Appendix C: Industry Profiles
Manufacturing Overview
Manufacturing output rose from $14,435 million in 1988 to $16,672 million in 2001 (see Figure 4). During this time manufacturing's contribution to GDP fell from 18.3 to 15.5 per cent. Employment fell from 313,900 in 1987 to 285,100 in 2001 (Household Labour Force Survey). The corresponding rise in output and decline in employment indicates an increase in productivity.
Figure 4: Quarterly Manufacturing Output Data 1987-2002
Source: Quarterly data from Statistics New Zealand System of National Accounts GDP chain-volume series expressed in 1995/1996 prices
Manufactured exports have risen with simply and moderately transformed manufactures rising from $2,550 million in 1988 to $5,163 million in 2001. Elaborately transformed manufactures increased from $1,592 million or 11.8 per cent of merchandise exports in 1988 to $4,320 million or 19.1 per cent of merchandise exports in 2001 (Statistics New Zealand). This growth of advanced manufactured goods illustrates how the sector has moved into producing more high-value added goods.
Figure 5 shows the breakdown of manufacturing employment and output by ANZSIC Industry Subdivision in 2001. Food manufacturing is the biggest employer with 23.7 per cent of manufacturing employment and contributes 31.0 per cent of manufacturing output. Machinery and equipment manufacturing employs 17.7 per cent of the manufacturing sector and contributes 14.3 per cent of manufacturing output. Textiles, clothing, footwear and leather manufacturing employs 9.2 per cent of manufacturing workers and contributes 5.9 per cent of manufacturing output.
Figure 5: ANZSIC Manufacturing Subdivisions' Percentage Share of Manufacturing Employment and Output
Source: Statistics New Zealand System of National Accounts GDP chain-volume series expressed in 1995/1996 prices and March 2001 Census of Population and Dwellings
Textile, Clothing, Footwear and Carpet Industries
Generally, the TCFC industries have undergone major transformation following the removal of import licensing and the reduction of tariffs from 1988. The decline in the textile, clothing and footwear industries was, however, well established prior to these policy changes and is not unique to New Zealand. Given that these industries, particularly apparel, are labour intensive, production centres worldwide are shifting, favouring countries with lower production costs or strategic geographic location. Consequently, substantial job losses have been occurring in all major developed economies. In spite of these significant changes in global production patterns, there are many examples of highly innovative, exporting New Zealand TCFC enterprises. Many firms are also able to competitively supply the domestic market with quick delivery, fast turnaround times and flexibility of supply. A number of companies, particularly in the apparel industry, are basing their design and marketing in New Zealand and manufacturing in countries with lower labour rates.
Aside from the phasing out of import licensing and tariff reduction, the Textile and Clothing Industry Preliminary Report (BE & NZIER 2001) study identified the following factors as affecting the TCFC industries as a whole:
- globalisation which has exposed firms to rapid change, and increased international interdependence in trade, technology, transport, management and financial systems;
- the emergence of a nation-wide discount chain;
- changes in consumer tastes and buying habits, including Internet and catalogue mail-order;
- changes in the structure of the labour market and in policy impacting on skills development; and
- the predominance of very small family owned/managed businesses. (BE & NZIER 2001, p.9)
Textiles Industry (ANZSIC C221, C222 (excluding C2222), C223)
The textiles industry is very diverse. Significant products in the textile industry include woven and knitted wool and woollen blend fabric for apparel and interior furnishings; woven and knitted textiles using imported raw materials; safety fabric for specialised use; industrial textiles such as cloth for crop protection; shade cloth; and embroidery, screen printing, dying and printing of fabric.42 Other textile products include wool yarns; rope, cordage and twine; household textiles (including curtains and bed linen); tents; canvas goods; and flags. While there are several examples of highly innovative firms within the industry, much of the industry is still dependent on supplying local apparel manufacturers.
Seventy per cent of firms in the textiles industry employ no more than 5 people. As at February 2001 the industry comprised 789 geographic units employing approximately 7,700:
- Wool Scouring (C2211) - 32 units employing 474;
- Synthetic Fibre Textile Manufacturing (C2212) - 29 units employing 282;
- Wool Textile Manufacturing (C2214) - 47 units employing 1,545;
- Textile Finishing (C2215) - 30 units employing 252;
- Made-Up Textile Product Manufacturing (C2221) - 407 employing 2,553;
- Rope, Cordage and Twine Manufacturing (C2223) - 21 units employing 225;
- Other Textile Product Manufacturing (C2229) - 137 units employing 993;
- Knitting Mills (C223) - 86 units employing 1380.
