TEXTILES AND CLOTHING IN THE WORLD ECONOMY
Background study prepared by the GATT Secretariat to assist work undertaken by the Contracting Parties in pursuance of the Decision on Textiles and Clothing taken at the November 1982 Ministerial meeting
This study has been produced on the GATT Secretariat's own responsibility and it should not be assumed that GATT Contracting Parties agree with the analysis and observations contained in it. This version of the study is the same as that previously circulated to Contracting Parties, with the exception of a small number of factual and typographical corrections.
General Agreement on Tariffs and Trade Centre William Rappard, 154, rue de Lausanne 1211 Geneva 21, Switzerland Geneva, July 1984
84-1473 TABLE OF CONTENTS
Chapter Page
INTRODUCTION.. . .i ,, 1
1. OVERVIEW OF THE ISSUES AND SUMMARY OF CONCLUSIONS 4
2. RELATIVE IMPORTANCE OF TEXTILE AND CLOTHING INDUSTRIES IN ECONOMIC ACTIVITY
A. Production and Employment ...... 15
B. Trends in Demand ...... 30 C. Technological Change .33 D. Trends in World Trade 35 E. Trade Policies . 53
F. Other Factors ...... 4 . 54
G. Investment ...... 55
3.L EVOLUTION OF POLICIES AFFECTING TRADE IN TEXTITES AND CLOTHING
A. Policies prior to the Second World War ...... 62
B. Policies 1948-1961 ...... 63 C. Policies 1961 to present .65
(1) The Eight Current Developed Country Participants in the MFA ...... 66 (a) Tariffs .67
(b) The LTA and ?FA ...... 71
(c) Outward Processing Trade ...... 104 (d) EC Agreements vith Certain Mediterranean
Countries and Portugal ...... 105 (e) Safeguard, Anti-dumping and Countervailing
Duty Actions ...... 106 (f) Other Border Measures .107 ii
Page
(2) Australia, New Zealand and Norway ...... 108 (a) Tariffs ...... 109 (b) Other Tmport Measures and the Use Made of the Tariff-quota System of Australia. . . 111 (c) Non-tariff Measures: New Zealand . . 116
(d) Non-tarif f Measures: Norway . . 118
(3) Developing Countries
(a) Tarif fs. . . 121
(h) Non-tarif f Measures. . . 127
(4) Trade Policies in the Eastern Trading Area . . 129
D. Other Policies
(1) Sectorial and General Support Programmes . . . 132 (2) Policies With Incidental Effects on the Textile and Clothing Industries. 135
4. THE ECONOMIC IMPACT OF POLICIES AFFECTING TRADE IN TEXTILES
AND CLOTHING . 144
A. Tariffs . 145 B. Quantitative Restrictions 148
5. ECONOMIC CONSEQUENCES OF ALTERNATIVE FUTURE TRADE POLICIES GOVERNING TEXTILES AND CLOTHING. 165
A. The Demand for Textiles and Clothing . 166 B. International Competitiveness 169 C. Impact From the Viewpoint of the Importing Countries . 173 D. Impact from the Viewpoint of the Exporting
Countries . 175 iii
Page
TECHNICAL NOTES ..178
REFERENCES ..193
APPENDICES: (issued separately)
I. Statistical Tablesa Il. Charts III. Principal Technological Developments in Textiles and Clothinga IV. Relating Trade to Domestic Production and Consumptiona V. Chronicle of Selected Actions In the Field of Textiles: 1948 - 19606 VI. The Operation of the Long-Term Arrangement Regarding International Trade in Cotton Textiles (LTA)6 VII. The Operation of the Arrangement Regarding b International Trade in Textiles (MFA)
aIssued with the main study; bExpected to be available at a later date. iv
LIST OF TABLES AND CHARTS 1. Overview of the Issues and Summary of Conclusions Tables Page 1.1. Relative Importance of Employment and Output in Textiles and Clothing Industries in the United States and Western Europe, 1953-1980 ...... il
2. Relative Importance of the Textile and Clothing Industries in Economic Activity Tables 2.1. Production of Textiles and Clothing by Main Areas and Countries, 1953-1982 ...... 17 2.2. -Employment in Textiles and Clothing by Main Areas and Countries, 1953-1982 ...... 18 2.3. Distribution among Developed and Developing Countries of Production and Employment in Textiles, Clothing and Manufactures, 1953-1980 .19 2.4. Share of Textiles and Clothing in Manufacturing Production in Developed and Developing Countries, 1953-1980 .21 2.5. Share of Textiles and Clothing in Manufacturing Employment in Developed and Developing Countries, 1953-1980 .22 2.6. Share of Textiles and Clothing Production and Employment in GDP and Active Population in Selected Countries, 1975 ... 24 2.7. Share of Textiles and Clothing Combined in Industrial Output and Employment in Eastern Europe and the USSR, 1960 and 1981 .27 2.8. World Fibre Production, 1900-1980 .29 2.9. Total Consumer Expenditure and Expenditure on Clothing in Developed Countries, 1963-1982 ...... 32 2.10. Textile Exports by Main Areas, 1980 .37 2.11. Clothing Exports by Main Areas, 1980 .37 2. 12. Share of Textiles in Exports of Manufactures and in Total Merchandise Exports by Main Areas, 1955-1982 .39 2.13. Share of Clothing in Exports of Manufactures and in Total Merchandise Exports bv Main Areas, 1955-1982 .39
2.14. Area Distribution of World Trade in Textiles, 1955-1982 .... 40 v
Page
2.15. Area Distribution of World Trade in Clothing, 1955-1982 .... 41
2.16. Main Exporters and Importers of Textiles, 1963-1982 ...... 42
2.17. Main Exporters and Importers of Clothing, 1963-1982 ...... 43 2.18. Origin of Imports of Textiles and Clothing into Developed Countries, 1963-1982 ...... 45 2.19. Share of Individual Suppliers in the Import Market for Textiles in the United States, 1963-1982 ...... 46 2.20. Share of Individual Suppliers in the Import Market for Clothing in the United States, 1963-1982 ...... 48 2.21. Share of Individual Suppliers in the Import Market for Textiles in the European Community, 1963-1982 ...... 49 2.22. Share of Individual Suppliers in the Import Market for Clothing in the European Community, 1963-1982 ...... 51 2.23. Trade Balances of Major Areas in Selected Commodity Groups, 1981 ...... 52 2.24. Share of Textiles and Clothing in Manufacturing Gross Fixed Investment in Selected Developed Countries, 1963-1980 ...... 56 Charts 2.1. Relationship Between Per Capita GNP and the Share of Textiles and Clothing in Manufacturing Value Added in Selected Countries, 1975 ...... 26 2.2. Relationship Between Per Capita GNP and the Share of Textiles and Clothing in Manufacturing Employment in Selected Countries, 1975 ...... 26 2.3. Trends in World Exports of Textiles, Clothing and Manufactures, 1970-1982 ...... 36
3. Evolution of Policies Affecting Trade in Textiles and Clothing Tables 3.1. Nominal and Effective MFN Tariff Rates in Selected Developed Countries, 1962 ...... 67 3.2. Pre-Tokyo Round and Post-Tokyo Round Tariffs in Eight Developed Areas ...... 68 3.3. Pre-Tokyo Round and Post-Tokyo Round Average Tariff Levels for Textiles and Clothing in Eight Developed Areas ...... 69 vi
Page 3.4. Dispersion of Tariffs on Textiles and Clothing in Eight
Developed Areas ...... 70 3.5. Textiles and Clothing Developments in the United States and the European Community, 1974-1977 ...... 79 3.6. Textiles and Clothing Developments in the United States and the European Community, 1978-1981 ...... 82 3.7. Evolution of Austria's Restrictions ...... 84 3.8. Evolution of Canada's Restrictions ...... 85 3.9. Evolution of the European Community's Restrictions ...... 87 3.10. Evolution of Finland's Restrictions ...... 88 3.11. Evolution of Sweden's Restrictions ...... 89 3.12. Evolution of the United States' Restrictions ...... 91
3.13. Simple Average Quota Utilization Rates in Textiles and Clothing by Selected Supplying Countries for Five Importing Countries, 1979-1982 ...... 93-94
3.14. United States - Quotas and Quota Utilization Rates by Supplying Countries, 1979-1982 ...... 95-96
3.15. European Community - Quotas and Quota Utilization Rates by Supplying Countries, 1979-1982 ...... 97-98 3.16. Tariffs in Australia, New Zealand and Norway ...... 109 3.17. Average Tariff Levels for Textiles and Clothing in Australia, New Zealand and Norway ...... 110 3.18. Textile and Clothing Developments in Australia, 1974-1981 115 3.19. Textile and Clothing Developments in New Zealand, 1974-1981 ...... 118 3.20. Textile and Clothing Developments in Norway, 1974-1981. 120 3.21. Six Developing Markets: Sectorial Differences in Average Tariff Levels ...... 125 3.22. Average Tariff Levels in the Textile Sector: 21 Developing Markets in the Early 1980s ...... 126 3.23. Non-tariff Measures on Imports of Textiles and Clothing Reported by 22 Developing Markets (End-1983 or Nearest Date) .... 128 vii
Page 3.24. Hungary's Pre-Tokyo Round and Post-Tokyo Round Average Tariff Levels ...... 130 3.25. Domestic Measures in the Textile and Clothing Area in Developed Countries .133 Charts 3.1. Average Tariff Levels for Textiles and Clothing: 21 Developing Markets in the Early 1980s ...... 122 3.2. Average Tariff Levels in the "Textile Sector": 21 Developing Markets in the Early 1980s (a) Fibres, Yarns and Fabrics .123 3.2. Average Tariff Levels in the "Textile Sector": 21 Developing Markets in the Early 1980s (b) Made-Up Articles and Clothing ..124
4. Economic Impact of Policies Affecting Trade in Textiles and Clothing Table
4.1. Average Annual Growth Rates of EC and EFTA Trade in Textiles and Clothing, 1962-1972 and 1974-1982 ...... 147
5. Economic Consequence of Alternative Future Trade Policies Governing Textiles and Clothing 5.1. (Table and Chart) Increment in World Population by Areas, 1985-2005 ...... 167
APPENDIX I: STATISTICAL TABLES A.1. Share of Textiles and Clothing in Manufacturing Production and Employment in Selected Countries, 1975 ...... 1 A.2. Total Consumer Expenditure and Expenditure on Clothing in Selected Countries, 1963-1982 ...... 2 A.3. Implicit Deflators for Total Consumer Expenditure and Expenditure on Clothing, Selected Developed Countries,
1963-1982 ...... 3
A.4. Share of Clothing in Total Consumer Expenditure in Selected Developed Countries, 1963-1982 ...... 4 A.5. Consumer Expenditure on Household Textiles in Selected Developed Countries, 1973-1982 ...... 5 viii
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A.6. Share of Textiles in Trade in Manufactures by Main Areas and Selected Countries, 1955-1982 ...... 6 A.7. Share of Textiles in Total Merchandise Trade by Main Areas and Selected Countries, 1955-1982 ...... 7 A.8. Share of Clothing in Trade in Manufactures by Main Areas and Selected Countries, 1955-1982 ...... 8 A.9. Share of Clothing in Total Merchandise Trade by Main Areas and Selected Countries, 1.953-1982 ...... 9 A.10. Share of World Imports of Textiles and Clothing Purchased by Major Developed Countries, 1963-1982 ...... 10 A.11. Share of Individual Suppliers in the Import Market for Textiles in the European Community (Excluding EC Intra-Trade), 1963-1982 ...... il A.12. Share of Individual Suppliers in the Import Market for Clothing in the European Community (Excluding EC Intra-Trade), 1963-1982 ...... 12 A.13. Share of Individual Suppliers in the Import Market for Textiles in Australia, 1963-1982 ...... 13 A.14. Share of Individual Suppliers in the Import Market for Clothing in Australia, 1963-1982 ...... 14 A.15. Share of Individual Suppliers in the Import Market for Textiles in New Zealand, 1964-1982 ...... 15 A.16. Share of Individual Suppliers in the Import Market for Clothing in New Zealand, 1964-1982 ...... 16 A.17. Share of Individual Suppliers in the Import Market for Textiles in Norway, 1963-1982 ...... 17 A.18. Share of Individual Suppliers in the Import Market for Clothing in Norway, 1963-1982 ...... 18 A.19. Trade Balances of Major Areas in Selected Commodity Groups, 1963-1981 ...... 19 A.20a. Trade of the Eastern Trading Area in Textiles, 1968-1981 .. 20 A.20b. Trade of the Eastern Trading Area in Clothing, 1968-1981 .. 20 A.21a. Exports of All Commodities, Manufactures, Textiles and Clothing from the Eastern Trading Area, 1968-1981 ...... 21 A.21b. Imports of All Commodities, Manufactures, Textiles and Clothing into the Eastern Trading Area, 1968-1981 ...... 22 ix
A.22. Share of Textiles and Clothing in Manufacturing Fixed Investment in Selected Countries, 1963-1981 ...... 23 A.23. Share of Machinery and Equipment in Total Investment in Textiles and Clothing in Selected Developed Countries, 1972-1980 ...... 24 A.24. Total Exports of Textile Machinery (SITC 7171) from Seven Major Producing Countries, 1962-1982 ...... 25 A.25. Geographical Distribution of World Spinning and Weaving Capacities, 1963-1981 ...... 26 A.26. Canada: Quotas and Simple Average Quota Utilization Rates by Supplying Countries, 1979-1982 ...... 27-28 A.27. Finland: Quotas and Simple Average Quota Utilization Rates by Supplying Countries, 1979-1982 ...... 29 A.28. Sweden: Quotas and Simple Average Quota Utilization Rates by Supplying Countries, 1979-1982 ...... 30-31
APPENDIX II: CHARTS
A.1. Employment in Industry in Selected Countries (Post 1960) .... 32 A.2. Average Share of Textiles and Clothing Production in GNP and Total Employment, Related to Per Capita GNP, in Selected Countries, 1938 and 1975 ...... 33 A.3. Gross Fixed Investment and Production in Textiles and Clothing in Selected Developed Areas, 1964-1980 ...... 34 A.4. Changes in World Short-staple Spinning and Weaving Capacities, 1930-1981 ...... 35 x
ABBREVIATIONS
CIRFS Comité International de la Rayonne et des Fibres Synthétiques EEC, EC European Economic Community, European Communities EFTA European Free Trade Association FAO Food and Agriculture Organization of the United Nations GDP Gross domestic product ILO International Labour Organization IMF International Monetary Fund ISIC International Standard Industrial Classification IFCATI/ITMF International Federation of Cotton and Allied Textile Industries, now known as International Textiles Manufacturers' Federation LTA Long Term Arrangement on Cotton Textiles MFA Multi-Fibre Agreement. Full title, Arrangement on International Trade in Textiles OECD Organization for Economic Co-operation and Development SITC Standard International Trade Classification STA Short Term Arrangement on Cotton Textiles TSB Textiles Surveillance Body UNCTAD United Nations Conference on Trade and Development UNSO United Nations Statistical Office c.i.f. cost, insurance and freight f.a.s. free alongside ship f.o.b. free on board
