Bond University From the SelectedWorks of Umair H. Ghori July 1, 2009 ASEAN & South Asia; Victims & winners in textiles & clothing trade after quota expiry Umair H Ghori, University of New South Wales Available at: https://works.bepress.com/umair_ghori1/4/
ASEAN & SOUTH ASIA ; VICTIMS AND WINNERS IN TEXTILES & CLOTHING (T&C) TRADE AFTER QUOTA EXPIRY. Umair Hafeez Ghori, PhD Candidate, Faculty of Law, UNSW Australia.
WHY IS THIS SECTOR SO IMPORTANT TO ASIAN NATIONS? Overwhelming reliance on T&C exports (lack of diversity in exports) (Figure 1) Percentage of Share in Total Merchandise Exports 2007 (Textiles & Clothing) Source: WTO International Trade Statistics 2008 Vietnam Thailand Philipines Malaysia Indonesia Cambodia Nepal Sri Lanka Pakistan India Bangladesh 5.5 6 2.7 9 13.1 16.9 19.1 44.7 65.1 70.4 86.6 0.0 20.0 40.0 60.0 80.0 100.0
1.4 1.2 1 0.8 0.6 0.4 0.2 0 (Figure 2) Apparel Manufacturing Labour Costs (US $ Per Hour) in Leading Asian Apparel Producers (2008) Source: Emerging Textiles Bangladesh Sri Lanka India Pakistan Cambodia Indonesia Malaysia Philippines Thailand Vietnam US $/hour 0.22 0.43 0.51 0.37 0.33 0.44 1.18 1.07 1.325 0.38 ASIA HAS AN ABUNDANCE OF SKILLED AND CHEAP LABOUR FORCE. THIS SECTOR IS A CRITICAL EMPLOYER.
SOME MAJOR POLICY ISSUES THAT AFFECT GLOBAL T&C TRADE Outward Production Processing (OPP); Counterproductive Rules of Origin (ROO) as part of the Generalised System of Preferences (GSP) Schemes operated by Developed countries; NAMA Negotiations & Preference Erosion; Reduction of Tariffs; Non-Tariff Barriers; Regional FTAs; Safeguards; Role of Large Retailers.
Current Developments (US Market) 40 (Figure 3) Percentage Growth Rate in US T&C Imports (Top 10 Suppliers 2006-08) Source: ITCB 30 20 10 0 2006-07 2007-08 -10-20 China Vietnam India Mexico Ind'sia B'desh Pakistan H'duras Cmbdia Italy 2006-07 19.4 34.2 1.5-11.8 7.8 6.4-2.5 3 13.2 8 2007-08 1.1 19-0.5-11.9 0.8 10.8-2.9 3.7-2 -8.7
Current Developments (EU Market) 30 (Figure 4) Percentage Growth Rate in EU T&C Imports (Top 10 Suppliers 2006-08) Source: ITCB 25 20 15 10 5 2006-07 2007-08 0-5 -10 China Turkey India B'desh Tunisia Morocco Pakistan Sws'land Ind'sia Vietnam 2006-07 25.5 16.6 12.9 5.2 15 17.3 16.4 17.8-2.4 22.4 2007-08 21.2-4.8 5.4 15 7.2 1.5 2.7 2.6-1.5 15.5
Major South Asian Producers compared with Leading ASEAN, African, Caribbean & Central American Producers in the US Apparel Market (2006-08) Source: OTEXA (Data in Million US $)
Heavy reliance by Asian, African, Caribbean and Central American LDCs; OPP countries are dependent on preferential treatment; Quotas encouraged growth in garment assembly; With lifting of quotas and increase in competition, many countries have faced losses (refer to Table 1). Investor countries from Asia have experienced little success availing preferential treatment (e.g. Malaysia s Ramatex Group failed investment in Namibia to take advantage of US AGOA regime)
(Table 1) Comparison of Leading Sub-Saharan African, Caribbean and South Asian LDCs Producers in the Post-Elimination Period in the US Market 2006-08 (Export Figures in US $) Regime/Regions Producers 2006 2007 2008 CBTPA/CBI Dominican Republic Honduras El Salvador Costa Rica Jamaica Haiti 1,855,015,941 2,629,050,201 1,646,419,735 491,589,847 56,494,558 406,340,140 1,550,490,762 2,445,447,004 1,433,174,483 479,494,899 48,860,905 449,683,466 1,060,794,572 2,517,999,687 1,507,316,039 431,548,408 36,612,176 452,206,347 AGOA/Sub- Saharan Africa Botswana Cameroon Ethiopia Ghana Kenya Lesotho Madagascar Malawi Mali Mozambique Namibia Niger Nigeria Senegal Sierra Leone Swaziland Tanzania Uganda 30,046,649 388,569 3,614,838 5,173,618 271,021,220 390,712,124 277,099,960 22,781,165 67,884 2,516,176 53,223,668 4,755 173,021 74,766 135,134 160,997,148 4,099,000 4,843,622 28,676,816 231,738 5,995,851 9,534,710 263,721,082 387,031,425 238,438,804 18,186,761 42,191 693,549 33,237,435 252,218 102,946 73,973 560,733 135,268,891 3,714,752 1,258,077 31,499,394 516,004 4,908,518 7,865,836 249,036,112 383,525,513 289,689,942 19,825,465 671,626 160,659 28,624,052 97,681 81,395 48,387 287,697 135,284,398 3,238,908 1,150,042 Asian LDCs Nepal Maldives Bangladesh Sri Lanka Vietnam Cambodia 95,777,738 4,719,927 2,456,926,163 1,677,028,018 3,396,087,943 2,150,791,435 84,921,014 1,401 2,997,871,424 1,702,827,293 4,557,975,441 2,435,480,467 70,534,615 0 3,191,221,645 1,590,426,057 5,425,272,587 2,386,067,213
Mexico s decline in the US Market (-11.9% in 2007-08); Turkey s decline in EU Market (-4.8% in 2007-08) Turkey is less dependent on sourcing inputs from EU since it possesses vertically integrated industries; Poor performance of African & Caribbean LDCs; ROO shackles poor countries into sourcing from expensive suppliers in order to qualify for preferential treatment; Some reform of EU GSP where regional cumulation was allowed; Positive result was Cambodia s growth in 2006-07 (see Figure 4)
Reduction of Tariff peaks on T&C products. Ambitious tariff cuts will lead to reduction in applied tariff rates and loss of tariff protection. Developing countries would have to eliminate tariffs used to shield their industries from foreign competition. Conflicting interests within developing countries and the LDCs. LDCs are concerned about preference erosion which would negate the advantage that their T&C exports to developed countries currently receive. Tariff s becoming the new tool of protectionism after expiry of quotas in 2005. Main T&C Specific Issues in NAMA Negotiations. Even though the primary sponsors of NAMA Negotiations are the developed countries. The developing & LDCs dependent on T&C trade have an important stake in the outcome especially in regards to products of interest to them.
