A ‘damp squib’ EC event for continuance of managed textile trade

Geneva, 9 May (Chakravarthi Raghavan) - A sectoral trade ‘event’ on 5-6 May, planned by the EU Trade Commission, in a classic ‘divide and rule’ effort, to build steam behind moves of the EU and US governments and their textiles and clothing industry, to find a way to continue the ‘managed’ (by importing countries) trade in textiles and clothing, appears to have become a ‘damp squib.’

Contrary to the intentions and expectations of the EC Commission and Europe’s textiles and clothing lobby, EUROCOTTON, and despite the way the various panel sessions (and the title of subjects to be dealt with) were organized and run, it became evident that there was no life behind moves to find some way to continue the regime.

As Mr. Munir Ahmad, Executive Director of the International Textiles and Clothing Bureau (the alliance of developing country textiles and clothing exporters), put it: “the message out of the meeting was clear, namely that the (the discriminatory) 42-year-old ‘quota regime’ that restrained the exports and trade of developing countries, is behind us, and it is time to look forward and focus on issues like tariff peaks that are restraining the exports from developing countries during recent years.”

The EC Commission had given a big advance billing for the event (broadcast live on the internet, webcast as it is known in technical jargon), as one to bring together close to 800 government officials, business people from industry and trade, trade unionists and representatives of NGOs from over 70 countries, to discuss “the impact of textile quota elimination in 2005, which will put an end to almost four decades of quotas that have restrained trade in textiles and clothing.”

An EC media announcement on 2 May, on the event and its importance, had quoted the EC Trade Commissioner, Pascal Lamy, as saying: “There has been no full realisation yet of the impact of the end of quotas. The only certainty is that the stakes are high: there are millions of people working in this sector, and many countries, in particular in the developing world, are very dependent on textiles trade. We need to examine closely what will change, and there are real concerns that there should be effective market-opening world wide. We will look at the main trade policy options for the sector, and try to converge around approaches which take into account the very diverse concerns of parties concerned.”

Government officials and trade interests of developing countries had ben invited (with some who were expected to support the EC moves enabled to be present), and participated. The EU Commission and Eurocotton (European textile industry lobby) in a classic ‘divide and rule’ effort, had organised and orchestrated the event to provide a ‘platform’ where those developing countries and their ‘trade’ benefiting from the ‘rentier’ incomes of current preferential and discriminatory (tariff and quota) regime of trade in textiles and clothing would come out and ask for continuance.

With the event organized in Brussels, and with Eurocotton as well as the textiles and clothing labour unions making an effort to mobilise a large number of their members to be present (and cheer speakers from their side), and with representatives of European producers in the majority, judging from the webcast, it was more like a visiting football or cricket team playing in a stadium with vociferous supporters for the local team.

The idea that was sought to be projected, through the two-day meeting, was that the end of the Agreement on Textiles and Clothing at end of 2004, would only or mainly benefit China (which has emerged as a highly competitive exporter and dominant player), and to a lesser extent India (singled out for its tariff levels on textiles and clothing imports), and that other developing countries would be losers and hence’measures’ must be taken so that the benefits of the end of the ATC would be spread ‘equally and evenly’ across countries, and that other developing countries should voice their views and concerns.

A number of governments from developing countries, with varying interests and/or benefiting from the special arrangements and preferences of the US and EC, who were at the meeting and spoke, did not rise to the bait of the EC about the negative effects of loss of preferences. Several of them said they had taken measures to make their industries competitive and face a quota-free regime.

Perhaps only Bangladesh and Mauritius government representatives obliquely, and their trade interests more directly, voiced their concerns and in effect wanted some way to continue to enjoy the preferential trade benefits of the present quota-regime.

A panel discussion on ‘promoting sustainable development through textiles and clothing trade’ was turned into one where the Mauritius minister posed the question how the trade of small countries like itself, in particular the clothing sector (and exports by contractual arrangements) could be sustained.  With many of the speakers at the panel focussing on this, the EC official chairing the session, Mr. Robert Madelin, Director-in-Charge of sustainable development in DG Trade, seemed to complain that no one seemed to be addressing the issue of ‘sustainable development’.

But overall, even if some of the developing countries have been privately concerned over the likely emergence of China as a powerful competitor in international markets or their own, this was not voiced much at the meeting itself.

