The global gem and jewellery industry over the past decade has observed significant changes and showed signs of growth, on account of increasing income as well as demand from the emerging economies across the world. Among the various types of jewellery, plain diamond jewellery accounted for the largest share of the global jewellery market, followed by plain gold jewellery.
Diamonds being the world’s major natural resource is used in both jewellery and industrial applications. The growth in demand for diamond-studded jewellery has been due to the strong economic growth in key diamond jewellery consuming nations and marketing efforts of diamond companies.
Traditionally, gold has held the leading position in most of the jewellery markets across the world because of its value as well as tradability factor. In 2008, although the total gold consumed as plain gold jewellery decreased in volume terms, the sales recorded gain in value terms. Demand for platinum jewellery has gained ground in the last few years, in not only the developed markets of the US and Europe but also in emerging markets like China and India, due to the ‘elite’ tag and ‘high-end’ value attached to the metal.
Geographically, the US continues to be the largest consumer for gems and jewellery, followed by China/ India, the Middle East and Japan. In Europe, the UK and Italy are the largest consumers, and Italy is also one of the world’s largest jewellery fabrication centers. The emerging markets, like China, India which are traditional jewellery centers of consumption, are expected to develop as the largest consumption markets for both traditional as well as branded jewellery.
The report analyzes the trends and challenges of the gem and jewellery and also outlines the opportunities driving the present as well as future industry growth. The report focuses on the retail jewellery sales, different jewellery segments and future potential of the four large consumers of jewellery – the US, China, India and the UK. The report analyzes the sales trends, demand patterns and future outlook of the three major segments of the jewellery industry, i.e. platinum, gold and diamond.
The report also talks about the future outlook of the industry and its growth. By combining SPSS Inc.’s data integration and analysis capabilities with our relevant findings, we have predicted the future growth of the industry. We employed various significant variables that have an impact on this industry and created regression models with SPSS Base to determine the future direction of the industry. Before deploying the regression model, the relationship between several independent or predictor variables and the dependent variable was analyzed using standard SPSS output, including charts, tables and tests.
Problems and Challenges faced by the local and global industry
Currently, the local gems and jewellery industry is encountering trade obstacles and high competition. These include,
The lack of local raw materials
The rapid growth of the gem and jewellery industry in competing countries with lower labor costs
the high rate of import taxes in those countries, including new tariff barriers which play an important role for international trade; the rules of origin for gemstones; the rules of product origin;
Consumer Protection Measures, which emphasize the impact on consumer’s health; along with the Environment Protection Measure.
All these factors affect the manufacturing, technology, cost and export value of local gems and jewellery. We can notice that the export value of Sri lankan gems and jewellery in the later stage is increasing in the decreasing rate. Therefore, it is necessary to study various factors concerning the export barriers facing the local gems and jewellery industry, especially the study of the non-tariff barriers and customs tax in important trading countries such as USA, EU, Japan; including all countries which are new and potential markets for Sri Lanka, such as China, Saudi Arabia, Bahrain and the United Arab Emirates, in order to help plan the manufacturing and marketing processes so that the Sri Lankan gem and jewellery industry can compete in international trade.
Research Methodology
3.1 Collection of Basic Information
The information sources used in the Research Project are from both local and international organizations such as the Board of Investment (BOI), related Chambers of Commerce, Customs Department, Department of Business Economics, Thai Trade Centers, United Nations, electronic media, as well as interviews with exporters on non-tariff barriers, customs procedures and measures which are obstacles for Thai exporters.
3.2 Information Analysis and First Assessment
Data analysis is the method of taking all data concerning various measures from the afore mentioned countries to analyze which measures are the Non-Tariff Barriers (NTB), namely the measures which have been set up by the competing countries are higher than the international standard and result in obstacles for the international trade.
3.3 Implementation
3.3.1 Issue a handbook of regulations, trade barriers, tariffs and non-tariffs from the co- trading countries and new markets, and the impact to the Thai gem and jewellery industry.
3.3.2 Organize a seminar for exporters to inform them of details on rules, trade barriers, tariffs and non-tariffs from the co-trading countries and new markets, and the impact to the Thai gem and jewellery industry.
3.3.3 The Gem and jewellery Institute of Thailand (GIT) will prepare a database on the Internet and its information will be updated regularly so that the manufacturers and exporters have access to all this information.