SYMBOLS
... not available nil - 1
INTRODUCTION 1. At the GATT Ministerial meeting of 29 November 1982, the Contracting Parties took the following decision: 1. To carry out on a priority basis a study of: (i) the importance of textiles and clothing in world trade and particularly for the trade prospects of developing countries; (ii) the impact on economic activity and prospects of countries participating in textiles trade, of the existing systems of restraints and restrictions relating to textiles and clothing, principally the MFA [Arrangement Regarding International Trade in Textiles, more commonly known as the Multifibre Arrangement]; (iii) consequences for economic and trade prospects in these countries of a phasing out on the basis of the provisions of the General Agreement, or of the continued maintenance, of the restraints and restrictions applied under the existing textile and clothing regimes, principally the MFA; and 2. To examine expeditiously, taking into account the results of such a study, modalities of further trade liberalization in textiles and clothing including the possibilities for bringing about the full application of GATT provisions to this sector of trade. 3. This work should be completed for consideration by the Contracting Parties at their 1984 Session. 2. This background study has been prepared by the GATT secretariat, for the Contracting Parties, in response to a request by the GATT Council (GATT document C/M/165) for documentation pertaining to parts (i), (ii) and (iii) of paragraph 1. of this decision. Chapters 2, 3 and 4 of this background study are intended to cover sub-paragraphs (i) and (ii) of the terms of reference, while Chapter 5 covers. sub-paragraph (iii). 3. Chapter 1 provides an overview and summary of the key developments and issues in the textile and clothing industries. It is intended to serve two purposes: to provide a "story line" for the material in the subsequent chapters, and to put the developments and issues in perspective with respect to the broad economic concerns of countries. Because post-war developments and policies in these two industries are more complex than is the case in most other manufacturing activities, the overview is useful in keeping track of how the many pieces "fit together". For those who do not have the time needed to read the entire study, Chapter 1 (together with this Introduction) provides a general understanding of the purpose and broad conclusions of the study. 4. Chapter 2 presents a statistical profile of developments in the textile and clothing industries, primarily in the period since 1948. It begins with data on trends in production and employment, then presents data on various factors that have influenced production and employment, such as trends in demand, technical change, changes in trade flows and so on. A final section considers the impact of these developments on investment and the capital stock.
5. Although statistics on the two industries are interesting in their own right, they can be fully evaluated only when they are compared with statistics on the rest of the economy. To this end, the trends in textile and clothing production, trade and so forth are compared - when the data permit - with the corresponding trends in the manufacturing sector as a whole, and in the overall economy. The result is a profile of developments not only in textiles and clothing per se, but in those two industries in their role as one part of a country's general economic activity. Sub-paragraphs (ii) and (iii) of the terms of reference indicate the importance of viewing the two industries in the overall perspective of the economy as a whole. 6. Chapter 3 surveys trade policies affecting textiles and clothing. The terms of reference refer to "the existing systems of restraints and restrictions relating to textiles and clothing, principally the MFA". In deciding which policies to include, the lack of a generally agreed definition of what constitutes a "restraint" or "restriction" presented a problem. The fact that there are no objective criteria for settling the dispute over the proper definition suggested that it would be best not to try to establish a precise definition for the purposes of this paper.
7. As a result, we have covered a fairly wide range of policies. This selection is not intended to pre-judge, in any way, the content of future discussions of policies in the area of textiles and clothing. 8. In this context, we had to consider what to do with policies that fall in between those specific to textiles and clothing, and those which are applicable to all industries. We have handled this on a "case by case" basis.
9. Chapter 4 contains an analysis of the economic effects of the policies surveyed in the preceding chapter. While actual developments have been taken into account, no attempt is made in this study to produce quantitative estimates of the effects of trade policies.
10. In Chapter 5 the analysis turns from the current situation to the future. It begins with a discussion of the factors that will play a major rôle in determining the demand for the output of the textiles and clothing industries in the next two decades. This is followed by an examination of the factors that will have an important influence on the prospects for those two industries in the main geographic areas, including both "real" factors (such as technical change) and government policies. - 3 -
11. It is within the context of the examination of the latter factor that we consider the possible economic effects of the two broad policy options specified in the terms of reference: (1) a continuation of the present system of restraints and restrictions on trade in textiles and clothing, and (2) a phasing out of those restraints and restrictions on the basis of tie provisions of the General Agreement. - 4
CHAPTER 1: OVERVIEW AND SUMMARY Main economic features 1.1. From the mid-nineteenth century onwards, the textile industry has played a key rôle in the initial industrialization process in most countries. This is not surprising, given the combination of a large domestic demand (clothing being a basic necessity) and the early success at mechanizing textile production. Clothing itself, it should be added, was a relative latecomer to this process, especially as far as international trade is concerned. The ready-made clothing industry received an early stimulus from the demand for uniforms during World War I, but it remained mostly a domestic-oriented industry until the latter part of the 1950s. Even today, in many developing countries consumption of ready-made clothing is the exception rather than the rule.* 1.2. As the first group of countries to industrialize moved up the development ladder, including the United Kingdom, the United States, France, the Federal Republic of Germany and many of the smaller European countries, other countries followed in their footsteps. The most important example between the two world wars was Japan. Not long after the Second World War, as Japan continued up the ladder, a number of developing countries began to follow a similar pattern, with increased competitiveness in cotton textiles (and soon clothing) one of the early signs that industrialization was underway. 1.3. This pattern, of countries in the early stages of industrialization becoming world market competitive in a particular group of products - textiles, clothing, footwear, leather goods are among the standard examples - and successfully challenging producers in countries further up the ladder, is a natural and predictable process. A low level of economic development is related to low levels of physical capital and labour skills ("human capital"). Countries just beginning to industrialize have, by definition, a relative abundance of 1.w skilled workers, and thus find that among manufactured goods their initial comparative advantage lies with those products whose production uses relatively large amounts of low skilled labour. Provided the country's economic policies are such that efficient industries can prosper and expand, those industries will become competitive suppliers in the world market. As these countries move into the middle range of the development ladder, real wages rise and they find themselves challenged, in turn, by newcomers lower down. the ladder. This began happening to Japan's textile and clothing industries in the 1960s, and is already happening to some of the countries that successfully challenged Japan two decades ago. The phenomenon of competition from "low cost suppliers" is neither unusual nor unique to the industrial countries.
*Please refer to the Technical Notes at the end of the study for details on the composition of the country groupings, the data sources for the tables and charts, and so forth. - 5
1.4. In principle, this should be a relatively smooth process. As workers in the more advanced countries gradually up-grade their skills, they move on to more productive, higher paying jobs in other industries, making way for the increased imports from developing countries. For those who do not, there are opportunities to move horizontally, into similar low skill jobs in areas less vulnerable to competition from labour abundant countries, in particular, non-traded services (the latter being a secularly expanding sector in all developed countries.) 1.5. In practice, the process has not always been smooth, especially as far as textiles and clothing are concerned. Three factors seem to account for the difficulties. The most general is the lack of sufficient structural flexibility in the developed countries (whether that lack of flexibility is inherent, or simply the result of policies that block an adjustment process that would otherwise occur fairly smoothly, is another matter). Second, the textile and clothing industries are not only large industrial employers, but tend to be concentrated in particular geographic regions and to have workforces with special characteristics, which means that their adjustment problems are likely to get more attention than those of other industries. Third, world consumption of textiles and clothing has been expanding at a relatively slow pace, thereby increasing the difficulty of making room for new producers. 1.6. At the risk of some over-simplification, the period from the 1920s until the late 1950s can be described as one in which Japan was the main challenge and cotton textiles were the problem. In the course of the 1960s, several important changes occurred. A number of developing countries, and certain countries in Eastern Europe, emerged as important exporters. Trade in clothing increased dramatically, as improvements in communications and transportation increased the opportunities for 1 wholesalers and retailers to source clothing on a world-wide basis. Synthetic fibres captured an important part of the world fibre market. And the introduction of labour-saving spinning and weaving machines moved the textile industry - at least in many developed countries - closer to the average for all industries as far as physical and human capital intensity is concerned. As a result, it has been argued that comparative advantage in many types of textiles may have "returned" to the developed countries. The period since the late 1960s can thus be described as one in which the developing countries have been the main challenge and clothing was the main problem. 1.7. Given the central rôle of employment in the policy debate, it is important to note that the "price" of the increased productivity in textiles was a sharp decline in employment of low-skill workers, as production was made more intensive in physical and human capital.- This illustrates in a practical way the simple but important point that there is no way in which a developed country can be Internationally competitive in a product whose production is intensive in low-skilled labour. 1.8. In the present seating it is not surprising that the clothing industry in the developed countries believes that protection against low cost suppliers remains necessary. To understand why their view - 6
continues to be supported by the developed countries' synthetic fibre and textile industries, it is necessary to examine post-war policy developments. Main policy features 1.9. The most common feature of trade policies in the textiles (and later clothing) area over the past century is the above-average level of government intervention. With the exception of the United Kingdom and Japan, tariff protection of the textile industry has been commonplace from the nineteenth century to the present. Stimulated by the Great Depression and competition from Japan, the interwar period witnessed a dramatic increase in protection of the mature textile industries against competition from Japan, other newcomers and one another. The first known voluntary export restraint (VER) in textiles, involving Japan's textile exports to the United States, was adopted in 1936. 1.10. Most of the developed countries, particularly in Western Europe. began the postwar period with very restrictive trade régimes. As the 1950s progressed, many of these policies were liberalized under the auspices of the GATT and the Organization for European Economic Cooperation (OEEC). Trade policies affecting textiles, and in particular discriminatory policies against Japan, some developing countries, and some East European countries not only remained mainly untouched by this liberalization, but tended to increase in restrictiveness.
