Bridges Weekly Trade News Digest • Volume 8 • Number 28 • 1st September 2004
Supachai Consults Members On Controversial Textiles Quota Phase-Out
On 3 August, WTO Director-General Supachai Panitchpakdi held consultations among WTO Member countries on whether to organise an emergency meeting to respond to concerns around the global phase-out of textiles quotas at the beginning of 2005. The consultations were in response to a request made by Minister Cuttaree of Mauritius in July (see BRIDGES Weekly, 21 July 2004). Mauritius, along with vulnerable textiles producers such as Bangladesh and Nepal, had raised concerns regarding their ability to compete in a post-quota world, and requested an emergency meeting to examine adjustment costs. They warned that the phase-out of quotas, in combination with the emergence of China in the market, would lead to "unintended consequences," which would cost "hundreds of thousands if not millions of jobs in those countries that can least afford it".
Following his consultations, Supachai said Members had provided a mixed response to the request for an emergency meeting. He proposed that Members that so wished could raise the textiles issue at the Council for Trade in Goods at its next regular meeting on 1 October, which already is set to review the quota phase-out process. Reportedly, China, India, Pakistan, Brazil, Egypt, Hong Kong, Thailand and Indonesia objected to the idea of holding an emergency meeting, as this could be seen as a first step towards quota extension. Developed countries such as the EC and US remained neutral.
Report details winners, losers
In related news, the WTO released a discussion paper on "The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing" in mid-August, which details the predicted upcoming changes. The paper details the expected growing market shares of China and India in particular, but also notes that countries close to large consumer markets might not fare as poorly as expected. Latin America and Central and Eastern Europe may in fact remain in a rather strong position as clothing, and fashion in particular, is becoming something of a "perishable good".
Sub-Saharan Africa and countries currently enjoying trade preferences are likely to lose out, according to the report. The long-term decline of the local Western European and US textiles industry is likely to continue. Although China is expected to gain significant new market shares, the picture is not altogether bright for the country. "Other developing countries are catching up with China in terms of unit labour costs in the textile and clothing sector and China has not yet shown competitive strength in the design and fashion segments of the markets," concludes the report.
In addition, some textile companies and organisations in China have raised concerns regarding declining prices. Xu Xiaochuan of the Sichuan Xinlixin Textile Company called for a voluntary mechanism to control export prices in order to prohibit malicious price competition and to secure profits, especially after 1 January 2005. A senior official within the Chinese trade administration noted that rock-bottom prices would only lead to criticism internationally and spur protective measures, such as anti-dumping levies, in importing countries. The prices for Chinese clothing, garments and knitwear for export have gone down by 30 percent over the last five years.
Background
The WTO Agreement on Textiles and Clothing (ATC) was set up as a transitional mechanism in 1995, with a view to phasing out quotas for trade in textiles and clothing by the end of 2004. A number of developing countries that currently enjoy preferential access to developed country markets, through schemes such as the US African Growth and Opportunity Act (AGOA), fear they will lose all access after quotas are lifted and more competitive producers, such as China and India, pick up large market shares. These small and vulnerable economies are concerned that the development gains that their infant textile industries have allowed them to make will be lost and the industries devastated. Supachai, in his consultations, highlighted the role of the IMF Trade Integration Mechanism (TIM) in assisting developing countries in the adjustment to liberalised trade in the areas of textiles and clothing (see BRIDGES Weekly, 22 April 2004).
A number of textiles groups from both developing and developed countries issued an Istanbul Declaration in March this year, calling for the extension of quotas by three years, and in June called for an emergency WTO meeting (see BRIDGES Weekly, 23 June 2004). Retailers and importers have, however, strongly opposed any extension of quotas. A grouping of US-based business associations, representing companies such as GAP and J.C. Penney, wrote to Supachai in advance of the 3 August consultations calling for a predictable process and no quota extensions.
To access the WTO discussion paper on "The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing," visit internet.
"Supachai Consults On Possible Emergency Meeting For Textiles And Clothing Adjustment Challenges WTO," WTO RELEASE, 4 August 2004; "WTO envoys agree textiles "crisis" meet for October," REUTERS, 3 August 2004; "WTO: China, India To Soon Dominate Global Textile Trade," AP, 12 August 2004; "Textiles Warn Of Price War Damage," XINHUANET, 23 August 2004.