The WTO has agreed to hold further consultations on the phase-out, this December, of long-standing quota barriers to textile and garment imports. Less competitive developing country exporters fear they will lose business to China, India, Egypt and Pakistan once their quota-guaranteed shares of theUnited States and European markets are eliminated. The quotas create market entry rights for a specified volume of textiles and garment imports from particular countries. Although they have limited the growth of sales from Bangladesh, Turkey, Lesotho, Mexico and others. But they have guaranteed access for these countries that could not be taken from them by the more competitive producers in China, India, Egypt and Pakistan. In other words, protection means protected profits. The WTO consultations were agreed late last week after months of private meetings between the WTO Director General and representatives of some of the poorest developing countries. The governments of importing countries, pressured by “big retailers”:http://www.ictsd.org/weekly/04–09-01/story2.htm who want access to competitive supply, are determined to go ahead with the market opening, which culminates a 10-year planed phase-out of the quotas. Some of the competitive producers, including China, are also reluctant to hold any special meetings in WTO, because they are concerned that it might imply that the final steps might be reconsidered or postponed. bq. But trade officials and industry leaders said an unexpected outpouring of concern from several dozen countries, including Turkey, Mexico, Bangladesh, Mauritius and Lesotho, persuaded the WTO to consider the call for global action.(“Telegraph of Calcutta”:http://www.telegraphindia.com/1041003/asp/business/story_3834807.asp) The WTO has recently released a detailed report “The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing”:http://www.wto.org/english/res_e/booksp_e/discussion_papers5_e.pdf that considers the potential impacts of the end of the quotas. The situation in the industry is complex with many different factors affecting competitiveness, including labor costs that seem to favour economies such as China and India, but also proximity to markets that may secure the competitive position of Central American and East European economies. It’s the poorest countries of Sub-Saharan Africa and Central Asia that may be the most vulnerable to competitive pressures. But this does not mean it’s appropriate to respond to their dilemma by attempting to shore up their position by protection or trade preferences that do nothing to improve underlying competitiveness. As China clocks up spectacular successes in North American markets, it’s own price competitiveness is under pressure. According to “China Daily”:http://www.chinadaily.com.cn/english/doc/2004–08/23/content_367923.htm, Chinese officials and some manufacturers are calling for floor prices to stop ‘malicious competition’ from their own industry cannibalizing the growth in the United States market or provoking U.S. safeguard action.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher