Published: The Financial Express, June 18, 2004,

By Pradeep S Mehta

The demise of the quota system in the Agreement on Textiles and Clothing at the end of this year may not be smooth on several counts. This may be because of, first, the clamour by many countries and their businesses to extend the quota system and, second, the European Union’s (EU) threat of bringing back the social clause in the context of the end of the textiles quotas. Thus, the possible gains to textile-competitive countries, like India, Indonesia, the Philippines, Pakistan and China will be thwarted if any of these moves succeed even partially.

Speaking at the WTO public symposium at Geneva in May, Pascal Lamy, the EU trade commissioner, said: “We failed to bring in social issues at Doha and will launch a campaign soon after the end of this year when the quotas under the agreement on textiles and clothing comes to an end”. This is just a tip of the iceberg.

A few months ago, the EU launched a major salvo, which, if implemented, can become a nightmare in the international trade scenario. A discussion paper on Collective Preferences was released, which goes far beyond the issue of labour standards alone. Perhaps to pacify possible reactions, Mr Lamy admitted that the paper was still in discussion mode, but stressed that countries should have a holistic approa-ch towards trade (just like the EU does). The paper envelops a bunch of non-trade concerns, such as environment, gender, forests, industrial and agricultural restructuring and cultural amalgamation. It suggests that international trade will need to be harmonised with these concerns.

“Social rights are Anglo-Saxon concepts and at a very premature stage in developing countries. Social rights should be an integrating factor in this globalising world rather than lead to disintegration”, writes Shuaihua Cheng, a Chinese WTO expert with the Shanghai Municipal Government Research Centre in a mail to the writer. “Greater interaction among developing countries must be conducted, while India should also consult China before any major blunder is done resulting from an outdated mindset.” It is on the basis of the Collective Preferences that EU would seek justification for the inclusion of labour standards in the WTO.

Following the publication of the International Labour Office’s report on the social dimensions of globalisation, the international trade union movement, too, is gearing up to launch a fresh offensive on the inclusion of labour standards into the WTO. Most developing countries oppose this because they act as protectionist device and a non-tariff barrier restricting imports in a country.

The WTO deal on textiles and clothing (ATC), as the successor to the Multi-Fibre Arrangement, governs international trade in textiles and clothing. It was brought into the WTO framework as a trade-off to TRIPs during the Uruguay Round negotiations. Being a labour-intensive sector, it is an extremely important sector for the developing countries. They agreed to TRIPs hoping that this liberalisation in textiles will help them to develop as well as create more jobs for their impoverished people. “If there ever was an industry which widely contributed to economic growth in many Asian countries, then it was the textile and clothing industry”, write Samar Verma of Oxfam GB in India and Dean Spinanger of the Kiel Institute of World Economics, Germany, in a paper on the death of the quota system in Bridging the Differences, published under a CUTS-University of Sussex research project: EU-India Network on Trade and Development.

“While there does not seem to be a consensus opinion on what the impact of the elimination of the textile quotas might imply, there seems to be a growing concern that China’s accession to the WTO will have a massive impact on global textile and clothing exports”. In fact, one ploy, which the trade union movement uses to woo other developing countries, is precisely the competitiveness of the Chinese textile industry on the basis of ‘low’ labour standards. Its argument is that a social clause in the WTO will actually help other developing countries, like India. Further, a recent move by the powerful US labour body, AFL-CIO, to check cheap imports from China was rejected by the US administration, but it is not yet dead.

Exports of textiles and clothing account for 50 to 70 per cent of developing countries’ trade. And it is with the help of quotas that many poor countries have developed their textile and clothing exports. With the elimination of the quota system, the rich countries’ markets will be exposed to stiff competition.

“The end of the quota system is bound to sharpen competition and radically change the picture”, said Mr Lamy at a seminar in Brussels on March 25, 2004. “Attention will focus more on the rules governing international competition. I think the question of compliance with the ILO conventions on fundamental social rights-banished from the arena of trade issues at Doha despite my best efforts will be back on the agenda, this time probably at the request of the very developing countries which resisted it at Doha”.