FOR almost 50 years, the international textile and clothing trade has been managed by a system of quotas, but as of yesterday, January 1, 2005, these quotas will be eliminated.

This has been causing much contention among World Trade Organisation (WTO) member states.
Those countries that already can compete, mainly China and India, are building up inventories and looking forward to 2005.

China has long been preparing for the coming boom, investing billions of dollars in new factories along the country's eastern seaboard, particularly in the Yangtze River Delta, turning rice communities into new specialty cities.

For example, Datang, fondly called 'Socks City', produces nine billion pairs of socks annually, sufficient to supply the entire global market. Europe has also prepared a seven-step plan to enhance their competitiveness in the new quota-free regime, and expects to be competitive.

However, most other WTO member states, including the United States, seem to be unprepared for the expected intensification of competition and are worried about widespread business failure and related socio-economic problems.

Against the background of a dramatic increase in Chinese imports of textiles and clothing into the US, from 10 per cent in 2001 to 72 per cent in 2004, the National Council of Textile Organizations has argued that if quotas are lifted as planned, the US industry will be destroyed.

In early September, it was reported that US textile makers threatened to sue the American government for protection of their industry from expected Chinese competition.

At a meeting on September 28, US textile industry officials met with representatives from 13 countries that support some action to prevent countries such as China and India from dominating the world textile and clothing market in 2005.

On September 29, a US official said that the Bush administration would consider requests to limit textile and apparel imports from China based on the threat they pose of market disruption.
Other countries, unable to compete with China, India and perhaps Europe, are actively seeking assistance to adjust their economies when quotas are eliminated.

Seven countries, Bangladesh, Mauritius, the Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda, which were later joined by Jamaica, Mongolia and Nepal, submitted a proposal asking the WTO Secretariat to study the impact of the elimination of quotas on their fragile textile and clothing industries and to analyse the adjustment-related issues and costs.

Their proposal highlighted the negative global effects of the elimination of quotas.
One study estimated that around 27 million jobs will be lost worldwide, with a significant impact on female employment, thereby exacerbating the existing social and economic problems in these countries and fostering social unrest.

After much heated discussions and deadlock, especially from China, India, Pakistan and Hong Kong, a WTO technical assistance and training plan was accepted at a December 10 meeting of the WTO's Committee on Trade and Development.
This experience in liberalising the global textile and clothing industry is instructive.

China, once treated as a 'developing country', has been severely criticised for being "heavy-handed" and for failing to show solidarity with its developing country partners.

Although the Chinese government recently announced a two to four per cent export tax on some clothing categories, it will not alleviate the adjustment pains that will be felt in developing countries.

Even the Americans see no real benefit.
The American Manufacturing Trade Action Coalition (AMTAC), a Washington-based textile industry lobby group, expressed scepticism about the export tax, insisting that Chinese prices would still undercut theirs.

The US, it seems, is quite prepared to use trade remedies to protect its interest.
It is reported that the US Department of Commerce has agreed to consider at least 11 controversial petitions from AMTAC to impose safeguards to block some imports of Chinese textile products.
The European Union (EU) has also left open the possibility of using safeguards to block surges of Chinese imports, albeit "only if strictly necessary."

So, are we in Jamaica and Caricom ready for 'free trade' in this industry? Doesn't look so.
The writing has been on the wall for some time. Since the 1980s, employment in the garment industry in Jamaica has fallen from 40,000 people to about 10,000 today, with employees earning less than half of what they earned in the 1980s.

Although there has been about a three per cent growth in apparel exports last year and some growth early this year, this is not likely to be sustained on the same old terms after 2005.

The special access to US markets under the Caribbean Basin Initiative is all but gone. NAFTA settled the matter of whether we are cost competitive in the industry, especially given crime-related costs.

So, do we have a plan for adjustment for this industry? We seem to be now joining others in seeking assistance for an adjustment plan - bit late in the day, I think. The horse gone through.

Unless we focus on adding value through unique designs that we can brand as 'Caribbean' or 'Jamaican' or 'Reggae' or 'Ital clothes', or something, we simply will be unable to compete with the likes of China and India after 2005.

Dr Rosalea Hamilton is chief executive officer of the Institute of Law and Economics, www.ilejamaica.org. Email: rosaleahamilton@yahoo.com

Trousers in Denim

Cream of the 'Crop'

Cheeky's World