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Trade Liberalizations, Foreign Markets and the U.S.

Trade Liberalizations, Foreign Markets and the U.S. Samarendu Mohanty Jaime Malaga. Agreement on Textiles and Clothing (ATC). ATC is a ten-year process to progressively dismantle the extensive network of bilateral quotas built up over past three decades.

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Trade Liberalizations, Foreign Markets and the U.S.

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  1. Trade Liberalizations, Foreign Markets and the U.S. Samarendu Mohanty Jaime Malaga

  2. Agreement on Textiles and Clothing (ATC) • ATC is a ten-year process to progressively dismantle the extensive network of bilateral quotas built up over past three decades. • Sequential integration of all textiles and clothing products into full application of WTO rules in four stages. • Sequential increase of quota amount for the remaining products in four stages

  3. ATC Integration Process in Stages 49% 67% 84% 100% 51% 33% 16%

  4. Agreement on Textiles and Clothing (ATC) • For products remaining under quota, the rates of annual growth applicable to these quotas have been increased. • First stage: 16% • Second stage: 25% • Third Stage: 27% • At the conclusion of transition period, all quotas will be eliminated

  5. Actual Progress Achieved so far… • As expected, integration of products into WTO has begun with the least sensitive areas and with few quotas being removed. • The basic requirements for the product integration and quota growth rates have been met by developed countries (United States, Canada, European Union and Norway). • In the first stage: • Correct volumes of products were integrated but not quotas were eliminated. • In the second stage: • A greater number of products under quota were integrated in Canada. • Few quotas were removed by the European Union and the United States.

  6. Actual Progress Achieved so far… • However, Developing exporting countries are concerned that the products chosen for integration are of little commercial interest to them. • In the second stage: the EU’s integration program included more than 20 categories of products of which 14 were with quota restrictions accounting for less than 4 percent of the volume of EU’s import in 1990. • Unites States also integrated babies’ garments excluding cotton diapers, down filled coats and certain hosiery items accounting for a mere 1.3 percent of total imports.

  7. Actual Progress Achieved so far… • Based on current situation: • It appears that the textile and clothing products of greatest interests to the exporting developing countries will be maintained up to the end of the transition period. • However, developed countries have reconfirmed their commitments for full integration of the sector by January 2005.

  8. Trend in World Textile and Clothing Trade • World exports of textile and clothing increased by 16 percent from 1992 to 1997 (286-332 billion dollars). • Of which 64 percent went to developed countries. • Developing countries count for 165 billion dollars. • 57.3 percent of their exports went to developed countries. • Remaining 42.7 percent was among developing countries themselves.

  9. Trend in Developing Countries Textile & Clothing Imports 70 60 31 27

  10. World Clothing Trade:Developed vs Developing Billion Dollars 200% 65%

  11. The prospects for expansion of trade in textiles and clothing between developing countries, particularly emerging new markets in Asia and Latin America are extremely bright. • These countries have been liberalizing their import regimes of both textile and cotton

  12. Trade Liberalization Measures Taken By Developing Countries • Reductions in textiles and clothing sector in trade-weighted tariff averages range from 9 percent in Zimbabwe to 52 percent in India. • Argentina, Brazil, Chile, Columbia, Costa Rica, El Salvador, Indonesia, Jamaica, Mexico, Peru, Uruguay and Venezuela have bound all their tariffs • Bound Rates • India, Turkey, Singapore, Korea, Malaysia, Philippines, Thailand, and Tunisia: 61-98% • Senegal and Zimbabwe: 22-44%

  13. Textile 14 % of industrial prod. 27% of county’s export earnings Employment to 35 million. Cotton Third largest producer in the world. One million cotton farmers Textile 20% of industrial prod. 60% of country’s export earning. 38% of total employment Cotton Fourth largest producer in the world Importance of Cotton and Textile in South Asia India Pakistan

  14. Cotton and Textile Situation in India • Accounts for 15 percent of world cotton production. • Net exporter for most years since 70s. • Transformed into a net importer for last two years primarily due to increased mill consumption. • Accounts for a mere 3 percent of world textile trade. • However, Indian textile trade has been growing at a compound annual rate of 11.53% in terms of dollar terms during 92/93-00/01 (14 billion dollars in 00/01)

