GENEVA — After months of intense industry lobbying and a diplomatic blitz by a group of poor countries spearheaded by Mauritius and Bangladesh, the World Trade Organization on Friday is to put the spotlight on the ramifications the end of quotas will have on the $330 billion global trade in textiles and apparel.
“Our concern is that small countries and suppliers should not be crowded out by those who have advantage on account of their size,” said Toufiq Ali, Bangladesh’s WTO ambassador.
In a similar vein, Claudia Hernandez, the Dominican Republic’s WTO ambassador, said of the coming session: “We hope it will give some clear results for countries whose economies depend heavily on textiles and apparel. [Government] studies already undertaken show we will be severely affected when the regime is dismantled.”
In 2003, apparel represented 62.3 percent of Bangladesh’s merchandise exports and 51.4 percent of the Dominican Republic’s, according to WTO data.
However, the liberalization of the sector is also expected to put heightened pressure on textile and apparel manufacturers in the U.S. and European Union, who in recent years have experienced huge job losses as a result of competition with suppliers in lower-cost regions, such as Asia.
In August, the U.S. textile and apparel manufacturing industries employed 695,000 people, according to U.S. government data. That marked a 4.1 percent decline from the prior year. In 1995, the two industries employed more than 1.3 million people, though revisions in how the U.S. tracks data mean that the numbers aren’t directly comparable.
The job-contraction story isn’t unique to the U.S. and EU. Employment data by the International Labor Organization shows that, due to privatization, China’s textiles sector eliminated 2 million jobs between 1995 and 2001, but in the same period the nation added an extra 400,000 spots in its apparel sector.
The end of the quota system, which was established in the Agreement on Textiles & Clothing, is also expected to result in job losses in countries that have in recent years posted gains in employment in the sector, such as Mexico.
A movement for the WTO to reconsider the effects of the end of quotas took on life early this year, starting in March when industry associations from the U.S., EU and many developing nations began signing the Istanbul Declaration for Fair Trade in Textiles & Clothing. That petition called on the trade body to consider extending the quota regime through 2007, a drive that was unsuccessful in attracting the support of any government, which meant the group had no point of entry to bring its cause to the WTO.
In July, the governments of Mauritius and Bangladesh asked the WTO chief, Supachai Panitchapakdi, to hold an emergency session of the WTO’s Council on Trade in Goods to examine the unintended consequences of the quota phaseout. But their carefully crafted letters did not formally request extension of the quotas.
The Istanbul Declaration proposal to extend the quota regime is now considered dead in the water in light of strong opposition shown by India, China and other major developing countries, since such a change by the WTO would require the agreement of all 147 member nations.
Given the sector’s political sensitivity in many poor and rich countries. the inclusion of the item “Post-ATC adjustment-related issues” in the agenda of the WTO’s Council for Trade in Goods will be followed closely by industry, political leaders and top trade policy makers. It was described by some trade diplomats as a potential “policy bomb” for the WTO.
Senior trade diplomats warned the textiles and apparel issue has the potential not only to derail the present Doha Round of trade talks aimed at further liberalizing trade, but also to undo the historic GATT Uruguay Round package deal agreed to in 1994 after eight years of negotiations.
Under the Uruguay deal, developing countries agreed to new global accords on intellectual-property rights and trade in commercial services in exchange for rich countries committing to liberalize trade in agriculture, textiles and apparel. The phaseout of the decades-old quota regime that governed most global trade in textiles and apparel began in 1995 and was a centerpiece of the package.
According to diplomatic sources, Friday’s WTO meeting will largely focus on the problems countries expect to face after Jan. 1. Developing countries from Africa, Asia and Central America are determined to keep the issue on the WTO agenda until their concerns are addressed, diplomats said.
Seasoned WTO hands say the meeting could trigger heated exchanges with exporting countries questioning a recent WTO working paper called “The Global Textiles and Clothing Industry Post the Agreement on Textiles and Clothing.”
The paper predicted a substantial increase in market share for China and India, while countries previously unrestricted “will lose market share,” as will local producers in North America and the EU.
It also concluded that producing countries close to major importers — like Mexico and certain Eastern European countries, which ship to the U.S. and EU, respectively — will suffer fewer negative effects.
Munir Ahmad, executive director of the 24-member International Textiles & Clothing Bureau, an umbrella body for poor exporting nations, in a recent paper said the WTO study is “lacking in necessary analytical vigor and employing imprecise (at times misleading) data, it is liable to adding to the confusion.”
Francesco Marchi of the European industry umbrella grouping Euratex, said he reckons a lack of consensus among developing countries as to what they want reduces the odds of the WTO meeting producing any clear results.
The confab could intensify pressure on the major WTO trading powers to try to craft adjustment solutions or risk seeing the revived Doha trade talks kept hostage to a hostile issue, said trade sources, who asked not to be identified ahead of the upcoming discussions. Already, some developing country envoys said the U.S. and the EU are not the problem, but point to other big developing countries such as India, China, Brazil and Egypt, as those that don’t want the issue touched.
This assessment is not shared by diplomats from those countries, who for years supported lifting quotas. The public concerns about the end of the quota system have been raised only in the past few months. For much of the past decade, exporters from dozens of developing countries — including some of the Istanbul petitioners — said they were looking forward to the end of quotas.
The exporting powerhouses assert that the quota regime was a deviation from the free-trade principle of comparative advantage that favored the rich countries to the detriment of exporters.
A senior Indian official, who spoke on the condition of anonymity, said of the concerned nations: “We’ll be listening to them and see what we can do.”
Meanwhile, a senior Chinese official, who also asked not to be named, said, “We have no objections to listening to their concerns.” But, he added, “If there’s any intention to extend the ATC or take measures contrary to the spirit to the abolition of the quotas, we will have great concerns.”
Asked about the idea that China would agree to voluntary export caps — a move that could ward off multiple safeguard-petition fights — he said adamantly, “It’s totally unacceptable to China.”
Euratex’s Marchi conceded China will “put in danger small-country suppliers who have not attempted to modernize quickly.”
Although the widespread consensus in Geneva is that the end of quotas will have both winners and losers and that the adversely affected players, in particular poor developing countries, should be helped, there are divergent views on how to proceed.
Some assert it’s up to the U.S., the EU and China to come up with an orderly transition. But those major players have so far publicly stuck to the letter of the WTO agreements.
In contrast to the doom-and-gloom scenarios, some studies have projected that the benefits from integrating the sector into the mainstream of global trade rules could boost the global economy. A review by the Paris-based Organization for Economic Cooperation & Development said the end of quotas would boost the world economy by $6.5 billion to $324 billion a year, an exceptionally wide range.