ITCB protests EU moves to use sustainability, social standards

by Chakravarthi Raghavan

Geneva, 25 Apr 2001 - - The International Textiles and Clothing Bureau, an alliance of 24 major developing country exporters of textiles and clothing have addressed a letter to the EC Commissioner Pascal Lamy expressing serious concerns about the Commission’s consideration of ideas to use environmental and social impacts of liberalization of quotas - aimed at protecting the EC market after the end of the Agreement on Textiles and Clothing on 31 December 2004, when the trade will be fully brought under the WTO/GATT disciplines.

The European Union which has been flagging and raising the issue of ‘sustainability’ on the trade front, and seeking to introduce this concept in trade accords, preferential agreements with developing countries, and commodity agreements, has recently issued an informal discussion paper about “The non-trade impacts of trade policy - asking questions, seeking sustainable development.”

The EC document however, though posing it in the form of questions, is suggesting that the liberalization of the textiles and clothing industry trade, and the shift of the production to the developing countries, would result in developing countries using large amounts of water and chemicals in the production process, thus adding to pollution and deteriorating environment.

And the workers and labour involved in these industries would be at lower levels of wages and social protection.

And it broaches the idea that for the sustainability and environment considerations, restrictions could be imposed on these imports on environment and sustainability grounds. That this would reintroduce the 30-40 year scheme of protection that has enable these industries to survive in the advanced countries is presumably an unintended side-effects of the EC’s generous desire to safeguard the environment and social situation of developing countries.

The EC paper on the EUs approach to a “more sustainable WTO”, lists as specific topics for negotiations to enhance the WTO’s contribution to sustainable development as:

·        substantial improvements in market access across the board, including products that developing countries are likely to export. This would imply that (a) the EU and other developed countries being willing to liberalise substantially in sectors where developing countries are competitive; and (b) ensuring that the subsequent increase in production takes place within a framework of technical assistance or other policies that limit risks of environmental or social degradation;

·        New WTO rules on investment, competition and trade facilitation to improve governance of the world economy. The contribution of such rules to development should be an important objective of the negotiating process. New rule making in these areas should contribute to enhancing the regulatory capacity of developing countries and help all countries to address new challenges raised by globalization;

·        clarifying and - if necessary - improving existing WTO rules from a sustainable development perspective;

·        improving the transparency of EU and WTO trade policy-making perspective.

Very desirable objectives? Think again

The various parts of the paper, relating to agriculture, fisheries and textiles and clothing, all talk about the benefits of free trade and liberalization, but hedge them with talk of environment impacts of pollution, In the part (6.9) on different ways of integrating sustainability into trade policy, and the case of textiles, the paper notes that currently a greater part of the EC demand is met by EC production than would be the case under conditions of unrestricted trade.  All QRs it notes are due to go by 1 January 2005. But the consequences for location and volume of production within EC could not be foreseen now, since it would depend on whether developing would open their own markets both among themselves and to industrial countries. But a sustainability analysis of the accord, the EC says, would show that the EC would have a social cost in terms of employment and income.

In the more competitive exporting countries, output would receive a double stimulus, as exporters would have new opportunities to gain market share at the expense both of less competitive third countries and less competitive EU producers.

“A rapid increase in output in a country where environmental regulation is at present weak or inadequate will lead to increased, perhaps disproportionately increased, levels of water and air pollution, and may also incidentally correlated with negative social developments in terms of ill-regulated employment of the very young or very vulnerable female labour:”

While the paper concedes that not ending the quotas agreed in the Uruguay Round is not a feasible option, without making developing countries question the WTO itself, it in effects suggests consideration of building in sustainability and social elements into the discussions, and the use of additional ‘flanking measures’. It also notes that while developing countries have complained about the pace of liberalization, the principle of a transition period itself had not been questioned.

The paper itself does not say whether in time the EC would be coming up with a request for longer transition, to enable developing countries to develop environment sustainability and social standards, before the textiles and clothing trade would be fully integrated and the trade liberalised?

Perhaps this is just the first shot across the bow.

The ITCB letter to Pascal Lamy draws attention to these views in the paper and says:

“Our members have been alarmed by the EC’s consideration of these ideas, particularly at this juncture when implementation of the ATC has been giving rise to serious concerns among many developing countries. In failing to come up to their legitimate expectations, it has damaged their confidence in the WTO system and in the process of multilateral trade liberalization.

“The EC’s consideration of such new ideas adds to these concerns.”

The ITCB letter signed on behalf of its 24 members by Uruguay (which now chairs the ITCB) adds:

“While we hope that the articulation of these ideas is not meant to be used as a pretext to delay the phase-out of quota restrictions on textiles and clothing, we believe that there is no valid basis for the conclusions about negative environmental and social consequences (in the paper, and summarized in the letter).”

The conclusions of the paper were also in sharp contrast to an earlier part on trade, growth and employment which pointed out that international trade was critical to competitive markets, and that removing obstacles to trade allowed the same level of production with less resource depletion and pollution, and provided a powerful incentive to producers to adopt more efficient production practices.

Apparel production, the ITCB points out, has very low emissions if at all - involving primarily application of labour to pre-manufactured components. Even textile manufacturing is substantially cleaner than many other industries.  Studies attempting to measure environmental effects of textile quotas liberalization generally do so on basis of assumptions in a non-dynamic environment.

Most researchers agree that results from such methodologies should be treated as speculative, and not a substitute for actual measurement of emissions. And empirical evidence shows that even if pollution might tend to aggravate in early stages of the development process, it decreases after a certain level of income has been achieved.

There is little or no evidence that polluting industries migrate to take advantage of lax regulations. Neither studies on trade flows nor on flows of FDI demonstrate that environmental regulations are an important factor in international decisions on relocation of industries.

It is also disingenuous for the paper to argue that increase in output in developing countries may lead to negative social developments in terms of ill-regulated employment of the very young or vulnerable female labour. In fact economic growth through liberalization can be a part of the solution to such perceptions.

“We believe,” says the ITCB, “that liberalization of quota restrictions on textiles and clothing is important to provide the conditions necessary for growth and employment in developing countries, with their attendant benefits for social equity and ecological efficiency. Also essential is international action to facilitate transfer and diffusion of technology and finance to these economies.

“It is only through such concerted action that concerns about sustainability can be properly addressed. Indeed by holding back on progressive liberalization of quotas promised under the ATC, the EC and other developed countries might in fact have been unwittingly working against the objective of integrating sustainability into their textile trade policies.”

The ITCB hopes that in the light of these, the EC consideration of ideas articulated in its discussion paper takes place in proper perspective, and that “it does not result in conditions retarding developing countries’ opportunities for alleviating poverty, which is essential to address concerns about perceived negative social and environmental problems.” – SUNS4883

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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