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The Consequences of MFA Phase-Out

New Study on Global Textiles and Clothing Trade

A new study prepared by the International Labour Office (ILO) says that despite widespread concern that the lifting of global textile and clothing quotas in January 2005 would be a labour and trade catastrophe for many developing countries, the results thus far of the phasing out of the MFA have been a mixed bag. The study was prepared for a tripartite meeting of business, labour and government leaders from key textile and clothing producing and consuming countries on 24-26 October under aegis of the ILO. Participants will discuss strategic and policy responses that concern more than 40 million workers worldwide and hundreds of thousands of enterprises in the $350 billion global clothing and textile sector. An In Brief summary.

The report, Promoting fair globalization in textiles and clothing in a post-MFA environment (see reference), presents the most up-to-date global picture of labour issues in the textiles and clothing industry. It provides an analysis of the current trade and employment situation in the textiles and clothing (TC) sector, and confirms some of the predicted implications. However, the overall picture is more complex than had been expected.

* Winners and loosers
China and India, as predicted, appear at first glance to be the biggest gainers following the end of the MFA, with China seeing an 18.4 per cent increase in textile and clothing exports during the first fourth months of this year, and India recording a 28 per cent growth in textile exports for the first three months. However, further examination shows that the growth rate for Chinese exports was actually declining month by month, while India also saw a decline of 24 per cent in its ready-made garment exports.

Meanwhile, a number of Asian countries often cited as potential losers under the new regime do not appear to be doing badly in the months following the end of the MFA. In Bangladesh, garment exports declined in January 2005 by US$ 52 million but strongly recovered in February by US$ 157 million and slightly increased again in March. In Pakistan, textile and clothing exports during the first four months of 2005 reached a record level and underwent average monthly growth of 22.1 per cent when compared with the same period in 2004.

While many Asian countries appear to be doing well or holding their own in the wake of the MFA phase-out, textile and apparel producers and workers in Europe, the Americas and Africa appear to be losing out.

* Jobs at risk
As anticipated in most of the post-quota scenarios, employment in the United States and EU textile and clothing industry fell at the end of 2004 and during the first months of 2005, declining by 6.5 per cent between May 2004 and May 2005 in the United States and by 5 per cent between February 2004 and February 2005 in the 25 member States of the European Union.

Meanwhile, during the first three months of 2005, textile and clothing exports to the United States under the terms of the African Growth and Opportunity Act (AGOA) fell by 25 per cent compared to the same period in 2004. Of the 39,000 jobs generated by the textiles and clothing industry in Kenya, some 6,000 have disappeared since October 2004 and half of all TC employment is estimated to be at risk. In Lesotho, one of the world's poorest economies, some 6,650 out of 56,000 garment workers were left jobless and a further 10,000 workers have been notified that they will be hired and paid only when work is available.

With increased competition from Asia, most Latin American textile and clothing producers have also lost market share in the recent past. The study cites Mexico, which has failed to compete efficiently and has lost much of the revenue once generated by its textile and clothing industry.

The study cites Cambodia, where an ILO project, Better Factories Cambodia, has helped the garment industry to deal with the phase-out of the MFA, and ILO Decent Work Country Programmes in Morocco, the Philippines and Romania, which aim to improve the competitiveness of the textile and clothing industry by promoting decent work.

Within the European Union, a Social Dialogue Committee for Textiles and Clothing created in 1999 has enabled the social partners, and in particular trade unions, to influence the restructuring process.

* Fair globalization?
"Failure to manage this transitional period would erode confidence in the agenda of development through trade, harm the reputation of the TC business community for addressing the socio-economic challenges of globalization, and cause damage to the workers and economies concerned", warns the report.

The ILO tripartite meeting will examine innovative approaches in a number of countries and textile and clothing enterprises in their search for improved competitiveness. Their experiences provide useful material for the elaboration of a global strategy to promote fair globalization in the sector.

"In the post MFA environment, businesses and workers in the textile and clothing sector are under enormous pressure to produce the right product, at the right price, at the right time and under the right conditions", said Juan Somavia, Director-General of the ILO. "This meeting will discuss the elements involved in fashioning new strategic and policy responses throughout the global supply chain."

Reference:
* ILO, Promoting fair globalization in textiles and clothing in a post-MFA environment. Report for discussion at the Tripartite Meeting on Promoting Fair Globalization in Textiles and Clothing in a Post-MFA Environment, International Labour Office: Geneva 2005.

Find the complete study >>> here.

(Posted: 23 October 2005)

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