Textile exports in 2001 were $56 million.43 The TCFC Strategy 2008 export target is $90 million. Much of New Zealand's export success in this industry is with high quality pure wool carpet yarns, pure wool and woollen blended yarns and fabric. Specialised safety fabric was identified as an area of growth in the industry.
Those textile tariffs that are not duty free are generally between 5 and 7.5 per cent with a few at 12 or 12.5 per cent. The highest rate of 12.5 per cent applies to woollen fabrics; fabrics of manmade filaments or manmade staple fibres; narrow-woven fabrics; knitted or crocheted fabrics; certain blankets and curtains; and twine/ropes/cables.
Carpet Industry44 (ANZSIC C2222)
The carpet industry comprises 25 geographic units employing around approximately 900 people. The industry is dominated by 3 large, vertically integrated firms - Cavalier Bremworth, Feltex and Godfrey Hirst. These manufacturers are significantly more capital-intensive than typical textile firms. Vertical integration, flexibility, design and technology seem to be the strengths of the industry (BE & NZIER 2001).
Carpet production increased 39 per cent from 1992 to 2002 while carpet yarn production increased 40 per cent. Despite the fact that the industry is cyclical and exposed to competition from synthetic substitutes, domestic market share of New Zealand producers has remained stable at around 80 per cent over the 1992-2002 period. Carpet imports rose 30 per cent from 1992 to 2002. The percentage of synthetic carpet imports over this period ranged from 77 to 60 per cent with an average of 68 per cent.
Both carpet yarn and carpet exports have enjoyed considerable growth. From 1990 to 1996, carpet yarn exports fell by almost half, but since 1996 they have grown rapidly. In the September year 2002, carpet yarn exports totalled $88 million with 70 per cent to Australia. Total carpet exports grew by 50 per cent in the 10 years ending September 2002 with particularly strong growth in 1998 and 1999. Since 2000, however, total carpet exports have stabilised at around 3,800,000m². In the September year 2002, tufted carpet exports - accounting for the bulk of total carpet exports - totalled $76 million with 90 per cent to Australia. The TCFC Strategy has a goal of $170 million carpet exports by 2008.45
The tariff on carpet is 17 per cent and carpet yarn tariffs are 7 per cent.
Clothing Industry (ANZSIC C224)
The clothing industry has significantly downsized following the freeing up of import restrictions and subsequent decline of domestic market share. In 1987 clothing manufacturing employed 18,063 (Apparel and Textile Federation figures). According to the 2001 Census clothing manufacturing (C224) employed approximately 8,400 representing a fall of 46 per cent from 1987. The industry comprises 945 firms with a high proportion of very small enterprises - 70 per cent of clothing manufacturing geographic units employ no more than 5 people. Seven clothing manufacturing geographic units have 100 or more employees. Eighty per cent of all employees are female and 14.4 per cent of employees are from the Asian ethnic group.
Trade in apparel has risen markedly since import licensing was phased out and tariffs were reduced. Apparel exports in 1989 were $29 million; in 2001 they were $222 million46 with Australia the predominant market taking 87 per cent of all exports. The TCFC Strategy's goal for clothing exports is $621 million by 2008. Imports in 1989 were $86 million; in 2001 they were $860 million with 69 per cent from China.
Despite the consolidation of the industry, the clothing industry remains diverse in terms of size, structure and range of garments produced. Firms range from cut, make and trim operations that produce finished garments on a contract basis using fabrics supplied to them, through to vertically integrated operations which produce their own fabric, manufacture their own garments and sell those garments in their own stores.47 Those companies operating in particular niche markets and those that are manufacturing more "up market", fashion garments or specialised products appear to have been less affected by increased apparel imports. Others, especially in the more "basic line" area, have been more directly affected.
The Textile & Clothing Industry Preliminary Report (BE & NZIER 2001) identified the following opportunities in the apparel industry: glamour, mid- and high-end women's fashion; industrial work wear, uniforms and safety equipment; outdoor, sports and leisure wear; and quality, quick delivery and consistent reliable service. In addition, the tourist market is becoming increasingly important to the industry.
