With the formation of European Union all the member states are required to follow the EC 92 as the Single European Act. The single European act was a step closer to the goal of economic integration. This Economic integration has revolutionised all the laws and regulations and has changed the whole business environment in most of the member states.
With the dismissal of the trade barriers the European act also proposed an array of commercial policies including single European standards for goods produced. This has given rise to difficulties for the companies producing below the standards as they are faced with the challenges of technology upgrade and quality advancement while keeping the prices competitive due to increased competition. For example in the Italian textile industry producers are struggling to keep under priced clothes from flooding the Italian market, designer label brands are waging another battle - against imitations, or "knockoffs", as they are known in the trade. (Italian designers, 2005) Most of the fakes come from China or other Asian countries with the low labour costs and no concern for social services, welfare and pollution control.
Although the Italian sector is currently facing unprecedented challenges but these challenges can be faced only by innovation. These include the abolition of quantitative restrictions (quotas) which took place on 1st January 2005. These challenges are occurring in a period of marked slowdown in economic activity, which has a significant impact on sectors such as textiles and clothing. Furthermore, at the same time the Euro has shown a significant upward trend against the US dollar. All in all, every segment of textiles and clothing production, from spinning and weaving to garment make-up, has in one way or the other suffered from the impact of the developments of the last few years. (Textiles and clothing sector in the EU-25) The years 2001-2004 have been particularly difficult for the industry. After substantial falls in production and employment in the previous three years, it is estimated that in 2003 production fell by a further 4.4% and employment by 7.1% (EU-25, source: Eurostat). The trade deficit (EU-25) amounted to 29.4 billion in 2003, the trade in textiles reaching a surplus of 3.7 billion and the deficit in clothing 33.1 billion.
The European union was expanded in May 2004 having 25 members. The aim of the creation of the union was to create the most competitive and dynamic knowledge-based economy in the world, capable of substantial economic growth with more, and better, jobs and greater social cohesion (Elizabeth Hunt Recruitment). All the member states of the EU have to follow common trade and employment laws, which on the one hand provided them with the ease of free trade and larger availability of work force and a vast product market on the other.
"Under harmonisation the most essential requirements for projection of health, safety, the environment, and product standards are established. Once these EC-wide essential requirements have been met by all members, i.e., harmonisation, each member state will be expected to recognise each