WTO discussions on MFA

1. WTO discussions on MFA ITGLWF / TWARO Post MFA 5-9 September Bangkok By Esther Busser, ICFTU

2. WTO preparations • During the 10 year phase out period the WTO Textiles Monitoring Body monitored the reductions in quotas • Only in 2004 a number of developing countries started to get worried about the possible job losses they would be confronted with after the phase out • In August 2004 the WTO published a study on the expected effects of the phase out. Main conclusion of the report is that the expected major winners of the phase out will be China and India.

3. WTO discussions • Discussions on the consequences of the phase out have taken place in the Goods Council. • A number of member states have made proposals • The WTO secretariat has published an LDC report • Regional and National workshops are taking place

4. Submissions • On 29 September, Bangladesh, Dominican Republic, Fiji, Madagascar, Mauritius, Sri Lanka and Uganda, later joined by Jamaica, Mongolia and Nepal, in the Council for Trade in Goods (CTG) • LDCs on 20 October 2004 in the Sub-Committee on LDCs • Turkey on 25 October 2004 in the CTG • Tunisia on 11 March 2005 in the CTG • Turkey on 28 June 2005 in the CTG

5. Discussions in the Goods Council • An emergency meeting was asked for in August 2004, but not enough members were in favour • Discussions would take place in the Goods Council on the 1st of October • 22 developing countries met on 24 September to prepare the 1 October meeting. • They wanted adjustment issues to be a permanent item for the Goods Council and they wanted a study by the secretariat on the impact of phase out on small and vulnerable producers.

6. Discussions in the GC • At the 1 Oct meeting a proposal was submitted by Bangladesh, Mauritius, the Dominican Republic, Fiji, Madagascar, Sri Lanka and Uganda. • They asked for a study on adjustment related issues and costs and a workprogramme to discuss possible solutions • This proposal was not adopted due to a cool reaction from China and other members, although 38 countries took the floor in support of the proposal

7. Turkey proposal • Turkey submitted a proposal on the 26th of October. • Turkey referred to the responsibility of WTO members to address the concerns of developing and least developed countries about the sustainability of their economic growth. • Turkey proposed a monitoring mechanism and a safeguard mechanism that is automatically triggered. • Members reacted negatively on the proposals

8. Turkey proposal • China and India reacted critically and said that the phase out would be in the interest of developing countries • Adjustment challenges could be met by investments in the textile sector, by improvement of the application of rules of origin and by adjustment assistance of the World Bank and IMF

9. Discussions in the GC • The WTO secretariat would look into the possibility to do a study on the competitiveness of LDCs in T&C after the phase out. • Countries wanted adjustment related issues to remain on the GC agenda. China, India and Pakistan wanted these discussions to move to the LDC sub-committee

10. Discussions in the GC • With regard to technical assistance a number of regional workshops had taken place before the phase out, and countries requested four regional workshops after phase out • China, India, Pakistan and Hong Kong objected. The latter three softened their positions • Decided was to have national workshops, on request of the country

11. Discussions in the GC • The LDC sub committee decided on 20 January that the WTO secretariat would prepare a report focusing on coherence programmes of IMF and WB, rules of origin, and technical cooperation to enhance competitiveness of LDCs in textiles and clothing • The report was published in June

12. Tunisia proposal • On 10 May a proposal by Tunisia was submitted. • It was supported by Turkey and Jordan • The proposal asked for ways to stabilise market prices for textiles and clothing • It also asked for a funding mechanism to help with adjustment • China objected to discuss the proposal

13. Proposal by Turkey • Turkey made a proposal on the 28 of June • It described the effects of the quota phase out, the adjustment challenges and the role of China which holds nearly 50% of the world market, which has led to a decline in prices • Collective remedies are necessary as this is a global problem and many countries face similar challenges

14. Proposal by Turkey - elements • Establishment of workprogramme for periodic review global textile and apparel production • Consultations with NAMA and Ag chairs • Possible ways of stabilizing prices should be explored • CTD has to work on problems caused by declines in prices • WTO should develop ways to cooperate with other international organizations including WB and IMF to effectively direct resources

15. Reactions on proposal • Discussions will continue on this proposal in the next CTG (council for trade in goods), despite opposition from China • Informal consultations will take place ahead of the CTG meeting on the 10th of November • Mood is changing

16. LDC report • Options for least developed countries to improve their competitiveness in the textiles and clothing business through: • Coherence programmes of the IMF and World Bank • Trade related technical assistance and capacity building • Non-reciprocal preference schemes • Other means

17. Coherence with IMF and WB • Emphasis on private sector development and trade in achieving growth and poverty reduction • Analyse limitations (infrastructure, policies, human capital, regulations and corruption) • Reduce costs of inputs and of doing business • Country by country basis, not sector specific • Involved in the Cambodia project (WB)

18. TIM • Trade integration mechanism • Financial support to address adjustment issues due to trade liberalization • Extension of existing loan facilities (same conditions) • Further indebtment

19. Technical assistance and capacity building (TRTA / CB) • Analytical work indispensable to identify constraints • Training of labour force and officials, enhance access to information and promote exports • Integrated Framework (IF) (mainstream trade in national development plans such as PRSPs, and coordination of trade related technical assistance) • Country driven and supported by IMF, ITC, UNCTAD, UNDP, WB and WTO

20. Preferences • Preferences for LDCs have been extended • However, utilization rates have been low Measures to improve utilization: • Coverage (non discrimination among LDCs) • Predictability (on permanent basis and no conditions) and • Rules of origin (simplified, harmonized and relaxed)

21. Preferences • Asian LDCs underpreferred (no access to AGOA and Cotonou) • Product coverage limited under US schemes • Predictability important for investors • Preferences should be seen as short-term. Erosion will take place

22. Other measures • South-south trade: 4% of LDC clothing exports to developing countries • High tariffs (China 19.6% for clothing, Malaysia 15%, Korea and Chinese Taipei around 12%) • Non-reciprocal preferences through regional trade agreements • Lowering tariffs on inputs • Special training courses and enhance human capital in the long term

23. Other measures • FDI and micro credit schemes • Streamline customs procedures • Improve transport system • Establish EPZs • Compliance with international labour standards as positive signal for investors – niche market

24. LDC report • Reactions on the LDC report were positive • Several members made reference to the report during the last CTG • There were suggestions to do a similar study for non-LDC countries

25. National workshops • Only three national workshops have been planned so far • They take place at the request of a member state • The programme will be developed in consultation with the member state • The first one took place in the Dominican Republic in July, main focus was on CAFTA • Two others are planned for september / october in Uganda and Kenya