30-Year Reform and Opening up - Export Review

By Dennis K. Zhao

The  year  of  1994 was  a milestone  on  a historical  road  of  the  textile  trade  development worldwide. The Final Act concluding the Uruguay Round  and  officially  establishing  the WTO regime was  signed  during ministerial meeting at Marrakesh, Morroco  on  the  15th  of April, 1994,  and  hence  is  known  as  the Marrakesh Agreement. That marked a beginning  of  quota phase  out . China  has  been  on  a  resolute stance to trade restrictions and protectionism all through quota phase out and post-quota period and will continue  to do so when safeguard deal terminates...

The Third Phase (1994 -2004): Quota Phase-Outs

A glimpse of history in quota regime The  year  of  1994 was  a milestone on a historical  road  of  the  textile  trade development worldwide. A big event took place  in April 1994  that witnessed an  unprecedented  achievement  at Uruguay  Round which  had  been launched  at Punta  del Este, Uruguay on  20 September  1986.  The  Final Act concluding  the Uruguay Round  and officially  establishing  the WTO regime was signed during ministerial meeting at Marrakesh, Morroco on  the 15th of April, 1994, and hence  is known as  the Marrakesh Agreement.

The establishment of the World Trade Organization  (WTO) was a lot more  significant ,  especially  for developing countries. Exports of textiles and  clothing  from  developing  countries had long faced restrictive blocks to their exports  called  quotas. Brought  in  force as a temporary  relief measure  in  favor of  the  domestic  textile manufacturers in  the  developed  countries,  this  quota system  had  been  in  force  for  decades now.  In 1962,  a Long Term Agreement (LTA)  regarding  international  trade  in cotton  textiles was  signed.  It  replaced the  one-year Short  Term Agreement that existed at the time. LTA underwent several renewals and was subsequently replaced  by  the Multi Fibre Agreement (MFA)  in 1974, which was expanded  to cover  exports  of  synthetic  fibres  and woolen products, besides cotton. The MFA  regime  existed  for  over twenty  years,  until  1994 when  the Uruguay Round  of Multilateral  Trade Negotiations  resulted in  the Agreement on Textiles and Clothing  (ATC). The ATC sought to phase out all quota restrictions in four phases spread over a period of 10 years. The first three partial phase-outs  were in January 1995, January  1998  and January  2002.  The final  one  is  due  on January 01, 2005.
 
Smooth Growth

The  phase  out  of MFA was  largely welcomed  by exporting  countries,  but  it  did  not  bring  about  immediate export  growth  for China  as  the most  sensitive  categories that accounted for 49% of the total MFA -capped trade still remained unchanged until the very  last day prior to Jan.1st of 2005. China's export of textiles and  clothing was experiencing a smooth stack-up  to  reach  $37.967  billion in 1995, only a minor growth 6.8%  in  the  initial  year  of quota  phase  out  as  against $35.548  billion  in  1994. When  the first  phase  out  (three  years  from 1995  to  1997) moved  into  its  2nd year of 1996, China's export  turned out  to  be  a  negative  growth  to compare with  the  year  before  in terms  of  both  export  value  and national share. 

From the year of 2002 to the end of 2004, the last three years of MFA phase out according to the Agreement of Textiles and Clothing  (ATC) witnessed a rapid and  stark  export  growth from China  to  reach $95.29 billion in 2004,  20.68% up as opposed to  the  previous  year's  figure  (the year of 2003), but  its growth speed slowed  down  by  6.96  percentage point on a year-on-year comparison.

The last year during the 10-year phase out of quota regime was nothing but dramatic.  Fearing that China would dominate the world textile market after  quantitative restriction was  gone, National Council of Textile Organizations (USA)  joined hands with  Turkish

textile manufacturers  association and many  other  industrial  bodies from other countries to work out an announcement  known  as  "Istanbul Declaration"  designed  to mount pressure  on WTO  to  postpone  the deadline of quota elimination. The  Istanbul Declaration was first endorsed on March 3rd 2004 in Istanbul by leading  Turkish  and American  textile  and  apparel trade  groups.  Groups  from Mexico  signed  two  days later  and were  then  joined the  following  week by groups  representing  Sub-Saharan Africa. The following week, European  textile  and apparel  groups  endorsed  the Declaration.  A week later, leading South American  groups  endorsed  the Declaration. The Declaration calls for an emergency meeting of the World Trade Organization  in order to examine whether  the quota phase-out currently scheduled  for January 1st, 2005 should be extended until December 31st, 2007 or some other actions should be taken.

The  very  presumptuous,  invidious,  heart-catching  but  not  convincing statement is tantamount to stirring up a global rival against China. It says "if quotas  are  removed on  January 1st, 2005 global  textile  and  clothing  trade will be monopolized by a few countries such as China. The consequence will be massive job disruption and business bankruptcies in dozens of countries dependant upon textile and clothing exports." "In textile categories in the United States where a number of quotas have already been eliminated, China has taken almost 60 percent of the market  in less  than  two  years  and  is  continuing  to  increase  its  share. Chinese  textile exports have also quickly captured a dramatic portion of  the market  in other regions and countries, including the EU, Japan, and Australia. China's massive growth has  come  at  the expense of  virtually  all other participants  in  the market, especially the least developed and the developing countries which are poised to lose as many as 30 million jobs due to the quota phase-out." Regardless of these  loud but nebulous cries, WTO remained  irrevocably wedded  to  its decision  to  terminate quota on  the  very frst day of  Jan.1st 2005 without delay.