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Speacial Reports/ WTO |
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Textiles and clothing in the WTO regime
By Muhammad Aslam Shad
For pragmatic policy formulation in the textile
and clothing sector, it is important to peep into
the trade history of the world, particularly the
year 1945.
As
the world had just witnessed mass slaughters,
destruction of economic infrastructure and
disruption of free flow of trade, it was decided
to restructure international political and
economic order to avoid such catastrophes in
future. As a result, on the trade front, the
contracting parties agreed to create GATT in 1947
with the objective to regulate the flow of goods
at global level.
The US initially brought about across the board
reduction in tariffs and trade barriers, but after
seeing how quickly Japan was rehabilitating
itself, it started to pressurize GATT into
dispensing with its declared objectives of
removing of quantitative restrictions and ensuring
of non-discriminatory treatment in relation to
textiles and clothing which were virtually taken
out of its ambit through the 'short-term' (1960)
and the 'long-term' cotton arrangements (1962-73)
and the subsequent multi-fibre arrangements (MFA)
of 1974.
The perpetuation of non-tariff barriers and the
erection of quota walls caused much resentment
among the developing countries, who started
exerting pressure on the rich countries which were
not only adamant that the MFA quota regime be kept
intact to a great extent, but also that trade in
services and intellectual property should be
included in the GATT ambit to be traded like
goods.
As a compromise, the World Trade Organization
(WTO) was created on 1st January 1995 in which
both sides were accommodated by including
services, intellectual property, agriculture and
textile and clothing in its purview.
A ten years' transitional period was provided for
phasing out of quotas for textiles and clothing
under the new arrangement called Agreement on
Textile & Clothing (ATC), which shall extinguish
on 31st December 2004.
In spite of the short sighted policies of
different governments in the last two decades and
the shocks experienced on the economic front,
Pakistan's textile and clothing sector has done
fairly well, withstanding the quota walls in
transacting its business.
Now that the situation is somewhat favourable, it
is imperative that the all concerned including the
industrial and business community and
functionaries of the government, particularly from
the CBR and its field formations, must
re-orientate their thinking and move towards
excellence in quality, pricing, timely delivery,
facilitation and research.
In the last few years, the industrial community
has taken commendable steps by investing $4
billion in BMR, which has pushed our cloth
production by 14 per cent and synthetic fibres by
26 per cent, yielding $7.4 billion in the
financial year 2002-03 as compared to $5.9 billion
the year before.
As the current trend is for the establishment of
air-jet looms units, open-width processing units,
and in printing major strength is of 'rotary'
screen printing machines, further investment
should be made in the import of latest machinery
for spinning, weaving, bleaching, dyeing,
printing, finishing and knitting etc.
It is a good sign that the export of fabrics, bed
wear, knitwear and garments has crossed billion
dollars level, and the share of made-up and
clothing has gone up to 57 per cent and of yarn
and fabric to 43 per cent, much more needs to be
done.
The industry must improve production efficiency
through increased automation, re-engineering of
systems, backward and forward integration of
operations, moving up the value chain, strategic
collaboration with foreign firms besides enhancing
marketing capabilities as quota-free access of
Mexico and Caribbean countries to the US market
and of Central and Eastern Europe and the
Mediterranean Rim, including Turkey to the
European Union market, is on its way out.
As these countries will no longer have this
competitive advantage, Pakistan can make effective
inroads into the US and European Union markets
through downward revision of prices and
improvement of quality.
All concerned in this line should look into
consumer preferences by collaborating with the
leading design houses of the US and Europe, invest
more in international marketing by establishing
sales offices in world centres such as New York,
Tokyo and London, and migrate from low-end to
high-end products.
They also must assume higher responsibility in the
logistics value chain by acquiring technology to
ensure timely, error-free delivery of merchandise
and start providing warehousing facility to buyers
until the goods are needed.
