Bridges Weekly Trade News Digest • Volume 8 • Number 33 • 6th October 2004
WTO Members Brace For Textile Quota Liberalisation
WTO Member countries are preparing a variety of different initiatives intended to ease the impact of the phase-out of textile and clothing quotas at the end of this year. At a WTO Goods Council meeting on 1 October, seven countries submitted a proposal for WTO action to address the impact of the upcoming elimination of quotas on their fragile textile and clothing industries. The proposal — from Bangladesh, Mauritius, the Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda — asks 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.
The programme of action, however, was not adopted due to a cool reaction from China and several other WTO Members. The chairman of the Goods Council, Ambassador Alfredo Vicente Chiaradia of Argentina, agreed to hold informal consultations among Members as soon as possible to further discuss the proposal. Nevertheless, the Mauritian ambassador to the WTO, S.B. Servansing, said he was satisfied with the results of the meeting and that "thirty-eight countries took the floor today in support of the proposal, so I don’t think the WTO could shut this down now."
Despite speculation that at least one Member would call for an extension of quotas beyond the 1 January 2005 deadline, no such request was forwarded. Prior to the meeting, the Global Alliance for Fair Textile Trade (GAFFT), an alliance representing textile industry associations in the US and more than 50 other countries, had pushed hard for such an extension.
Positions taken by key players
Several key countries weighed in on their preferred course of action to alleviate problems caused by the textiles phase-out. China said that the phase-out must take place as planned and that the best way to handle adjustment costs was to enhance the assistance programs of the World Bank and the International Monetary Fund while removing impediments to the trade of smaller more vulnerable producers such as preferential rules of origin. The US indicated its interest in further discussions but said that China needed to take some responsibility for the adjustment costs smaller countries will face as a result of anticipated increases in Chinese exports. "We believe that large apparel exporting countries have an obligation to look beyond their own borders on this and work with developing countries to ease the transition," an official from the US mission in Geneva said.
According to several sources, including a WTO report released this summer, the phase-out of quotas at the end of this year will lead to a dramatic increase in exports from large developing countries such as China and India. This increase could have potential adverse implications for smaller developing countries such as Bangladesh and Mauritius that have thus far based the development of key textiles and clothing industries upon guaranteed quota access to developed country markets (see BRIDGES Weekly, 29 September 2004).
Pakistan’s Commerce Minister, Humayun Akhtar Khan, welcomed the elimination of textile and apparel quotas, but said "I don’t think much can be done at the WTO" on the issue of adjustment costs. Instead, he said that it was up to individual countries to "exercise their rights available to them in defensive trade measures". According to Indian senior government officials, India at the Goods Council meeting sought a reduction in tariff peaks maintained on its textile exports, and urged developed countries to lower their average tariffs in the sector. Officials said India also emphasised that no new trade protection measures or rules of origin should be introduced that would deny developing countries the benefits of trade liberalisation in the textiles and clothing sector.
Restrictive rules of origin blamed
Munir Ahmad, executive director of the International Textile and Clothing Bureau, said that the real problem for small developing countries’ textile and clothing industries is not just the elimination of quotas but the restrictions imposed by strict rules of origin by the US and the EU (see BRIDGES Monthly, September 2004). Such rules of origin, enshrined in agreements like the EU’s Everything But Arms initiative and the US African Growth and Opportunity Act (AGOA), hinders textile exports from developing countries to developed countries, thereby stunting their economic growth.
Small countries struggle to prepare industry
Meanwhile, smaller developing countries attempted to assess the impact of the phase-out and develop adjustment mechanisms. The seven proponents of the WTO proposal cited estimates that up to 27 million jobs worldwide may be lost as a result of quota elimination, and Servansing said that "there will be more losers than winners" in the quota elimination process. Bangladesh’s WTO Ambassador Toufiq Ali noted that 80 percent of his country’s exports were in the garments sector and that the vast majority of these exports were made possible through guaranteed quota access. Production of ready-made garments has been one of the most important sectors of Bangladesh’s economy, employing about 1.6 million workers, or one-third of its industrial labor force. The changing marketplace could not only affect the economy, but social relations as well. Millions of women and girls, whose destinies are entwined with the fortunes of the country’s garment sector, may be affected by the quota changes. Bangladeshis hope that the international community will lend support such as aid and technical assistance to efforts to upgrade skills and retrain displaced workers.
Cambodia is another country that has been trying to come to grasp with the phase-out of quotas. Foreign investment in recent years has been concentrated in the flourishing garment sector, which employs 240,000 workers and provides family income for up to a million people. Given lower production prices in other parts of Asia, Cambodia has been hoping to survive the post-quota environment by publicising its ethical label to discriminating consumers. Cambodian garments are sold to the West with the certified seal of ILO approval, which entails recognition of trade unions, overtime payment, and acceptable working conditions. The country is promoting its garment industry as a role model for ensuring compliance with international labour standards and preventing the exploitation of child labour.
US groups prepare China safeguard
In related news, on 29 September a US official said that the Bush administration would consider requests to limit textile and apparel imports from China based on the threat they pose of market disruption, despite comments from Chinese officials that such a move would be challenged at the WTO. Grant Aldonas, US Commerce Undersecretary for international trade, said that the Commerce Department would consider the evidence presented and that "the best evidence would be rising imports". However, he mentioned that the Department was drawing up guidelines that would describe other kinds of evidence the US textile industry could present to demonstrate the threat, such as increased investment by China in textile and apparel production. A confrontation between China and the US regarding the textile safeguard may come earlier, he mentioned, if US industry groups try to extend in late December the restrictions placed on imports of Chinese brassieres, dressing gowns, and knit fabrics imposed last year.
"The Price of Free Trade - Part I: Bangladesh," YALE GLOBAL, 29 September 2004; "The Price of Free Trade - Part II: Cambodia," YALE GLOBAL, 1 October 2004; "U.S. to Consider Textile Petitions Despite Threat From China of WTO Case," WTO REPORTER, 30 September 2004; "WTO Members to Continue Talks on Proposal To Examine Global Quota Elimination Impacts," WTO REPORTER, 4 October 2004; "Pakistan Set for Textile Quota Removal But Seeks Greater Access to United States," WTO REPORTER, 4 October 2004; "Poor textile producers seek WTO help on quotas," REUTERS, 1 October 2004; "WTO study of global impact of phasing out textile quotas proposed," ASSOCIATED PRESS, 1 October 2004; "Textile industry begins political campaign Monday in N.C.," ASSOCIATED PRESS, 1 October 2004; "Textile quota phaseout gives WTO a headache," THE TELEGRAPH (INDIA), 3 October 2004; "Poor nations seek WTO textile aid," WALL STREET JOURNAL, 2 October 2004; "India seeks cut in tariffs on textile exports," BUSINESS STANDARD, 5 October 2004.