The Global Textile and Clothing Industry post the Agreement on Textiles ...
DISCUSSION PAPER NO 5
The Global Textile and Clothing Industry post the
Agreement on Textiles and Clothing
by
Hildegunn Kyvik Nord?s1
World Trade Organization
Geneva, Switzerland
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Discussion Papers are presented by the authors in their personal capacity and opinions expressed in these
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the WTO Secretariat or of its Members and are without prejudice to Members' rights and obligations
under the WTO. Any errors or omissions are the responsibility of the authors.
Any citation of this paper should ascribe authorship to staff of the WTO Secretariat and not to the WTO.
1
Research assistance from Roberto Chavez and useful comments from Michael Finger and Robert Teh are gratefully acknowledged.
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ISSN 1726-9466
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Printed by the WTO Secretariat
VII-2004, 1,000
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.
TABLE OF CONTENTS
I.
INTRODUCTION .....................................................................................................................................1
II.
THE STRUCTURE OF THE TEXTILE AND CLOTHING SECTOR ....................................................3
III.
THE AGREEMENT ON TEXTILES AND CLOTHING .......................................................................13
IV.
TRADE PATTERNS IN TEXTILES AND CLOTHING .......................................................................16
V.
THE IMPACT OF PHASING OUT THE ATC.......................................................................................24
VI.
CONCLUSION........................................................................................................................................34
VII.
REFERENCES ........................................................................................................................................35
LIST OF TABLES AND CHARTS
FIGURE 1:
THE SUPPLY CHAIN IN THE TEXTILE AND CLOTHING SECTOR........................................4
FIGURE 2:
VERTICAL SPECIALIZATION SHARE IN EXPORTS, SELECTED COUNTRIES
AND TERRITORIES, 2001 ..............................................................................................................9
FIGURE 3:
SOURCE OF IMPORTS OF TEXTILES TO THE USA................................................................17
FIGURE 4:
SOURCE OF IMPORTS OF CLOTHING TO USA.......................................................................18
FIGURE 5:
SOURCES OF IMPORTS OF TEXTILES TO THE EU ................................................................20
FIGURE 6:
SOURCES OF IMPORTS OF CLOTHING TO EU .......................................................................21
FIGURE 7:
MARKET SHARES BEFORE AND AFTER QUOTA ELIMINATION, TEXTILES, EU...........27
FIGURE 8:
MARKET SHARES BEFORE AND AFTER QUOTA ELIMINATION, CLOTHING, EU ............28
FIGURE 9:
MARKET SHARES BEFORE AND AFTER QUOTA ELIMINATION, TEXTILES, USA...............29
FIGURE 10:
MARKET SHARES BEFORE AND AFTER QUOTA ELIMINATION, CLOTHING, USA ...............30
TABLE 1:
THE COST STRUCTURE OF THE CLOTHING INDUSTRY, SELECTED
COUNTRIES, 2001 (PER CENT OF GROSS OUTPUT) ...........................................................7
TABLE 2:
THE COST STRUCTURE OF THE TEXTILE INDUSTRY, SELECTED
COUNTRIES, 2001 (PER CENT OF GROSS OUTPUT) ...........................................................8
TABLE 3:
EMPLOYMENT IN TEXTILES AND CLOTHING, ATC COUNTRIES (THOUSANDS)............10
TABLE 4:
EMPLOYMENT IN TEXTILE AND CLOTHING (THOUSANDS) ............................................12
TABLE 5:
INTEGRATION OF TEXTILES AND CLOTHING INTO GATT................................................13
TABLE 6:
INTEGRATION DURING THE FIRST 3 STAGES ......................................................................14
TABLE 7:
THE US TRADING PARTNERS' TRADE WITH THE UNITED STATES, 2002.......................19
TABLE 8:
EU'S TRADING PARTNERS' TRADE WITH EU, 2002 ..............................................................22
TABLE 9:
CHINA'S SHARE OF TOTAL IMPORTS, SELECTED COUNTRIES ........................................23
TABLE 10: EXPORT TAX EQUIVALENT OF QUOTAS BASE YEAR ........................................................25
TABLE 11: IMPORTS AS SHARE OF DOMESTIC DEMAND WITH AND WITHOUT QUOTAS ............26
TABLE 12: REVEALED COMPARATIVE ADVANTAGE AND BINDING QUOTAS, 2000. .....................32
I.
