From catwalk to crossroads: Apparel industry’s new challenge

The recent tariff revisions under the Trump administration have overshadowed Sri Lanka’s well-established apparel sector, a key pillar of the country’s export economy. As a recognised exporter of high-end, ethically produced garments, Sri Lanka has built a reputation in the US niche market for quality and reliability. However, the new tariff bands threaten to undermine this progress, risking foreign earnings and thousands of direct and indirect job opportunities.

The removal of the US garment quota system years ago led to the downfall of many small and medium-scale manufacturers, leaving only a few large players in the market. Despite this, Sri Lankan exporters persevered, carving out a strong international brand image for “Sri Lanka” through quality, compliance, and innovation. Now, with the new tariff structure in place, the future of this sector hangs in the balance.

To weather these headwinds, Sri Lanka must adopt a comprehensive strategy focused on diplomacy, diversification, domestic reform, and collaboration. The following key measures are vital:

Diplomatic engagement

Bilateral negotiations: Engage directly with US trade officials to explore the possibility of exemptions, tariff relief, or preferential trade agreements.

Leveraging diaspora networks: Mobilise Sri Lankan-American business groups and lobby allies within the US to advocate for equitable trade treatment.

Global platforms: Raise concerns at the WTO and other forums, highlighting the disproportionate impact on developing nations.

Export diversification

Geographic expansion: Seek new markets beyond the US, such as the EU, China, India, ASEAN, and Africa.

Product innovation: Invest in higher-value and niche products, like sustainable fashion, technical textiles, or organic apparel, to attract premium buyers.

Strengthening domestic industries

Support for manufacturers: Offer fiscal incentives, tax relief, and export subsidies to cushion the impact of tariffs.

Branding and innovation: Promote value addition and brand positioning to reduce reliance on price-sensitive, low-margin segments.

Trade agreements and strategic alliances

Expand FTAs: Deepen existing trade relationships through regional FTAs with blocs such as RCEP, SAARC, and ASEAN.

Leverage GSP schemes: Maximise gains under Generalised System of Preferences (GSP) from friendly countries.

Policy and regulatory reforms

Ease of doing business: Streamline processes at ports and customs, reduce bureaucratic delays, and improve infrastructure.

Attract FDI: Offer incentives to US and other investors to set up joint ventures or local production hubs in Sri Lanka.

Public-private collaboration

Export advisory councils: Form platforms that bring together government officials and industry leaders to strategise sector-specific responses.

SME empowerment: Provide access to technology, training, and packaging/logistics support to ensure smaller exporters remain competitive.

Level the playing field: Ensure equal access to facilities, finance, and support services for SMEs.

Focusing on backward integration

A major gap in Sri Lanka’s apparel value chain remains the limited availability of locally produced raw materials, particularly fabric. At this critical juncture, backward integration is essential. The Board of Investment (BOI) must take the lead in attracting investment in fabric and accessory manufacturing to reduce import dependency and add resilience to the supply chain.

Private sector’s role and Government facilitation

The onus also falls on private sector investors to diversify production bases, explore untapped global markets, and invest in innovation. The government must, in turn, act as an enabler — working hand-in-hand with the private sector to open doors, remove bottlenecks, and create a trade environment that promotes resilience and sustainability.

In conclusion, Sri Lanka’s apparel sector has long stood as a symbol of quality, ethics, and innovation. It must now pivot with agility and determination to overcome the threats posed by shifting global trade policies. With the right mix of strategy, collaboration, and forward thinking, the country can protect its flagship industry and continue to make its mark on the global fashion map.

(The writer is former Senior Deputy Director, Board Of Investment. He can be reached via [email protected].)