1.11. During the early postwar years, a number of developing countries either continued to apply import-substitution policies for textiles, or introduced such programmes for the first time. In most instances Article XII of the General Agreement was invoked to justify these policies. These protective measures were often part of a restrictive system that covered a wide range of products. in contrast to the developed country measures on textiles, which were maintained or increased at the same time that restrictions on most other nor-agricultural products were being reduced. 1.12. Japan's accession to the GATT in 1955. the move to external convertibility of West European currencies in 1958 (which removed the balance-of-payments justification for existing quantitative restraints) and the emergence of important developing country exporters combined to create pressure for alternative approaches to controlling "low wage imports" into the industrial countries. It was in this context that the concept of "market disruption" was introduced into GATT discussions (more on this below).
1.13. Although cotton textiles and clothing were not the only products caught up in this process, they were clearly the main concern, as is evidenced by the fact that they have been the only products to be formally exempted from the regular GATT rules and given a régime of their own. Initially this took the form of the Short-Term Arrangement Regarding International Trade in Textiles (the STA), which was in force from October 1961 until September 1962. In October 1962 the Long-Term Arrangement Regarding International Trade in Cotton Textiles (the LTA) came into force, lasting (with extensions) until 1973. -7
1.14. These agreements were significant events in GATT's history. An important part of world trade was formally exempted from GATT rules, in particular the non-discrimination rule and the general prohibition of quantitative restrictions. The new rules operated principally to affect exports from japan and the developing countries. 1.15. It is unlikely that there will ever be agreement on the merits and demerits of the STA/LTA. As a major derogation from the General Agreement, and the stepping stone to the Multifibre Arrangement (MFA), they are hardly consistent with the general liberalization of trade in the 1950s and 1960s. Against this view, two related points have been made. First, the LTA was promoted as a way of increasing trade in cotton textiles. As Dam (1970, p.300) notes, ... the Arrangement was proposed and sold by its proponents as a device for increasing international trade in cotton textiles. The premise was that if trade increased gradually and in an "orderly manner" ... the economic and social costs of the displacement of local production by imports from the less-developed countries and Japan could be reduced to the point where the special measures, often illegal under the General Agreement, then being taken by many importing countries could be eliminated. 1.16. In the case of the West European countries, which began with more extensive restrictions than the United States, this goal was realized to the extent that unilateral measures were replaced by restraints based on agreed criteria and some quotas increased. 1.17. The second point is also mentioned by Dam (1970. p.315), Agreement on the statistical results. even if obtained, could not serve to verify or to disprove the proposition ... that, paradoxically enough, the imposition of certain kinds of direct trade restrictions may, when subjected to appropriate multilateral supervision and control, aid in the long-term effort toward the reduction of overall leveIs of trade barriers. Most of the criticisms of the Long-Term Arrangement have ... involved the administration of the Arrangement by the importing countries. The exporting countries have less often challenged the principle of such an arrangement than the unilateral character of measures taken by the importing countries. It should be noted that Dam wrote this four years before the LTA was converted into the MFA. 1.18. By the middle of the 1960s, synthetic fibres and yarns were eroding the dominant position of cotton in textiles and clothing, and certain developing countries and countries in Eastern Europe were competing effectively in the market for wool fabrics and clothing. Since the LTA was limited to cotton products, bilateral QRs outside both the GATT and the LTA began to spring up. especially in the trade policies of the United States and Canada. - 8
1.19. Pressure to "legitimize" the restrictions on non-cotton textiles and clothing led to the first MFA, which entered into force in January 1974. In exchange for their agreement to negotiate a new arrangement, Japan and the developing countries were able to have an important influence on the terms and conditions. The resuit was that "The minimum growth rates for quotas, the flexibility provisions and the rules, procedures and implementing arrangements set up by the MFA were all more favourable to developing countries than the corresponding aspects of the LTA." Another important feature of the MFA was the creation of the Textiles Surveillance Body (TSB), with an independent chairman and balanced membership; it supervises the implementation of the MFA and reports to the Textile Committee. Granting these changes and innovations, it remains true that by extending the special rules to non-cotton textiles and clothing, the MFA represented a sizeable increase in the amount of trade formally exempted from regular GATT rules.
1.20. In contrast to the divided opinion over the extent to which the LTA and MFA I did or did not contribute to an expansion of world trade in textiles and clothing, there is little doubt that MFA II, which entered into force in January 1978, resulted in a significant tightening of the developed countries' restrictions on imports from developing courtries. The negotiations in 1977 had taken place against a background of sluggish output growth, declining employment and increasing imports of textiles and clothing in the United States and, to a much sharper degree, Western Europe. The developed countries successfully pushed for a modification of the rules to make it much easier for them to avoid the requirement that the quotas be increased 6 per cent per year more or less independently of either the market share already achieved or the growth of domestic demand in the importing country. The key to this change, which amounted to a significant step toward establishing upper limits on the share of domestic consumption supplied by the developing countries, was a provision for "jointly agreed reasonable departures" from the MFA's rules (which themselves6are a jointly agreed departure from the rules of the General Agreement). 1.21. The Protocol for MFA III, which entered into force in January 1982 for a period of four years and seven months, does not contain the "reasonable departures" clause. Two other important changes from the MFA Il protocol are the Pddition of what has become known as the "anti-surge" provision governing the use of unutilized quotas carried over from the previous year, and the establishment of a permanent Sub-Committee of the Textiles Committee to monitor adjustment policies and measures on a regular basis. Regardless of these changes, the actual. implementation of MFA III has involved a further tightening in the application of restrictions. (See Chapter 3 for a summary assessment of the operation of the LTA and MFA.)
1.22. It is more difficult to generalize about post-1961 trends in policies not governed by the LTA and the three MFAs. Tariffs on textiles and clothing in the industrial countries were reduced in the Kennedy and Tokyo Rounds, but by less than tariffs on manufactured goods in general, leaving them well above the average for manufactures. - 9
Among the developed countries, New Zealand did not participate in either the LTA or MFA, Australia and Norway did not participate in MFA II and III, and two members of the MFA - Japan and Switzerland - do not apply MFA restrictions. 1.23. During the 1970s, the composite of policies affecting trade in textiles and clothing became even more complex as many of the developed countries provided their industries with financial assistance in the form of employment subsidies, adjustment and modernization grants and so forth. In contrast to earlier ?fforts to aid textile and clothing producers (such as establishing the LTA and MFA I), which occurred against a background of declining trade restrictions on most other manufactured goods, these "domestic" interventions were often part of a broader effort to assist a number of producers affected by shifting comparative advantage and lower rates of economic growth (examples include steel, automobiles and shipbuilding). 1.24. Trade policy developments in the developing countries are even more difficult to summarize. With certain important exceptions, tariffs on textiles and clothing remained high and unbound, and a number of developing countries have continued to invoke Article XVIII to justify various quantitative limitations and licensing schemes. Comparisons between the level of protection in developing and developed countries are difficult, however, for several reasons, including the frequency of exemptions from import restrictions in developing countries, the fact that tariffs on textiles and clothing may not be very different from tariffs on many other consumer goods in those countries, and the fact that the Article XVIII actions cover a broad range of products in addition to textiles and clothing. As for domestic subsidies, the limited amount of available evidence suggests that the developing countries' infra-structure programmes are often broadly similar to the industrial countries' regional development programmes, in that textiles and clothing firms share in the benefits, along with other industries. 1.25. A question was raised above regarding the motivation behind the active support which the synthetic fibre and textile industries in the developed countries give to the MFA. The answer appears to lie primarily in the fact that the synthetic fibre producers in the developed countries currently sell more than 80 per cent of their output to domestic textile firms, which in turn sell more than 80 per cent of their output in their own domestic markets, and that both industries are thus affected by changes in the level of imports of clothing and household furnishings. According to the developed countries' fibre and textile producers, import restrictions in developing countries are the principal obstacle to their efforts to reduce their dependence on sales in their own domestic markets. Textiles and clothing as special cases 1.26. The special treatment accorded to the textile and clothing industries over the 23 years since the STA, or over the past half century in the case of textiles if we begln with the discriminatory quantitative measures introduced in 1930s, was based on the view in the industrial countries that the trade-related problems confronting these industries were special. - 10 -
1.27. The formal recognition of this view in the GATT framework occurred in 1959/60 with the introduction of the concept of "market disruption". Although not originally intended to apply exclusively to textiles and clothing, they are the only two industries to which the Contracting Parties have actually applied the concept. The Decision on the Avoidance of Market Disruption was adopted by the Contracting Parties in 1960, and in 1961 it was incorporated in the STA. A year later it became a key part of the LTA, a role which it has continued to play in the MFA.
1.28. To understand the intended role of the concept of market disruption, it is necessary to consider its relation to GATT's regular safeguard clause (Article XIX). The concept of market disruption introduced three fundamental changes. First, it would not be necessary for the allegedly injurious increase in imports to have already occurred - a potential increase could be sufficient to justify additional restrictions. Second, imports of the product from particular sources could be singled out as the source of the problem, rather than imports of the product in general; the logical corollary was that the additional restrictions could be applied on a country-specific (that is, discriminatory) rather than MFN basis. Third, the existence (size) of a price differential between particular imports and goods of comparable quality sold on the domestic market could be used in determining the need for additional restrictions. In the course of reviewing the operation of the LTA and MFA, the discussion in Chapter 3 details the problems that have arisen in connection with the application of the concept of market disruption. 1.29. One of the important questions to be answered in designing future trade policies for textiles and clothing is whether the criteria by which they were judged in the past to be a "special case", and thus in need of a separate trade régime, continue to be valid. Judging from the literature, there were two principal criteria for the initial grant of a special status: the first was that the challenge presented by "low cost" imports was, with only minor exceptions, unique to textiles (and later clothing); the second was the importance of employment and production in those industries in the country's overall economic activity.
1.30. It would be difficult to argue the first point in 1984. A number of developing countries have become competitive in a wide range of manufactured goods since 1960, and even more so since the 1930s. The competitive challenge of developing country exports of footwear, ships, radios, televisions and other light consumer goods, steel and other manufactures has to be managed within the GATT system. Nor, as was noted above, are the developed countries the only ones feeling the pressure of "low cost" imports, as is evident in the situation facing producers of labour intensive products in the Republic of Korea, Hong Kong, Taiwan, Singapore and other more advanced developing areas. - 11-
1.31. The relative importance of employment and output in textiles and clothing in overall economic activity in the industrial countries has also changed over the years, as is evident in Table 1.1.
