By  on December 27, 2004

GENEVA — The end of the quota system will bring major changes to the world economy, with the apparel manufacturing industry that is spread throughout the developing world likely to concentrate into a handful of countries with the right combination of low costs and steady infrastructure, two studies conclude.

The combined apparel and textile manufacturing sector, which employs more than 30 million workers in more than 50 countries, could compress into as few as five or six nations by 2007, according to a report by the International Confederation of Free Trade Unions, a labor umbrella group representing 150 million workers in 152 countries.

The study warned that such a shift may cause major economic dislocation in developing nations that are dependent on apparel exports, many of which are not prepared for the changes that will come after the 148 nations of the World Trade Organization drop the quotas that regulate the $330 billion apparel and textile trade on Jan. 1.

“Little has been done in countries such as Bangladesh or Cambodia to diversify the economy in anticipation of the end of the quota system, although it was announced 10 years ago,” the ICFTU said in its report, adding that governments need to address this issue “as quickly as possible.”

The ICFTU’s prediction that the industry will consolidate into such a small number of nations within two years of the end of quotas is a far more dire scenario than industry executives predict. Sourcing executives planning for 2005 typically assert they will continue to operate in 15 to 25 countries, and that they intend to cut back their operations in other nations more gradually.

However, the labor organization was in step with most industry experts in asserting that China stands to benefit the most from the end of quotas.

The report noted that Chinese factories have aggressive management and are equipped with modern machines because of large investments, they have economies of scale and they have ready access to cheap labor.

But the study also noted that China enjoys some unfair advantages, including state aid to industrialists such as “loans through state banks granted on the understanding that they will probably never be repaid.”

The report noted that in the face of this competition, Bangladesh stands to lose one million jobs and Cambodia as many as 200,000. Tens of thousands of jobs may also be lost in the Dominican Republic, Guatemala and Mauritius.

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