MEETING MILLENNIUM DEVELOPMENT GOALS IN SUB SAHARAN AFRICA: THE CONTRIBUTION OF TEXTILE AND CLOTHING SECTOR UNDERMINED

Moses Kindiki

African Clothing and Footwear Research Network, Institute for Development Studies, University of Nairobi, Kenya

Sixth Global Development Conference, Dakar, Senegal

22-26 January 2005

OUTLINE

Introduction Multilateral Trade Regime (MTR) in Textiles and

Clothing (T& C): A Brief History Effects of Trade Restrictions on Human Development

and Millennium Development Goals (MDGs) in Sub-Saharan Africa (SSA)

Prospects and Challenges Beginning 2005 Onwards Summary, Conclusions and Recommendations

1 INTRODUCTION

Millennium Declaration: Special attention to Least Developed Countries (LDCs); in essence SSA

To achieve MDGs, emphasis on manufacturing/ agro-industry and textiles necessary; gains from trade key

But… MTR in T & C has undermined gains from trade, jeopardising human development and MDGs - no evidence of improvement in future unless action is taken

2 MTR in T & C: A BRIEF HISTORY

1960s and 70s: Internationalisation of production/ globalisation (Simai, 1990) (product cycle theory) (Kojima, 1977)

North re-technologised (Biel, 2000); New International Division of Labour (NIDL) (Frobel et al, 1980)

Nevertheless, developing countries T & C manufactures increased hence ‘special’ arrangements (1961-1994) (Das, 1998)

1995-2004-Transition to liberalisation; 2005 onwards- liberalisation

3 EFFECTS OF TRADE RESTRICTIONS ON HUMAN DEVELOPMENT/ MDGs 1961-1994

– Quotas and tariffs imposed on developing countries (Das, Op. Cit.)

– Result (a): Developing countries loss of government revenue and income to poor households

• LDCs most affected • 27 million jobs forgone in developing countries; US$ 64

billion lost annually(IMF and World Bank, 2002)• Mutual impact: 27 m jobs in the South; consumer prices

less by 20-30 % in the North (Madra and Quadir, 2004)

… Effects (1961-1994)

– Result (b): No industrial upgrading, no training • Tariff escalation undermined industrial upgrading hence

lower exports earnings• Even then, upgrading without training would have

negative effect- unskilled and semi skilled workers would lose their jobs

• However, neither upgrading nor training took place

… Effects (1995-2004)

Transition to Liberalisation (1995-2004)– Loss of revenue and incomes continued owing to loopholes:

• No clear benchmark for integrating products• No specification regarding choice of products• Tariff escalation (Das, Op. Cit.)

– Result: • No significant gains on human development• However, African Growth Opportunity Act (AGOA) brought relative

gains

… Effects (AGOA:2000-2004)

AGOA– Extended SSA preferential access to US market – Increased range of products for which preferential treatment

is granted (with respect to T & C sector, apparel included) (USSSATECF, 2004)

– Results• Increased preferential coverage by 73 % (apparel constituted 5 % of

the 73 %)• May raise Africa’s non-oil exports by between 8 and 11 % by 2008

(Mattoo and Subramanian, 2003)• A number of SSA countries have become highly dependent on the

sector for export earnings (IMF & World Bank, Op. cit.)

4 PROSPECTS AND CHALLENGES BEGINNING 2005 ONWARDS MTR

– Developed countries may be reluctant to integrate all products (Das, Op. Cit.)- low-skilled women workers in SSA LDCs will suffer most

– Balance of payment problems for SSA LDCs highly dependent on the sector for export earnings (IMF and World Bank, Op. Cit.)

– Fallacy of composition- lower standards of living and shaky safety nets in SSA LDCs (Peet, 2003; UNDP, 2003)

… Prospects and Challenges (MTR)

– SSA LDCs will lose out owing to ‘trade-related’ competitive factor (UNCTAD, 2002; Hayashi and Bauer, 2004)

– SSA LDCs adjustments will entail massive job losses (Peet, Op. Cit.; Hayashi and Bauer, Op. Cit.)

– Deteriorating labour conditions owing to increased competition likely (Das, Op. Cit.; UNCTAD, Op. Cit.; Peet, Op. Cit.)

– SSA LDCs seeking to expand production from a low base will be constrained by normal World Trade Organisation (WTO) safeguards (Das, Op. Cit.)

…Prospects and Challenges (AGOA)

AGOA– Rule of Origin (ROO) would limit the otherwise

welfare gains– Without the ROO, Africa’s non-oil exports would

increase by US $ 0.54 (Mattoo and Subramanian, Op. Cit.)

– With the ROO, the increase in non oil exports will be US $ 0.1-0.14; total SSA exports will be reduced by 30 percent (Mattoo and Subramanian, Op. Cit.)

… Prospects and Challenges (AGOA)

– For SSA LDCs, impact of ROO on exports more dramatic • Mauritius (not an LDC): Exports will be lowered by 26 percent; the

decline would be 18 percent in absence of ROO• Madagascar (LDC): exports will be lowered by 19 percent;exports

would be higher than in transition period in absence of ROO (Mattoo and Subramanian, Op. Cit.)