Apparel tariffs are generally 19 per cent with 60 per cent of Tariff item lines also carrying an alternative specific rate. The exceptions are gloves at 7 per cent, accessories at 7.5 per cent, headgear at 17 per cent and leather apparel at 17.5 per cent. Virtually all infants' wear and childrenswear is duty free by way of Part II concessions.
Footwear Industry (ANZSIC C225)
In 2001 the industry comprised 45 firms employing approximately 730 people. The industry is now concentrated in Auckland - almost 50 per cent of all footwear firms are located in the Auckland region and 63 per cent of all footwear employment is in the Auckland region. The industry has an unusually high proportion of Pacific peoples with 20.6 per cent of footwear employees identifying themselves as being of Pacific Island origin in the 2001 Census.
Significant rationalisation of the industry has occurred since 1986. Production fell from 7.7 million pairs in 1986-87 to 1.65 million pairs in 1998-99. In 1989 imports were $55 million while in 2001 they had risen to $246 million. Exports in 1989 were $10 million; in 2001 they had increased to $60 million48 - 65 per cent to Australia and 21 per cent to the USA. The 2008 target aims to lift this to $130 million.
The industry produces a wide range of products from industry, safety and children's school shoes, women's comfort and fashion shoes and trainers, through to hand-made shoes. There is little manufacturing of men's footwear. While there are several very successful companies, the industry has created few brands of its own. Nor is there a New Zealand footwear item that is distinctive and unique (BE & NZIER 2001).
Adult footwear tariff rates are 19 per cent. Children's footwear is duty free, and the tariff on mid-size footwear is 17.5 per cent.
Motor Vehicle and Automotive Component Industry
The automotive component industry (and the motor vehicle industry until 1998) has received higher levels of tariff protection than other manufacturing industries - except for the TCFC industries. The automotive component industry has the second highest tariff rates - generally 10 per cent.49
In the early 1980s, New Zealand had nine vehicle assembly firms operating 15 plants. Following the Ford/Mazda closure in 1996, four assemblers remained: Nissan in South Auckland, Toyota in Thames, Mitsubishi in Porirua and Honda in Nelson. In 1998 these four plants ceased local production after the government decided to reduce motor vehicle tariffs from 15 per cent to zero on 1 December 2000, or sooner if the New Zealand assembly closed. On 14 May 1998 the government removed tariffs on all passenger and light commercial vehicles, excluding motor homes and ambulances,50 following announcement by all four remaining assemblers that they would cease production during 1998.
There are 557 geographic units involved in motor vehicle and part manufacturing.51 Most of the remaining manufacturers are overseas companies using international brands and appear to be very efficient at producing low volume, short-run product lines. In 2001 total income for the industry was $517 million.52 In the June year 1998 automotive component exports were $141 million. In the June year 2002 they had increased to $242 million (45 per cent of this figure is alloy wheel exports to the USA).53 Exports tend to be in specialised niche markets, including alloy wheels, tyres and automotive lighting. The motor vehicle and parts manufacturing industry employs around 3,600 people.54
Plastics Industry
There are 540 geographic units in the plastics industry employing approximately 7,500 people.55 Fourteen plastics processing companies in New Zealand employ more than 100 persons each.
The New Zealand plastics industry is made up of four relatively distinct categories: technical plastics; film; packaging; and pipe. The New Zealand plastics industry is unique in that it is a processing industry with no polymer resins industry. All raw materials are therefore imported duty free. The second characteristic of the industry is the comparatively higher proportion of packaging manufacturing compared to the proportion of packaging in total plastics processing in other developed nations. Plastic packaging production accounts for 60 per cent of the processing industry. A significant amount of plastic packaging is used for export products, particularly for the dairy, meat and horticultural industries.
Exporting of processed plastic products from New Zealand has increased significantly over recent years, with 72 per cent of direct exports going to Australia. The total value of direct exports has risen from $132 million in 1986 to $401m56 in 2001 principally through developing international niche markets. In addition, indirect exports are estimated at $80-100 million annually.
Given the small size of the domestic population base, the industry will continue to look overseas to expand its markets. It has already found some advantage in some niche market areas. The small home market has meant for many processors the need to be able to engineer small production runs at short notice, and this experience is now being exploited in a number of areas for overseas customers. (Plastics New Zealand)
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