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South Asia Hopes to Survive End of Textile Quotas


A system of quotas on the global textile trade expires on the first of January. The Multifiber Arrangement pushed North American and European companies to spread their purchases of textiles and garments across dozens of nations. Now they can focus on just a few very efficient producers. VOA's Patricia Nunan takes a look at how South Asian nations are bracing to deal with the change.

Sitting at rows of sewing machines, 40 men are making clothes ranging from little girls' party dresses to trendy, silk tops detailed with intricate embroidery.

These are just some of the specialties that Harpreet Sindhu, the director of Cornell Overseas, a New Delhi garment manufacturing company, hopes will help the business thrive in the coming years.

"Just feel the fabric. It's silk chiffon, very beautiful," she said. "And the detailing that we add is what is really our capability - to be able to add to a simple blouse."

Cornell Overseas supplies its U.S. parent company, April Cornell, with clothes, furniture and house wares that are sold across North America.

Like thousands of companies in Asia, Cornell Overseas is bracing for the shift in demand expected after January 1, with the end of the Multifiber Arrangement on the international textile trade. The 30-year-old quota system allowed North American and European countries to set quotas on imported textiles from other, mostly developing nations.

The system, originally meant to protect manufacturers in developed countries from low-cost producers in poorer countries, wound up pushing importers to buy from dozens of countries. Without quotas, importers can purchase from the most competitive producers they can find, no matter where.

Analysts say that change to the $500 billion global industry could cause shockwaves in countries unprepared to deal with it.

China, with its vast, low-cost labor pool, efficient shipping and huge factories, is expected to dominate the textile market once the quotas are lifted.

For that reason, Ms. Sindhu has traveled to China to see what the competition is all about. She came back to India cautiously optimistic.

"I was impressed because I found the product is interesting, the product is well-priced, the people looked very professional, but I was not really intimidated," she said.

Industry analysts say that is the right attitude for Indian manufacturers to have. They say earnings in India's textile sector could climb from $11 billion a year in 2002 to at least $30 billion by 2010. That is largely because India has a strong track record in producing synthetic fibers and grows its own cotton, giving manufacturers easy access to affordable raw materials.

"Given both these aspects, it is quite likely that India might be the second-best gainer post-quotas going away," said Raghav Gupta, who is with the international management consulting firm KSA Technopak.

"Although it is also likely India may not be close to China - it might be a distant second, but a second, all right."

Other South Asian nations, such as Bangladesh and Sri Lanka, will have to stay on their toes to survive. Neither country produces its own raw materials, which means that without the quota system, they probably never would have developed a garment industry at all.

Mr. Gupta says Sri Lanka has developed a niche market in producing high-quality apparel and lingerie, which will help it to weather the storm. But Bangladesh may have a more difficult time.

A report sponsored by the International Monetary Fund estimates that garment manufacturers in Bangladesh employ almost two million people. More than half of them could lose their jobs when the quotas end. Millions of others in related industries, such as shipping and trucking, also might find themselves out of work.

Bangladesh has joined more than 50 nations that have petitioned the World Trade Organization to keep the quotas in place for three more years - although it is not likely the trade body will do so. There also is hope that U.S. textile manufacturers will persuade Washington to limit Chinese imports, which may help protect some of Bangladesh's exports to the world's biggest consumer market.

Some hope that will help give Bangladesh's industry the boost it needs to survive.

"We want the developed countries to hold China from unfair competition. And that's how we think Bangladesh will fight back," said Anisul Haque, the president of the Bangladesh Garment Manufacturers Association.

Mr. Haque admits that there are several areas where Bangladesh needs to improve to help the industry ease the pain come January, including modernizing port facilities and cutting delays in customs to reduce shipping time. Such efforts may help Bangladesh and other South Asian countries survive in the new global market.

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