American Textiles Manufacturers Institute, “The China Threat to World Textile and Apparel Trade,” available via the Internet at www.atmi.org.
Appelbaum, Richard, 2004, “Assessing the Impact of the Phasing-out of the Agreement on Textiles and Clothing on Apparel Exports on the Least Developed and Developing Countries,” Institute for Social Behavioral and Economic Research, Center for Global Studies, University of Santa Barbara.
- Search Google Scholar
- Export Citation
)| false Appelbaum, Richard, 2004, “ Assessing the Impact of the Phasing-out of the Agreement on Textiles and Clothing on Apparel Exports on the Least Developed and Developing Countries,” Institute for Social Behavioral and Economic Research, Center for Global Studies, University of Santa Barbara.
Avisse, Richard, and M. Fouquin, 2001, “Textiles and Clothing: the End of Discriminatory Protection,” La Lettre du CEPII, No. 198.
Cerra, Valerie, Sandra A. Rivera, and Sweta Chaman Saxena, 2005, “Crouching Tiger, Hidden Dragon: What Are the Consequences of China’s WTO Entry for India’s Trade?” IMF Working Paper 05/101, (Washington: International Monetary Fund).
Chang, Woon, and Peter Kilduff, 2002, “The US Market for Technical Textiles,” Small Business Technology Development Center (SBTDC), Technical Textiles Industry Study, North Carolina, USA.
Export Import Bank of India, 2005, “Textile Exports: Post MFA Scenario, Opportunities and Challenges,” Working Paper Series No. 9, February, Mumbai.
Francois, J.F., B. McDonald, and H. Nordstrom, 1994, “The Uruguay Round: A Global General Equilibrium Assessment, CEPR Discussion Paper, (London: Centre for Economic Policy Research).
Francois, J.F., H.H. Glisman, and D. Spinanger, 2000, “The Cost of EU Trade Protection in Textiles and Clothing,” Kiel Institute of World Economics Working Paper 997.
Francois, J. F. and D. Spinanger, 2001, “With Rags to Riches but then what? Hong Kong’s T&C Industry vs. the ATC and China’s WTO Accession,” Fourth Annual Conference on Global Economic Analysis Paper.
Garments and Textiles Export Board, Department of Trade and Industry, 2002, “The Philippines Garments and Textile Industry,” December 31.
International Monetary Fund and World Bank, 2002, “Market Access for Developing Country Exports- Selected Issues,” available via the Internet at www.imf.org/external/np/pdr/ma/2002/eng/092602.pdf
Kathuria, Sanjay, and Anjali Bhardwaj, 1998, “Export Quotas and Policy Constraints in the Indian Textile and Garment Industries,” mimeo World Bank.
Kathuria, Sanjay, Will Martin, and Anjali Bhardwaj, 2001, “Implications for South Asian Countries of Abolishing the Multifiber Agreement,” World Bank Policy Research Working Paper 2721.
Manole, Vlad, 2005, “Winner or Loser ? Effects of Quota Abolition in World Markets for Textile and Apparel,” World Bank DECRG mimeo.
Mlachila, Montfort, and Yongzheng Yang, 2004, “The End of Textiles Quotas: A Case Study of the Impact on Bangladesh,” IMF Working Paper 108, (Washington:International Monetary Fund).
Nordas, H.K., 2004, “The Global Textile and Clothing Industry Post the Agreement on Textile and Clothing,” World Trade Organization.
Nyugen, T.T., C Peroni, and R.M. Wigle, 1993, “An Evaluation of the Draft Final Act of the Uruguay Round,” The Economic Journal 103: pp. 1509-49
Organization for Economic Co-operation and Development, 2004, A New World Map in Textiles and Clothing – Adjusting to Change, Paris.
Reinert, K.A., 1993, “Textile and Apparel Protection in the United States: A General Equilibrium Analysis,” World Economy, pp. 359-376
Spinanger, Dean and Samar Verma, 2003, “The Coming Death of the ATC and China’s WTO Accession: Will push come to shove for Indian T &C Exports?” Bridging the Differences – Analyses of Five Issues of the WTO Agenda, ed. by Alan Winters and Pradeep S. Mehta, 2003, CUTS, Jaipur, India.