TABLE 1. 1. - RELATIVE IMPORTANCE OF EMPLOYMENT AND OUTPUT IN TEXTILES AND CLOTHING INDUSTRIES, 1953-1980 (Percentages)
United States Western Europe 1953 1963 1980 1953 1963 1980
Employment In textiles relative to: All manufacturing 6.7 5.4 5.1 11.4 8.5 5.8 Total employment 2.0 1.4 1.1 3.3 2.6 1.6 In clothing relative to: All manufacturing 8.9 7.8 6.0 8.2 7.2 4.6 Total employment 2.7 2.0 1.2 2.3 2.3 1.3 Output In textiles relative to: All manufacturing 4.3 3.9 3.0 9.3 6.9 4.1 GDP 1.5 1.0 0.7 3.4 1.9 1.0 In clothing relative to: All manufacturing 4.5 3.5 2.6 4.1 3.4 2.3 GDP 1.6 0.9 0.6 1.5 0.9 0.5
1.32. It is clear from the figures in the table that in terms of output, and even more so in terms of employment, the textiles and clothing industries in the United States and Western Europe have declined in relative importance throughout the post-war period. In each area in 1980, employment in the two industries combined was less than 3 per cent of total employment. 1.33. On the basis of the developments described above, it appears that it would be less easy today to argue the uniqueness of the competitive challenge facing textiles and clothing than it was in the 1930s or at the end of the 1950s. The central issue 1.34. Changes in the developed countries' textile and clothing industries, as well as changes going on in manv other tradeable goods industries, have had the effect of bringing the trade-related problems confronting those two industries into the mainstream of commercial relations. As such, trade policy officials face essentially the same general issues in dealing with textiles and clothing as they do in dealing with several other tradeable goods industries. The solutions to these problems lie at the general trade policy level. - 12 -
1.35. The fundamental issue is structural adjustment, that is, the way in which economies respond to the pressures for changes in the patterns of production and trade that are inherent in the process of economic growth. In many respects, the structural adjustment problem confronting the textiles and clothing industries in the developed countries is the prototype for structural adjustment in general. Future policy decisions regarding these two industries will be a key test of the developed countries' approach to structural adjustment. The possible effects of two alternative sets of trade policies for textiles and clothing are considered in Chapter 5. - 13 -
FOOTNOTES TO CHAPTER I 1While these technological advances had a major impact on the clothing industry, it is also true that they occurred "outside" the industry; the clothing industry itself has remained labour intensive. 2While in the 1950s and 1960s wages were virtually identical in the two industries, wages in the textile industry of the United States increased by 15 per cent relative to wages in clothing by 1983. This is consistent with the presumption that the level of human capital has increased in the textile industry relative to clothing. 3Article XII and XVIII permit the use of QRs for balance- of-payments reasons. Article XVIII recognizes that developing countries may need additional flexibility in this regard. 4The application of GATT rules to trade in agricultural products has been less than complete, but that is the result of waivers for certain countries plus de facto treatment, as opposed to the formal creation of a separate set of rules, as happened with textiles and clothing. 5Keesing and Wolf, 1980, p.40. 6See Keesing and Wolf (1980, Chapter 3) for a detailed description of the negotiation of MFA II. As regards the operation of MFA III, the TSB reported in December 1983 that ... on the basis of notifications reviewed in 1982 and 1983, the overall picture is one of a somewhat more severe implementation of the Arrangement since the coming into force of the 1981 Protocol of Extension:
- unilateral measures ... have been taken more frequently;
- a number of new bilateral agreements, with previously unrestrained countries had been concluded;
- coverage in terms of products under restraint has increased;
- there are more cases of growth and flexibility at [lower] levels ... and there are a few cases of no growth or flexibility being granted; - agreements concluded with large suppliers are again more restrictive. - 14 -
8Commenting on the GATT working party which carried out the work leading to the 1960 Decision, Dam (1970, p. 298) observes The working party sidestepped the argument that the problem was only one of the appropriate safeguards and that the General Agreement contained sufficient safeguards (such as the escape clause in Article XIX and the renegotiation provisions of Article XXVIII) to protect any legitimate interests of the importing countries. It concluded that "whether or not safeguards against situations of 'market disruption' were already available within the provisions of the General Agreement, there were political and psychological elements in the problem which rendered it doubtful whether such safeguards would be sufficient to lead some contracting parties which are dealing with these problems outside the framework of the Ceneral Agreement or in contravention of its provisions to abandon these exceptional methods at this time."
The remarks by the working party in the above quotation from Dam have a contemporary ring, especially for anyone who has been following the deliberations in recent years on the issue of reforming Article XIX or, more recently, the search for a solution to the problem of so-called "grey area" measures such as VERs and OMAs. - 15 -
CHAPTER 2: THE RELATIVE IMPORTANCE OF THE TEXTILE AND CLOTHING INDUSTRIES IN ECONOMIC ACTIVITY
2.1. The purpose of this chapter is to provide a statistical profile of the textile and clothing industries, with a particular focus on developments since the Second World War. Whenever possible, statistics on the two industries are related to the corresponding figures for the manufacturing sector and the economy as a whole. 2.2. Developments in production and employment are presented in Section A. This is followed by four sections dealing with the principal determinants of the changes in production and employment, namely trends in demand (Section B), technological change (Section C), trends in world trade (Section D), and trade policies (Section E; these policies are covered in detail in Chapter 3). Other develcpments may of course influence the textile and clothing industries as well - for example, exchange rate movements - and some of these are mentioned briefly in Section F. Section G considers the impact of these various developments on investment and the capital stock in the textile and clothing industries. A. PRODUCTION AND EMPLOYMENT 2.3. World production of textiles is estimated to have increased, in real terms, by about 90 per cent between 1900 and 1937. In terms of the relative share of the textile industry in manufacturing activity, however, a declining trend had already began to emerge in some developed countries around the turn of the century, and in many of them there was a sharp drop from 1913 to 1929, reflecting among other things the .oss of export markets resulting from competition from Japan2 and impùrt-substitution policies in Central Europe and Latin America. The declining share of textiles in manufacturing activity appears to have been temporarily arrested in the late 1930s in some countries. 2.4. Once we enter the post-World War II period, the availability and quality of statistics on production and employment in the textile industry - and, as it begins to enter international commerce in an important way, of data for the clothing industry - begin to improve, but not as much as might be hoped. The difficulties are related to the nature of the activities, which can be carried out in large and small 'factories', as well as in even more informal surroundings, such as private dwellings. This problem is compounded by (i) the fact that official statistics generally do not cover establishments with less than a certain minimum number of employees, and (ii) the existence of an "underground" economy that escapes official statistics altogether (an expanding area in many countries in recent years). These statistical limitations, which are more serious for clothing than for textiles because of differences in the minimum size efficient unit, must be kept in mind in interpreting the following production and employment statistics. - 16 -
Trends in production 2.5. Tables 2.1 and 2.2 highlight post-war trends in production and employment in textiles and clothing. As can be seen from the figures, production of textiles and clothing in the developed countries as a group increased between 3 and 4 per cent a year on average between 1953 and 1973. During the period 1963-73, the growth of textile production was especially strong in North America and Japan, exceeding that in the developing countries and the Eastern trading area; the same was also true for Japan in the case of clothing. 2.6. For both textiles and clothing the average annual production growth rates in all the major developed areas turned negative in the years 1973-82. Considering that this period included the two worst post-war recessions, some slowdown was inevitable. The average figures for 1973-82 also indicate that while the expansion of output in the developing countries and the Eastern trading area slowed down, it remained positive during this period. Trends in employment 2.7. Employment trends in the developed countries were less favourable than production trends in both industries. This was especially so in the case of textiles, where each of the post-war period averages in Table 2.2 are negative, as are each of the years since 1973. The limited data available for the developing countries and the Eastern trading area indicate low growth rates in employment in both industries for most of the period since 1974, with the exception of employment in the developing countries' clothing industry in the mid-1970s. 2.8. Taken together, the figures in Tables 2.1 and 2.2 imply an increase in "implicit productivity" per textile worker in the range of 3-4 per cent a year for the developed countries. For clothing workers the increase in output per employee is less, reflecting the more restricted opportunities for labour-saving investments. Output per clothing worker in the developing countries has been relatively flat (if the figures are accurate, there were sizeable declines in 1974 and 1975). Worldwide distribution of textile, clothing and manufacturing activity 2.9. Post-war trends in the relative shares of the developed and developing countries in production and employment in textiles, clothing and all manufacturing are indicated in Table 2.3. In the case of textile production, the share of North America declined until about 1975, then levelled off at around 20 per cent. (Throughout this study it should be kept in mind that a declining share does not necessarily mean that the absolute level of production - or employment, trade and so forth - is declining.) Japan's share increased until about 1970, then levelled off at around 9-10 per cent. The EC's share of the developed and developing countries' textile production has shown little change since the early 1960s. Employment share for textiles, in contrast, has shown a general declining trend in the developed areas (with the partial exception of Japan). As for the developing countries as a group, they doubled their share of textile production between 1953 and 1980 (from 18 to 35 per cent), and increased by half their share of textile employment (from 52 to 73 per cent). TABLE 2.1 - PRODUCTION OF TEXTILES AND CLOTHING BY HAIN AREAS AND COUNTRIES, 1953-1982 (Average annual percentage rate of change in volume)
1953-1963 1963-1973 1973-1982 1974 1975 1976 1977 1978 1979 1980 1981 1982
Textiles Developed countries 3 4 -1%5 -6 -61 9 -1 -I 4%i -3!5 -2!; -5! United States 2 6 -1%1 -7 -8 10 0 2%f 51i -41à -2 -8%5 Canada 5 6% -ll -2%5 -3%5 1 4 4 8 -31i l -18% Japan 9 7 -1 -10 -5% 9 -2 1 2 -1 -2 -1 EC (9) 2l% 2 -2 -4% -7!5 10 -21j -3 5 -3! -5_J _4 Other Western Europe 21% 21S -1%5 -1 -10i 6 -2 -4 4 1 -3 -4 Developing countries 5IS 5%5 2 1 2 6 0 311 3%5 211 O1}5° Eastern trading areaa ... 5% 3 5% 6% 5 4 4% 1% 15 -I -l Clothing Developed countries 3%à 3 -1% -3% -4 9 2 -1 2 -4!5 -4%J -6 United States 31% 3 -1 -21 -51% 17 6%5 0 O -5 -5 -9! s Canada 2% 3% -1J ° 1 411 -6 7J5 3%5 -311 -2 -15 Japan .. 7 -1 -5 -9 7 -1 2 -2 -5il -1 6 EC (9) 4 2 -2% -3%S -2 4 -1 -5 5 -5 -8 -411 Other Western Europe 4 1% -1 -2 -4 6 -315 -6 0 5 -4 -2 Developing countriesc 55 2IS 31à 7%l 5 -1 4 2%5 O 2%j 1 Eastern trading areab,c ... 61à 4 7 61 6 3%5 3%5 5%f 3%5 2%f 1
a Including footwear. bExcluding centrally planned economies in Asia. cIncluding leather and footwear. TABLE 2.1 - EMPLOYMENT IN TEXTILES AND CLOTHING BY HAIN AREAS AND COUNTRIES, 1953-1982 (Average annual percentage rate of change)
1953-1963 1963-1913 1973-1982 1974 1975 1976 1977 1978 1979 1980 1981 1982
Textiles
Developed countries -1 -Ili -411 -5 -10 -I -4 -4 -3;à -4fs -4,5 -5 United States -Zls I1l -3 -5 -10 6 o -1 -4)j -2 -9 Canada -1 Ii -3,5 -Ili -lOit -1 -5 3 -2 1 -161j Japan 215 -21j -5'1 -61j -13 -2 -6 -815 -31h -3,5 -4 -Ilf EC (9) -Ili -5S -61s -4 -4 -4#l -4#à -6 -61j -61à Other Western Europe -1 -2 -4i; -41S -101j -3 -3 -615 -21f 0 -31à -6
Developing countries 211 3 . . . 811 4 2 . . . Eastern trading areaa 0 I O o o Clothing -18 Developed countries 2 3,i -3 -411 O -2 -3 -1 -3 -4½ -411
United States -21j -S 5 0 -2 -3 -2 -6 Canada -I -2 -4 O -5 2 -1405 Japan 1 61à -3 2 -3 -1 1 EC ?; -5 -6 -61g -5 -4 1 -1 _4! (9) -3 -01 -8IS -5,5 Other western Europe 2 -1 -4 -3,5 -411 -5 -4 -21à -5 -615 -5 Developing countriesb 4 10 1 5 3 21i 2
Eastern trading Area b 3 n -1
a Excluding centrally planned economies in Asia Including leather and footwear. - 19 -
TABLE 2.3. - DISTRIBUTION AMONGDEVOLOPED AND DEVELOPING COUNTRIESOF PRODUCTION AND EMPLOYMENTINTEXTILES,CLOTHING AND MANUFACTURES a,1953-1980 (Percentages: allmarket economies=100) PRODUCTION EMPLOYMENT 1953 1963 1970 197,5 1980 1953 1963 1970 1975 1980
TEXTILES
Devoloped countries 82 75 70 66 65 48 34 34 31 27 North America 36 30 27 20 21 10 6 7 7 7 Japan 5 7 10 9 9 9 10 9 9 8 Western Europe 40 35 32 34 32 28 18 16 14 il BC (9) 36 32 29 31 29 26 16 14 13 10
Developed countries 18 25 30 34 35 52 66 66 69 73 SouthernEurope 5 5 6 8 8 6 5 5 6 6 Asia 6 10 il 12 13 36 50 52 51 55 Latin America 6 8 10 il il 7 7 5 6 6
Africa 1 2 3 3 ... 2 4 4 6 ... CLOTHING
Developed countries 92 86 80 75 75 67 52 49 44 39 NorthAmerica 59 49 41 31 33 23 16 15 14 14 Japan 1 2 6 9 8 2 6 6 7 6 Western Europe 29 32 31 33 30 40 29 26 21 16 EC (9) ?5 27 27 29 26 35 26 24 19 15
Developing countries 8 14 20 25 25 33 48 51 56 61 Southern Europe 2 4 5 9 8 6 7 7 7 8 Asia 3 5 6 8 8 19 31 35 38 40 latin America 3 4 8 7 7 7 8 6 7 8
Africa - I 1 1 ... 1 2 3 3 ... MANUFACTURING
Developed countries 93 90 88 84 83 69 60 61 58 55 NorthAmerica 59 49 41 32 32 23 17 18 16 18 Japan 2 6 10 12 13 7 10 il 1l 11 Western Europe 30 33 34 38 35 37 32 30 28 25 BC (9) 27 29 30 33 31 33 28 27 25 22
Developing countries 7 10 12 16 17 31 40 39 42 43 Southern Europe 2 2 3 4 4 5 5 5 6 6 Asia 2 3 3 4 5 19 27 26 26 29 latin America 3 4 5 7 7 6 6 6 7 8 Africa - 1 1 1 ... 1 2 2 3 ...
