coping with such pressures through other mechanisms such as subsidised transportation (Smith, 2003). Elsewhere, in Bulgaria, Pickles (2002) has found that firms have also been forced to respond to the temporal flexibility required by workers also engaged in supplementing household income through seasonal agricultural employment and work. Cost pressures are also experienced in the emergence of new competitors in lower cost areas, such as Ukrainian firms, although, as we have seen, this is counterbalanced by the quality differences of clothing production between Slovakia and Ukraine. Nevertheless, if Ukrainian producers are able to upgrade quality to match (if not surpass) Slovak levels then competitive pressures will intensify. Furthermore, EU membership may increase costs for Slovak producers, through the costs of implementing otherwise desirable employment and environmental legislative requirements. The effect may be to stimulate a further off-shoring of production to newer producing regions, such as those in the former Soviet Union.Second, it is clear that reliance on outward processing strategies has failed to develop significant design capability in Slovakia. While there are cases of design intensity in production in some firms, it is clear that being locked into outward processing forms of production has not enabled the transfer of technology and knowledge to enable many Slovak firms to develop design capability. Rather, reliance on western designs, brands and trademarks remains predominant in the Slovak clothing sector. However, the development of design capability is seen as necessary in order to upgrade production and move out of low-cost production.Third, and finally, there is a general absence of specific regional policies to promote upgrading in the clothing sector and those policies that do exist are limited in scope. However, there is evidence from western Europe – notably from Italy – that a dense tissue of regional institutions involved in providing credit, technological support and employment training can be important in the sustenance and potential upgrading of clothing sectors. Whether, however, such policy foci would help to overcome the continual pressure for cost reduction and low wages in what, after all, is an increasingly globalised manufacturing sector remains an open question, and the experience of higher cost locations in the EU and USA suggest that cost imperatives may determine the fate of even relatively high quality production in central Europe