Sustainable Development Policy Institute

SDPI - UN-TIHP workshop: What comes after the quota went? Human development effects of the ATC expiry- November 21-22, 2005

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SDPI Press Release

Workshop Assesses Textiles Trade from Human Development Perspective
Friday, November 18, 2005

ISLAMABAD: The Sustainable Development Policy Institute (SDPI), together with UN Trade Initiatives from Human Development Perspective (UN-TIHP), is organizing a regional workshop on "What comes after the quota went? Human development effects of the Agreement on Textiles and Clothing (ATC) expiry". The workshop will take place from November 21-22, 2005 in Best Western Hotel Islamabad. It will bring together policy-makers, researchers, representatives of non-governmental organisations, and other stakeholders from South Asia to discuss the human development effects of the expiry of the quota system in textiles and clothing (T&C) trade, and strategies to ensure the development-friendliness of the multilateral trading system.

Almost a year has passed since the quota system for exports of T&C under the World Trade Organisation’s (WTO’s) Agreement on Textiles and Clothing (ATC) was phased out in January 2005. It gave way to freer global trade in textiles and clothing, more intensive competition, and lower product prices. The T&C industry in developing countries is very employment-intensive - in particular involving female workers – making the running out of the quota regime in January 2005 a hotly debated issue for human development.

The T&C sector is the biggest exporter for several South Asian economies and a large industrial employer. So far, liberalisation has supported growth in Pakistan’s textile exports. Yet, employment-intensive sectors such as the clothing industry may suffer not only in Pakistan, but also in various countries of the region. Increased competition has already down prices and increased demand for better product quality. This might have adverse implications for working conditions.

Overall, the ATC expiry provides a test case for the development costs and benefits of opening up of trade under the WTO for developing countries. The South Asian region is a particularly interesting case due to the presumably dissimilar impact of this agreement on the individual countries. The workshop will contribute to an assessment of these challenges and opportunities and to the development of alternative strategies. Its proceedings and recommendations will be presented to the media during a press conference on Tuesday, November 22, 2005, 3.00pm at the Best Western Hotel Islamabad.

Textile Workers Should Not be Victims of Freer Trade

Islamabad, November 22, 2005. The weakest stakeholders in the textile chain should not bear the brunt of adjustment costs of freer trade. This was demanded by the participants of the workshop “What comes after the quota went? Human development effects of the ATC expiry?”, which took place at the Best Western Hotel Islamabad from November 21-22, 2005. The workshop was jointly organised by the Sustainable Development Policy Institute (SDPI), an Islamabad-based research think-tank and the UN Trade Initiatives from a Human Development Perspective (UN-TIHP). Participants represented both other South Asian countries as well as different stakeholders ranging from trade unionists, researchers, and government officials to businessmen.

Since January 2005, the textile and clothing (T&C) sector faces a completely new trade environment. The quota system that has governed T&C exports from South Asia and other producing countries was lifted under the Agreement on Textiles and Clothing (ATC), an accord under the World Trade Organisation (WTO). The T&C sector is the export engine in most South Asian countries. But apart from that it is a large industrial employer, particularly for female workers. This makes the abolition of the quota system an issue for human development.

During the first eleven months of freer trade in T&C, some changes in the regional economies have already become apparent. Overall, T&C exports have increased. However, this positive broad picture conceals country-specific effects and damage. Whereas Bangladesh has been spared of the anticipated crash in garment exports, Nepal has lost a significant number of orders from abroad. Pakistan and India’s textile industries do well in the post-quota era, but their respective garment sectors struggle to survive the harsh competition after China entered the freer T&C market. This might translate into significant employment losses. At the same time, the intensified competition also puts pressure on wages and working conditions, which have not been particularly rosy even before the opening of the market.

Despite the very diverse backgrounds of the participants, all agreed that in order to translate the liberalised trade environment into gains for human development across the region, both workers’ demand for decent working conditions and the industry’s competitiveness need to be safeguarded. Quality improvements in T&C products by investing in workers’ skills as well as in research and development is one concrete step that would help both to retain and gain market shares and would also strengthen workers’ bargaining power and pay. In order to achieve this, workers, employers and the government should strategise jointly regarding the post-quota scenario in T&C. Also, poor T&C producing countries should negotiate jointly with the large importers in the USA and Europe-this way their dependence on the T&C exports cannot be easily exploited. To make sure increases in competition do not victimise the weakest link in the textile chain - the workers -, regionally and at the level of the WTO and International Labour Organisation (ILO), minimum labour standards should be enforced. Those workers hit by closures due to the quota expiry should be retrained and provided with new employment opportunities.