chapter  3
75 Pages

Liberalization of the textiles and clothing sector

Introduction In the eighteenth through the twentieth centuries, the textiles and clothing (T&C) sector had been at the forefront of the industrialization of the Western world, especially in the United States, the United Kingdom, and Germany. In the twentieth century, especially since World War II, this sector paved the way for industrialization and economic growth for scores of post-colonial countries. In the 1950s and early 1960s, the sector played a crucial role in the industrial transformation of Japan; in the early 1970s, it played a similar role in the industrialization and export-led economic growth of the East Asian Tigers-Hong Kong-SAR, Taiwan, Singapore, and South Korea; in the 1980s, the sector made inroads into mainland China and several Southeast Asian countries; and in the 1990s, the sector moved to South Asia, Central America and the Caribbean, Mexico, the Mediterranean, as well as Sub-Saharan African countries (Dickerson, 1991). The transformative power of clothing, a rudimentary manufacturing activity, is thus fascinating. It requires simple technology, low start-up and fixed costs, relatively less challenging entrepreneurial skills, and low-skilled labor (Nordas, 2004; Jones, 2001), but quickly turns into a powerful harbinger of industrialization through its multidimensional backward and forward linkages. As the industry grows, it creates backward linkages with more capital and scale-intensive textile sector, and forward linkages with global value chains through sophisticated production and marketing networks (Gereffi and Memedovic, 2003). It is thus not surprising that by the 2000s, less developed countries emerged as the dominant producer and exporter of T&C products worldwide, triumphantly demonstrating their inherent and evolving competitive advantage in this highly labor-intensive manufacturing sector. The day of eventual triumph of less developed countries in the T&C sector, however, arrived several decades late, arguably because of the prolonged and protracted protection of this sector in the developed countries. In fact, this sector came under the same overriding rules and conditions similar to all other internationally traded manufacturing products only recently: in 2009, to be precise. If history is any guide, advanced industrialized countries, otherwise committed to freer global trade regimes, restrained

trade in this sector by adopting numerous protectionist measures, such as quantitative restrictions, quotas, tariffs, licenses, and so on, for at least four decades. Presumably, advanced industrialized countries found the advantageous position of less developed countries in this manufacturing sector hugely incompatible with their domestic political and economic interests. Worse still, while both tariff and non-tariff barriers to many manufacturing products, especially in which developed countries enjoyed comparative advantage, fell sharply under successive rounds of GATT negotiations,1 the T&C sector faced movement in the opposite direction ((Dowlah, 2004, 51-76). Eventually, the Uruguay Round Agreement on Textiles and Clothing (ATC) brought this sector into the strengthened GATT discipline in 1994, providing a 10-year transition period for eliminating all protectionist measures by 2005. The following section presents a brief background of the international trade regimes that proliferated in the T&C sector during the GATT period. The third section explains the major features of the ATC and the challenges the agreement confronted during its implementation phases. The post-ATC transformation of global T&C trade is explained the fourth section in order to assess the consequences of full liberalization of this sector. The fifth section examines postATC issues and WTO negotiations in this sector with a special emphasis on the economic interests and options for developing and least developed countries. The final and fifth section concludes the chapter.