The UNCTAD Secretary-General, Mr. Rubens Ricupero, called an ‘oxymoron’, the title of the subject on which he was asked to speak, ‘Will all developing countries benefit equally from textiles and clothing liberalisation?’ But Ricupero’s characterisation of the allotted title for his presentation applied to the entire two-days (5 and 6 May) of the meeting.

If the issue is one of looking at ‘winners’ and ‘losers’ of free trade and trade liberalisation in this sector, surely it makes more sense to address the issues of inapplicability of neo-classical economics (of free market and free trade) to development as such, and in that context the application of neo-classical economic theory (and its recent aberration of neo-liberalism) not only to the liberalisation of ‘trade in goods’ (treating advanced and developing nations equally), but of the whole gamut of WTO and its rules being used for liberalisation of trade in goods, services and investment (while protecting the global monopolies in intellectual property) - a system from which the two major entities, the US and EU and their corporations gain the most.

The opening session, as well as the four subsequent panel sessions, both in terms of the subjects given to the speakers, and the way they were organised, were all ‘value loaded’, and aimed to ensure an appearance of legitimacy but no more than a token of various viewpoints being presented and debated; those who have been campaigning before and after the Uruguay Round for an end to the managed trade, and for full application of the WTO/GATT trade rules based on most-favoured-nation and non-discriminatory trade principles, were asked to meet in effect the criticisms from the trade and industry of the importing countries.  A majority of speakers in each session were drawn from those with counter-views.

China and its emergence was projected as something to be feared, and one which would affect all developing countries hoping to benefit, or now benefiting from the textiles and clothing industry. At a slightly lower level, a second target of attack was India.

But both refused to be baited, and played in low key their responses to the attacks on them from the EU textile lobby, and the labour and environment unions, or the textiles and clothing exporters of a few developing countries (like Bangladesh and Mauritius) who expressed concern, and sought special preferences and protection, against the competitive exports of China and India.

The Chinese Minister for Foreign Trade had been invited to participate, but did not come, and China was represented at the meeting by its trade diplomats from the mission in Geneva. India participated at the level of a secretary (permanent official) from the textiles ministry.

India was also singled out, though others too have high tariffs, for the level of tariffs on imports of textiles and clothing, with the EU and US industry, and Pascal Lamy for that matter, pointing an accusing finger and asking for a ‘level playing’ field for their exporters and need for ‘reciprocity’ of market access and tariff cuts.

While demanding equity and reciprocity, it seemed to escape the trade establishments and the trade of the US‘and Europe, that they had deprived (without paying any compensation) the GATT rights of developing countries (including India and Pakistan) for over 40 years, through the Short-term textiles agreement, then through the long-term one and then the MFA regimes, all purportedly to undertake adjustment; and developing countries including India had paid a price under the Marrakesh treaty, by taking on new obligations, just for restoration of their GATT rights in this sector. And now the are asked to pay a second time (by cutting tariffs) to enable the uncompetitive US and EU to comply with the ATC.

Both the WTO Director-General, Dr. Supachai Panitchpakdi, and Ricupero, left little doubt in the message they gave: the ATC regime will definitely end on 31 December 2004, and enable trade based on comparative advantage to prevail.

“At the end of December 2004, the ATC will be terminated, and all textiles and clothing products will be fully integrated into the WTO rules, and bilateral quotas removed,” Supachai said without any qualifications. He underlined that in the Uruguay Round developing countries were united in their determination to correct the anomaly of a sector of international trade operating outside the multilateral rules, but governed by a trade-distorting regime (of the Multifibre Arrangement). “Full application of WTO rules” to this sector of trade “will be a very positive and long-awaited development for the industries and millions of customers who will benefit from a more open and non-discriminatory and transparent trading environment,” he added.

In re-phrasing the subject of his presentation, and the question to be dealt with as “whether developing countries will benefit from textiles and clothing liberalisation,” Ricupero said the answer seemed obvious from the point of view of differing comparative advantages of developing countries across continents (based on factor endowments, strengths and weaknesses in the textiles and clothing sector, domestic policies and a host of other factors spelling variations in competitiveness).

“The question of equal benefits from textiles and trade liberalisation is disingenuous from the vantage point of view of liberal economic theory of international trade,” Ricupero said and underlined that the international trading community was committed “to lift at last the remaining vestiges of quota restrictions” as stipulated in the ATC.