– Similar trend in apparel sub sector• Before 2004: LDCs (e.g. Madagascar) recorded most impressive

gains; more developed countries (South Africa and Mauritius) posted modest growth (Mattoo and Subramanian, Op. Cit.)

• Reason for the scenario above: LDCs were exempted from ROO up to September 2004

• LDCs growth in the sector expected to be stunted

…Prospects and Challenges (Gender Issues) Gender Issues

– T & C sector largest employer of women in developing countries after agriculture (Hayashi & Bauer, Op. Cit.); Empowering women through access to paid work has greatest multiplier effect to meet MDGs (Kabeer, 2003)

– But.. Women empowerment likely to be eroded• Competition= specialisation (LDC specialise in labour-

intensive activities)=low value exports= low incomes for women

…Prospects and challenges (Gender Issues)

• Competition= adjustments= loss of low skilled jobs (mostly held by women)

• Upgrading will require skilled labour; most women lack such skills; many women will lose jobs or benefits will be unevenly distributed (Nicita & Razzaz, 2003)

5 SUMMARY, CONCLUSIONS & RECOMMENDATIONS Summary

– Millennium Declaration: Special needs for LDCS (SSA)– Emphasis on manufacturing/agro-industry & textiles

necessary; trade key– Gains from trade in T & C sector have been undermined

(1961-2004); but AGOA has mitigated this– From 2005 onwards, owing to competition and AGOA’s ROO,

LDCs will lose out, jeopardising human development and MDGs in a gendered pattern

…Summary, Conclusions and Recommendations (Conclusions) Conclusions

– The ROO notwithstanding, AGOA has mitigated the costs of industrial globalisation in SSA hence contributing to human development

– However…implementation of the ROO beginning 2005 will undermine these gains

– The hardest hit by liberalisation will be poor women in SSA Recommendations

– Developed countries should end all trade barriers in the sector (including putting in place adjustment programmes) and ROO should be abolished

…Summary, Conclusions & Recommendations (Recommendations)

– SSA LDCs should set up policies that guarantee conditions and rights of workers are met; collaborate with NGOs to set up training programmes to upgrade workers’ skills

– At DDA, development principle should be accorded highest priority

Without growth of such key sectors as apparel in SSA LDCs, MDGs will not be met in the region by 2015 (at current rates MDGs in SSA will be met in the next over 100 years (World Bank, 2004). Achieving MDGs would yield the best results for mutual impact and social sustainability than any other economic strategy

REFERENCES

• Das, Bhagirath Lal, 1998a, The WTO Agreements: Deficiencies, Imbalances and Required Changes, Zed Books Limited, London and New York.

• Frobel, F, Heinrichs, J and Kreye, O, 1980, The New International Division of Labour: Structural Unemployment in Industrial Countries and Industrialisation in Developing Countries, Cambridge University Press, pages 1-23.

• Hayashi, Michiko and Bauer, Melanie, 2004, ‘Gender-Related Issues in the Textiles and Clothing Sector’, in Tran-Nguyen, Anh-Nga and Zampeti, Bevigilia (eds), 2004, Trade and Gender: Opportunities and Challenges for Developing Countries, UNCTAD, New York and Geneva.

• International Monetary Fund and the World Bank, 2002, ‘Market Access for Developing Country Exports- Selected Issues’, in Trade Electronic Bulletin, Volume 3, Issue 21 (Winter).

…References

• Kabeer, Naila, 2003, Gender Mainstreaming in Poverty Eradication and the Millennium Development Goals: A Handbook for Policy Makers and Other Stakeholders, The Commonwealth Secretariat, London.

• Kojima, Kiyoshi, 1977, ‘The Re-organisation of North South Trade’ in Kojima, Kiyoshi, 1977, Japan and a New World Economic Order, Croom Helm, London.

• Madra, Ek and Quadir, Serajul, 2004, ‘Asia’s Fear and Hope as Textile Quotas End’, in the Daily Nation, 24 December 2004, page 11, Column 1 to 3.

• Mattoo, Devesh Roy and Subramania, Arvind, 2003, ‘The Africa Growth Opportunity Act and Its Rules of Origin: Generosity Undermined?’ in African Development Review, Issue 26, Volume 6, pages 829- 851 (June).

…References

• Nicita, Alessandro and Razzaz, Susan, 2003, Who Benefits and How Much? How Gender Affects Welfare Impacts of a Booming Textile Industry, World Bank Policy Research Working Paper 3029 (April), [http://econ.worldbank.org/files/25832_wps3029.pdf], (accessed 26 July 2004).

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• Simai, Mihaly, 1990, Global Power Structure, Technology and World Economy in the Late Twentieth Century, Pinter Publishers, London.

• UNCTAD, 2002, Trade and Development Report, [http://www.unctad.org/en/docs/tdr02.en.pdf], (accessed 2 July 2004).

• UNDP, 2003, Making Global Trade Work for People, Earthscan Publications Limited, London and Sterlin.

• UN Economic and Social Commission for Asia and the Pacific (UNESCAP), 2003, Promoting the Millennium Development Goals in Asia and the Pacific: Meeting the Challenge of Poverty Reduction, UN, New York.

• World Bank [devnews@worldbank.org], 2004b, ‘Brown’s Aid Initiative Faces an Uphill Battle’, in [devnews@lists.worldbank.org], (Press Review, 17 February).