Outlook for Asian Textile and Clothing Trade in the Post-Quota Era

32 pages, published in Issue 120, November-December 2005   Report price: Euro 600.00; US$ 785.00

On December 31, 2004, quotas were eliminated under the Agreement of Textiles and Clothing (ATC) and trade in textiles and clothing was thus reintegrated into the world trade system. When the ATC was conceived in 1994, the gains from quota elimination were expected to go to low wage and populous Asian countries such as India, Indonesia, Pakistan, the Philippines and Thailand The losers were predicted to be small and marginal exporters, former large quota holders in East Asia, and firms in the EU and the USA. But the outlook for Asian suppliers other than China has been changed by China’s entry to the World Trade Organisation (WTO) in late 2001 and its growing dominance of Western markets. Asian suppliers will also be impacted by preferential trade agreements (PTAs) giving non-Asian partners duty-free access to the EU and the USA. The proliferation of PTAs has cast doubt on whether Asian suppliers other than China will achieve the gains they were promised.

The USA, the EU and a few other WTO members have used safeguard quotas to protect their markets in the post-quota era. In the first few months of 2005 China made strong inroads into EU and US markets—at the expense of preferential suppliers and former large quota holders in East Asia. In contrast, Asian suppliers such as India, Indonesia, Bangladesh, Pakistan and Sri Lanka maintained or slightly improved their positions in the US market. Some are moving into higher quality products as they adjust to low cost competition from China. Meanwhile, in the post-quota era, efficient Asian production networks continue to be undermined by EU and US preferential trade deals, enforced by restrictive rules of origin. Such a situation could be avoided if negotiators at the WTO Doha Round were to prove successful in reducing EU and US textile and clothing import tariffs.

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