- Search Google Scholar
- Export Citation
)| false Spinanger, Deanand Samar Verma, 2003, “ The Coming Death of the ATC and China’s WTO Accession: Will push come to shove for Indian T &C Exports?” Bridging the Differences – Analyses of Five Issues of the WTO Agenda, ed.by Alan Wintersand Pradeep S. Mehta, 2003, CUTS, Jaipur, India.
Terra, M.I., 2001, “Trade Liberalization in Latin American Countries and the Agreement on Textiles and Clothing in the WTO,” Paper Presented at the Conference on the Impact of Trade Liberalization Agreements in Latin America and the Caribbean, Inter-American Development Bank.
- Search Google Scholar
- Export Citation
)| false Terra, M.I., 2001, “ Trade Liberalization in Latin American Countries and the Agreement on Textiles and Clothing in the WTO,” Paper Presented at the Conference on the Impact of Trade Liberalization Agreements in Latin America and the Caribbean, Inter-American Development Bank.
Trela, I. and J. Whalley, 1990, “Global Effects of Developed Country Trade Restrictions on Textiles and Apparel,” Economic Journal, Vol. 100, pp 1190-1205.
Trela, I. and J. Whalley, 1995, “Internal Quota Allocation Schemes and the Costs of the MFA,” Review of International Economics, 3(3), pp. 284-306.
US International Trade Commission, 2004, “Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the US Market.”
Winters, Alan, and Pradeep S. Mehta, 2003, In Bridging the Differences – Analyses of Five Issues of the WTO Agenda, CUTS, Jaipur, India.
Yang, Y., 1994, “Trade Liberalization and Externalities: A General Equilibrium Assessment of the Uruguay Round,” Australian National University (Unpublished).
Yang, Y., W. Martin, and K. Yanagishima, 1997, “Evaluating the Benefits of Abolishing the MFA in the Uruguay Round Package,” in Global Trade Analysis: Using the GTAP Model, ed. by Thomas Hertel (Cambridge University Press)
The authors would like to thank Mitali Das, Jean-Jacques Hallaert, Manoj Joshi, Deena Khatkhate, Kalpana Kochhar, Hans Peter Lankes, B.P. Misra, Monfort Mlachila, and Jerald Schiff for their helpful comments. They would further like to thank Jean-Jacques Hallaert for his help with the GTAP simulations and Dustin Smith for the U.S. trade data. All remaining errors are those of the authors.
The National Textile Policy targets textile and apparel exports of $50 billion by 2010. With comprehensive reforms, McKinsey (2004) expects India to increase its exports by 15–18 percent annually and win 5 percent of the global apparel export market by 2008 and to earn $25–30 billion. With only minor reforms, annual growth of 8 percent at best is expected.
World trade in T&C was $395 billion in 2003.
It is also expected to have a substantial impact on major importing countries, in particular on consumer prices and employment.
The final stage, beginning on January 1, 2005, witnessed the removal of 701 quotas by the United States, 167 quotas by the European Union (EU) and 239 quotas by Canada.
The literature estimates that developing countries as a whole would have income gains of about $24 billion a year, export revenue gains of about $40 billion, and employment generation of 27 million jobs (IMF and World Bank 2002).
It should be noted that developments in the pre-2005 period were biased by the quotas that constrained many but not all countries.
India exports textiles and clothing mainly to the quota-imposing markets of the United States and EU; with these two markets comprise over 70 percent of Indian exports (World Bank, 2004).
The same study also observes that other low-cost countries, particularly India, will benefit, as U.S. importers try to reduce the risk of sourcing from only one country.
Caution is needed in analyzing the developments in the first half of 2005 as they reflect many factors including the end of the quota regime but also reflect the uncertainty regarding EU and US treatment of Chinese imports.
These are the product lines liberalized in January 2005, or the “Phase IV liberalization.”
