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Textiles and Clothing : Implication for Less-Advantaged Developing Countries

(held in Divonne-les-Bains on 7 June 1999)

Introduction

The role of the textiles industry as an engine of growth

The implementation of the ATC (1995-1999)

What remains to be done : the prospects and outlook for the future of trade in textiles and clothing

Eco-labelling

 

I. Introduction

1. In response to requests from less-advantaged countries (LACs), and in the current series of assistance projects, on 7 June 1999 AITIC held a workshop on textiles and clothing, in particular on the implications of the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC) for the LACs. It was held with the sponsorship of the WTO and with technical cooperation from the WTO, the International Textiles and Clothing Bureau (ITCB) and the International Trade Centre (ITC).

2. The formal sessions covered:

• The provisions of the ATC.

• The implementation of the ATC (1995 - 1999) and what remains to be done (2000-2004).

• The prospects and outlook for the future of trade in textiles and clothing.

• Eco-labelling.

3. In addition, Mr. S. Harbinson, Permanent Representative of the SAR of Hong Kong, China and Chairman of the ITCB, gave an overview in an address at lunch.

II. The role of the textiles industry as an engine of growth

4. As an indication of its importance, 9 percent of world trade is in textiles and clothing, providing some 142 million jobs (formal and informal) worldwide. However, textiles and clothing trade is heavily concentrated in the industrial countries. Textiles and clothing imports of the EU, US, Japan, Canada and Switzerland account for 70 percent of the world total. By contrast, imports by developing countries (including China, Mexico, Korea, Hong Kong, among others) amount to only 14% of the world total.

5. The importance of textiles and clothing in the early stages of industrialisation as an engine of growth is clear, e.g. Japan in the early 1900's, Hong Kong, Korea and Chinese Taipei from 1950 to 1980 and the ASEAN countries and China from the 1980s on. Against this background there is a long history of restraint in textiles and clothing trade: the bilateral voluntary agreements of the 1950's; the formal arrangements in respect of cotton textiles from 1961 to 1973; the Multifibre Arrangement from 1974 to 1994; and the key provisions of the ATC. (See paragraph 6 below and the AITIC Briefing Paper at Annex B; further detail on the textiles and clothing trade is in an Explanatory Note and a CD-Rom available from the Textiles Division of the WTO.)

III. The implementation of the ATC (1995-1999)

6. The WTO and ITCB identified the key elements of the ATC, and therefore of its implementation as:

• the product coverage (all products which were subject to MFA or similar quotas in at least one importing country);

• the integration of these products into normal WTO rules (a 10 year period of four stages: at 1 January 1995, 1998, 2002 and 2005, respectively 16 percent, a further 17 percent, a further 18 percent and finally 49 percent by volume of a Member's 1990 imports, covering four major groupings of products, to be removed from quota control);

• the increase in existing quota annual growth rates (a three-stage process: at 1 January 1995, 1998 and 2002, respectively 16 percent, 25 percent and 27 percent increases per annum, with increases for small suppliers advanced by one stage),

• the role of the Textiles Monitoring Body (the notification of MFA and similar quotas and the surveillance of the special transitional safeguards mechanism).

7. An aspect of the product coverage of the Agreement is that tariff headings not actually under restraint in a particular importing country were available for "integration" into normal WTO rules, which has implications for the rate of real integration to date (see paragraph 9 below).

8. On the integration of these products, it is for the importing countries maintaining quotas to select the specific tariff heading and the percentage of volume to be applied to each heading subject to there being some selection from each of the tariff groupings: yarns, fabrics, made-ups and clothing. It is significant that in the higher added value groupings, particularly clothing, the selection to date can be described as notional. For example, for the US the percentage by volume of 1990 imports integrated to date by tariff grouping is:

The situation is comparable for the EU and Canada.

