Cancun Fails To Dampen Spirit Of EU Textile Cos

Written by Malcolm Subhan | Brussels, Sept 30: | Updated: Oct 1 2003, 05:30am hrs
The textile and clothing industry in the 15-nation European Union (EU) has mixed feelings about the failure of the WTO trade ministers to reach an agreement at their recent meeting in Cancun. With a turnover of some $170 billion last year, the industry is one to be reckoned with. Even so, it is having a hard time holding its own against imports, which came to $62 billion last year, and consisted largely of garments from Asia. Despite exports of just over $36 billion, the EU was left with a trade deficit of $26 billion.

For the industry in the EU, the Doha Development round of trade negotiations is an opportunity to get countries like India, with its high import duties and numerous non-tariff barriers, to open up their markets to imports. Securing better access to overseas markets is the offensive element in the industrys strategy. The defensive element is the creation of a vast free trade area covering the enlarged, 25-nation EU, on the one hand, and the countries of the eastern and southern Mediterranean, including Morocco and Tunisia, on the other.

The textile and clothing industry in the present 15-nation EU is already looking forward to the entry next May of 10 Central and East European member states. Within this 25-nation single market there will be an increase in shipments of fabrics to the new member states, to be made into garments for the 15 existing member states and for export to non-EU countries. But the textile and clothing industry is also working actively for the strengthening of what it terms the Pan Euro Med zone, a vast free trade area covering some 35 countries, which will allow garment manufacturers in countries with high labour costs to relocate production in countries where labour costs are considerably lower.

The failure of the WTO trade ministers to reach an agreement on the modalities for the tariff negotiations on non-agricultural products is a source of considerable disappointment to the textile and clothing industry in the EU. Not that such an agreement was in sight. The draft declaration on market access for non-agricultural products submitted to the trade ministers at Cancun was very similar to the earlier draft; indeed, its revised provisions for added flexibility for unbound tariffs were unacceptable to the European textile and clothing industry, as they would benefit such major exporting countries as India and China.

Industry sources here doubt that the Doha Development round will end on time. The European industry had been looking forward to the successful completion of the round by the end of next year, as agreed to by WTO trade ministers when they met in Doha some two years ago. With the developing countries, including India, of course, committed to reducing their textile and clothing tariffs as from 2005, the European industry could have looked forward with a measure of confidence to the expiry of the 1995 WTO Agreement on Textiles and Clothing, and the consequent elimination of all the quotas originally imposed by the EU and other developed countries under the 1972 Multifibres Arrangement (MFA).

Despite the failure to reach an agreement at Cancun, EU industry sources here believe that the trade negotiations launched at Doha in 2001 will continue. They note that the Uruguay Round which, like the Doha Round, was scheduled to last just three years in fact continued for another four years. But the elimination of quotas in 2005 will witness intense competition among textile exporting countries, focused on the European and American markets. In other words, while Asian countries will have unfettered access to the 25-nation EU, European exporters will continue to face tariff and non-tariff barriers in many Asian and other developing country markets, according to the European industry.

This is the bad news for the European textile and clothing industry, according to Euratex, the organisation which represents it in Brussels. The industry is therefore trying to take comfort in the fact that with the Doha Development round likely to continue well beyond 2004, it will have time to make a success of enlargement and to successfully complete the Pan Euro Med Zone. The industrys own trade body, Euratex, has intensified its contacts with the Mediterranean countries in this connection. During a seminar on the rules of origin, held earlier this year in Rabat, the capital of Morocco, Euratex noted the growing interest on the part of the countrys textile and clothing industry in the Pan Euro Med Zone.

The EU has signed and, in certain cases, is already implementing association agreements with several Mediterranean countries. They include Algeria, Lebanon and Jordan. The EU is also giving strong support to the implementation of the Agadir agreement, which provides for the creation of a free trade area between Egypt, Jordan, Morocco and Tunisia by 2006. The longer the conclusion of the Doha Development round is delayed, the more time the enlarged EU will have to consolidate the Pan Euro Med Zone, described by the EUs trade negotiating arm, the European Commission, as the wider Europe. This is also true as regards the enlargement of the EU to 25 member states from May 1, 2004. As far as the European textile and clothing industry is concerned, enlargement has been a fact of life for some years now, given that the industry in the 10 new member states already enjoys quota and duty-free entry into the 15-nation EU. Turkey, a candidate for EU membership, may never be admitted, but it has already concluded a free trade agreement with the EU. Full EU membership for 10 countries, most of them with living standards well below those of the 15 existing members, is bound to pose problems of integration and consolidation. A delay in bringing the Doha Round to a successful conclusion will give the 25-member EU time in which to solve these problems, without the additional strain of having to cope with the requirements of a successful Doha Round. For the industry, this is the positive side to the failure in Cancun. Even so, for the Director-General of Euratex, Bill Lakin, failure in Cancun was on balance, bad rather than good assuming that Cancun would have resulted in a text acceptable to us.