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04 April 2003
The Agreement on Textiles and ClothingThe Agreement on Textiles and Clothing
The Challenge of a QuotaThe Challenge of a Quota--free Marketfree MarketUnderstanding What Might HappenUnderstanding What Might Happen
Presentation by Presentation by Mr. Matthias KNAPPEMr. Matthias KNAPPE
Senior Market Development Officer Senior Market Development Officer International Trade Centre UNCTAD/WTOInternational Trade Centre UNCTAD/WTO
04 April 2003
With the Phasing-out of the ATC in 2005 the question is not…
Whether there will be a change or not!The question is whether it will be a:
• Sudden collapse• Or an immense and unstoppable but
somewhat predictable change
04 April 2003
What Might Happen:
Market Indications andNew Challenges for Market Entry
What Might Happen:
Market Indications andNew Challenges for Market Entry
Structure
04 April 2003
Regionalisation of Trade
Trade develops along regional linesExport of final garments• US: NAFTA, Free Trade with SADC,
CACM, Andean Countries, etc.• EU: Turkey, Mexico, Brazil, South Africa,
ACP, etc.Sourcing of fabrics and ancillaries:• SADC/AGOA, ASEAN, SAARC,
CACM/CBI, Andean region, etc.
Guatemala
Australia
BulgariaCanada
Estonia
Hong Kong
Hungary
Israel
Japan
Korea, Rep.
Macao
Mongolia
New ZealandPoland
Romania
Singapore
Turkey
Swaziland
Lithuania
Taiwan
Korea, Dem. Rep.
Algeria
Cyprus
Egypt
Lebanon
MaltaMorocco
SyriaTunisia
Micronesia
ArmeniaAzerbaijan
Belarus
Bosnia & HerzegovinaChina
Iran
Iraq
Kyrgyzstan
Libya
Moldova
Palau
Russia
Saudi Arabia
Tajikistan
Turkmenistan
Ukraine
Vietnam
Yemen
Uzbekistan
Marshall Isl.
Oman
Nauru
Albania
ArgentinaBahrain
Brazil
Brunei
Ivory Coast
Croatia
Cuba
Georgia
Guyana
Indonesia
JordanKazakhstan
Malaysia
Mali
Mexico
Namibia
Pakistan
Paraguay
Philippines
Qatar
St. Kitts
Slovenia
South Africa
Sri Lanka
Thailand
UruguayIndia
Dominican Rep.
Kuwait
Laos
Afghanistan
Nepal
Bhutan
Cambodia
Maldives
MyanmarBangladesh
Bahamas
Cape Verde
Comoros
Congo Dem.Rep.
Eq. Guinea
Eritrea
Ethiopia
Kiribati
Liberia
Samoa
Seychelles
Somalia
Sudan
Tonga
Tuvalu
Vanuatu
Sao Tome
Antigua
Belize
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Barbados
Ctrl. Afr. Rep.
Chad
Congo
Djibouti
Dominica
Fiji
Gabon
Gambia
Ghana Grenada
Guinea
Guinea-BissauHaiti
Jamaica
Kenya
Lesotho
Madagascar
Malawi
Mauritania
Mauritius
Mozambique
NigeriaPapua
St. Lucia
St. Vincent
Sierra Leone
Tanzania
Togo
Trinidad
Uganda
Zambia
Zimbabwe
W.T.O.
G.S.P
AndeanGroup
A.C.P.
C.A.C.M.
L.D.C.
Euromed
E.F.T.A.
Chile
Rwanda
Angola E.E.A.
Czech Rep.
Bermuda
Senegal
Niger
Slovakia
YugoslaviaMacedonia
Suriname
Latvia
East Timor
Solomon Isl.
Greenland
Montserrat
Aruba
Anguilla
Gibraltar
Niue
Tokelau
Cook Isl.
Costa RicaNicaragua
HondurasEl Salvador Panama
Norway
Liechtenstein
Iceland
Switzerland
PeruBolivia
VenezuelaEcuador
Colombia
U.A.E
U.S.
