Pascal Lamy* charts an optimistic course around the pitfalls of quota elimination One of the most important results of the Uruguay Round trade talks, which led to the establishment of the World Trade Organisation (WTO) in 1995, was the agreement on the elimination of quotas on imports of textile and clothing products world- wide. After almost four decades of existence, quotas will cease to exist from 1 January 2005. This is one of the most significant events in the history of the world trading system, whose repercussions will be felt by the industry everywhere, affecting tens of millions of employees across the world as well as traders and consumers. Just over a year from this crucial deadline, pressing questions are being posed on the challenges of quota elimination in economic and trade terms, as well as social and development terms. This week the European Commission adopted a policy paper that lists measures we will pursue in response to these questions. The elimination of quotas should not be a threat, but rather an opportunity. Many studies accentuate the significant gains to be expected for the world economy. Developing countries as a whole should be able to increase their exports to industrialised countries. Greater competition should lead to greater economic efficiency, and lower import prices should result in cheaper prices for consumers. The way forward will depend on the response from industry and on the policies on competitiveness followed by governments. However, as with any major economic change, it will put the textile and clothing sector -- where there is already a general overcapacity -- under additional strain, in industrialised as well as developing countries. Nobody can tell just how individual countries will respond to and be affected by the new competition without quotas. Realignments in world production patterns are likely. Important adjustment costs may be relatively more intense in developing countries, especially those which are most dependent on textiles: some of the poorer ones, small countries which lack an integrated textile and clothing industry, and those lacking adequate infrastructure to attract investment and capacity to conform to fast changing market requirements. The least developed countries are the most vulnerable, especially in Africa and the Caribbean, and, to a lesser extent, in South and Southeast Asia. Some of these are dependent on textiles for up to 90 per cent of their industrial exports, and their employment in the sector can reach 60 per cent of the working population in industry. Other developing countries may also be under great pressure, in particular those around the Mediterranean. What can be done to cushion the impact on these countries? The way to go is not to hamper competition in the sector nor to limit market access that other countries enjoy, but instead to enact measures to facilitate imports from the weakest countries, in full compliance with the multilateral regulations. The first step would be to grant duty-free access to imports from the least developed countries, something that the EU already provides under the Everything But Arms initiative, such as to countries in the African, Caribbean and Pacific zone. Unilateral trade preferences -- such as the EU's Generalised System of Preferences -- could be concentrated on those countries most in need. We could also examine measures to facilitate greater use of such preferences, including taking steps so that rules of origin contribute to enhancing market access. In the case of the countries around the Mediterranean, progress towards the completion of an integrated trade zone should be accelerated so that it becomes effective by the end of 2004, thus promoting the competitiveness of the textile and clothing sector of the whole area. For the EU, these are matters of regional stability, as in Southern and Eastern Mediterranean countries there are almost four million people working directly in this sector. The majority of textiles produced in these countries are also EU bound. A July agreement between trade ministers from the Euro-Mediterranean on a common set of origin rules was a major step towards integration and competitiveness objectives. Dismantling textile quotas is not enough. We must tackle the inordinately high tariffs that still exist in many countries, as well as non-tariff barriers. Trade in the sector has been characterised so far by an almost one-way flow: from developing countries to industrialised countries. The EU, the US and Japan account for 80 per cent of the world's garment imports. Differences in comparative advantage may have played a role, but so have high levels of protection. For this reason the EU proposed in the WTO a genuine convergence of market access conditions world-wide. The proposal suggested that all countries -- with the exception of the least developed ones -- bring their custom duties to the lowest possible common levels, on the basis of reciprocity, and eliminate all non-tariff barriers. The most important and competitive textile exporting countries must fully be a part of this process, even if time might be needed to facilitate a smooth transition. Other issues that will require attention include respect for intellectual property rights, the fight against counterfeiting and vigilance to counter unfair trading practices. We must also promote sustainable development. Action here should not be contrary to multilateral trading rules or be construed as a protectionist device. It should consist mostly of encouragement and persuasion -- granting export advantages to countries which have a proven track record of respect for core labour standards as promoted by the International Labour Organisation as well as encouraging adherence to international environmental agreements. Policies supporting diversification into other sectors and activities in developing countries should also be promoted. Competitiveness and solidarity should be mixed to ensure that the gains of the post-2005 textile and clothing trade are widely shared. We look at the textile sector as a test case of joint action at world level. Let us all contribute to its success. * The writer is European commissioner for trade.