This and other studies use 1995 or 1997 as the base. The results are based on the trade patterns observed in these two years. The results presented in this paper use the updated 2001 base year.
Simulations, using 1997 as the base year, suggest that China will increase market share in the EU from 10 percent to 12 percent for textiles, and from 18 percent to 29 percent for clothing, whereas India is projected to increase market share in the EU from 9 percent to 11 percent for textiles and from 6 percent to 9 percent for clothing. For the U.S. market, China’s share is expected to increase from 11 percent to 18 percent for textiles and triple in the clothing sector, from 16 percent currently to half of the market after the phase out. India’s market share in the U.S. is projected to remain at 5 percent for textiles, while its share of clothing is estimated to almost quadruple from 4 percent to 15 percent.
It is argued that if the removal of quotas is supplemented with domestic reforms geared towards the textile and clothing industry, welfare gains to India may be three times as high as compared to just the removal of quotas (Kathuria et al 2001).
The United States has signed the Caribbean Basin Trade Partnership Act (CBTPA), the African Growth and Opportunity Act (AGOA), the North American Free Trade Agreement (NAFTA), and the Andean Trade Preferences Act (ATPA). The EU accords preferential access to Eastern European countries and countries in the Mediterranean rim. Its preferential trade agreements include the Euro-Mediterranean Association Agreements, Africa Caribbean Pacific (ACP) Trade Agreement, and the Everything But Arms (EBA) Initiative with 49 least developed countries.
The average post-Uruguay Round tariffs on textiles and clothing for the United States, EU, and Japan are 14.6 percent, 9.1 percent and 7.6 percent, respectively. At a disaggregated level, 52 percent of the textiles and clothing imports in the United States have tariff rates of 15.7 percent to 35 percent, 54 percent of EU imports have duties between 10.1 percent and 15.0 percent and 55 percent of the Japanese imports have the duties between 5.1 percent and 10.0 percent (UNCTAD 2004)
Recently, the EU unveiled the new generalized system of preferences (GSP) under which India will continue to enjoy GSP benefits for exports of clothing but not textiles to the EU. China will also lose the GSP benefits for exports of T&C to the EU.
On May 13 2005, the United States imposed safeguards, initiated in April 2005, on cotton knit shirts and blouses (Category 338/339), cotton trousers (Category 347/348), and cotton and man-made fiber underwear (Category 352/652) limiting import growth to 7.5 percent. It claimed that the U.S. market is being disrupted with substantial increases in imports of these products from China. In addition, currently there are other cases pending. On May 23, 2005, the EU initiated safeguards on two categories of textile products: t-shirts and flax yarn, constraining import growth to 7.5 percent. Furthermore, on June 10, 2005, the EU and China agreed on an arrangement that will manage the growth of Chinese textile imports to the EU until the end of 2008 on 10 categories of T&C.
However, we may be overestimating the liberalization as we remove all export tax equivalents (ETEs) as the GTAP does not permit the removal of simply those export taxes related to the MFA/ATC quota elimination.
We simulate a 50 percent reduction in the quotas imposed on China’s exports to analyze the sensitivity of scenario 1 to the presence of safeguards and are not intended to capture the precise impact of the current EU and US limits on imports of Chinese T&C. It should be noted, however, that these simulations can serve only as benchmarks since they are based on very aggregate information.
In the GTAP model, economic welfare is represented as being derived from the allocation of national income between private consumption, government consumption, and savings. This recognizes that households gain benefits from the current net national saving since this increases their future household consumption. Benefit is also acquired from the government’s provision of public goods and services, as proxied by current government expenditure. Thus, the negative welfare effect for India is derived after taking into account the possible positive effect on domestic consumers because of the reduction in prices.
The negative effect on India is in contrast to the previous studies based on earlier versions of the GTAP database. This paper uses GTAP version 6, which includes an improved domestic coverage of India and also improved coverage of tariffs on agriculture and manufactures.
The surveys covered 111 firms in 12 sectors in 1998, and 82 firms in 10 sectors in 2003.
