Euratex On Overdrive As Textile Quota End Nears

Written by Malcolm Subhan | Updated: Jul 3 2004, 05:43am hrs
January 1, 2005, should be a red-letter day for Indian textile and clothing exporters, since it will mark the disappearance of all quotas, in line with the agreement reached by the MFA countries in 1994. But will these quotas be finally phased out next January 1 or will they be extended for three years

Moves to extend the present system of quotas are under way. The Istanbul Declaration, signed by the US, Mexico and Turkey in early March, called for a three-year extension. Their initiative has been backed by a growing number of developing and developed countries to the point where a Global Alliance has emerged.

Meeting in Brussels on June 17, the Alliance called for an emergency WTO meeting to consider either a three-year extension of the quotas or alternative measures, like automatic safeguards against the hijacking of world markets by major exporting nations, notably China and India. Euratex, the Brussels-based body that represents the European, including Turkish, textile and clothing industry, has just come out in favour of an emergency WTO meeting. It claims that the situation is very different today from what it was 10 years ago, when the Agreement on Textiles and Clothing (ATC) was signed.

Chinese textile and clothing exports to the 25-nation European Union (EU) in particular are likely to reach such levels after next January as to pose a threat to not only the Europ-ean industry and exporters but also to exporters in smaller and poorest developing countries. Hence, the Euratex statement calling for an emergency WTO meeting.

The EU trade supremo, Pascal Lamy, re-affirmed at his press conference this week that the EU stood by its 10-year old commitment to phase out all textile and clothing quotas by January 1, 2005.

Euratex believes, however, that both the EU and the US would agree to an emergency WTO meeting, were a sufficiently large number of the poorest and less competitive developing countries to press for it. Whether Mr Lamy, or his US counterpart, would agree to extending the ATC deadline remains to be seen.

Probably not, is the short answer. Mr Lamy, it must be remembered, co-chaired the high-level group on textiles that the EU set up in February. The group has just submitted its report, The Challenge of 2005. The last of its seven recommendations deals with China. Pointing to the exceptional surge of Chinese exports at reduced prices in 2002-2003, the group wants the matter to be discussed in the recently established EU-China Textiles Dialogue, to avoid a similar situation after January 1.

Meanwhile, it has called for the creation of a mechanism to monitor (a) the level of imports from China, (b) the market access Beijing offers EU exporters and (c) Chinas compliance with its WTO commitments. The group also recommends that requests by EU textile and clothing firms for safeguard measures, under the textiles-specific clause negotiated at the time of Chinas accession to WTO, be handled in a transparent manner.

The efforts to contain any future surge in Chinese exports should be set against the recommendations aimed at raising the level of imports from the poorest and smaller developing countries. It takes the view that the benefits of the EUs generalised system of preferences (GSP) scheme should be limited to these countries, given that major suppliers, such as India, China, Pakistan, Indon-esia and Taiwan, are competitive and do not need tariff preferences.

It also recommended that the weakest countries be allowed a wider geographical choice for sourcing intermediate products. This could be managed through changes in the rules of origin, including a temporary and limited derogation from the double transformation rule for the benefit of the least developed countries.

The report also contains recommendations aimed at securing EU exporters better access to the markets of third countries, notably China and India. This is to be achieved through lower tariffs, and the elimination of non-tariff barriers. Tariff cuts will be negotiated in the Doha Development Round, while trade barriers will be dealt with under an EU action plan.

The groups GSP recommendations may be incorporated in the revised GSP scheme which Mr Lamy and his colleagues on the European Commission (EC) will be sending to the EU governments later this month. The new scheme will come into force on January 1, 2006, for a 10-year period.

The groups other recommendations will be the subject of a report which the EC will send to its member states by September. The report will contain proposals for implementing these recommendations. The 28-member high-level group will monitor the follow-up to its recommendations during the next two years.

The group was chaired by Mr Lamy the commissioner for Enterprise and Information Society, Erkki Liikanen. France, Italy, Germany and Portugal are represented on the group Others are drawn from industry, retailers, distributors, importers, trade unions etc.