Bridges Weekly Trade News Digest • Volume 8 • Number 37 • 3rd November 2004
LDCs Discuss Upcoming Textile And Clothing Transitions
The WTO Sub-Committee on Least-Developed Countries met on 29 October and discussed what one delegate described as "urgent problems" relating to the phase-out of textile and clothing quotas at the end of this year. The meeting focused on a document submitted by Tanzania on behalf of the least developed countries (LDCs) entitled "Market Access for LDCs in the Textiles and Clothing Sector After the Expiry of ATC" (WT/COMTD/LDC/W/36). The document was tabled to facilitate discussions amongst LDCs regarding adjustment issues. Although delegates at the meeting failed to agree on the proposals in the document, Members planned to continue informal consultations on the issue and possibly to convene another Sub-Committee meeting this year.
International trade in textiles and clothing has been governed by a system of quotas for over forty years that is being eliminated with the expiry of the Agreement on Textiles and Clothing (ATC) at the end of this year. The 28 October document suggested that "the quota availability has given predictable market access for LDCs, and motivated local as well as foreign entrepreneurs to develop local industries". It noted that the textile and clothing sector plays a key role in the economic development of LDCs, not only providing valuable export earnings but also acting as a viable alternative to the export of raw commodities by offering "opportunities for diversification, foreign exchange earnings, contributions to the development of Small and Medium scale enterprises and, most importantly, generating employment at comparatively low cost". Noting that women make up the "vast majority" of the workforce in garment factories, the submission says "any dislocation in this sector would have severe consequences in terms of job and income losses, jeopardizing their socio-economic situation".
The LDCs expect that the expiry of the ATC will, by liberalising the guaranteed quota access, allow more cost-effective countries with proximity to major markets, links in the supply chain and distribution network, bargaining position with the transnational intermediaries, and sheer economic size to capture market share in key export destinations such as the EU and US. This may have devastating employment and poverty effects, and the LDCs thus asked the WTO to (a) identify the problems associated with the phase-out of the ATC; (b) analyse the scenario of market access in the textiles and clothing sector for LDCs after the expiry of ATC; and (c) suggest measures allowing the market share of LDCs to be retained, the adjustment process in the post ATC period to be less painful, and the transition to the integration of the textiles and clothing sector into the multilateral trading system for LDCs to be smooth and market disruption minimal. Though trade sources suggest that a few countries are calling for the extension of quotas, the LDC group said in the submission, and in Rwanda and Bangladesh’s response to questioning from Japan, that no one was asking for such an extension, but rather for solutions in a quota-free environment. Members indicated that it was not possible to suggest actual adjustment mechanisms because the post-2004 trading environment was too uncertain and unknown. They suggested that a study into the issue was essential to understand the post-quota system and realistic adjustment options.
India, China, Brazil, and Hong Kong (China) opposed the commissioning of a study, saying that trade adjustment is a systemic issue and that sectoral issues should not be engaged in by the WTO. However, owing to tremendous pressure from LDCs and certain other developing countries, delegates from these countries said that they would convey the request for a WTO study to their governments. India, China, the EC and the US expressed their willingness to study practical solutions (such as preferential tariffs in textiles or other industrial products, preferential rules of origin or better market access at the south-south level) in a coherent way within the WTO mandate and within the discussions under the Council for Trade in Goods. This coherence should, they stated, also go along with the Bretton Woods institutions programme recently raised at the General Council (see BRIDGES Weekly).
The LDC request closely echoes a request made at the 1 October WTO Goods Council meeting (G/C/W/496), where Bangladesh, Mauritius, the Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda (subsequently supported by Jamaica, Nepal and Mongolia) asked the WTO Secretariat to prepare a study on adjustment-related issues and costs arising from quota elimination and to establish a WTO work programme to discuss possible solutions to the problems identified in the study (see BRIDGES Weekly) It further supplements Turkey’s 26 October submission to the Goods Council (G/C/W/497) calling for "mechanisms to protect the market shares of the developing countries in their export markets" (see BRIDGES Weekly).
ICTSD reporting.