India, China may dominate as WTO textile quotas lapse

Tuesday, 20 April 2004, 19:30 IST
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WASHINGTON: India and China are expected to emerge winners as the World Trade Organisation (WTO) plans to eliminate a global textile quota system that capped sales from developing nations. The WTO's 146 members plan at the end of this year to eliminate the textile quota system that shielded domestic industries in the US and Europe, and in some smaller countries. The result is expected to be a major shift in sourcing and production, and new pressure on once-protected companies, with China and India the big winners, says a Washington Times report. "China is expected to become the 'supplier of choice' for most US importers... because of its ability to make almost any type of textile and apparel product at any quality level at a competitive price," the US International Trade Commission said in a January report. Consumers may see a small bump in apparel prices towards the end of the year as the international system adjusts, but eventually they should deflate by 15 percent to 20 percent, Standard & Poor's said in a report released here. China, which produces a variety of designer-label clothing sold in US department stores, sells about two million to three million garments annually. This is expected to triple by next year, with almost all the new clothing heading to the US as worldwide quotas on foreign-made apparel disappear. "The quota-free competition will be huge. Prices will be down 10 to 15 percent or more. The consumer will get the lowest price on merchandise," The Washington Times said quoting a New York-based businessman, Li, who also runs warehousing and logistics operations that channel clothing made in China, India, Central America and other nations to retailers such as J.C. Penney and Nordstrom. India is especially confident it can take advantage of new opportunities. The ITC projected that the country's apparel exports would rise almost 100 percent when quotas are lifted. "Once the quota goes, we will double our sales to the US," the Times report said quoting Sakthivel, head of Poppys Knitwear, a company in the southern Indian town of Tirupur that sells its products, including restaurant uniforms, to chains such as Pizza Hut and innerwear to Hanes. But the US and some other manufacturers are terrified they will be driven out of business by low-cost competitors. US textile and apparel-sector job losses will hit 630,000 through 2006 and a projected 1,300 textile plants in the country will close if quotas are lifted, according to a textile-industry report published last year. "This sector is about to be wiped out because of unfair Chinese trade practices. But there isn't a lot of interest in that fact in Washington," said Cass Johnson, president of the National Council of Textile Organisations. "We believe it will be a very traumatic and chaotic event," said Steve Dobbins, president and chief executive officer of Carolina Mills, based in Maiden, North Carolina. Carolina Mills, which makes synthetic fibres used in high-end hosiery, has over more than three years closed 10 plants and laid off 1,400 employees as competition from abroad intensified. The firm still has about 1,200 workers in seven plants, but Dobbins said he is concerned about the future. "Once the quotas go off, things will go downhill unless something happens," he said. Smaller nations are also poised for major job losses as the global industry consolidates. Industry groups in more than 30 nations, including the US and Mexico, have asked for an extension on the quotas until 2007, citing China's use of export subsidies and other illegal trade practices, and a potential loss of 30 million jobs worldwide. But the quota phase-out has been in the works for a decade, and any extension appears unlikely.
Source: IANS
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