Tryst With Textility

While product patents are being introduced in developing countries for pharmaceuticals and agricultural chemicals under the Agreement on Trade Related Aspects of Intellectual Property Rights TRIPS, textile quotas are being removed in developed countries under the Agreement on Textiles and Clothing ATC.

Both these agreements are part of the larger global compact of April 15, 1994, at Marrakesh that set up the World Trade Organisation WTO. Since WTO itself formally came into existence on January 1, 1995, the new year also marks the 10th anniversary of this very influential and much controversial Geneva-based body which operates outside the pale of the UN network.

The removal of textile quota barriers by rich nations offers an unprecedented business opportunity to countries that can leverage their cheap manpower in what is essentially a labour-intensive industry.

And yet again, the China spectre cloaks India
WHEN the ATC was signed in 1994, India seemed to be the country that stood to benefit the most. But the situation changed somewhat seven years later, when China joined WTO.

China8217;s textile industry happens to be bigger and more advanced than that of India. As a corollary, the quotas fixed for China were also much larger than those for India. Thus the existing production base in China for clothes is on a much larger scale.

The gap between the two neighbours can be gauged from this little factoid: India does not manufacture any industrial sewing machine, the basic tool of the trade, and it imports much of its requirement from China.

More importantly, China has also long had the advantage of economies of scale. India, on the other hand, restricted garments to the small-scale sector till as recently as four years ago.

Another crucial factor that gives an edge to China in the clothing industry is its success in effecting labour reforms. Not surprisingly, there is a consensus among experts that India can scarcely compete with China, especially on the price front.

THE good news, however, is that China may to some extent become a victim of its own success. In the run-up to the deadline for lifting the quotas, there have been widespread fears in developed countries of being swamped by Chinese exports.

The Bush Administration has been seized of American industry demands to continue some sort of 8216;8216;safeguards8217;8217; specific to China. One justification being offered for discriminating against China is its belated entry into WTO.

Whether or not the US and EU actually come up with any fresh protectionist measure, an adverse focus on China can only benefit India.

Fair fight, free competition. India has no excuses now
EVEN otherwise, India has its reasons 8212; such as abundant availability of cotton 8212; for being optimistic that the dismantling of quotas will help it increase its share in the global textile trade from its current level of three per cent.

At the same time, it is clear that the quota-free regime will in itself be a challenge. As Union Textiles Minister Shanker Sinh Vaghela put it, 8216;8216;Though the removal of restraints would provide unrestricted access, it would also result in unrestricted competition in the world market.8217;8217;

The government8217;s advice to the textile industry is that, in the free trade environment, success will be determined entirely by commercial factors like quality, prices, delivery schedules and marketing skills.

To be sure, the government too needs to do its bit. It needs to augment the existing infrastructure 8212; especially in ports 8212; carry out labour reforms and remove the excess fiscal burden on man-made fibre.The rest is destiny.