REDUCTION OF TARIFFS -TWO PERSPECTIVES- Reduction of Tariffs due to a Regional FTA. ASEAN has been successful in concluding AFTA. South Asia concluded SAFTA Ineffective since it excludes sensitive T&C related categories. Positive effects of ASEAN FTA clearly evident. Asian countries source from each other at more competitive prices. Even Sri Lanka & Bangladesh source more textiles input from ASEAN than India & Pakistan Reduction of Tariffs as part of NAMA Negotiations. Global in scope. Wide ranging products. T&C considered an exception. Conflicting interests between developing countries & some LDCs. Some countries even calling for tariffs to be maintained in order to keep their preferential margin. Elimination of quotas has rendered preferential treatment somewhat redundant!
Comparison of T&C Tariffs between South Asian & ASEAN Exporters
Tariffs restrict entry into target market; By comparison NTBs are more prohibitive since their associated costs cannot be accurately measured; Examples include ROO, TBT, SPS, Import licensing, certification formalities, excise & taxes on T&C inputs. Unilateral imposition of NTB is often employed for protectionist purposes. Major issue after quota expiry since it raises compliance costs for Developing countries & LDCs
QUESTION> Did India & Pakistan Capitalise on Safeguards on China? Employing the US Market as an example and comparing Percentage of Market Share and any Change in Market Share of Top Apparel & Made up Exports (China V India V Pakistan) (June 2007- June 2008) ANSWER> No Substantial Gains were Made. Percentage of Market Share in the US Percentage change in Market Share in the US Categories China India Pakistan China India Pakistan Men's/Boys Cotton Shirts, Not Knit (340) Women's/Girls Cotton Blouses (339) Men's/Boys Cotton Shirts. Knit (338) Cotton Sweaters (345) Floor Coverings of Wool (465) Cotton Terry & Other Pile Towels (363) Men's/Boy's Cotton Trousers (347) Cotton Bed Linen (362) Cotton Hosiery (332) Women's/Girl's Cotton Trousers etc. (348) 19.27 9.02 0.51 12.9 3.92 1.5 8.74 8.78 8.36 53.33 0.99 0.13 17.02 36.8 9.33 20.82 28.85 19.16 8.48 4.55 4.56 58.08 7.15 17.46 14.34 0.63 16.12 15.54 4.25 1.8 39.27 2.54-36.41-4.43 7.17 7.82-7.68 0.94-7.47 83.55 28.35-4.79-3 0.43-13.59 15.26 26.92 22.43-25.32 1.09 26.76 16.4-7.67 2.51 48.35-26.42-0.62-21.22 20.4-12.02 Source: US Department of Commerce, Office of Textiles & Apparel (OTEXA)
Role of Large Retailers after Quota Expiry Importers likely to enter into long term sourcing relationships with major suppliers; Concentration of sourcing from a few Asian countries will adversely affect smaller competitors; Increased competition impacts prices; Manufacturers reducing prices to remain competitive has labour welfare issues; Labour exploitation sweatshops allegations; Quota expiry suits importers and retailers but does not favour industries.
Trade Figures have been mixed; Vietnam and China s growth has been exceptional; Established countries such as Pakistan & Thailand have struggled. Indonesia, India & Bangladesh have posted respectable growths Philippines, Malaysia, Cambodia shares affected. Rising labour costs in China to favour Vietnam but the benefits may flow on to other competitors. In absence of an effective SAFTA regime, South Asian countries would either prefer a bilateral trade agreements (e.g. India-EU FTA) or seek preferential access for their exports. Effectiveness of preferential trade schemes are questionable in the quota-free era. Current global financial crisis to affect buying power of US/EU consumers in niche items. Low-end market segment would not be significantly affected. Price impact on exports due to increase in fuel costs and other inputs. Political instability affects export performance (e.g. Pakistan losing foreign orders). Conflicting interests in NAMA and ongoing tariff reduction negotiations *may favour India and Pakistan* but not Sri Lanka and Bangladesh. ASEAN and South Asia to be amongst leading exporters in the coming years along with China. Might even take the lead from China as costs rise in China and OPP further shifts to other Asian countries. CONCLUSION...