a All manufacturing excludingfood, beverages, tobacco, non-ferrous netals and petroleum refineries. - 20 -
2.10. The figures in Table 2.3 indicate that the share of Western Europe (and the EC) in the market economies' production of clothing has changed very little in the post-war period. North America s share, in contrast, declined from an estimated 59 per cent in 1953 to 33 per cent in 1980. The counterparts to the declining North American share were the increase in Japan's share over this period (from 1 to 8 per cent), and the increase in the developing countries' share (from 8 to 25 per cent). On the employment side, there was a general decline in the developed areas' shares of market economy clothing employment (except in Japan, where it has been constant since the early 1960s), and an increase in the developing countries' share (nearly all of which occurred in the Asian area). 2.11. A point worth noting is that, according to the production figures in Table 2.3 for both textiles and clothing, the respective shares of the developed and developing countries showed very Iittle or no change between 1975 and 1980. 2.12. For comparison purposes, Table 2.3 also indicates the comparable figures for shares in the market economies' total manufacturing production. With certain exceptions, the remarks in the preceding paragraph about changing shares in clothing production and employment also hold for the case of total manufacturing production and employment. Shares of textiles and clothing in manufacturing production 2.13. Our perspective on the developments described above is improved b! considering what has happened to the shares of the textiles and clothing industries in total manufacturing activity and in aggregate national economic activity. Tables 2.4 to 2.6 provide data for the market economies; similar data for the East European countries and the USSR are provided in Table 21.7. 2.14. Ir is evident from the figures in Table 2.4 that the share of the textile industry in manufacturing production has been declining more or less steadily throughout the postwar years in all the country groupings in the table except Africa (Table 2.1 indicates that absolute declines in textiles production began to occur only in the 1970s; before then, textile production was increasing, but more slowly than the rest of manufacturing). Fer the developing countries as a whole, the share of textile output in manufacturing is currently about two and a half times larger than in the developed countries (11.5 versus 4.4 per cent). 2.15. For clothing, the situation portrayed in Table 2.4 is somewhat more mixed. of the four developed areas, only Japan did not show a steady decline over the postwar period in the share of clothing in total manufacturing production. At the same time, clothing's share of Japanese manufacturing production was smaller than the corresponding figures for the other three developed areas throughout the post-war period. 2,16. Among the developing country areas, trends were even more mixed. Clothing's share in manufacturing production has increased steadily in Africa and declined more or less steadily in Latin America. In Southern Europe and Asia, gains between 1970 and 1975 were fully reversed by 1980. - 21 -
TABLE 2.4. - SHARE OF TEXTILES AND CLOTHING IN MANUFACTURINGa PRODUCTIONINDEVELOPED AND DEVELOPING COUNTRIES,1953-1980 (Percentages)
Textiles Clothing
1953 1963 1970 1975 1980 1953 1963 1970 1975 1980
MARKETECONOMIES 8.4 7.6 6.4 6.3 5.6 5.2 4.2 3.6 3.5 3.1 Developed countries 7.4 6.3 5.1 5.0 4.4 5.1 4.0 3.3 3.2. 2.8 North America 5.1 4.7 4.1 4.0 3.6 5.2 4.1 3.5 5.4 3.1 Japan 16.5 9.5 5.8 5.1 3.9 1.6 1.6 2.0 2.6 1.9 EC (9) 11.5 8.5 6.1 5.9 5.3 4.8 3.9 3.2 3.1 2.6 Other Western Europe 8.9 6.2 4.6 3.8 3.6 6.1 5.3 3e7 3.3 3.0 Developing countries; 23.5 19.3 16.3 13.3 11.5 6.8 5.9 5.9 5.4 4.5 Southern Europe 24.4 16.4 12.9 10.8 30.3 6.0 6.3 5.8 6.8 5.4 Asia 28.Q 25 Z '7.9» 18.2 15.7 8.2 7.2 6.5 6.8 5.6 Latin America, 19.0 15.7 12.7 10.7 8.8 7.1 4.9 5.7 3.6 3.0
Africa 22.5 24.5 27.4 23.5 ... 2.1 4.0 5.2 6.0 .
all mmufacturing value added, excluding food, beverages, tobacco, non-ferrous metals and petroleum refineries. Seec Table 2.7 for related data for the Eastern trading area. 2.17. For the developing countries as a group, the estimated current share of clothing production in manufacturing output is about 60 per cent larger than in the developed countries (4.5 versus 2.8 per cent). The fact that this is smaller than in the case of textiles (where the share in developing countries is 160 per cent larger than in the developed countries) is due largely to the fact that domestic demand for ready-made clothing is smaller in developing countries. Share of textiles and clothing in manufacturing employment 2.18. lurning to employment, we see from the figures in Table 2.5 that the trend in the share of textile employment in total manfacturing employment in North America has been quite different from trends in the other three areas. In North America, textile's share has declined since the early 1950s. but only gradually; moreover, between the early 1960s and the mid-1970s. It actually increased marginally. In the other three area, textile's share has declined much more sharply, but from a much higher initial share than in North America; this it has been a process of their employment shares moving closer to the North American figures over the post-war period. Despite the much sharper declines since the early 1950s, the share of textiles ir manufacturing employment in the EC and (especially) Japan was above the corresponding figure for North America in 1980 (6.8 and 10.9 per cent respectively, versus 5.7 per cent). - 22 -
TABLE 2.5. - SHARE OF TEXTILES AND CLOTHINGINMANUFACTURINGa EMPLOYMENT IN DEVOLOPED AND DEVELOPING COUNTRIES,1953-1980 (Percentages)
Textiles Clothing
1953 1963 1970 1975 1980 1953 1963 1970 1975 1980
MARKET ECONOMIES 17.4 17.3 16.5 15.4 14.8 8.8 9.2 8.4 8.0 8.0 Developed countries 12.1 9.9 9.1 8.4 7.2 8.6 8.0 6.8 6.1 5.7 North Amrica 7.8 6.3 6.7 6.6 5.7 8.6 8.9 6.9 7.0 6.6 Japan 23.1 16.5 14.2 12.6 10.9 3.0 5.2 4.2 4.6 4.8 EC(9) 13.5 9.8 8.7 7.9 6.8 9.4 8.4 7.4 6.2 5.4 Other Western Europe 10.4 8.5 6.8 5.7 5.2 9.8 7.3 6.8 5.3 4.5 Developing countries 29.2 28.3 27.8 25.2 24.0 9.2 10.9 11.0 10.7 10.9 Southern Europe 20.0 16.9 15.5 14.8 14.5 9.5 11.1 10.8 10.0 11.0 Asia 34.6 32.9 33.2 29.9 28.5 9.0 10.9 11.6 11.8 11.3 Latin America 20.5 17.9 14.7 14.1 12.2 10.3 11.2 9.0 8.0 8.7 Africa 32.1 32.5 29.3 30.3 ... 5.5 9.7 10.3 9.0 ...
aAll manufacturing, excluding food, beverages, tobacco, non-ferrous metals and petroleum refineries. See Table 2.7 for related data for the Eastern trading area. 2.19. The figures for clothing employment in the major developed country areas point to a pattern very different from that for textiles. Because the decline in clothing's share has been somewhat more gradual in North America than in Western Europe, by 1980 clothing employment was a larger share of manufacturing employment in North America (6.6 per cent) than in Western Europe (4.5 to 5.4 per cent). And despite a more or less steady increase in clothing's share in Japan over the post-war period, Japan's 1980 figure of 4.8 per cent was only about three-quarters of the North American figure. 2.20. Employment in textile production has represented a sharply declining share of manufacturing employment in each of the developing areas shown in Table 2.5 (especially in Southern Europe and Latin America), with the exception of Africa. Clothing employment, in contrast, has held its share more or less constant over the post-war period, with the partial exceptions of the sharp increase in Africa between 1953 and 1963 and modestly declining trend in Latin America until the second half of the 1970s. As a result of these trends, clothing's share of manufacturing employment in the developing countries has moved from being marginally above the developed country figure in 1953 (9.2 versus 8.6 per cent) to being nearly twice as large in 1980 (10.9 versus 5.7 per cent). - 23 -
Figures for individual countries 2.21. Data for groups of countries obscure wide variations among individual countries in the relative importance of the textiles and clothing industries. Among the developed countries, textiles' share of manufacturing production in 1975 ranged from about 2½ per cent in Norway and Sweden to 10 per cent in Italy (see Appendix Table A.1). For clothing production, the range is smaller (Italy's figure of 3.6 per cent, which is matched or exceeded by eight other developed countries, seems rather low and is a reminder of the need to view the production and employment data - especially for the clothing industry - with considerable caution). 2.22. Textiles' share of manufacturing employment in 1975 ranged from 3.3 per cent in Sweden to 13.7 per cent in Italy. The same two countries also defined the range for clothing's share in manufacturing employment, from 3.1 per cent in Sweden to 9.8 per cent in Italy. 2.23. Not surprisingly, the range among the 37 developing countries in Appendix Table A.1 is much wider. Twelve of those developing countries reported that the textile industry's share of manufacturing production in 1975 exceeded 20 per cent, while in eleven countries it was under 10 per cent. In three developing countries, clothing's share of manufacturing output exceeded 20 per cent (Hong Kong, Mauritius and Jamaica), while in 25 countries the reported share was under 5 per cent.
