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WTO: End of Quotas May Hurt Nations

GENEVA — Publicly confirming the fears of opponents to the lifting of apparel and textile quotas, a World Trade Organization report on Thursday said the end of the restrictions Jan. 1 is likely to cause “considerable...

GENEVA — Publicly confirming the fears of opponents to the lifting of apparel and textile quotas, a World Trade Organization report on Thursday said the end of the restrictions Jan. 1 is likely to cause “considerable disruption’’ that will hurt some apparel manufacturing nations.

The study marks one of the WTO’s few acknowledgments that the demise of the decades-old trading system could damage economies. These concerns prompted an aggressive, but ultimately unsuccessful, lobbying campaign by industry associations from more than 50 countries this year to have the phaseout extended.

The expiration of quotas is intended to allow for free-flowing trade in textiles and clothing. But thousands of companies in developing nations like Bangladesh, as well as U.S. firms, have said that China, with its access to cheap labor and mass production capabilities, will dominate the global market.

The study by the 148-nation WTO acknowledged that the end of the system “may lead to temporary restrictions, such as safeguards and contingency measures, and cause considerable disruption in current market shares and welfare gains, and losses for exporters and importers.”

The report, “Overview of Developments in the International Trading Environment,” said that quota allocation allowed some developing nations to develop export businesses “which they now stand to lose as a result of liberalization.”

China challenged the report’s findings and tone. Li Enheng, China’s deputy representative to the WTO, told delegates attending a closed session of the trade body that he considered the section on textiles and apparel unbalanced, according to trade officials at the meeting, who spoke on condition of anonymity.

Other WTO diplomats said they look forward to the end of quotas. David Shark, deputy chief of the U.S. delegation to the WTO, described the quota phaseout as “a milestone.”

According to a copy of Shark’s remarks at the session, he said it is a good example of an issue “where WTO members can make ambitious commitments and fulfill them despite obvious sensitivities.” Shark added that he hoped to see similar progress in the Doha round of trade talks, meant to further advance free trade.

Supachai Panitchpakdi, the WTO’s director general, told the closed session that the abolition of the restrictions will bring considerable improvement in living standards for the world economy.

This story first appeared in the December 17, 2004 issue of WWD.  Subscribe Today.

He conceded that there is “understandable anxiety on the part of some countries about the associated short-term adjustment costs,” according to a copy of his remarks. But he added, “the restructuring of domestic industry is a necessary part of the process of liberalization.”