The importance of the Doha Development Agenda on trade and investment of textiles and clothing sector after quota elimin

1. The importance of the Doha DevelopmentAgenda on trade and investment of textiles and clothing sector after quota elimination Conference: The Future of Textiles and Clothing after 2005 5-6 May, 2003 Kazu Toyoda Director General for Manufacturing Industries Ministry of Economy, Industry and Trade Government of Japan

2. Japan’s fundamental idea on trade and investment of textiles and clothing sector after quota elimination MFA quota elimination post 2005 A world-wide expansion of trade and investment can be expected. However… High tariff rates Non-tariff barriers (NTBs) Uncertain environment for investment Abuse of anti-dumping (AD) measures Remaining problems Not only North-South trade, but also South-South trade will not fully develop. Trade would be seriously disturbed by the abuse of anti-dumping measures. Due to uncertainty, developing countries are less recipient of investment. Improvement of market access → harmonization by sectoral approach Clarification of anti-dumping rules Establishment of investment rules Proposed solutions １

3. ・Japanese textile market, where imported products occupy 70%, has become one of the most liberalized among the major countries as the result of the utmost tariff reduction during the UR negotiations. ・Japan has never invoked MFA quotas nor transitional safeguard measures under the ATC. Japanese textiles and clothing trade Import penetration ratio of Japanese textile market（2001) ○67.4％　（based on weight） ○33.0％　（based on value） 2

4. Tariff rates of main items from selected countries 3

5. The importance for developing countries /2000 The amount of textile consumption market of all developing countries The amount of textile trade (intra-developing countries） About $ 700 billion 1990 $ 46.5 billion ×1.4 1999$ 81.6 billion ＥＵ＋ＪＡＰＡＮ＋ＵＳＡ：$ 500billion (About 20% of world textile trade) Developing countries could reap income gains of over $500 billion from the full trade liberalization. This will lift more than 300 million people above the poverty. (World Bank, Global Economic Prospects, 2002) 4

6. The importance for LDC (least developed countries） LDC can enter textiles and clothing sector, especially in sewing which is highly labor-intensive. - a case study - Bangladesh The clothing industry of Bangladesh, mainly sewing, has dramatically developed past 10 years and become a major exporter. ・Shares of clothing in total export have doubled (or about 76% of total export). ・Value of clothing export has increased about seven times. (Source - Bangladesh Bureau of Statistics) ・GDP rates continue to grow at average 5% over the past 10 years. $ 31 billion in 1991　→　$ 47 billion in 2001 The Improvement of market access provides export opportunities in textiles and clothing trade. 5

7. Overview of proposals submitted in textiles and clothing sector at the WTO market access negotiations Swiss formula. Elimination all tariffs by 2015. Although “zero-for-zero” was proposed for other sectors, there is no proposal for sectoral approach on textiles and clothing sector. Developed countries: individual reduction formula. Developing countries: average of coverage products. “zero-for-zero” and “harmonization”: voluntary basis. Non-sectoral approach USA Ten developing countries(INDIA etc） Average target tariff reduction formula Line-by-line basis reduction formula Sectoral approach E U JAPAN Separate from average target tariff reduction formula, sectoral approach & harmonization for textiles and clothing sector. In the “compression mechanism” proposal, “all Members ...deeper cuts for textiles, clothing, and footwear… these tariffs within a narrow common range as close to zero as possible.” 6

8. Initiation of anti-dumping (AD) measures targets textiles and clothing sector (so called “double jeopardy”) The textiles and clothing sector accounts about 10% of the total initiation of anti-dumping measures to developing countries. Phasing-out of MFA quotas is likely to lead to abuse of anti-dumping measures after the end of 2004. anti-dumping measures initiated during the period, 1/1/1990-31/12/1999 Targeting developing countries: 1,603 cases Targeting developed countries: 880 cases source: WTO Rules Division database 7

9. International collaboration in textiles and clothing sector ・International division of labor in textiles and clothing sector can be developed, based on competitive advantage. However, there exist some impediments (high tariffs, limited flow of investment, abuse of anti-dumping measures etc.) ・Each developing country can receive substantial benefit by elimination of above mentioned impediments. A case of high quality cotton shirts Planning / design Japan Spinning India Dyeing / finishing Japan Fabrics Indonesia Dyeing / finishing Malaysia Sewing China / Cambodia 8

10. 100 MILLION YEN 100 MILLION YEN FY The importance of Foreign Direct Investment (FDI) to textiles and clothing sector of developing countries - case 1 - The companies in Asiawhich the Japanese textile companies invested export about 50～60% of all their production to the other nations (including to Japan)．　 ９

11. The importance of Foreign Direct Investment (FDI) to textiles and clothing sector of developing countries - case 2 - FDI by Japan and USA in the textiles and clothing sector has been downward trend since late of 1990’s. An example - FDI by Japan and USA in the textiles and clothing sector in 1990’s. To promote FDI in the textiles and clothing sector, the establishment of WTO investment rules is essential. １０