In 2003, the EU consisted of 15 countries, including the UK, Germany, France and Italy. On May 1 this year, ten more countries came in: the newcomers include Poland, Hungary and the Czech Republic. From this year their textile and clothing exports to EU, which amounted to some 8 billion euro in 2003, will now be recorded as part of the internal trade of the EU, and not as imports.
The EU wants to share the benefits of enlargement with its nine neighbours across the Mediterranean sea and four in Eastern Europe. Under its European Neighbourhood Policy (ENP), the EU wants to offer them the prospect of a stake in the EUs internal market, including further liberalisation to promote the free movement of persons, goods, services and capital.
Now just three southern Mediterranean countries (Egypt, Tunisia and Morocco) exported textiles and clothing worth some 8 billion euro to the EU in 2003. Within the next two or three years, their exports could well be recorded as part of the EUs internal trade, thanks to an emerging network of free trade agreements involving the EU and the southern Mediterranean countries.
How might the EUs enlargement, and the successful implementation of its European Neighbourhood Policy, affect Indias exports to the EU India, Bangladesh and Pakistan were doing very well on the 15-nation EU market in 2003, according to the report published by the European textile and clothing industrys lobby in Brussels, Euratex.
China was doing even better. The report refers to Chinas awesome performance, noting that its clothing exports to the EU rose by 18 per cent to 11 billion euro, and its market share to 20 per cent in 2003. With textile exports worth 2.4 billion euro, China was the EUs largest external supplier, followed by Turkey.
Indias garment exports came to 2.6 billion euro, and its textile exports to 1.7 billion euro in 2003. The corresponding figures for Pakistan were 1 billion and 1.2 billion euro. Bangladesh was ahead of both India and Pakistan, however, with clothing exports worth 3 billion euro.
The challenge facing India, even China for that matter, stems from the very nature of the enlarged EU and its preferential trade relations with its immediate neighbours to the south and the east. Two major clothing exporting countries Romania (3.7 billion euro in 2003) and Bulgaria (961 million euro) are expected to join the EU as full members by 2007. A third, Turkey (7.3 billion euro in 2003) could join by the end of the decade. It already has a FTA with EU.
Production cost in all these countries, and in most of the EUs 10 new member states, are much lower than in the older EU member countries, with the possible exception of Greece and Portugal. It will be easier, therefore, for European manufacturers to shift clothing production to low-wage countries that are either within the EU or are closely linked to it through the ENP.
The rise in demand is likely to continue. But a higher proportion of it is likely to be met from within the EU and its ring of friendly nations. Indeed, the continuing fragmentation of the EU clothing market, and the shorter delivery times that go with it, will favour domestic producers and those within the EUs orbit.
The task of implementing the ENP will fall on the successor to the current EU Commissioner for external relations, Chris Patten Ms Benita Ferrero-Waldner, former foreign minister of Austria. From November 1 she will be responsible for creating the wider Europe and strengthening EUs relations with India and other Asian and Latin American countries.