United Press International

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June 23, 2003
Italy fashion industry now exporting jobs
UPI SpecialCorrespondent
ROME --The Italian fashion industry, a trendsetter for most of the world and long a mainstay of Italy's economy, is suddenly finding its
home base a little out of style.

For the first time ever, Italian fashion companies are growing faster in terms of jobs and the value of production, outside Italy than within
it, with most jobs driven out by rising labor costs, a strong euro and sluggish sales. Government economists say that by the end of the
year, the job losses in the industry will be so severe they will push the industry from it's long-time perch as Italy's third most important
economic sector -- it currently trails only tourism and government -- to fourth, dropping behind manufacturing as well.

"The Italian fashion industry is suffering less than the overall economy ... (because the industry has) always shown a resilience and an
ability to make people want certain things," Giuseppe Cantolara, an official with the Italian Chamber of Commerce in Rome, told United
Press International. "But what is suffering is the Italian side of the business. We are heading toward a situation where in the future only
the front offices and the designers will be in Italy and everything else will be done in cheaper markets."

That would be an unwelcome development in a country that takes such pride in its fashion sense and its homegrown brands. According
to the polling firm Opinioni, fully half of the country's ten best-known brands are related to fashion: No. 2 Armani, No. 3 Benetton, No. 5
Gucci, No. 8 Versace and No. 10 Valentino. No other industry has more than two companies on the list.

"There are certain things that are part of the Italian image, like food and wine, good coffee, opera," said Maria Rossi, co-director of
Opinioni. "But with the exception of fast cars and Fiat (Italy's No. 1 brand on Opinioni's list and the producer of Ferrari autos), none of
these other areas can so easily be so easily identified with specific companies as fashion. The other sectors are not connected so
much to specific companies."

In an effort to stem the tide, the government has taken some steps to slow the exodus -- such as tax breaks and incentives to invest in
domestic expansion -- but European Union rules prevent most of what are termed "preferential" treatment to be aimed at specific

Meanwhile, the European Union's expansion into the former Soviet Bloc presents companies with even more incentives to move
eastward, as lower labor costs there are combined with EU legal protection that limits risk.

"With the ease of transport, the speed of communications and the availability of good quality raw materials in many countries, it's more
and more difficult for industrialized countries to compete" in terms of production, an Italian administrator from Gucci told UPI, asking not
to be further identified. "This trend is really just beginning."

Gucci, one of the first global Italian fashion brands, is one of the protagonists in that trend. The company announced in May that it would
open a major leather goods production factory in India by the end of the year, and it has contracted with several Eastern European
companies to produce products bearing the Gucci name in the last two years. Other companies have announced similar plans.

Even though companies are just starting to move large production plants abroad, the results are already being felt: according to the
Chamber of Commerce, 38,000 Italian fashion industry jobs were moved abroad last year, compared to only 6,000 in 2001. The figure
should be even higher this year, officials said, and it could approach 45,000 jobs.

And amid mostly flat overall sales levels, exports of 100 percent Italian made fashion products are expected to drop dramatically this
year -- the third straight decline -- to $20.5 billion from $22.0 billion in 2002 and $26.3 billion a year earlier. That trend, officials say, goes
to show how small a percentage of Italian fashion is truly Italian.

"There was a time when you almost never saw a label saying 'Assembled in Romania' or 'Made in India' on an Italian fashion product,"
Cantolara, the Chamber of Commerce official said. "Now it can be difficult to find a piece that doesn't carry such information."
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