9. Another indicator of the real effect (or rather the non-effect) of the integration process in the two major markets, the US and the EU, is the number of quotas (individual product limits) actually eliminated in stages 1 and 2:

10. The effect has been that, although a total of 33 percent of trade by volume has been integrated by stage 2, the actual amount integrated has been much lower. Less than 7 percent by volume and value per annum of restrained trade in the US, and less than 5 percent by volume and value per annum of restrained trade in the EU, has been freed of quotas. This is essentially a result of the nature of the product coverage, which allowed importers, quite legally, to "free" tariff items not actually under restraint.

11. In practice the increase in quota annual growth rates has been of minimal importance because of the small size of many agreed MFA growth rates (often less than 1percent). An indication of this is that in the EU the average pre-ATC growth rate was 3.44 percent per annum and after stages 1 and 2 it is 4.49 percent. For the US the figures are 4.61 percent and 6.36 percent.

12. Of interest has been the reduced incidence of "calls" under the special transitional safeguards mechanism, thanks in part to the vetting by the Textiles Monitoring Body. For example, in 1995 there were 24 applications for selective safeguards, whereas in 1998 there were only five.

IV. What remains to be done: the prospects and outlook for the future of trade in textiles and clothing

13. It was noted that the third stage of the ATC implementation begins on 1 January 2002, which will require the integration of a further 18 percent of the product coverage and the increase in quota annual growth rates by 27 percent per annum. The final stage begins on 1 January 2005, which requires the integration of all remaining products, the total elimination of quotas and the termination of the ATC.

14. Thus trade in textiles and clothing will be returned to normal WTO rules. This should allow the free interplay of market forces with open competition through such as price, quality, dependability and marketing. However, there were issues that are of concern to the LACs which will need to be addressed before and beyond the termination of the ATC, specifically:

• the great bulk of sensitive integration is being left to the very end of the 10 year period. There is fear that this will cause structural problems for importing countries which may produce political pressures to delay the full implementation of the ATC.alternatively, importing countries may resort to other ‘trade remedies" (changes in rules of origin, increase in antidumping measures, etc.) to minimise the effects of full liberalisation;

• certain exporters may have problems with the loss of "secure access" to markets which can be a feature of a quota system;

• the market access implications of the enlargement of the EU which may allow preferential access to new Members;

• the impact of regional trade arrangements, e.g. NAFTA, particularly if they are extended;

• the impact of the development of special Outward Processing Trade arrangements, particularly between the US and Central American/Caribbean countries and the EU and Eastern Europe/North Africa;

• the representation of LACs on the TMB, especially in its quasi-judicial role, such as in the vetting of special transitional safeguard actions;

• the role of the WTO Dispute Settlement Mechanism vis-à-vis the TMB in respect of textiles and clothing disputes;

• the possible abuse of antidumping measures;

• the importance of harmonised rules of origin, including preferential rules of origin;

• the significance of tariff peaks, particularly in the EU;

• the possibility of a link with labour standards.

15. It was considered that though the ATC is not for re-negotiation. The general issue of market access (which would include the textile and clothing sector and issues such as tariff peaks, antidumping measures and rules of origin) should be on the agenda for the WTO Third Ministerial Meeting in November 1999, and included in any new round of multilateral trade negotiations.

V. Eco-labelling

16. The International Trade Centre presented the topic, emphasising the role it played in the monitoring of the environmental aspects of international trade. Specifically the ITC was planning to collate and distribute information on eco-labelling in several sectors (further details and documentation is available from the ITC). The main points made on eco-labelling as related to textiles and clothing included:

• the increase in country specific eco-labelling schemes which, though to date are voluntary, have trade implication for LACs;

• in the main, industry was not convinced of the need for these measures, which added to costs, and there was no evidence of strong consumer demand;

• it was important for exporters to be informed by importers of the trade advantages and requirements of particular eco-labelling schemes;

• no common standards exist as yet, though the EU had published directives on eco-labels for T-shirts, bed linen and other textiles and clothing. These cover issues such as the elimination of the use of AZO-dyes and the reduction of water pollution;

• a particular problem for LACs was the lack of testing facilities (and the lack of proper standards).

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