EU trade chiefs dilemma: devil or deep sea

Written by Malcolm Subhan | Updated: Apr 16 2005, 05:30am hrs
Who makes the import policy of the 25-nation European Union (EU) Or, to put the question differently, who are the natural allies of Indias commerce minister and Indian exporters in Brussels The fact is that there is complete uncertainty for the moment as regards the EUs policy on such key issues as whether or not to (1) restrict imports of Chinese garments, (2) exclude Indian textiles and garments from the EUs revised GSP scheme (and to set a date for its introduction), and (3) introduce a mandatory system of labelling for all textile and clothing imports, to show their country of origin.

There has been such a hullabaloo here over Chinese textiles and clothing exports in particular that it is not easy to assess its likely impact on Indian exports of these products. The EUs trade supremo, Peter Mandelson, has made it clear that he does not want to re-introduce a system of quotas on imports from developing countries, including China. To do so would amount to resurrecting the 1994 Agreement on Textiles and Clothing, which expired at the end of last year and with it the old MFA-type quotas. Mandelsons team nevertheless has been monitoring imports from China, and last week he introduced guidelines for dealing with sudden and sustained increases in these imports. But we obviously need accurate and factually correct data before we can act, Mandelson declared. He hopes to have this data within the next few days, when he will be in a position to decide whether the alert levels set out in the guidelines have been reached, and for which products. Even so, the EU will not automatically limit imports of the products in question; rather, it will consult Beijing in order to allow the Chinese authorities voluntarily to restrict their exports to the EU.

For the EU textile and clothing industry, it is a case of too little, too late. Its Brussels-based office, Euratex, asked Mandelson on March 9 to take safeguard action against 12 product categories, on the basis of Chinese export statistics. That he has not done so, in the absence of reliable EU import statistics, has only fuelled the industrys anger against Mandelson. The fact is that the industry has failed to establish with the EUs new trade commissioner the close relationship it enjoyed with his predecessor, the Frenchman Pascal Lamy.

Mandelson has made it clear, for example, that he has a responsibility towards not only the European textile and clothing industry but also towards our close Mediterranean neighbours and the very weak and vulnerable developing countries dependent on the textile sector. In other words, EU trade policy must also take into account the interests of countries such as Tunisia and Morocco, for whom the EU is the principal export market, as well as Sri Lanka, Bangladesh and Mauritius. And, as a global player the EU must also remain on good terms with such rising powers as China and India.

Hence Mandelsons determined efforts to ensure that India continues to enjoy GSP treatment for its textile and clothing exports. He is facing equally determined opposition from the European industry as well as 14 of the 25 EU countries, including France. The leader of Frances extreme right wing political party, the National Front, has accused the EU of letting down Europes textile industry. For Mr. Le Pen, this is one more reason why the French should reject the EU Constitution, in the referendum set for May 29. Mandelson is therefore expected to delay his efforts to reach a compromise on his revised GSP scheme until the referendum is over, which means that the scheme probably will not come into operation until July 1 - as originally planned.

Another issue on which Mandelson will have to take the views of EU countries into account is that of the labelling of textiles and garments with their country of origin. Earlier attempts to introduce mandatory labeling for imports were defeated by an overwhelming majority of consumer organisations and business, including trade organisations. But Mandelson is consulting consumers, traders and manufacturers on the subject once again. The results should be known next month, as the consultation, which is online, ends on April 30. Consumers and the retail and import trade are expected to reject moves to introduce labeling of country of origin of imports; but with Italy strongly in support of such labeling, the outcome remains uncertain. What are some of the conclusions Indian exporters can draw from the events of the last fortnight That its natural allies here are the EUs Trade Commissioner, Peter Mandelson, and the organisations representing the retail trade and importers. The most important of these organisations is the Brussels-based EuroCommerce, an apex body representing 4.7 million companies in 28 countries. EuroCommerce, which is strongly opposed to the labeling of imports, is in close contact with Chinas diplomatic mission to the EU.

Euratex, however, wants India excluded from the revised GSP scheme for textiles and clothing. It is waiting for statistics on the EUs imports of Indian textiles and clothing before deciding on whether to ask Mandelson to take safeguard action against India also. Euratex paradoxically wants to consult regularly with its Indian counterparts; it is more relaxed about imports from India and, more to the point, sees in the countrys affluent middle classes an important market for quality European textiles and garments. It is perhaps time that organisations such as Texprocil opened an office here!