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government-trade

China: ‘The Elephant in the Living Room’

BRUSSELS — The end of quotas on textiles and apparel in 2005 among World Trade Organization members could bring major economic changes to many parts of the world. For China, it poses great opportunity, but many other developing countries could...

BRUSSELS — The end of quotas on textiles and apparel in 2005 among World Trade Organization members could bring major economic changes to many parts of the world. For China, it poses great opportunity, but many other developing countries could face significant economic shake-ups.

That was the consensus of speakers at an EU-sponsored trade forum that wrapped up Tuesday here.

Calling China “the elephant in the living room,” American Textile Manufacturers Institute president Parks Shackelford said the threat posed by that country was too large to ignore.

China — which already produces about one-fifth of the world’s apparel — could experience a 150 percent jump in textile and clothing exports after 2005, a 2001 World Bank report showed. Shackelford claimed China’s apparel industry was unbeatable because of a 40 percent undervalued currency, a highly subsidized industry and what he called an “unlimited” labor supply. He urged governments to put pressure on China to float its currency.

In addition, he suggested the U.S. use the safeguard measures China agreed to in a bilateral trade deal that cleared the way for its WTO entry. Under the terms of that deal, the U.S. has substantial leeway to limit Chinese imports if they have a market-disrupting effect.

“What is the future if we don’t do something?” Shackelford asked. “China wins.”

Chinese Foreign Minister Lu Fuyuan, who had been scheduled to speak at the opening session, did not attend, but others in the national delegation rallied to the country’s defense. One delegate noted that China’s textile and clothing imports have been increasing more rapidly than exports, while another said it was unfair to punish a country for its competitive advantage.

China’s gain may be India’s and Pakistan’s loss, though these countries could make up for this if they undertake structural reforms, several speakers said. The expected post-2005 surge in Chinese exports may also have far-reaching negative effects on developing nations in other parts of Asia as well as Latin America and Africa that rely heavily on apparel exports as a source of foreign income.

For many developing countries, textiles and apparel constitutes the most important industrial sector, in terms of exports and jobs. For some countries, the sector accounts for as much as 90 percent of industrial exports and more than 50 percent of industrial employment.

Rassel Hassan Kadir, managing director of Bangladesh-based Warda Textile Mills Ltd., said he fears that the end of quotas will result in “social anarchy” in his country, where the sector employs some 10 million people directly and indirectly. He said there could be dire consequences for women, who constitute about 90 percent of workers in his country’s industry. He said Bangladesh will only be able to compete with the likes of India, Pakistan and China if given duty-free access and other preferential treatment by importing countries.

Several speakers agreed with this general approach for granting special trade regimes to help developing and least-developed countries maintain their competitive position. EU Trade Commissioner Pascal Lamy said one solution was to promote regional agreements such as those between the EU and Mediterranean countries and the NAFTA trade block.

Lamy also underscored the need to expand the consuming textile market well beyond the U.S. and the EU, which together account for about four-fifths of global textile imports.

“Instead of everybody reaching for the same cake in 2005,” he said, “we are thinking in terms of a larger cake.”

But expanding the world market means that nations that have up until now maintained high tariffs and other protectionist measures, such as India, will have to relent, speakers said.

“I challenge all countries represented here to follow the European example and not use their fertile imaginations to create new barriers,” said Filiep Liebeert, president of EU textile and clothing industry association Euratex.

Lamy said the purpose of the event was not to draw formal conclusions but to share questions, problems and possible ideas for solutions. He added that although there were still many unresolved issues, there were three principles that found universal agreement.

First, the 2005 deadline is nonnegotiable.

Second, the disappearance of quotas will reveal the existence of other trade obstacles such as tariffs and nontariff barriers, which must be addressed. If new protective measures are introduced in the post-quota regime, “then we will have taken two steps forward only to take one step back,” Lamy said. He urged WTO members especially to fight nontariff barriers such as stringent labeling requirements and minimum import prices while giving preferential treatment to the poorest countries likely to be hit hardest by the changes.

Third, the disappearance of quotas will have a tremendous effect on world trade, but this will largely depend on the extent to which government, business, employers and other stakeholders tackle the resulting regional imbalances, industry restructuring, changes in the labor market and other changes.

Developing and industrial countries alike agreed on the importance of promoting sustainable development, broadly defined as responsible capitalism with consideration for the environment, health, human rights and ethical issues. But most acknowledged this will not be easy.

Jaya Kirshna Cuttaree, Mauritius’ minister of industry, commerce and international trade, said promoting sustainable development was the only way to ensure a safer world, adding that that the Sept. 11 terrorist attacks and the Iraqi war showed how closely economics are linked to stability and security. But he is not yet convinced that liberalizing trade would promote sustainable development for the poorer nations of Africa, still sorely lacking in basic infrastructure.

“Can anyone here say convincingly that the liberalization of textile trade is going to lead to sustainable development of Africa?” he asked rhetorically.