INTRODUCTION
After more than forty years of import quotas, the
textile and clothing sector will become subject to
the general rules of the General Agreement on
Tariffs and Trade from 1 January, 2005.
Liberalization has been controversial because both
textiles and clothing contribute to employment in
developed countries, particularly in regions where
alternative jobs may be difficult to find. In the
European Union, for example, the sector is
dominated by small and medium-sized enterprises
concentrated in a number of regions that are highly
dependent on this sector (Commission of the
European Communities, 2003).
Textiles and
clothing are also among the sectors where
developing countries have the most to gain from
multilateral trade liberalization.
In fact, the
prospect of liberalization of the textiles and
clothing sectors was one of the reasons why
developing countries accepted to include services
and intellectual property rights ¨C areas to which
they were sceptical at the outset ¨C in the Uruguay
Round (Reinert, 2000).
The objective of this paper is to assess the likely
impact of liberalization, taking into account recent
technological and managerial developments in the
sector, and focusing on recent developments in
supply chain management in the clothing and
textiles sectors.
The clothing industry is labour-intensive and it
offers entry-level jobs for unskilled labour in
developed as well as developing countries. Job
creation in the sector has been particularly strong
for women in poor countries, who previously had
no income opportunities other than the household
or the informal sector.2 Moreover, it is a sector
where relatively modern technology can be adopted
even in poor countries at relatively low investment
costs. These technological features of the industry
have made it suitable as the first rung on the
industrialization ladder in poor countries, some of
which have experienced a very high output growth
rate in the sector (e.g. Bangladesh, Sri Lanka,
Viet Nam and Mauritius).3 These characteristics,
however, have also made it a footloose industry
2
3
See Nord?s (2003a) for a discussion.
The textile and clothing sector has also grown very fast in
more developed countries that have entered into preferential
agreements with the EU or the US or both (e.g. Bulgaria,
Lithuania, Macedonia and Jordan).
that is able to adjust to changing market conditions
quickly.
At the same time, the textile and clothing industry
has high-value added segments where design,
research and development (R&D) are important
competitive factors. The high end of the fashion
industry uses human capital intensively in design
and marketing. The same applies to market
segments such as sportswear where both design and
material technology are important. Finally, R&D is
important in industrial textiles where, again,
material technology is an important competitive
factor.
Textiles and clothing are closely related both
technologically and in terms of trade policy.
Textiles provide the major input to the clothing
industry, creating vertical linkages between the
two. International trade in the two sectors is
regulated by the Agreement on Textiles and
Clothing (ATC) at the multilateral level, while
bilateral and regional trade agreements typically
link the two sectors through rules of origin
accompanying preferential market access.
At the micro level, the two sectors are increasingly
integrated through vertical supply chains that also
involve the distribution and sales activities.
Indeed, the retailers in the clothing sector
increasingly manage the supply chain of the
clothing and textiles sectors. This development
probably started with the establishment of shopping
malls such as Wal-Mart in the United States in the
1970s.
Wal-Mart
insisted
that
suppliers
implemented
information
technologies
for
exchange of sales data, adopted standards for
product labelling and methods of material handling.
This ensured quick replenishment of apparel, which
in turn allowed the retailer to offer a broad variety
of fashion clothes without holding a large
inventory. This approach has spread throughout
the industry in the United States as well as
elsewhere (and to other industries), shifting the
competitive advantage of suppliers from being
mainly a question of production costs to becoming
a question of costs in combination with lead time
and flexibility. This development has in turn
favoured suppliers located close to the major
1
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