Sep 15, 1988

TEXTILES NEGOTIATIONS SEEN AS TEST OF URUGUAY ROUND.

GENEVA, SEPTEMBER 13 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The outcome of the negotiations in the Uruguay round in textiles and clothing would be a test case of the commitment of major trading countries to liberalise trade and development, and the credibility of the Uruguay round negotiating process itself, a senior UNCTAD official declared Tuesday.

The Director of the Manufactures Division of the UN Conference on Trade and Development, Mr. B. L. Das, was addressing delegates to the 8th annual session of the Council of Representatives of the International Textiles and Clothing Bureau (ITCB).

The ITCB is the alliance of third world countries who are members of the Multifibre Arrangement (MFA), which currently governs the trade in textiles and clothing.

Textiles and clothing is one of the issues on the agenda of the Uruguay round MTNS in goods, and negotiators in this area have been mandates "to formulate modalities that would permit eventual integration of this sector into GATT on the basis of strengthened GATT rules and disciplines, thereby also contributing to the objective of further liberalisation of trade".

While third world countries have pressed for negotiations to set the modalities and time-table for an end of MFA, the industrialised countries have shown no signs of agreeing to this.

In informal talks, the U.S. has made it clear that it would not negotiate in the Uruguay round and end to the MFA.

The omnibus U.S. trade law adopted by Congress, and which provides a mandate to the administration for the MTN negotiations, has not mentioned textiles and clothing at all.

The other industrialised countries, while less frank than the U.S., have positions on MFA no different.

Also, the U.S. Congress has now adopted a bill further mandatory restricting imports into the U.S., in violation of the MFA.

The meeting of the ITCB is taking place against the background.

Earlier, in opening the meeting, Amb. Darry Salim of Indonesia, the chairman of the ITCB, noted that in the two years since the adoption of MFA-4, the dramatic upsurge in protectionism had been fully unveiled, with a number of bilateral agreements and unilateral restraints setting the seal on the MFA as "a selective, discriminatory trade regime purposely directed against developing countries".

The industrialised countries, Salim said, ha realised the full potential of the MFA as a protective regime. In 1988, the profits of the textile industry had surpassed that of previous years, and there had been a rapid growth of the industry and reinvestment.

However, this had not satiated the protectionist appetites, and the industry was pressing for more vigorous protection.

At Punta del Este, the GATT Contracting Parties had failed to agree on a standstill and rollback of protection in this sector, and in formally recognising the MFA as a multilateral instrument negotiated under GATT auspices, had emboldened the textile industry in the industrial countries to take full advantage of the discriminatory regime. The MFA had emerged in full competition to the GATT system.

While the third world participants in the negotiations had put forward proposals for full integration of the trade into the GATT, the industrialised countries had not demonstrated their political readiness to negotiate, and negotiations were deliberately being pushed into areas that had no relationship to the negotiating objective.

In his speech, Das said that the Uruguay round MTNS was "highly complex and diversified" compared to earlier rounds. It was "qualitatively different" from earlier trade liberalisation efforts, and its outcome might have an impact on production processes.

Issues on the agenda like TRIPS and TRIMS, and trade in services, would have significant effects on the textiles and clothing sector as well.

The Uruguay round itself had been launched against the background of general preoccupation with the continuing erosion of the international trading system, as evident from the ever-increasing recourse to bilateral rather than multilateral solutions to trade problems, to discrimination and to managed trade.

Halting and reversing the increased recourse to measures contravening or circumventing GATT rules were viewed as a major incentive to entering into another round of MTNS.

But despite the efforts of major trading nations to strengthen the coordination of their economic policies and their repeated commitments to standstill and rollback, "there has been no significant improvement in the fundamental conditions which have contributes largely to the continuing erosion of the international trading system", Das said.

Rather, the management of international trade flows had increased and the governments of major trading nations were having difficulties in resisting strong protectionist pressures.

It was against this background that the Uruguay round had been launched, and naturally there was a great deal of expectation from it, he noted.

An essential pre-requisite for inspiring confidence in the negotiating process was hence the faithful adherence to an implementation of the standstill and rollback commitments, and at the least exercise of restraint and avoidance of unilateral actions.

Another important contribution to confidence building would be through "significant progress" in areas of interest to the third world, as in the area of textiles and clothing.

While the industrialised countries had tables a large number of proposals on various negotiating issues, there were very few such proposals on textiles and clothing.

The UNCTAD official hoped that the concrete proposals tabled by the ITCB would be taken up for serious consideration during the negotiations.

"Any linking between removal of restrictions in this sector in the developed countries outside the normal GATT rules with the expectations of further concessions from developing countries would not be fair", the UNCTAD official said in a reference to the stance of the industrial countries.

"Developing countries", Das pointed out, "have already made a major concession so far in accepting special rules for textiles, which are in derogation to normal GATT rules".

Trade in this sector had been subject to long-standing derogation from GATT rules. About one-half of the imports of textiles and clothing into the industrialised countries were subject to Non-Tariff Measures (NTMS), both within and outside MFA. The ratio of imports for this sector into the major trading nations from the third world countries covered by the NTMS exceeded seventy percent.

The derogation from GATT for trade in textiles and clothing had been meant to be temporary, but had now continued for a quarter of century and "stands the risk of being accepted as a fact of life".

The industries in industrialised countries had undertaken extensive measures to make them competitive, through application of technology and capital investment, while third world countries had seen their exports frozen, and had lost the incentive to modernise their industries.

In third world countries, where there was already scarcity of resources for new investments, there was natural hesitation in investing in a sector so prone to uncertainties because of the environment created by the special restrictive arrangement.

The MFA regime had been adverse to consumers in the industrialised countries too.

In the U.S.A., costs to consumers through higher prices for textiles and clothing had been estimated to be 20-27 billion dollars at year. Any jobs protected were at very high cost to the economy, and the cost of jobs through trade and exports in other sectors.

A UNIDO study had brought out that in 1983 trade in manufactures with the third world had resulted in net direct and indirect employment gain to industrial countries of 4.3 million man-years.

Thus, stifling exports of third world countries hurt both the third world and industrial countries.

The third world countries spent the bulk of their export earnings on imports of capital goods and industrial intermediaries from the industrial countries. Hence pressures of the type that had resulted in continuation of the MFA should be effectively resisted in the interest of both the exporting and importing countries, the UNCTAD official argued.

"Any softness in this respect is bound to encourage those pressure groups which have been asking for similar restrictive arrangements in other sectors like footwear, etc.".

Underscoring the need to build up all round opinion to realise the objectives of the Uruguay round in this sector, Das noted that even in the exporting third world countries, "vested interests might have grown that would feel safe under the protection of assured quotas and would be naturally apprehensive of new competition from freedom to export".

"Such a feeling of comfort is short-run and limited, and the opportunities for expansion and modernisation under unrestricted export system would far outweigh the illusory advantages perceived by some of the present established exporting firms".

The MFA, Das said, had institutionalised discrimination and rendered trade more restrictive for third world countries, for whom textiles and clothing were backbone industries.

The MFA approach was now being sought in other sectors of export interest to the third world.

It would be "a tremendous boost" to the international trading system if "decisive and concrete" steps could now be taken to bring the trade in this sector under the rules and principles of GATT.

From this perspective, the outcome of negotiations in this sector would "clearly transcend sectoral concerns".

"It is a test case of the commitment of major trading countries to liberal trade and development, and it is also a test case of the credibility of the negotiating process itself".

"If the discriminatory restrictions against developing countries cannot be halted in the sector of key importance to developing countries, the confidence in the outcome will naturally be eroded".