Andorra
Bil.
Complex Patchwork of International Trade Agreements: European Trade Policy
04 April 2003Source: Robin Anson, Director Textiles Intelligence; Hong Kong 3 October 2002; www.textilesintelligence.com
Prices will Fall Further
04 April 2003
Possible New WTO-conform Protective Measures after 2004
• Increased use of trade remedies.a) Safeguards (fairly traded imports).b) Antidumping & countervailing duties
(unfairly traded imports).• T&C products as targets for retaliation in
dispute settlement cases.• Increase of administrative burdens (record
keeping).
04 April 2003
New Possible Protective Measures until 2004
• Attempts to divide the developing world.• Reciprocal market access demands.• Tough rules of origin, transhipment and
customs enforcement.• No unilateral concessions.
04 April 2003
Likely Post-2004 US sourcing pattern
The US Congressional Textile Caucus:• Sourcing is driven by quota constraints (retailers
buy from 40-60 countries).• To be cut by half by end 2005/2006.• Further drop to 1/3 to ¼ by 2010.• LDCs will especially be hard hit.
Source: US Department of Commerce: Report to the Congressional Textile Caucus on the administration’s efforts on
textile issues; Washington, September 2002
04 April 2003
US Customs-Trade Partnership Against Terrorism: Burden for T&C Exporters• Under the Department of Homeland Security• Envisaged a supply chain covering manufacturers• Manufacturer-monitoring to include security
compliance• E.g. verification of job applications• US customs to visit manufacturers randomly• Mandatory advanced cargo electronic information• That could add extra transit time
04 April 2003
Enterprise Record-keeping RequirementsImposed by Importing Country Customs• Understandable records, in which steps of
production are clear.• Actual production machinery necessary.• Payment for materials & payroll.• Export documentation, incl. shipping records.• Contracts, incl. with subcontractors.• Cutting, assembly and out-processing records.• Certificates of Origin.
04 April 2003
What buyers request from enterprises
• Strong buyer’s market: concentration on a few countries where they can source best.
• Critical Mass needed.• Pure CMT business will phase out, buyers will ask for
services (approach to customer satisfaction).• Retail-Supplier Partnership (transparency, joint planning).• Craftsmanship is taken for granted.• Lean retailing: transfer of inventory management to supplier• Sales- and demand-driven strategies replace supply-driven
strategies.
04 April 2003
ECO Labelling
• Eco labelling schemes remain “voluntary”.• Choice of buying environmentally-friendly
products serves those using it as a marketing tool to distinguish from competitors.
• For others it can reduce market access.• No international standards.
New Restrictions for T&C Exporters
04 April 2003
Codes of Conduct - Ethical Sourcing
• Social sourcing as a criteria for trade.• Increased insistence on social responsibility of
manufacturers/suppliers.• Corporate CofC/ business values to guarantee
certain standards.1. No child labour2. Working conditions3. No forced labour4. Compensation
5. No discrimination6. Working hours7. Minimum wages8. Freedom of associations
04 April 2003
Some NGOs Active on/in Labour Standards
US: www.behindthelabel.orgwww.wrapapparel.comwww.cepaa.org (SA 8000)www.fairlabor.org
Canada: www.maquilasolidarity.orgEU: www.cleanclothes.org
04 April 2003
What Might Happen:
Survey the Performanceof the Major Players
What Might Happen:
Survey the Performanceof the Major Players
Structure
04 April 2003
Expected Winners & Losers
• Countries now fully using their quotas will increase their exports.
• Countries not using their quotas:unlikely to benefit.• DCs not under quota will face intense competition.• DCs without meaningful export quantities: it will
become even more difficult to enter world markets.• Mass products: high competition.• More specialised/ wider range: lower impact.• Overall: Pure economics favour large suppliers to
the detriment of SME suppliers.
04 April 2003
China: Will the Winner Take it All?