2.24. In 15 of the developing countries, textiles employment was 20 per cent or more of manufacturing employment (in 6 of those countries, it exceeded one-third). Five countries reported employment shares in excess of 20 per cent for clothing. 2.25. In many ways, the most interesting figures of all are those which relate the textiles and clothing industries to overall economic activity. Table 2.6 reports tentative estimates for sixteen developed and thirty-six developing countries in 1975. For textiles and clothing combined, there are only three developed countries in which output accounted for more than 2 per cent of GDP (Italy, 3.1 per cent; Belgium-Luxembourg, 2.3 per cent; and Switzerland, 2.1 per cent). Among the developing countries, in contrast, 21 of the 36 countries reported that textiles plus clothing represented 2 per cent or more of GDP (at 16 per cent, Hong Kong had by far the largest share; Taiwan was second with 5.9 per cent). 2.26. Rough estimates of the share of textile and clothing employment combined in the "active population" in 1975 are also given in Table 2.6 (active population refers to the estimated number of people between 15 and 60 years of age; note that this is a very different concept from that of total employment or total labour force). Three developed countries reported figures in excess of 4 per cent (Italy, 5.8 per cent; Belgium-Luxembourg, 5 per cent; and Austria, 4.1 per cent). Available data for the developing countries in the table (which must be considered very rough estimates) indicate that in eight of them employment in textiles and clothing combined represented 4 per cent or more of the active population. TABLE2.6. - SHARE OF TEXTILES AND CLOTHING PRODUCTIONAND EMPLOYMENTIN GDP AND ACTIVE POPULATION a,1975 (percentages)
Textiles Textiles Textiles Textiles &Clothing & Clothing &Clothing & clothing in GDP inactive in papulation GDPpopulationinactive
1 United States 1.3 2.3 27 Indonesia 0.9 1.3 2 Canada 1.3 2.3 28 Israel 2.4 3.8 3 Japan 1.1 3.8 29 Malaysia 0.9 1.0 4 Belgium-Luxemburg 2.3 5.0 30 Philippines 2.1 3.8 5 France 2.0 3.1 31 Singapore 1.1 4.2 6 Germany, Fed. Rep. 1.9 2.7 32 Sri Lanka 1.9 2.8 7 Italy 3.1 5.8 33 Thailand 2.6 2.4 8 Netherlands 1.1 1.7 34 Argetina 5.7 2.5 9 United Kingdom 1.9 3.1 35 Brazil 2.3 1.5 10 Austria 2.0 4.1 36 Chile 2.9 2.2 11 Finland 1.9 3.1 37 Colombia 3.4 1.5 12 Norway 0.8 1.6 38 Dominican Republic 0.5 0.4 13 Sweden 1.0 1.6 39 Guatemala 1.2 1.9 14 Swizerland 2.1 2.9 40 Haiti 0.8 0.1 15 Australia 1.2 2.1 41 Jamaica 1.7 2.7 16 South Africa 1.9 2.3 42 Mexico 1.7 1.4 43 Peru 3.1 1.3 44 Trinidad and Tobago 0.5 3.1 17 Greace 4.1 3.3 45 4.3 4.6 18 Portugal 5.6 5.7 46 Algeria 1.2 0.8 19 Spain 3.3 5.0 47 Egypt 5.0 4.8 20 2.3 2.1 48 Ivory Coast 2.1 0.4 21 Yugoslavia 4.7 3.1 49 Kenya 1.0 0.5 22 16.0 18.8 U Korea, Rep. of 4.7 4.2 50 Morocco 1.5 3.8 24 Taiwan 5.9 51 Nigria 0.9 0.3 25 India 2.8 2.5 52 Tunisia 1.3 1.0 26 Pakistan 3.2 6.5 - 25 -
Explaining country differences 2.27. Some small developing countries (commonly island economies) have hardly any textile industry but frequently a large export-oriented clothing industry. Conversely, several large developing countries have an important textile industry, but only a small clothing industry. 2.28. In all but a few countries, where special factors or statistical aberrations may be at work, the share of textiles and clothing in manufacturing employment is observed to be markedly higher than the corresponding share of those two industries in production. In other words, value-added per employee tends to be below the average for manufacturing, usually much more so in the case of clothing than in that of textiles. The difference tends to be much larger, absolutely and relatively, in developing countries than in developed countries. 2.29. The group of countries in which textiles and clothing combined accounts for 30 per cent or more of manufacturing, comprises some following export-oriented policies and some producing primarily for the domestic market. As already suggested, such factors as a country's size and the nature of its foreign trade regime, as well as its traditions, lifestyles and natural resources all have an impact on the relative importance of the textiles and clothing industries in the manufacturing sector. Perhaps the most important factor, however, is the level of a country's per capita income. This is shown in Charts 2.1 and 2.2, where for each country the proportion of manufacturing production and employment contributed by textiles and clothing combined are plotted against the country's per capita income. Simple regression lines were estimated and have been drawn in the Charts. They reveal that, for example, a per capita GNP of $7 000 in 1975 was typically associated with a production share of 9 per cent and an employment share of 12 per cent. With per capita GNP at $300 these shares were 25 and 38 per cent, respectively.
2.30. In most cases, large deviations from the regression line can be easily explained. Thus apart from the high share of clothing in some island economies (and notably Hong Kong), very large textile shares can be found in countries engaged in the primary processing of their domestic cotton production (for example, Egypt and Pakistan). The shares of both textiles and clothing can be unusually small in countries richly endowed with raw materials, which have not pushed import substitution very far (such as Malaysia and Kenya). 2.31. When considering figures on the relative importance of the textiles and clothing industries in the national economy, it is important to recall that the share of total manufacturing in GDP and aggregate employment tends to increase in the early stages of development, and then to begin declining as per capita income rises above a certain level. During the latter period, the fact that textiles and clothing generally account for a declining share of manufacturing activity means that there is an even more marked decline in the share of textiles and clothing in total production and employment. Simplifying the process to an extreme, three typical phases associated with growing per capita incomes may be identified on the basis of experience to date: - 26 -
Chart 2.1
GIP per Capita Relationship Between Per Capita GNP and the Share of Textiles (s,leg scale) and Clothing in Manufacturing Value Added, 1975 l=CO-.U \-' 14
i.Il.8gS..j .2..S' So *11 ' .20\ ..3 . 9 *'.
.11 ZSCO -31 *17
.21
.3 \ S41 .41 ;3S. 42 .36 .1 *20 .4. -21* . 'S2'4 .31 .37 300
* O e .33 .47 .41 .37 .40 32\
\ ' r-.
10 30 40 t - Chart 2.2 ter capi (1.lot *Cle) Relationship Between Per Capita GNP and the Share of Textiles and Clothing in Manufacturing Employment, 1975a tCOWD . 3 "..s .4 *;1 S .10 3 s,9 .21
.1 .7 . Isoo .31 * a, .di *22 . 1 350 .34 21
. 16 .4S .
. 4 \ .24 .46 .43 .3 \ .1s
.48 *.37 .3 .23 -Se
*SI\ *5S3°30
.47
., o zoo .40 *3S -26 s30 .21\< p I IDP 61P I. 10 20 3» *i o v
aFor country code, see Table 2.6. - 27 -
(a) early phase: the share of textiles and clothing in manufacturing tends to rise, while the share of manufacturing in total production and employment also rises; (b) middle phase: the share of textiles and clothing in manufacturing starts declining, but this is more or less offset by the continued rise of manufacturing's share in total production and employment;
(c) mature phase: the continued decline in the share of textiles and clothing in manufacturing coincides with a secular decline in the share of manufactures in total production and employment.
2.32. This process results in a curve in the shape of an inverted "U" , in which the share of textiles and clothing in total production and employment increases with rising incomes up to a maximum and then declines again (see Appendix Charts A.1 and A.2). Whether these declining shares involve absolute declines in production and/or employment in any particular country - as opposed to a growth rate for textiles or clothing that is positive but below the average for the rest of the economy - depends on a number of factors, including the overall rate of economic growth. Eastern Europe and the USSR
2.33. In view of large differences in statistical methodology - as well as in some cases the absence of reliable statisties - the Eastern trading area was not included in the preceding discussion. The statistics in Table 2.7 suggest that, broadly speaking, the relative importance of textiles and clothing in industrial employment in Eastern Europe is about the same as in market economies at comparable income levels.'
TABLE 2.7. - SHARE OF TEXTlLESAND CLOTHINGCOMBIND IN INDUSTRIAL OUTPUT AND EMPLOYMENTIN EASTERN EUROPE AND THE USSR, 1960 AND 1981 (Percentages)
Bulgaria Czechoslovakia GDR Hongary Poland Romania USSR 1960 1981 1960 1981 1960 1981 1960 1981 1960 1981 1960 1981 1960 1981
Grossoutput 18.7 6.9 8.5 6.7 11.3 7.4 10.9 6.8 12.6 10.3 13.1 11.1 19.5 14.1 Employment 19.8 14.7 14.2 12.0 12.6 10.2 13.3 11.8 17.2 14.0 16.1 17.7 14.1 12.7a a1975 - 28 -
2.34. The data point to the tentative conclusion that the share of textiles and clothing in total industrial production has been declining in the last twenty years in all the countries shown in the table (as did their share in employment, except in Romania). In absolute terms, however, textile and clothing employment increased in all seven countries between 1960 and 1981, a large part of the increase being concentrated in clothing (as is noted in Chapter 3, a part of this increase is due to the growth of outward processing trade with Western Europe). The textiles and clothing "complex" 2.35. Given the high degree of technical integration in textiles and clothing, these industries are usually treated as a "sector". This remains, however, a rather narrow definition of the activities involved, notably as regards employment, value added, foreign trade and corporate structures. Other activities which are closely related to textiles and clothing include:
- upstream: specialized suppliers of inputs (fibres, textile machinery, dyestuffs, and so forth);
- downstream: wholesale and retail trade (and the fashion industry).
For the purposes of this study, the upstream activities are more important than downstream activities because - as will be seen below - their levels of output and employment are much more likely to interact with output levels in their own country's textile and clothing industries. 2.36. The inclusion of upstream activities materially changes the perception of the relative importance of textiles and clothing in a number of countries and of its evolution over time. In developed countries, the relative contraction of the textiles and clothing industries has generally been accompanied by relative stability or modest expansion in upstream activities (absolute levels of output and employment are, of course, much smaller in the latter activities). In many developing countries, in contrast, the expansion of textiles and clothing manufacturing has not had a noticeable impact on upstream industries. 2.37. The major structural change in fibre production in the post-war period was the substitution of synthetic for natural fibres beginning in the 1960s (as may be seen from the data in Appendix Table A.19, this development had a favourable impact on the developed countries' trade balance in textile fibres). This shift did not, however, preclude a modest increase in world production of natural fibres, as may be seen from the data in Table 2.8. 2.38. Nonetheless, developments have hardly been conducive to expanding exports in the case of countries for which cotton and wool fibres have been an important part of their exports. This is particularly Lrue for those developing countries whose exports of natural fibres have been affected not only by the competition from synthetic fibres, but also by restrictions imposed by the developed countries on their exports of textiles and clothing made of natural fibres. - 29 -
TABLE 2.8. - WORLD FIBRE PRODUCTION, 1900-1980 (Millions of metric tons)
Natural Fibres Man-made Fibres Cotton Wool Cellulosic Synthetic fibres fibres
1900 3 162 730 - -
1950 4647 1 057 1 608 69 1960 10 113 1 463 2 656 702 1970 Il 784 1 602 3 579 4 818 1973 13 738 1 432 3 856 7 744 1980 14 039 1 610 3 554 10 673
2.39. The production of textile machinery is concentrated in specialized enterprises in a few industrial countries. Employment in these enterprises generally represents a very small fraction of the domestic manufacturing labour force, except in Switzerland and, to a lesser extent, the Federal Republic of Germany. In both countries, the trade surplus in textile machinery is quite large in relation to the deficit in trade in textiles and clothing. For example, in 1982 the Swiss trade deficit on textiles and clothing combined was $580 million, while the export surplus on textile machinery was $990 million; the corresponding figures for the Federal Republic of Germany are $3.5 and $1.6 billion. 2.40. Dyestuffs and other chemical materials used in the textiles and clothing industries are of a lesser importance for employment and trade than fibres and machinery. They are also heavily concentrated in a few enterprises, mainly in the Federal Republic of Germany. 2.41. A key aspect of a country's upstream activities in the textile and clothing complex is whether they are internationally competitive. If they are competitive, and if there is reasonably easy access to foreign markets, those upstream activities will be relatively independent of secular trends in their own domestic textile and clothing industries. Alternatively, if those two conditions are not met, the upstream industries will see their future tied much more closely to their domestic customers. 2.42. A separate but equally important point is that if a country's textile or clothing industries are forced to buy inefficiently produced domestic inputs, this will act as a tax on their production. Trade restrictions on imported textiles or clothing can "neutralize" this tax effect as far as import-competing firms are concerned, but such restrictions do nothing to help firms that are export oriented (or could be if allowed to purchase inputs at world market prices). - 30
B. TRENDS IN DEMAND 2.43. The developments in production and employment described above reflect the composite effect of several factors. One important factor is the trend in final consumer demand for clothing, household furnishings (carpets, linen, curtains, and so forth, commonly referred to as "made-ups" and included in the textile category) and such miscellaneous products as automobile tyres, luggage and sporting goods. This, in turn, affects the demand for intermediate inputs such as fibres, yarns and fabrics. The demand for the inputs could, in principle, be derived from the demand for the final products (or vice versa) but in practice this is extremely difficult to do because of the complexity of the two industries and a variety of limitations in the data.
