Accessibility links

Some Developing Nations Fear Losses as Textile Quota Ends


A 30-year-old agreement capping textile exports to most developed countries expires at the end of this month as part of efforts to liberalize world trade. But some experts say the removal of the quotas will penalize poor countries.

The Multifiber Arrangement was designed as a temporary mechanism to safeguard textile industries in developed countries from rising competition abroad.

The agreement allowed governments to limit the quantity of textile products imported from the developing world.

Since its inception in 1974, the MFA has been extended four times. Despite the quotas, textile companies in the developed world generally failed to become more competitive against low-cost labor in poorer countries.

"In the end of the day, the developed countries did not get what they want," said Professor Au Kin-fan, who is with the Institute of Textiles and Clothing at Hong Kong Polytechnic University. "The [textile] industry was not properly adjusted and also suffered. On the other hand we saw the developing countries going up, like those in Southeast Asia."

Through the years, more and more Western clothing companies began sourcing products in Asia, where production is cheap. The quotas encouraged the development of the garment industry in developing nations such as China, Cambodia, Bangladesh, Sri Lanka, Pakistan and the Philippines.

But in 1994, international trade negotiators agreed to liberalize the textile industry and started phasing out the quotas. On January 1, the Multifiber Arrangement ends. This will allow importers to buy textile products in any volume from any country.

But not everybody welcomes free trade. Some developing nations that have enjoyed guaranteed markets under the quotas fear that they will lose out in a more competitive environment.

China and India - which can mass-produce clothing cheaply and have a ready local supply of raw materials such as cotton - are expected to dominate the global industry. The U.S. government estimates that China supplied some 25 percent of the world's textiles in 2002.

In the impoverished South Asian nation of Bangladesh, the textile industry is the heart of its economy - comprising 75 percent of total exports and employing close to two million people, three-quarters of them women.

Experts warn that without the quotas, the livelihoods of millions of people will be destroyed and that free trade will penalize the smallest, poorest nations.

"Freeing of the trade can be potentially beneficial but on the other hand, it can also be immiserising [create misery], it can also be poverty raising, it can be also detrimental to the immediate, medium- and long-term interest of developing nations," says Mustafizur Rahman, the director of the Center for Policy Dialogue in Dhaka.

Sok Hach, director of the Economic Institute of Cambodia, says the quota removal will further impoverish Cambodians. His country, ravaged by decades of war and economic mismanagement, is one of the poorest in the world.

"Poor young people want to go to work at the garment industry," he said. "Something like one million people live directly or indirectly on that industry. It's very important and it's very likely that Cambodia faces a problem when the garment industry, for example, collapses."

Bangladesh, Sri Lanka and Fiji are among a group of nations that appealed to the World Trade Organization to extend the deadline. But the trade body thus far does not seem inclined do so.

Chinese officials have sought to calm concerns and say China will adopt a "responsible" attitude on textile trade.

Some smaller nations are looking to Washington to even out access to U.S. markets. The United States is considering limiting Chinese exports after December 31 under pressure from American textile companies.

Other governments are seeking lower tariffs from the United States and European Union and help from private agencies to upgrade their industries.

There are winners, though, with the end of the textile quotas - consumers. Without quotas, clothing prices in most countries are expected to fall.

XS
SM
MD
LG