• China penetration into US market: Increase of exports by 50 % in 2002
• Is the quota-free Japanese market an example? In 2001 Japan imported 87.7% of its total garment requirements from P. R. China, an increase of 66 % over 10 years.
• Increased US and EU Quota-utilisation• Increase in volume; decrease in prices
04 April 2003
US Textile and Apparel Imports from China1/2002-7/2002
-100
-50
0
50
100
150
200
250
300
350
400
Total M
FAApp
arel M
FANon
-A M
FAFba
rics
MadeU
ps
Cotton
Prod
ucts
Cotton
App
arel
Cot Non
-AWoo
l Prod
ucts
Wool A
ppare
lWoo
l Non
-AMMF Prod
ucts
MMF Appare
l
MMF Non
-App
arel
S&V Produc
tsS&V App
arel
S&V Non
-A
Change in Volume Change in Unit Value
04 April 2003
Reasons for China’s Performance
• As a WTO-member China enjoys MFN, removal of certain quotas and quota phase-out by 2005.
• Low cotton prices in 2001• Rise in investments (import of T&C machinery
up 31% in 2001) = rise in productivity• Decline of US$ (RMB linked to US$)But:• T&C and product specific safeguards under
China accession protocol
04 April 2003
Effect of Liberalisation of US Category 350 on Major Exporters
Category 350: Cotton Dressing Gowns, Robes, etc. 7/2001-7/2002 YTD Comparison
18.54 27.79
439.23
40.09
681.36
-43.53-35.6 -21.15 -13.08-1000
100200300400500600700800
WorldBan
glade
shCambod
ia CBI
ChinaGua
temalaMex
icoSri L
anka
Sub-S
ah Afr.
% C
hang
e
04 April 2003
Effect of Liberalisation of US Category 847 on Major Exporters
Category 847: Trousers, Shorts Silk/Veg. 7/2001-7/2002 YTD Comparison
11.15
111.65125.08
6.55-38.28-45.37-33.13 -64.21
82.99
-100
-50
0
50
100
150
WorldBan
glade
shCambod
ia CBI
ChinaGua
temalaMex
icoSri L
anka
Sub-S
ah Afr.
% C
hang
e
04 April 2003
Quota Saturation for Cotton Trousers (347/348) 10/ 2002 YTD
100
62.4
85.7 83.196.3 92.9
75 69.5 69.1 68.8
94.4 89.7 91.5100
020406080
100
Bangla
desh
Cambo
diaChin
aHon
g Kon
gInd
iaInd
ones
iaKore
aMac
auPak
istan
Philipp
ines
Sri Lan
kaTha
iland
Turkey UAE
Quo
ta S
atur
atio
n R
ate
Source: www.emergingtextiles.com
US Quota Saturation October 2002
04 April 2003
US Quota Saturation for Cotton Coats(334/335) 10/2002 YTD
90.581.1 83.7 86.9
0
20
40
60
80
100
Bangladesh China Indonesia Macau
Quo
ta S
atur
atio
n R
ate
US Quota Saturation for Cotton Knit Shirts and Blouses(338/339) 10/2002 YTD
9882.2 84.9
100
80.487.4 85.1 88.5
0102030405060708090
100
BangladeshChina
Hong KongIndia
Malaysia
PhilippinesSri Lanka
Thailand
Quo
ta S
atur
atio
n R
ate
Source: www.emergingtextiles.com
04 April 2003
EU Quota Saturation for Category 4 (Shirts, T-Shirts) 11/2002 YTD
86.7699.7
110.67 112.21
0
20
40
60
80
100
120
China Hong Kong India Vietnam
Quo
ta S
atur
atio
n Ra
teEU Quota Utilisation Rates
04 April 2003
EU Quota Saturation RateCategory 5 (Pullovers, Jackets, Coats) 11/2002
020406080
100120140
Hong K
ong
India
Indon
esia
Macao
Malays
iaN. K
orea
Pakist
anS. K
orea
Taiwan
Thail
and
Quo
ta S
atur
atio
n R
ate
EU Quota Utilisation Rates
04 April 2003
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