2.44. Analysis of trends in the demand for products in this area is generally confined to clothing and certain household textile products, since these are the only items for which reasonably adequate statistics, expressed in current and constant prices, are available. Even these figures must be used with considerable caution, however. this is especially true of the inflation-adjusted "real" figures whose accuracy is crucially dependent on the quality of the price indices used so deflate the current value figures. 2.45. Trends in the consumption of fibres are sometimes used as a proxy for trends in the consumption of textile and clothing products. 10 Apart from inherent weaknesses in the methodology used to preparing these data (analyzed by the GATT secretariat in COM.TEX/W/83), there are a number of shortcomings which severalylimit their use in economic analysis. They cannot serve as an adequate indication of textile and clothing demand because they measure only the fibre content of the consumption of textiles and clothing. No account is taken of other inpucs (including labour and capital) used in all the processing stages up to and including the one that produces the product that is delivered to the final consumer; and these "other inputs" are much more important in value terms than the fibre content of the final products.
2.46. Moreover, these data are expressed in terms of weight. By failing to take into account the relative prices/values of the different products, this approach implicitly treats a kilo of one product as if it were of equal value to a kilo of any other product (this would be like treating kilos of cabbage, strawberries and long stem roses as equivalents when analyzing developments in agriculture). Among other things, the use of the "weight" approach means that changes in the composition of final consumption of textiles and clothing in favour of higher quality, more expensive items (or vice versa) are ignored. 2.47. Another consideration is that the amount of fibre per unit of output of textile and clothing products has been declining as a result of technological innovations; because of this, trends in fibre consumption would tend to underestimate trends in the final consumption of textile and clothing products. In addition to this purely technical - 31 - consideration, there is the more general point that an examination of the data fails to reveal a stable relationship between fibre consumption and expenditure on clothing or household textiles. 2.48. As a result of these manifold complexities, there is little choice but to base the economic analysis of demand for the output of the textile and clothing industries on the available data for consumer expenditure on clothing and certain household textile products. Clothing
2.49. n the developed countries, consumer expenditure on clothing has grown by an estimated 2½ per cent annually in real terms since 1973, compared to 4½, per cent in the preceding ten years (see Table 2.9 and Appendix Table A.2). Generally speaking, these trends in consumer expenditure on clothing in the developed countries as a group have been very close to the trends in consumer expenditure on al] products over the past twenty years.
2.50. According to the data in Table 2.9. however, the experience of the three major developed areas has varied considerably since 1973. In Japan an' the EC (except the United Kingdom), consumer expenditure on clothing increased much less rapidly than total consumer expenditure over this period (in 1981/82 several countries reported negative growth rates for clothing expenditure). Clothing expenditure in the United States and the United Kingdom, by contrast, s increased at a much faster rate than total expenditure since l973.
2.51. Date on shares of clothing in total consumer expenditure are reported in Appendix Table A.4. Measured in current prices, the share of clothing was smaller in all developed countries in 1981/82 than in 1963 or 1973. In constant prices this is also true, except for the United States, Canada. the United Kingdom and Sweden, where clothing's share currently is higher than it was ten or twenty years ago. 2.52. It is also interesting to note that the data in Appendix Table A.4 for anv given year reveal a very wide range among the developed countries in the share of clothing in consumer expenditure. In 1981, for example. clothing's share measured at currenc prices in Austria, the Federal Republic of Germany and Switzerland was 11.3. 8.9 and 4.8 per cent, respectively (in constant prices, the corresponding figures are 12.9, 8.8 and 5.2, respectively). These three countries provide an interesting comparison because they are, in many respects (such as per capital income, cultural traditions and climate), -elatively homogeneous. 2.53. The available data for developing countries, which is much more limited, reveals a similarly wide range of growth rates in clothing demand. Among the eight developing countries listed in Appendix Table A.2, India is the only one in which expenditure on clothing grew much more rapidly than total expenditu-e during the years 1973-80. In the Republic of Korea, and to a lesser extent in Mexico, the available data indicate that the increase in clothing expenditure was proportionately well below that of total consumer expenditure. TABLE 2.9. - TOTAL. CONSUMER EXPENDITURE AND EXPENDITURE ON CLOTHING a IN DEVELOPED COUNTRIES, 1963-1982 (Annual average percentage rate of change in volume)
1963-1973 1973-1982 1974 1975 1976 1977 1978 1979 1980 1981 1982
Developed countries Total 5 2 ' 2k 4½ 3-, 4 3½ 1 1! 11 Clothing 4- 2' -4 2 34 2' 5 3 1½ 2½ 4 United States Total 4½ 2½ .!> 2 5½ 5 4k 2½ ! 2< 14 Clothing 4 4 -1 3i 5 5V 9 4 1½ 7 Japan Total 8½ 3 -! 4 34 4 44 6 1½ 4 Clothing 7 -6½ 5½ 6!4 -2 2½ 2 -1 -4½ EC (9) Total 4½ 2 l 1!½ 32 4 4 1'½ § Clothing 4 1 O 2 1 2'. 2 2 -i' -1
aIncluding footwear. - 33 -
Household textiles and industrial uses
2.54. Information available on the demand for household textiles (excluding carpets) is confined to a number of developed countries (see Appendix Table A.5). These data reveal that in the last ten years the share of household textiles in current expenditure has generally declined (between 1973 and 1981, consumer expenditure on household textiles grew more slowly than expenditure on clothing). In the countries covered in Appendix Table A.5, shares ranged from 0.6 to 1.4 per cent in 1981, compared to a range of 5 to 11.3 per cent for clothing. Traditionally, an important industrial use for textiles has been in rubber tyres, but the evidence suggests that this particular source of demand for textiles has been declining in recent years as a result of technological developments. C. TECHNOLOGICAL CHANGE 2.55. Three types of technological change have had an important impact on the textiles and clothing industries in the postwar period. First of all, there has been rapid progress in transportation (for example, increased availability of air freight facilities and containerization) and telecommunications (especially between developed countries and many developing countries) that have made major contributions to reducing various costs and non-economic barriers associated with "distance" which had previously discouraged the "internationalization" of clothing production. The development of mass retailing, in turn, facilitated the extent to which these technological changes affected trade. As a result of these developments - which of course affected many other industries besides clothing - marketing strategies for production and distribution of clothing have been increasingly made on a global basis.13 2.56. Second, there are the previously mentioned developments based on remarkable advances in, synthetic-fibre technology, which plaved a major role in revitalizing the textile industry in the developed countries in the 1960s and early 1970s. Meanwhile. some developing countries began producing synthetic fibres. and have expanded their production capacities dramatically over the last decade. Many synthetic fibre manufacturers in the major developed countries have responded to this and other developments by diversifying and up-grading synthetic fibre materials, as well as developing energy-saving technology. These innovations, in turn. have helped the developed countries' textile producers to maintain their compétitive positions in a variety of textile products. 2. 57. Third. there are the "process" improvements, including the introduction of rotor spinning and shuttleless looms, improvements in conventional production methods and the introduction of automation into various stages of production (with a particularly large impact on knitting). Since the late 1970s there has been lncreasing use of comeputerized production management and application of electronics to new textile a:sd clothing machinery in search of higher productivity and improved versatility. It is difficult to evaluate the likely future effects of technological changes "on the horizon" on the textile and - 34 - clothing industries, beyond saying that recent technological developments are likely to create more opportunities for trade specialization in narrowly defined processes of the textiles and clothing industries than in the past. 2.58. In considering the pace at which these opportunities will actually alter the future stock of plant and equipment, it is important to take into account the cost of substituting capital for labour, particularly in a situation in which (i) many of the "easy" substitutions have already been made (at least in the leading firms), and (ii) real interest rates are expected to remain well above the unusually low levels that characterized the second half of the 1970s. (See Appendix III for a more detailed discussion of postwar technological developments affecting the two industries.) Technological change and employment 2.59. In recent years a number of researchers have attempted to identify the relative importance of different sources of job displacement. The most common approach is the so-called "accounting procedure", which attempts to decompose actual changes in employment between two points of time into those due to changes in domestic demand, exports, imports and productivity. However. this procedure involves several methodological problems, among which the most serious, is the assumption that the variables are independent of one another.14 Thus the accounting procedure neglects the possibility that increased imports in the past. or the threat of future import competition. stimulates productivity-increasing technological innovation. This would lead to an underestimate of the relative importance of import competition as a source of job displacement. For countries or integrated trading areas that are large enough to provide a relatively high degree of competition among domestic firms. the degree of underestestimation presumably is relatively small since the pressure of domestic competition would be sufficient to ensure the timely introduction of new technologies. 2.60. The general conclusion from recent empirical studies is that the labour-displacement effects (in the industry in question) of productivity growth are far more important than those of imports, though the magnitude of job displacement caused by different sources does vary by industry and even by sub-industry within the same industry. As far as the textile sector is concerned. this conclusion appears to hold at a fairly disaggregated level. However, these empirical results must be regarded as indicating rough orders of magnitude at best, and cannot be divorced from the methodological shortcomings noted above. 2.61. To the extent thatthe data presented in Tables 2.1 and 2.2 are reliable and comparable. the productivity increases implicit in a comparison of changes in production and employment in textiles and clothing are higher in the developed countries and in the Eastern trading area than in the developing countries. This holds for the 1950s, the 1960s. and the 1970s alike. Moreover, for all groups of countries the advance of labour productivity has been generally more rapid in textile production than in clothing production. These observations are likely to reflect the fact that (a) in the developed - 35 - countries wage pressure, in particular with respect to lower skill groups, has been relatively strong; (b) that, therefore, in these countries there have been relatively strong incentives to substitute capital for labour; and (c) that textile technology has been more susceptible to rationalization than clothing technology. 2.62. Advances in production and management technologies have had, and will continue to have, a great influence not only on the level of employment, but on its occupational distribution in the textile sector. For example, fewer operators in spinning and weaving (mainly female workers) are required per unit of output, as machine speed and capacity, and the degree of automation increase. The need for material handling by manual workers is being curtailed substantially, as rationalization and mechanization in the production processes proceed. 2.63. On the other hand, increased use of modern textile machines and computer technologies will increase the share of mechanical and technical. personnel in total employment in the textile sector. According to two studies done by the United States Department of Labor in 1974 and 1977, changes in the occupational structure due to the introduction of new technology in the 1970s appear to have been more striking in the textile industry than in the clothing industry.16 However, developments in clothing technology on the horizon, especially in the sewing stage, may have more profound effects on the employment structure of the clothing industry than those introduced in the past. This process will be stimulated by the longer-term problem in the developed countries of securing skilled and experienced sewers and stitchers, as well as by economy-wide increases in real wages. 2.64. Some of these key points regarding employment - as well as others, such as the age/sex/nationality characteristics of the textile and clothing labour forces - are taken up again in Chapters 4 and 5.
