WTO discussions on MFAITGLWF / TWARO

Post MFA5-9 September BangkokBy Esther Busser, ICFTU

WTO preparationsDuring the 10 year phase out period the WTO Textiles Monitoring Body monitored the reductions in quotasOnly in 2004 a number of developing countries started to get worried about the possible job losses they would be confronted with after the phase outIn August 2004 the WTO published a study on the expected effects of the phase out. Main conclusion of the report is that the expected major winners of the phase out will be China and India.

WTO discussionsDiscussions on the consequences of the phase out have taken place in the Goods Council. A number of member states have made proposalsThe WTO secretariat has published an LDC reportRegional and National workshops are taking place

SubmissionsOn 29 September, Bangladesh, Dominican Republic, Fiji, Madagascar, Mauritius, Sri Lanka and Uganda, later joined by Jamaica, Mongolia and Nepal, in the Council for Trade in Goods (CTG)LDCs on 20 October 2004 in the Sub-Committee on LDCsTurkey on 25 October 2004 in the CTGTunisia on 11 March 2005 in the CTGTurkey on 28 June 2005 in the CTG

Discussions in the Goods Council

An emergency meeting was asked for in August 2004, but not enough members were in favourDiscussions would take place in the Goods Council on the 1st of October22 developing countries met on 24 September to prepare the 1 October meeting.They wanted adjustment issues to be a permanent item for the Goods Council and they wanted a study by the secretariat on the impact of phase out on small and vulnerable producers.

Discussions in the GCAt the 1 Oct meeting a proposal was submitted by Bangladesh, Mauritius, the Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda. They asked for a study on adjustment related issues and costs and a workprogramme to discuss possible solutionsThis proposal was not adopted due to a cool reaction from China and other members, although 38 countries took the floor in support of the proposal

Turkey proposalTurkey submitted a proposal on the 26th of October.Turkey referred to the responsibility of WTO members to address the concerns of developing and least developed countries about the sustainability of their economic growth.Turkey proposed a monitoring mechanism and a safeguard mechanism that is automatically triggered.Members reacted negatively on the proposals

Turkey proposalChina and India reacted critically and said that the phase out would be in the interest of developing countriesAdjustment challenges could be met by investments in the textile sector, by improvement of the application of rules of origin and by adjustment assistance of the World Bank and IMF

Discussions in the GCThe WTO secretariat would look into the possibility to do a study on the competitiveness of LDCs in T&C after the phase out.Countries wanted adjustment related issues to remain on the GC agenda. China, India and Pakistan wanted these discussions to move to the LDC sub-committee

Discussions in the GCWith regard to technical assistance a number of regional workshops had taken place before the phase out, and countries requested four regional workshops after phase outChina, India, Pakistan and Hong Kong objected. The latter three softened their positionsDecided was to have national workshops, on request of the country

Discussions in the GCThe LDC sub committee decided on 20 January that the WTO secretariat would prepare a report focusing on coherence programmes of IMF and WB, rules of origin, and technical cooperation to enhance competitiveness of LDCs in textiles and clothingThe report was published in June

Tunisia proposalOn 10 May a proposal by Tunisia was submitted.It was supported by Turkey and JordanThe proposal asked for ways to stabilise market prices for textiles and clothingIt also asked for a funding mechanism to help with adjustmentChina objected to discuss the proposal

Proposal by TurkeyTurkey made a proposal on the 28 of JuneIt described the effects of the quota phase out, the adjustment challenges and the role of China which holds nearly 50% of the world market, which has led to a decline in pricesCollective remedies are necessary as this is a global problem and many countries face similar challenges

Proposal by Turkey - elements

Establishment of workprogramme for periodic review global textile and apparel productionConsultations with NAMA and Ag chairsPossible ways of stabilizing prices should be exploredCTD has to work on problems caused by declines in pricesWTO should develop ways to cooperate with other international organizations including WB and IMF to effectively direct resources

Reactions on proposalDiscussions will continue on this proposal in the next CTG (council for trade in goods), despite opposition from ChinaInformal consultations will take place ahead of the CTG meeting on the 10th of NovemberMood is changing

LDC reportOptions for least developed countries to improve their competitiveness in the textiles and clothing business through:Coherence programmes of the IMF and World BankTrade related technical assistance and capacity buildingNon-reciprocal preference schemesOther means

Coherence with IMF and WB

Emphasis on private sector development and trade in achieving growth and poverty reductionAnalyse limitations (infrastructure, policies, human capital, regulations and corruption)Reduce costs of inputs and of doing businessCountry by country basis, not sector specificInvolved in the Cambodia project (WB)

TIMTrade integration mechanismFinancial support to address adjustment issues due to trade liberalizationExtension of existing loan facilities (same conditions)Further indebtment

Technical assistance and capacity building (TRTA / CB)

Analytical work indispensable to identify constraintsTraining of labour force and officials, enhance access to information and promote exportsIntegrated Framework (IF) (mainstream trade in national development plans such as PRSPs, and coordination of trade related technical assistance)Country driven and supported by IMF, ITC, UNCTAD, UNDP, WB and WTO

PreferencesPreferences for LDCs have been extendedHowever, utilization rates have been low

Measures to improve utilization:Coverage (non discrimination among LDCs)Predictability (on permanent basis and no conditions) andRules of origin (simplified, harmonized and relaxed)

PreferencesAsian LDCs underpreferred (no access to AGOA and Cotonou)Product coverage limited under US schemesPredictability important for investorsPreferences should be seen as short-term. Erosion will take place

Other measuresSouth-south trade: 4% of LDC clothing exports to developing countriesHigh tariffs (China 19.6% for clothing, Malaysia 15%, Korea and Chinese Taipei around 12%)Non-reciprocal preferences through regional trade agreementsLowering tariffs on inputsSpecial training courses and enhance human capital in the long term

Other measuresFDI and micro credit schemesStreamline customs proceduresImprove transport systemEstablish EPZsCompliance with international labour standards as positive signal for investors – niche market

LDC reportReactions on the LDC report were positiveSeveral members made reference to the report during the last CTGThere were suggestions to do a similar study for non-LDC countries

National workshopsOnly three national workshops have been planned so farThey take place at the request of a member stateThe programme will be developed in consultation with the member stateThe first one took place in the Dominican Republic in July, main focus was on CAFTATwo others are planned for september / october in Uganda and Kenya