Bridges Weekly Trade News Digest • Volume 9 • Number 33 • 5th October 2005
IFIs Describe Textiles Assistance And Country Conditions At WTO
The fallout in least-developed countries (LDCs) resulting from the elimination of quotas on textiles and clothing trade might not have been as severe as originally anticipated, according to presentations made to the 29 September meeting of the WTO Sub-Committee on LDCs. Attempting to address concerns raised in a 28 June WTO Secretariat report on least-developed country (LDC) competitiveness in the sector (WT/COMTD/LDC/W/37, available at http://docsonline.wto.org), representatives from the International Monetary Fund (IMF), International Trade Centre (ITC) and World Bank spoke to Members about their organisations’ work and analysis regarding the end of the trade quotas. (see BRIDGES Weekly, 13 July 2005).
Members commissioned the Secretariat report, entitled "Options for LDCs to improve their competitiveness in the textiles and clothing business," in October 2004, at the urging of LDCs concerned about the impact of the 31 December 2004 phase-out of trade quotas in the textile and clothing sector (see BRIDGES Weekly, 3 November 2004). One of the report’s suggestions was that international financial institutions could provide trade-related technical assistance and capacity building to help LDCs adjust to the post-quota environment.
The IMF pointed out that its Trade Integration Mechanism (TIM) can deliver such assistance to the textile and clothing sector in needy countries, and has for Bangladesh (July 2005) and the Dominican Republic (January 2005). However, the terms of the programme mean that it can only do so in cases where there is a direct link between the sector and a serious balance of payments problem. Delegates recognised that the IMF’s mission is to assist countries that are most vulnerable to balance of payments problems. However, some LDCs questioned whether the TIM’s requirement that a country have a balance-of-payments problem made it a suitable tool for helping most LDCs deal with diminished market shares.
The ITC encouraged developing countries to refer to its work on value chain analysis; product and market development, including product diversification; and ideas for the development of South-South trade, including regional value chain cooperation.
The World Bank reported on the state of textile and clothing sectors in LDCs. It said that Bangladesh, which had been expected to lose market share to bigger players such as India or China, has not been as adversely affected as once feared. The Bank suggested that the efforts of Bangladeshi firms and policy makers to anticipate market trends had paid off. The representative from Bangladesh, however, pointed out that some sub-sectors within the industry had nonetheless been hit hard.
At the same time, the World Bank research indicated that other countries, particularly Lesotho, Malawi and Nepal, have not been coping well with the expiry of the quotas that used to guarantee them a certain share in European and US markets. It indicated that the competitiveness of LDC textile and clothing firms was strongly affected by regulatory processes, infrastructure and trade facilitation measures such as customs procedures.
The Sub-Committee decided to invite external organisations, including the UN Industrial Development Organization (UNIDO), to contribute to the discussion at its next meeting, at which diversification strategies, the conditionalities of the TIM and the preference schemes of major developed economies are likely to feature on the agenda.
Expansion of Integrated Framework
The Integrated Framework for Trade-Related Technical Assistance to Least-Developed Countries (IF) recently received a boost from the IMF and World Bank Development Committee, which endorsed the proposal to expand the IF’s resources and functioning at their 25 September meeting in Washington. Danish Ambassador Henrik Rée Iversen, who chairs the joint initiative between the IMF, ITC, UN Conference on Trade and Development (UNCTAD), UN Development Programme (UNDP), World Bank and the WTO, reported to the meeting that pledges to the IF have already seen an expansion in recent years, growing from USD 13.7 million in 2001 to USD 30.2 million in May 2005. Sixteen countries have finished their analytical studies on competitiveness and another five are nearing completion.
Members also noted that ten LDCs are currently negotiating their way into the WTO, a procedure that has been criticised for requiring concessions that go beyond WTO rules and for its heavy strain on national policy-makers (see BRIDGES Weekly, 21 September 2005). Afghanistan, Bhutan, Cape Verde, Ethiopia, Laos, Samoa, Sao Tome and Principe, Sudan, and Yemen are all in the midst of the accession process, which includes a requirement to negotiate bilateral market access deals with any countries that request them.
A new International Labour Organization report entitled "Promoting fair globalisation in textiles and clothing in post-MFA environment," is available at http://www.ilo.org/public/english/dialogue/sector/techmeet/tmtc-pmfa05/tmtc-pmfa-r.pdf.
ICTSD reporting.