Ways and means have to be devised to bring about
horizontal and vertical integration and set up
integrated production and supply lines by becoming
part of the global value chain.
This includes active participation in regional
textile exhibitions like the one that will take
place in Dubai from March 20-23, 2005, in which
leading manufacturers and decision makers from
South Asia, Africa, CIS countries and the Middle
East are expected to participate.
(i) Environmental concerns have assumed global
proportions. There is genuine awakening in the
West that more attention should be paid to check
environmental degradation. But there is strong
apprehension in the developing countries that this
would also be used as a non-traditional trade
barrier by the Western world to protect their own
non-competitive industries.
Pakistan, therefore, has to move on this count
cautiously and ensure that we fulfil all
fundamental requirements of the environmental
agreements, the agreement on technical barriers to
trade, substantially improve quality of our
exports and make our policies and implementation
mechanism environment-friendly.
The unbridled and unethical use of spurious
pesticides, must end. Pakistan should introduce
eco-labelling across the board, be prepared to
switch over to organic cotton growing and
effectively stop the use of hazardous chemicals in
the whole range of textiles and clothing.
For us, there is no policy option as 55 per cent
of our exports are destined to the US and the EU,
which have very high health, safety and
environment standards.
(ii) Social issues such as respect for core labour
standards, including child labour's minimum age,
would continue to be raised.
(iii) Threat to invoke anti-dumping duties: The
philosophy behind the anti-dumping law is that it
clears the way for normal, healthy international
competition by discouraging unfair,
market-distorting trade.
The anti-dumping law acts to preserve "a level
playing ground" on which domestic and foreign
producers can compete on the basis of who makes
the best product on the lowest cost - as opposed
to the situation in which some foreign producers
enjoy an artificial advantage because of
government-caused distortions in their home
market.
However, the law invariably is invoked,
particularly in the US, in a manner that it out
rightly tilts more in favour of the local industry
and acts as a protectionist measure.
Now this weapon is being employed all over, so
much so that in the year 2002, even China
initiated 10 anti-dumping investigations on
products with import value of $7 billion and
another 20 investigations in 2003.
Our exporters must try to strike a balance between
the compulsion to reduce prices and the threat of
anti-dumping duties, particularly in the changed
scenario when the U.S. has refused to repeal the
Byrd Amendment (which says that companies that
initiate anti-dumping and anti-subsidy complaints
should receive the proceeds of any duties that are
imposed which indirectly offers American firms
cash incentive to clamour for protection) which
has been held as illegal by the WTO.
(iv) Rules of Origin is the criterion used to
define where a product was made. The Rules of
Origin Agreement requires WTO members to ensure
that the rules of origin are transparent; that
they do not have restricting, distorting or
disruptive effects on international trade; they
are administered in a consistent, uniform and
impartial manner and are based on a positive
standard.
The developed countries have quite often flouted
this agreement as was recently done by the U.S.
which included made-ups with as little as 16 per
cent cotton content in the category of cotton
products so that the stringent rules of origin
could be extended to made-ups to contain the
market access of countries such as China,
Pakistan, Brazil, Egypt, South Korea, India and
Bangladesh. (v) Transparency of Local Laws etc
Pakistan does have a good chance as the
opportunity for boosting of exports is knocking at
our door but it can be availed only if we move
cautiously. There is more awareness but sadly this
has not translated into preparedness. And therein
lies a danger: that we will repeat our past
mistakes.
Our next-door neighbour, India, has embarked on an
upward trajectory, propelled by its thriving
software and business service industries, which
support corporations in the U.S. and other
advanced economies.
We, too, should try to steadily integrate our
economy in a larger web through trade and
investment treaties with powers such as China,
Japan, the US, EU and the ASEAN countries. As a
long-run strategy, it is equally important that
the whole nation be made aware of different facets
of the WTO through a systematic campaign.
Courtesy:The DAWN |
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Pakissan.com; Advisory Point
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