Poor countries led by Mauritius and Bangladesh are making an 11th-hour appeal today to the World Trade Organization to save their industries from being overwhelmed by textile-production superpowers such as China and India. Otherwise, they fear their textile trade — which in many cases represents half to three-quarters of their exports — will evaporate when quotas are abolished Jan. 1. .
At $350 billion, world trade in textiles and clothing accounts for 8% of all trade in manufactured goods. In countries as varied as Bangladesh, Nepal, Cambodia, the Dominican Republic and Sri Lanka, textiles and clothing make up more than half of all exports. In Bangladesh, “at least 25% of the two million workers engaged in this sector will be out of a job with no alternative source of income,” says the country trade attache to Brussels, Faizul Chowdhury. “The whole socioeconomic matrix of a country will be severely injured.” .
The plan to end the quotas by 2005 was agreed on by 123 nations participating in the Uruguay Round trade talks in 1995. Largely driving the change was the argument by developing nations that rich nations were using quotas to protect domestic industries. Rich nations went along as an early form of the “trade, not aid” approach to economic development that has gained favor among trade experts. .But in the past decade rich countries overwhelmingly have outsourced production to big developing countries such as China and India. China entry into the WTO in December 2001 has helped make it more competitive than many of the poor countries imagined it would when they signed the 1995 agreement. .
In the past year or so, China has quickly dominated sectors of the textile and clothing markets that already have been gradually freed from quotas. According to the National Council of Textile Organizations, Chinese shipments to the U.S. have soared more than 11-fold since quotas were lifted in 2002, while the share of the market held by 50 other countries plunged to 28% from 90%.”The losers are losing so much that there needs to be some urgent attention,” says Sivaramen Palaythan, a trade diplomat from the island nation of Mauritius in the Indian Ocean. “Many will be left worse off even if the global system benefits.” .
Although their labor costs may be just as low or lower than those in China, most developing countries lack the industrial base, fashion expertise and shipping connections to keep up. A WTO study, for example, indicates that China alone could capture 56% of the U.S. apparel market after the quotas are removed, up from 12% in 2001.Convincing the Chinese to make any concessions may be a tough task. Cao Xinyu, vice chairman of the China Chamber of Commerce for the Import and Export of Textiles, a government-run association, says China is taking the blame for a broader international phenomenon: a rise in demand for textiles from foreign companies that have shifted production abroad. .
He says China would work to resolve the disputes with other countries, but rejects new quotas or safeguards or voluntary restraints. “One thing is clear: If China is asked to take additional commitments outside its WTO commitments, China cannot accept that. We have already made concessions to get into the WTO, and we are not willing to make additional ones.” .
The U.S. and Europe have not made any formal offers of help but are sounding sympathetic. “We have to make sure that both developed and developing countries can cope,” says European Union Trade Commissioner Pascal Lamy. He has long said that free trade is not a cure-all for poor nations, noting in an interview last summer that, for them, “I do not think that liberalization is necessarily a good thing.” .
On the eve of the talks, poor countries were reluctant to spell out specifically what form aid should take. But privately, diplomats suggested lower tariffs, changes in how goods are classified or aid from the World Bank or International Monetary Fund to help make their industries more competitive.Changing how goods are classified would free up textile producers in poor countries to get their basic materials from anywhere in the world, yet still qualify for preferential tariffs. The way things stand now, much of what goes into a textile product, as well as its actual production, generally has to take place in a country in order for it to be counted as being made there — even if those source materials are scarce. .
Europe already is working on relaxing those so-called rules of origin as part of broader system of preferred trading rules to be completed by the end of next month. But that is controversial because it could allow developed countries products to end up benefiting from poorer countries preferential deals. .
Steve Lamar, International Trade Advisor at the American Apparel & Footwear Association, says it is in the interest of U.S. industry to see that developing countries remain competitive. U.S. yarn and cloth companies, for instance, enjoy strong demand from South American companies that cut and sew garments exported back to the U.S. .
“If you want to encourage U.S. yarn and fabric companies you do it by encouraging South American producers,” Mr. Lamar says.TEXTILE DEPENDENT
Top countries or regions that depend on textile exports; apparel and textiles as a percentage of merchandise exports. .
Country Total .
Bangladesh 85.90% .
Macau 84.4 .
Cambodia 72.5 .
Pakistan 72.1 .
El Salvador 60.2 .
Mauritius 56.6 .
Sri Lanka 54.3 .
Dominican Rep. 50.9 .
Nepal 48.7 .
Tunisia 42.4 .