“I thought I should emphasize this,” he continued. “The credibility of the multilateral trading system is at stake and I have no doubt that all will respect the terms of the ATC in line with commitments under the single undertaking compact of the Uruguay Round. This is our common starting point at this meeting. Anything that deviates from this would be simply counter-productive.”

“If the notion of equal benefits were developed as a standard for engaging in multilateral trade liberalisation, then that would unravel the liberal trade philosophy of the trading system and reinforce mercantilist pressures,” warned Ricupero. He also pointed to the fact that several of the Uruguay Round sectoral agreements, including that on the information technology products, benefited mostly a few major players.

Asked the UNCTAD head, “Was the notion of equal benefits ever posed in this regard? No. And it is the same spirit that should inform liberalization in this sector as well.”

In the context of textiles and clothing trade, the post-ATC regime offered opportunities of export markets being free of quota restrictions. “The name of the game is competitiveness and so, it is incumbent on various national stakeholders to prepare themselves to exploit the vast opportunities offered by the lifting of quota restrictions beginning 2005.”

The lifting of quotas constituted at one stroke “a credible response to development” because numerous analyses of the ATC had pointed to the back-loading of liberalization. “Liberalization delayed is liberalization denied.” The (10 year) intervening period between WTO and end of the ATC was an excellent opportunity for adjustments by importing countries, but this was water under the bridge, a missed opportunity. If liberalization had taken place at the early stages of the transition, lifting the bulk of quotas on socalled sensitive products such as apparel at the final stage would be a matter of course and “not a subject of suspected reluctance to lift quotas at hour of reckoning.”

The importing countries have themselves to blame for accumulating problems when the time comes.

He also pointed to the fact that in the intervening period, there had been a proliferation of contingent protective measures against textile products, “a disquieting development that if not reversed could undermine the efficacy of lifting quotas” under the ATC. He hoped that the end of the ATC would not presage the proliferation of contingent protective measures. “If so this would nullify the benefits of removal of quotas”. In this context, added Ricupero, the developing countries have a strong case in pressing for special and differential treatment in respect of improving rules and disciplines on contingent protective measures. “Developed countries should be extremely circumspect in using such measures on imports from developing countries.”

Referring to the web of preferential trading arrangements of the US and EC with a number of developing countries and sub-regions, Ricupero thought it unlikely that the “close investment and trade loops” under these agreements or schemes would be disturbed unduly, let alone displaced.

Liberalization of the trade in this sector will benefit the developing countries “by way of opportunities being available to them on an equal basis in a quota-free world, underpinned by the principles and disciplines of the multilateral trading system.” But translating the opportunities into actual trade performance was altogether a different matter, but one for “traders and economic operators to act on” and a matter that would require appropriate domestic policies and measures, Ricupero said.

In an intervention on behalf of the ITCB, the ambassador of India to the WTO and chair of the ITCB (who was asked to speak in a session on the impact on developing countries and economies in transition) suggested that the subject matter of the session begged the central issue, the cause of inequity in trade in textiles and clothing, that is the ‘singling out of this sector for targeted policy interventions’ by major developed countries to protect their domestic industries.

For years the instrument of intervention was the quota system applied on exports from developing countries. More recently, it was the “imaginative use” of rules of origin, aided by the convenience of relatively high tariffs applicable to the textiles and clothing products and the mechanism of regional arrangements.  “Often the purpose has been to advantage domestic textile producers in the developed world”, and “subtle campaigns” in the name of protection of labour rights and the environment, “aided sometimes willingly sometimes less so by governments” have the potential of becoming constraints on exports from developing countries.

For the short-term, added the ITCB chairman, there are fears about trade remedy actions (anti-dumping, safeguards, and so on) becoming the instrument of choice in the hands of protection-seeking elements.

Outlining these and other concerns of developing country exporters, the ITCB chair said the trade in textiles and clothing “has had a long and continuing legacy of targeted intervention” and it is this intervention that should be central to the discussion about the post-2004 period.

“The developed world owes it to developing countries to correct the situation, including by effective assistance particularly to least developed countries and small suppliers such as financial help, capacity building and other development tools.

“For this to happen, there is a need for a fundamental shift away from treating the sector different from all others, and to address it within the common integrated framework of multilateral rules and disciplines. Such an approach would best secure liberalization and spread the benefits deep and wide.”

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