  15. Composition of Indian Textiles Exports (2001/02) 9.91% 10.27% 45% 10.3% 29.8%

  16. Indian Textile Exports by Destinations (00/01) 20.4% 50.1% 23% 6.2%

  17. Pakistan Cotton and Textile Situation • Accounts for approximately 9 percent of world cotton production. • Mostly net exporter since late early 80s. • Accounts for approx. 1.2 percent of world textile trade.(5.4 billion dollars in 2001/02)

  18. India • Removed all restrictions on import/export of cotton and cotton waste. • Removed ceiling on cotton yarn exports • India has agreed to liberalize its textile imports regime by removing all yarn , fibers and some industrial fibers from its restricted list of imports. • Restrictions on garment imports will be phased out by end of this year. • As part of GATT commitments, India agreed to reduce tariffs on various textile items to 20 percent or less from the current 40 to 50 percent.

  19. Pakistan • Removed all restrictions import/export of cotton. • Improve the access of textile and clothing industry to fibers, yarns and cotton substitute by allowing imports at reduced tariffs. • The tariff on selected textile products would be reduced during the transition period of ATC to 35 percent for clothing, 25 percent for fabrics and 15 percent for fibers and yarn.

  20. Country Ranking on Production of Yarn Source: All Pakistan Textile Mill Association

  21. Prospects for India and Pakistan’s Textile and Cotton Trade Textile Trade • Textile exports from both India and Pakistan should increase at a much faster rate in the futures with the implementation of ATC • Comparative advantage in textile production. • Relatively low market shares. • However, both these counties will face stiff competition from other Asian competitors. Cotton Trade • India may become a substantial importer of cotton to meet its growing mill demand. • Expanding production by area expansion is difficult. • Technology mission on cotton launched under “National Textile Policy 2000”: may not increase production in the short-run.

  22. Prospects for India and Pakistan’s Textile and Cotton Trade Cotton Trade • India may become a substantial importer of cotton to meet its growing mill demand. • Expanding production by area expansion is difficult. • Technology mission on cotton launched under “National Textile Policy 2000” and massive investment in infrastructure: may not increase production in the short-run. • Pakistan may become a net importer of cotton. • Cotton area may not expand in the future in the face of resource constraint and the increasing competition from more efficient foreign cotton producers. • Pakistan would continue to be a cotton net exporter, if the production capacity of manmade fibers continues to expand and domestic consumers substitute them for cotton textiles.

  23. Value of US Cotton Yarn and Fabrics Imports from All Countries 1989-2001

  24. Value of US Cotton Yarn and Fabrics Imports from Latin America 1989-2001

  25. Value of US Apparel Imports from All Countries 1989-2001

  26. Value of US Apparel Imports from Latin America 1989-2001

  27. Volume of US Cotton Exports 1989-2000

  28. Volume of US Cotton Exports to Latin America 1989-2000

  29. Value of US Cotton Exports to all Countries 1989-2000

  30. Value of US Cotton Exports to Latin America 1989-2000

  31. LA-US Cotton/Textile/ Apparel Trade Changes • Cotton Yarn and Fabric: LA share of the US market 10-12% No change 1989/90-2000/2001 • Mexican Share of LA exports to US increased from, 15% to 85% (Main change in 1994-5 • LA share of US apparel market grew from 10-12% (89-91) to 32% (99-01) • Mexican share of LA exports to the US doubled from 20% to 43% during the same period. • US exports of cotton fiber to LA went from 5% to 35% of total US exports ( same period). • Mexican share of US cotton exports to LA: 70%

  32. Latin America’s Textile/Apparel Export Markets-US Share • Mexico 96-98% • Andean • Peru 65-85% • Colombia 55-65% • Ecuador 60-70% • Caribbean Basin ± 95% • Mercosur negligible

  33. Latin American/US Trade Agreements and Textile/Apparel Industry • Mexico: • NAFTA: Open US market for Mexican Textiles/ Apparel in 1994.. • Caribbean Basin: • 1983 CBI, CBERA, 1990, CBTPA, 2000: Same treatment as Mexico. • Andean Countries: • ATPA expansion to Textiles/apparel. • Mercosur: none • Free Trade Area of the Americas? 2005

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