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

• Concept Note
• Workshop Program
• SDPI Press Releases
  • Press Release I
  • Press Release I I
  • Media Coverage
• Workshop Report
  • Workshop Recommendations in Detail

Workshop Report

The weakest stakeholders in the textile chain should not bear the brunt of adjustment costs of freer trade. This was the demand of the participants at 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 institute and the UN Trade Initiatives from a Human Development Perspective (UN-TIHP).

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 clearly makes the abolition of the quota system an issue for human development.

Participants represented both other South Asian countries as well as different stakeholders ranging from trade unionists, researchers, and government officials to businessmen, which contributed to the breadth of the discussions. Dr. Karin Astrid Siegmann from the SDPI, chief organizer of the workshop, brought her expertise as a researcher who has been extensively involved in the study of the quota expiry and its impacts in Pakistan. Mr. Asif Anwar from the Centre for Policy Dialogue (CPD) in Dhaka shared the perspective of Bangladeshi T&C workers, entrepreneurs and government. Ms Yumiko Yamamoto from the United Nations Development Programme (UNDP) Regional Centre in Sri Lanka offered her take on the issue from a regional and gender-oriented lens. Other participants included Mr. Asif Siddiq, CEO of Union Fabrics, whose firsthand knowledge of the workings of the industry and the interests of fellow managers/owners enlivened the proceedings; Mr. Khwaja Shoaib from Farmer’s Vision Forum; Mr. Muhammad Yaqoob, chairman of the Muttahidda Labour Federation; and Mr. Muhammad Mohsin from the Ministry of Textile Industry. Mr. Syed Qasim Ali Shah from UN-TIHP also contributed to the proceedings, along with a gratefully received visit from Mr. Masood Rizvi from the Ministry of Textile and Industry.

The diversity of participants ensured a well-rounded analysis of the issue with inputs from the various actors involved in the industry. Bringing this group to the table for discussion and presentation was a unique opportunity to share ideas on the directions that not only Pakistan but the South Asian region as a whole should take in the post-quota era, with specific attention being given to human development considerations.

The workshop’s program followed four sessions: regional effects, human development challenges, mitigation and their effectiveness, and the development of a South Asian agenda.

Presentations included Ms. Yamamoto’s brief on textile trade flows in South Asia, where she raised the issue of gender-biased impact of structural changes in Bangladesh, wage issues, and sexual harassment among other points. An important issue brought up in this presentation was the question of compliance with labour standards, and whether this was a genuine effort or windowdressing to attract foreign buyers. The discussion of her presentation led to an illuminating exchange wherein Mr. Asif Siddiq, CEO of a fabrics exporting company in Karachi, alleged that Bangladesh’s categorization as a least developed country (LDC) gave it preferential treatment in the world market. According to him this accounted for its competitive edge and receipt of tariff exemptions. Mr. Asif Anwar from the CPD in Dhaka countered this by suggesting that, whereas Bangladesh received preferential treatment in the EU market due to its LDC status its exports to the USA had increased after January 2005.

Following discussion was a presentation by Mr. Asif Anwar on the export scenario in Bangladesh. The human development angle came up and was discussed, specifically relating to how increased competition in the post-quota era might adversely affect working conditions and wage rates. This because companies try to reduce labour costs to survive the harsher competition in the post-quota environment. The intervention of governments in market forces to deter the negative effects of increased competition was also discussed.

Dr. Karin Astrid Siegmann’s presentation on the case of Pakistan extended the human development analysis by looking at labour market impacts in this female-intensive industry. Using the results of a recently conducted research study in Karachi and Faisalabad, she highlighted trends in employment as well as a detailed and informative sectoral analysis. Whereas overall employment appears to be stable so far, indications are that employment-intensive sectors are facing tough competition, endangering low-skilled and female workers in particular, due to the fewer options for alternative employment they face. This was followed by Mr. Khwaja Shoaib’s presentation on cotton cultivation, with an emphasis on the issue of cotton contamination. The ensuing discussions followed this line of thought by considering government responses to cotton contamination and how the phenomenon affects exporters in the country. Participants agreed that providing incentives to cotton growers and pickers to reduce lint contamination would both support the industry’s efforts to improve the quality of Pakistani cotton products and thus increase its export and lead to better wages and working conditions for the very poorly paid cotton pickers. Mr. Mohsin then presented on government initiatives in the industry. The government sees skill development as a crucial step to remain competitive in the international market.

On the whole, during the first eleven months of freer trade in T&C, some changes in the regional economies have already become apparent. T&C exports from South Asia 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 are doing well in the post-quota era, but their respective garment sectors are struggling to survive the harsh competition after China’s entry into 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 - minimum labour standards should be enforced regionally and at the level of the WTO and International Labour Organisation (ILO). Those workers hit by closures due to the quota expiry should be retrained and provided with new employment opportunities.

Workshop Recommendations in Detail

1. Strengthen product quality by investing in workers’ skills and research and development (R&D). This would strengthen both workers’ bargaining power and the industries’ competitiveness. In cotton cultivation, incentives for low cotton contamination can increase both the industries’ export and improve cotton pickers’ pay.Support vulnerable/dismissed workers by e.g. the provision of training, help for business development.
2. Workers, employers and government should join hands to improve both competitiveness and working conditions.
3. Labour standards should be enforced at national, regional and international (WTO/ILO) level. Minimum standards provide a level playing field for competition and end blackmailing of countries by T&C buyers to reduce their labour costs further at the detriment of workers.
4. Producing countries should join hands at regional and international levels (e.g. SAARC). Joint negotiations can strengthen their bargaining power vis-a-vis T&C buyers.
5. Importing countries (e.g. EU, US) should actively work for more predictable, less discriminatory trade regime as specified e.g. in the Millenium Development Goals (MGDs).
6. Governments should support producers by reducing the costs of inputs (e.g. taxes on agricultural inputs, electricity prices) or the provision of subsidies to prodders to adapt to the structural change in the T&C sector.
7. The government should also provide incentives for industrial diversification away from a concentration on T&C production that has made countries vulnerable.
8. Awareness raising about trade impacts for stakeholders - from cotton growers/pickers to the government – is necessary.
9. Investment in social development, e.g. in the areas of health and education, serves human development directly, but also supports more skill-based industrial development that is less vulnerable to exploitation by industrialised countries. 11. Industrialised countries should support transition to freer trade in T&C through both bi-lateral and multi-lateral aid, e.g. in the area of skill development. Importing industrialized countries benefit from the quota expiry and have taken responsibility for reaching the MDGs that include developing a global partnership for development.