The Hindu Business Line : Textile exports from developing nations — Third World urged to be vigilant in post-quota regime

ALTHOUGH developing countries exporting textiles and clothing optimistically look to the imminent end to the vexatious derogation of free trade norms governing global trade in textiles and clothing in the form of a quota regime that was in vogue for more than four decades since the mid-1960s, the air is thick with fears that protectionist instincts of the rich countries would persist, providing scant comfort to the Third World.

This fear is voiced in a comprehensive report in one of the briefing papers launched by the reputed non-governmental organisation Oxfam International titled `Stitched up — how rich country protectionism in textiles and clothing prevents development in poor countries' - launched on the occasion of the recently held International Textiles and Clothing Bureau (ITCB) meeting here.

Oxfam said over 27 million people are employed in textiles and clothing production worldwide, more than two-thirds of whom are located in Asia with a majority of them being women.

Given that quotas are estimated to have exacted developing countries up to 19 million job losses, the lifting of quota regime on January 1, 2005 should have "significant benefits" for poor countries as a group, particularly countries with competitive industries whose exports were limited by MFA quotas would benefit. Others that have been protected by the quota system would encounter more difficulty in adjusting themselves to global competition. Thus even as quota phase-out is set to impart a range of experience to developing countries, Oxfam said what is palpably clear is that "if rich countries replace quotas with alternative forms of protectionism, all developing countries will suffer. Unfortunately, there are worrying signs that this might happen".

First, it said, rich countries had cynically exploited the salient features of the 1995-2005 Agreement on Textiles and Clothing (ATC) — a transition arrangement spread over 10 years to phase out quota system and ensure a fair and free trade dispensation, governing global trade in textiles and clothing — to delay lifting quotas for as long as possible on products that actually matter to developing countries.

This was completely against the spirit of the ATC, which envisioned that phase-out would be "progressive in character". Thus, "developing countries will face a short, sharp shock on 1 January 2005 as an enormous number of previously restricted products are liberalised overnight".

Second, even after quotas go, exports of textiles and clothing from developing to industrialised countries would face average tariff levels that are three times higher than for other manufactured goods, as well as sharp tariff peaks of up to 30 to 40 per cent for certain items.

These tariffs signify " a significant redistribution of wealth from poor to rich countries", it said citing that in 2002, exports from Bangladesh to the US represented $331 million in tariff revenue for the US Treasury, even in the same year, net overseas development assistance from the US government to Bangladesh was just $72 million.

In the US, this scenario is further exacerbated by the fact that most clothing and textile products are excluded from the Generalised System of Preferences (GSP).

Third, the Oxfam paper notes that both the US and the European Union (EU) have thrown ample hints that they would increasingly rely on safeguard measures to block imports from competitive developing countries once the quotas are over.

The US has recently announced that it would institute controversial "safeguard" quotas on Chinese exports of knitted fabric, dressing gowns, robes and bras, while the EU set off 57 cases against developing countries in the textile and clothing sector between 1994 and 2001.

"A long-running dispute between the EU and India over bed linen exports from the latter illustrates how rich countries can all too easily abuse safeguard mechanisms to block imports from developing countries," it said.

Hence the paper urges rich world to ensure reduction in tariff peaks on textiles and clothing imports from developing countries, refrain from unfair use of other non-tariff measures, provide relaxed rules of origin in the EU, especially for least developed countries and extend increased financial and technical assistance to countries that would suffer as a result of quota phase-out.

Textile exporting developing countries should on their part put in place a competitive industrial policy ensuring the infrastructure and customs efficiency for industrial growth and support mechanisms for workers and careful monitoring of corporate compliance with labour laws during MFA-related industrial restructuring.

It urges retail and brand corporations abroad to recognise corporate responsibilities towards host communities, suppliers and workers and follow responsible purchasing practices, while suppliers' in the developing world should respect workers' rights, the provision of adequate notice periods and compensation and due wages to workers who lose their jobs in the wake of MFA-related transition.

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