4. Results
4.1 From the study of the rules for import and the measures of non-tariff barriers in trading countries such as USA, EU and Japan and all countries which are new and potential markets for Thailand such as China, Saudi Arabia, Bahrain, the non-tariff barrier measures can be summarized as follows:
Non-Tariff Barriers
Products
Countries
Consumer Protection on Health
jewellery Colored
Stones
EU
USA
Issue Import License
Gold Bars and Gold
China
Ban on Import
Fine jewellery
Bahrain
Product Standards
Fine jewellery
Saudi Arabia
Labeling
Fine jewellery
Costume jewellery
USA
Some Countries in Europe
United Arab Emirates
USA
4.2 Analysis on trade measures from a legal aspect, which are non-tariff, and the relevant Agreement of WTO can be summarized as follows :
4.2.1 Measure on Consumer’s Life Protection and Health
4.2.1.1 The EU adopted a measure prohibiting using nickel as a mixture over 0.05 %. In the EU, manufacturers and importers of jewellery that contain nickel are under the control of the law concerning nickel in jewellery, and the general law regarding product safety. The importers have the duty, by law, to check whether or not the quality of the imported products meet the conditions stated in the law, otherwise the importers may face criminal charges. When considering the rightfulness of the measure under WTO, it is found that the limitation of nickel in the jewellery is a measure to fulfill the objective regarding consumer’s health protection. Moreover, it does not create unnecessary barriers for the international trade. Therefore, this measure coincides with WTO’s agreement.
4.2.1.2 A measure in the USA prohibits the import of irradiated gemstones, unless having license from the Nuclear Regulatory Commission and providing proper disclosure to the consumer. The control in using nuclear materials coinciding with the safety and public health is the responsibility of the Nuclear Regulatory Commission, while disclosing information to consumer is under the law of the Consumer Protection Safety Act. This measure is in accordance with WTO’s agreement, since the US didn’t state clearly the specifications of products and have no mandatory requirement of products produced under the conditions stated in the import license. However, if the issuing of the license is done too late or the organizations concerned do not publish the rules for licensing, this may be against the agreement concerning the issue of import licenses under WTO.
4.2.2 Measure of Import Prohibition
The Government of Bahrain has issued a law prohibiting the import of cultured pearls to protect the natural pearl industry in their country. This import prohibition or import limitation is severely in contrast with the Agreement of GATT/WTO. To protect the industry in the country, such import is allowed by the GATT agreement by using a tax levy as a substitution. Therefore, the law of prohibition on import of cultured pearls in Bahrain is against the commitment of Bahrain as per code no. XI : I of GATT 1994.
4.2.3 Measure of Product StandardsThe law of Saudi Arabia states that imported fine jewellery must have a Certificate of Conformity to guarantee that those product standards are in accordance with the Saudi Arabian Standard Organization. If considered under the controlled TBT’s Agreement, it is found that the objective of issuing this measure is to protect the consumer from being induced to buy low quality jewellery. Therefore, it is logical for the government to issue this measure, especially if the procedure of issuing the license to guarantee the product standard quality doesn’t create the limitation for international trade. Therefore, the measure to define the product standard of Saudi Arabia in not against the TBT’s Agreement. (Presently, Saudi Arabia is not yet a member of WTO).
4.2.4 Measure on Product Labeling The USA, some countries in the EU, and the United Arab Emirates have set measures on the import of fine jewellery to have a label to
guarantee the product quality or to have a label to verify the metal purity. There are consumer protection laws in both the USA and the EU. This enforcement is to provide information to consumers before making a buying decision. Therefore, the above mentioned measure does not go against the TBT agreement.
4.2.5 Declaration on the Country of Origin
To export costume jewellery to the USA, the Mark of Origin has to be reported. Thailand must declare the Country of Origin Marking while exporting costume jewellery in order to get tax privileges according to the GSP system of the USA. On the other hand, the country which renders GSP privileges for such imported goods has the right to set the measures on that country regarding declaring the Country of Origin. This measure doesn’t add any extra cost or cause deterioration to the goods. Therefore this measure does not go against the agreement of GATT/WTO.
4.3 From the analysis of the economic aspect and the international trade regarding non-tariff barrier measures, when considering only Thai gems and jewellery which has significant exports to the co- trading countries, it can be concluded as follows :
4.3.1 Colored StonesTo improve the quality of gemstones by heat treatment or irradiation is to add value to the product in the stage of the Operation Process of the chain of value. But to improve the quality of gemstones by natural heat treatment will add more value to the product while irradiated gemstones could be harmful to consumers. This method of improving the quality of gemstones is not successful and it is prohibited to export to the co-trading countries. The cost of heating gemstones is not high, while irradiated corundum (rubies and sapphires), which Thailand is famous for, offers no break-even point in terms of commercial returns, and is thus not widely practiced in Thailand. Currently, only one private organization irradiates gemstones, mainly semi-precious stones such as topaz. Therefore, the process of asking for an Import License for irradiated gemstones from related organizations in the USA is not difficult for Thai manufacturers.
Suggestions
• The government and private sectors should publicize to consumers worldwide the value of heat treated gemstones.
• The government and private sectors should promote the identification of colored stones, including setting the colored stone grading standard by the Gem and jewellery Institute of Thailand (GIT)
4.3.2 jewellery
4.3.2.1 To put Country of Origin labels on costume jewellery, including the process of obtaining raw materials, in the Inbound Logistics and the manufacturing process in the Operation Process of the chain of value. Both types of information will be indicated with the Country of Origin which has to be disclosed to the consumer thus adding value to the product in the stage of marketing and sales.
Suggestions
• The private sector should prepare information regarding the criteria of getting Country of Origin in case the measure of trade barrier will be applied in the future.
• The government sector should be ready to respond promptly to the process of settling disputes within the framework of WTO and to expedite the process to obtain a solution in identifying the Country of Origin under WTO.
4.3.2.2 The process of mixing nickel in with precious metals to make jewellery improves the quality of the hardness and luster. This method is in the Inbound Logistics and Operations Section of the chain of value. If manufacturers do not mix nickel with the precious metal for the jewellery in appropriate quantities, it will be harmful to consumer‘s health. To substitute other substances for nickel affects the cost which would be more or less depending on the substance in use. However, if manufacturers can produce jewellery without using nickel, the value of product will be added, in terms of the Marketing and Sales Process.
Suggestions
• The private sector should invest in research and product development to find other substances with similar qualities and costs as nickel that are not harmful to consumer’s health.
• The government sector should publicize clear information regarding the rule of acceptable quantities of nickel for each importing country.
4.3.2.3 The process of checking the standards of fine jewellery and issuing the Certificate of Conformity before exporting to Saudi Arabia will affect the chain of value in the process of Outbound Logistics, because it will take a longer time to distribute products and at the same time, the cost of exporting will also increase.
Suggestions
• The government sector should publicize to the manufacturers and exporters the rules and regulations of the process for identifying products in Saudi Arabia.
• The government sector should support the Gem and jewellery Institute of Thailand (GIT) in order that SASO grants GIT the right to be the product investigator before exporting to Saudi Arabia.
• The government sector should be ready to participate in bilateral negotiations in the event of problems with international trade resulting from unfair product analysis.
4.3.2.4 To put a hallmark on jewellery which is made from precious metals whether it be gold, silver, or platinum jewellery, thus disclosingthe information and creating confidence in the consumer. Since the nature of the Thai gems and jewellery industry is in sub-contract form, the hallmarking process is under the responsibility of the manufacturer. Therefore, the value added the Thai manufacturer should obtain from hallmarking in the process of marketing and sales has been missing.
Suggestions
• The government and private sectors should support the quality control process and the value of precious metal purity assaying and hallmarking certified by GIT.
• The government sector should publicize to the private sector the importance of hallmarking and creating an individual brand name.
5. The Legal Problems that Thailand May Encounter in the Future:
Problem of Country of Origin
Determining product origin is a rule that every country member of WTO must follow, as it will be the indicator of the manufacturing country and will result in advantages and disadvantages for different products. Therefore, it is necessary for every country to study and clarify the issue of product origin.
Problems of Trade by the Government Sector
At present, many socialist countries are members of WTO. However, the economic system of these countries consists of the planned economics with many state enterprises to handle economic activities. The problems concerning the trade under WTO regulations are that the state enterprises may administer economical activities of import limitation; the support from government, inclusive of the discrimination which is against the law of fairness of WTO.
Problems of Using Child Labor
Well developed countries such as the USA, and the EU agree that using child labor (under the age of 15 years) is a human rights concern. Therefore, internal laws of each country have been issued stating that both the USA and the EU have full authority to cut the GSP to the developing countries which violate the basic rights concerning child labor. It has been stated that child labor is widespread in the Thai gems and jewellery industry. Therefore, Thailand should be cautious about the afore-mentioned child labor problem.