Until 2001, most of the textile and clothing sector was reserved for the small-scale sector. The policy change allowing for de-reservation should help to form an integrated supply chain.
As a result, they have on average 10 to 20 percent of machines that Chinese plants have (McKinsey 2004).
The scheme provides a 5 percent interest reimbursement or 12 percent upfront subsidy on loans for investments in technology for specified sectors of the Indian textile industry. More than $1 billion has been disbursed under the scheme so far. However, many segments are yet to avail themselves of this fund as a majority of the loans have gone to the large mills.
Illustratively, compared to 20.6 women’s blouses that Hong Kong SAR manufactures per machine per day, India manufactures only 10.2. Similar figures for trousers for Hong Kong SAR and India are 19.3 and 16.8 and men’s shirts are 20.9 and 9.1.
A preliminary exercise by the RBI (RBI 2004), on the assumption of constant returns to scale, in a growth accounting framework, suggests a decline in total factor productivity growth (TFPG) of the textile sector in the 1990s. While capital intensity increased during the 1990s, growth in capital productivity in the textile sector declined during 1991–2000 vis-à-vis the previous decade. On the other hand, growth in labor productivity increased during the same period, but does not compare favorably with other countries.
Apart from spinning, the rest of the activities like weaving, processing, made ups, and garmenting are all found to be fragmented in India with consequential impact on quality and standardization. Only 3 ½ percent of total cloth production is from the organized sector and 12,000 of the 14,500 are hand processing units. Most of the garment exports are from SSI units because of the reservation policy in place until recently.
In the 2006 budget, 30 items under the category “Textile Products includes Hosiery” were dereserved from the SSI list.
In 2004, there was an increase to $2 billion, reflecting expansion and diversification (Economic and Political Weekly, December 4, 2004). According to a recent statement by the Union Textiles Minister, investments in the T&C sector increased to a little over $3 billion in 2004–05.
Official sources presenting sector-wise recipients of foreign direct investment (FDI) does not give data on textiles, implying that FDI flows were not significant in this sector. This is despite the government allowing 100 percent FDI in this sector since 2001.
The website (http://www.txcindia.com) of the Office of the Textile Commissioner, Economic Research and Market Intelligence Unit, Ministry of Textiles, gives a comparative picture of the excise and customs duty structure of major items of the textile industry during the last five years.
International experience shows that technological innovation has progressed in all levels of the supply chain from weaving to processing, to designing, packaging, patternmaking, cutting, inspecting, pressing, and packaging. Inroads have been made in the labor-intensive core of clothing manufacturing process.
Goldman Sachs (2004) recently surveyed about 30 major wholesalers, manufacturers, and retailers globally to examine the impact of the elimination of textiles and apparel import quotas in 2005. Both U.S. and EU respondents cited product quality as the top consideration in sourcing decisions post quota elimination, followed by product cost, production speed, working conditions, access to inputs, transportation speed, political stability, transportation cost, and geographical diversity.
The government is rightly focusing on technology to play a lead role in improving productivity.
The share of cotton in world fiber demand declined from around 50 percent in the early 1990s to around 38 percent in 2003, while the share of man-made fiber has increased from 44 percent to 60 percent.
In China, foreign retailers will have the right to set up distribution networks through wholly owned foreign enterprises, without any geographical or quantitative restrictions.
Technical textiles are nonclothing items used in aerospace, marine, medical, civil engineering, and other industrial applications (USITC). They are defined by their performance properties. Some studies identify this segment as having the greatest growth potential. The United States and Europe continue to be the major markets for technical textiles. Transportation and clothing components had the highest market share in early 2000, but the growth in these segments have flattened with their maturing.
The estimated worldwide consumption of technical textiles by the end-use market in 2000 was $60 billion and grew by an estimated 4 percent since then until 2005 (Chang and Kilduff 2002).
Through use of technology, retailers are able to monitor their sales more efficiently and reduce their inventory. The recent trend is for retailers to place more frequent small orders and shorter time lags.