Making The Made In Europe Tag More Attractive

Written by Malcolm Subhan | Updated: Mar 20 2004, 05:30am hrs
Last week, it was about tougher rules to combat anti-dumping. This week saw the creation of a high-level textile group. Its 29 members include ministers from four European Union (EU) countries; any number of CEOs from the top European textile and clothing companies, and leading department and chain stores; trade union representatives, and the EUs trade supremo, Pascal Lamy, and two of his colleagues.

Meanwhile, the European Parliament is pushing for the creation of a European monitoring centre to make sure the Chinese are not breaking any WTO rules in their determination to flood the EU market with cheap textiles and clothing.

At the same time the European Commission, the EUs executive arm, is pushing the industry to adopt a Made in Europe label of origin.

In other words, the EU authorities are launching any number of initiatives to help the European textile and clothing industry beat off the competition from big Asian players, like China and India and, at the same time, give a helping hand to the smaller ones, like Sri Lanka, and the economically weaker ones, like Bangladesh.

There are two reasons for these European initiatives. The obvious one is the countdown to January 1, 2005, when the EU, along with the US and other signatories to the 1994 Agreement on Textiles and Clothing (ATC), will have to scrap import quotas. The other is that Trade Commissioner Lamys term of office ends on October 1, as do those of his two colleagues on the high-level group, Commissioners Erkki Liikanen (business and information society) and Philippe Busquin (research). All three, therefore, want to make sure that they have done all they can to help the European industry before they leave the EC, in six months time. All three clearly believe that the European clothing industry in particular cannot compete with producers in China and India on the basis of price; hence their more wide-ranging strategy.

Mr Lamy wants to use the Doha development round of trade negotiations to secure a level playing field for European exporters. Many of their markets are either closed to them or are not as open as the EU market. Hence, Mr Lamys drive to get developing countries, and more particularly those in Asia, to open up their markets to European goods. He is confident that Asias middle classes will find the Made in Europe label attractive, and will be prepared to pay a higher price for clothes bearing this label.

Commissioner Liikanen, who will be in New Delhi next week to inaugurate the EuroIndia 2004 IT conference, plays a pivotal role in the field of industrial development: he is responsible for EU policy in the twin fields of business and the information society. For Mr Liikanen, European producers are world leaders in the field of non-woven and technical textiles. Our challenge, he told the press, is to build on existing strengths.

The EU has been trying to help European industry in general through a succession of research programmes. The latest of these framework programmes, the sixth, is being run by Commissioner Busquin. He believes the European textile industry can once again occupy a leading position if it invests in new production processes and materials using nanotechnology to develop intelligent fabrics, for example.

All three EU Commissioners are members of the high-level group which held its inaugural meeting here on March 5. The groups mandate is to come up with recommendations designed to make the European industry more competitive, both at home and in export markets. To make sure that the recommendations are ready for adoption by July, the groups 29 members have entrusted the task of drafting them to 29 sherpas (their term). The recommendations will cover trade policy as well as industrial and scientific policy. The focus will be on research and development (R & D) in order to reduce production costs, develop new materials and generally help industry innovate. This will involve the protection of intellectual property rights and measures to combat piracy and counterfeiting at the international level.

Many European firms are small and medium-sized. They simply do not have the resources, whether financial or human, to adopt the latest high-tech production methods. The European Parliament wants both the EC and the 15 EU countries to set up aid programmes for the industry. Another solution being envisaged is to encourage firms to form clusters, and to collaborate with each other. Another complementary solution calls for training in the use of high-tech tools.

A broad spectrum of recommendations is necessary. The EU textile and clothing industry may be one of the biggest in the world, with two-way trade amounting to over $125 billion in 2002. But it is hardly monolithic; in fact it is very fragmented, consisting as it does of some 177,000 manufacturing and processing companies.

The numerous stakeholders in the industry these include manufacturers, retailers, importers, the workforce, and consumers have conflicting interests. The trade unions accuse employers of relocating in developing countries, exporting jobs to countries where child labour is used. Manufacturers accuse retailers, especially the big department and chain stores, of driving down prices through cheap imports. Small producers favour tougher anti-dumping rules, not the big companies.

A good example of these conflicting interests is provided by the tougher anti-dumping and anti-subsidy rules which the 15 EU governments adopted earlier this month, on a proposal from Mr Lamy. Under the new rules, governments opposed to the adoption of anti-dumping measures will have to state exactly why they oppose these measures; abstention will no longer count as a negative vote.

The textile industrys Brussels-based lobby, Euratex, welcomed the new rules. But another Brussels-based lobby, EuroCommerce, described the new rules as bad news for consumers, commerce and developing countries.

EuroCommerce, which represents the retail, wholesale and international trade sectors, maintains that prices will increase and consumers choice will be reduced, because imports will be less attractive. At the same time, protectionist action against competitive imports from poor countries will become easier.

Both Euratex and EuroCommerce are represented on the high-level group, which is to make wide-ranging recommendations by July. So are importers, small businesses as well as multinationals, and trade unions. Reaching agreement will not be easy, therefore. But whatever be the outcome, Indian exporters will have to compete twice as hard on this market.