D. TRENDS IN WORLD TRADE
2.65. This is obviously a key part of our statistical profile of the textile and clothing industries, and there is a large amount of data to present. We begin with an overview intended to put trade in these products in perspective. This is followed by a series of more detailed examinations of trends in world trade in textiles and clothing viewed from several different angles. Overview of trade in textiles and clothing 2.66. The value of world exports of textiles and clothing in 1982 is estimated to have been $52 billion and $41 billion, respectively. In that same year, exports of natural fibres and man-made fibres totalled $12 billion and $3.8 billion, respectively, while exports of textile machinery were about $9.6 billion. Exports of all manufactured goods totalled $1,050 billion in 1982, out of a total of $1,845 billion for all merchandise exports. In other words, trade in textiles and clothing alone accounted for 9 per cent of world trade in manufactures, and for 5 per cent of world merchandise trade. - 36 -
2.67. Trends in world exports of textiles and clothing from 1970 to 1982, expressed in constant dollars to eliminate the effect of inflation, are given in Chart 2.3. It is apparent that during the period 1970-78, exports of clothing expanded at a noticeably faster rate than did textile exports. Clothing exports were also less affected by the 1975 and 1982 recessions than were textile exports. Over a longer period, data for textile and clothing exports combined (still in constant dollars, but not shown in the chart) indicate that the average annual increase declined from around 11.5 per cent during 1963-73, to about 4.8 per cent during 1973-82.
CHART 2.3. - TRENDS IN WORLD EXPORTS OF TEXTILES, CLOTHING AND MANUFACTURES 1970- 1982 World Exp.world of Billion 1975 Manuf. dollars 1975 1975= 100 39
35 Manufactures (right scale) 150
30
. / Clothing 125
25 "
1 ", 20 100
15
80 ' 10 /.R, 70
M . 1970 1973 1976 1979 1982
2.68. Table 2.10 is a simple origin-destination matrix for world trade in textiles in 1980. Among the more interesting features of the figures are the following: one-quarter of the developed countries' exports of textiles were sold to the developing countries; the developing countries sold almost as much textiles to one another as they did to the developed countries; and the Eastern trading area countries sold three and a half times more textiles to the developed and developing countries (combined) than they did to one another (in other words, mutual trade in textiles is less important in the Eastern trading area than in the developed or developing country areas). - 37 -
TABLE 2.10.- TEXTILE EXPORTS BY MATN AREAS, 1980 (Billion dollars)
Destination Developed Developing Eastern countries countries trading area Origin
Developed countries 25.1 8.8 2.2
Developing countries 7.7 6.2 1.2
Eastern trading area 1.6 1.9 1.0
aIf intra-EC trade is excluded, mutual trade among developed countries is $10.9 billion rather than $25.1 billion.
2.69. Table 2.11 presents the counterpart matrix for world trade in clothing in 1980. It is evident from the statistics that the developed countries' trade in clothing was primarily among themselves, whereas there was very little mutual trade in clothing among the developing countries. In terms of the relative importance of mutual trade in clothing, the Eastern trading area occupies an intermediate position between the developed and developing country groups.
TABLE 2.11.- CLOTHING EXPORTS BY MAIN AREAS, 1980 (Billion dollars)
Eastern destination Developed Developing countries countries trading area Origin
Developed countries 15.7 2.1 0.4
Developing countries 13.8 2.8 0.5
Eastern trading area 2.0 0.7 2.3
aIf intra-EC trade is excluded, mutual trade among developed countries is $6.3 billion rather than $15.7 billion. - 38
2.70. Tables 2.12 and 2.13 provide a perspective on the relative importance of trade in textiles and clothing. Taking textiles first, we see that the share of textiles in manufactured exports has been declining throughout the postwar period, both for the world as a whole and for each major country grouping (with the partial exception of the Eastern trading area). In 1982, textiles' share of the developing countries' manufactured exports was nearly triple the figure for the developed countries (10.6 versus 3.8 per cent). Corresponding figures in Appendix Table A.6 for selected countries reveal that the shares in 1982 ranged from 2 per cent for the United States to 6.6 per cent for Italy among the industrial countries, and from 6.8 per cent for Brazil to 68.2 per cent for Pakistan among the developing countries. 2.71. Trends in textiles' share of total merchandise exports (excluding petroleum) mirror those for the share in manufactured exports, with the important exception of the developing countries (Table 2.12). Whereas textiles have represented a sharply declining share of the developing countries' manufactured exports, the share of textiles in their total merchandise exports doubled between 1955 and 1973, from 3.7 to 7.4 per cent (this is explained by the fact that exports of manufactured goods other than textiles were expanding very rapidly). Figures for individual developing countries in Appendix Table A.7 indicate that this particular pattern is the result of trends in Southern Europe, the Republic of Korea and Taiwan. 2.72. The figures in Table 2.13 for the share of clothing in trade portray a rather different picture from that of textiles. In contrast to textiles, the share of clothing in world exports of manufactures has been increasing throughout the postwar period, reaching a point in 1982 where it was not far behind textiles' share (3.9 versus 4.9 per cent). The most dramatic increase has occurred in the developing countries, where the share of clothing in manufactured exports was 13.6 per cent in 1982, more than seven times the corresponding figure for developed countries. Among the developed countries listed in Appendix Table A.8, clothing's share was, by a very large margin, highest in Italy (at 7.2 per cent, clothing's share even exceeded that of textiles). Most of the developing countries in that table experienced a modest decline in clothing's share between 1973 and 1982, with the exception of India and Pakistan where the share doubled and tripled, respectively, in the most recent period. 2.73. The share of clothing in total merchandise exports followed a trend similar to the share in manufactured exports, again with the exception of the developing countries (Table 2.13). Expressed as a proportion of total exports, clothing expanded more rapidly, and did not drop off between 1973 and 1982, as was the case with clothing's share in manufactured exports. In 1982, clothing was three times more important in the total exports of developing countries than in the total exports of developed countries. The only major developed country with a share of clothing in total exports in excess of 2 per cent was Italy with 6.4 per cent (Appendix Table A.9). - 39 -
TABLE 2.12. - SHARE OF TEXTILES IN EXPORTS OF MANUFACTURES AND IN TOTAL MERCHANDISE EXPORTS BY MAIN AREASa 1955-1982 (Percentages)
1955 1963 1973 1982
Share of textiles in exports of manufactures: World 11.3 8.7 6.7 4.9 Developed countries 10.3 7.8 5.8 3.8 Developing countries 34.3 30.1 18.8 10.6 Eastern trading area 6.1 5.5 5.1 5.4 Share of textiles in total merchandise exports: World 5.6 5.0 4.6 3.6 Developed countries 6.7 5.2 4.2 2.9 Developing countries 3.7 5.3 7.4 6.1 Eastern trading area 3.2 3.6 3.4 3.8
aData in table exclude trade in petroleum.
TABLE 2.13. - SHARE OF CLOTHING IN EXPORTS OF MANUFACTURES AND IN TOTAL MERCHANDISE EXPORTS BY MAIN AREAS a 1955-1982 (Percentages)
1955 1963 1973 1982
Share of clothing in exports of manufactures: World 1.9 2.7 3.6 3.9 Developed countries 1.6 2.2 2.3 1.9 Developing countries 4.0 7.8 14.2 13.6 Eastern trading area 3.4 3.7 5.1 5.8 Share of clothing in total merchandise exports: World 1.0 1.6 2.4 2.8 Developed countries 1.0 1.5 1.6 1.5 Developing countries 0.4 1.4 5.6 7.9 Eastern trading area 1.8 2.4 3.4 4.1
aData in table exclude trade in petroleum. - 40 -
2.74. Figures on the relative importance of each of the major country groupings in world trade in textiles and clothing are given in Tables 2.14 and 2.15. For textiles, the figures show a steady decline over the postwar period of the developed countries' share of world exports, and a steady increase in the shares of the developing countries and the Eastern trading area. A comparison of the shares of exports and imports of textiles shows that whereas in 1955 the developing countries supplied 15 per cent of world exports of textiles, while buying 43 per cent of world imports, by 1982 the two percentages were nearly equal at 30 and 34 per cent, respectively. TABLE 2.14. - AREA DISTRIBUTION OF WORLD TRADE IN TEXTILES, 1955-1982 (Percentage shares)
1955 1963 1973 1982
EXPORTS (billion dollars) 4.7 7.0 23.4 51.5 World 100 100 100 100 Developed area 79 74 70 60 (EC intra-trade) (14) (23) (27) (22) Developing area 15 18 22 30 (Southern Europe) .. (2) (4) (5) Eastern trading area 6 8 8 10 IMPORTS World 100 100 100 100 Developed area 52 63 68 57 Developing area 43 30 25 34 (Southern Europe) ... (2) (3) (3) Eastern trading area 5 7 7 9
2.75. It comes as no surprise that in clothing, the increase in the developing countries' share of world exports has increased even more substantially, from 10 per cent in 1955 to 48 per cent in 1982, with the most rapid gains occurring during the 1963-1973 period (Table 2.15). 2.76. The shares of world imports of textiles and clothing purchased by the leading developed areas are given in Appendix Table A.10. The EC is by far the largest importer of textiles, even if intra-community trade is excluded. For clothing, the picture is different. Over the past 20 years, the shares of world clothing imports purchased by the United States, Canada and EFTA (less Portugal) have remained relatively constant. The shares of Japan and the EC, in contrast, increased sharply between 1963 and 1973, then tended to level off. In 1982 the United States' share and that of the EC, excluding intra-trade, were nearly equal (22 and 24 per cent, respectively). - 41
TABLE 2.15. - AREA DISTRIBUTION OF WORLD TRADE IN CLOTHING, 1955-1982 (Percentage shares)
1955 1963 1973 1982
EXPORTS (billion dollars) 0.8 2.2 12.6 41.0 World 100 100 100 100 Developed area 71 67 51 38 (EC intra-trade) (16) (23) (26) (19) Developing area 10 15 35 48 (Southern Europe) ... (2) (5) (6) Eastern trading area 19 18 14 14 IMPORTS World 100 100 100 100 Developed area 56 66 78 75 Developing area 26 17 10 17 (Southern Europe) ... (½) (1) (½) Eastern trading area 18 17 12 8
Leading exporters and importers 2.77. The fifteen leading textile exporting and importing countries and areas are listed in Table 2.16. One of the more interesting facts from the table is that the number of developing country exporters in the top fifteen was the same in 1963, 1973 and 1982, namely four (India and Pakistan in all three years; Taiwan in place of Portugal in 1973, and the Republic of Korea in place of Hong Kong in 1982). Despite the .significant gains of the Republic of Korea and China in the rankings between 1973 and 1982, the six leading textile exporters in 1982 were developed countries. It is interesting to note that over the twenty-year period, the share of the top fifteen exporters in total world exports of textiles declined from 84 to 73 per cent. 2.78. In the case of clothing exports (Table 2.17), the number of developed countries in the top fifteen decreased from eleven in 1963 to eight in 1982. Nonetheless, two of the five leading clothing exporters in 1982 were developed countries (Italy and the Federal Republic of Germany), and six developed countries were among the ten leading exporters. The most rapid decline in ranking was Japans, from fourth place in 1963, to tenth in 1973, to off the list in 1982. China, in contrast, which was not among the top fifteen ,clothing exporters in 1963, went from fifteenth place in 1973 to sixth place in 1982. -42 -
TABLE2.16.- MAIN EXPORTERS AND IMPORTERS OF TEXTILES, 1963-1982 (Billion dollars)
1963 1973 1982
EXPORTERS Japan 0.90 Germany, Fed. Rep. 3.04 Germany, Fed. Rep. 5.48 United Kingdom 0.71 Japan 2.45 Japan 5.09 France 0.63 France 1.69 Italy 4.01 India 0.54 Belgium-Luxembourg 1.69 United States 2.77 Germany, Fed. Rep. 0.53 Italy 1.53 Belgium-Luxembourg 2.72 Italy 0.53 United Ktngdom 1.45 France b 2.68 Belgium-Luxembourg 0.51 Netherlands 1.29 Korea; Rep. of 2.45 United States 0.49 Untied States 1.23 China 2.20 Netherlands 0.36 India 0.69 United Kingdom 2.02 Switzerland 0.21 Switzerland 0.64 Netherlands 1.78 Hong Kong 0.1l China 0.f60 Taiwan 1.75 Austria 0. Il Taivan 0.56 Switzerland 1.37 Chinaa 0.10 Hong Kong 0.46 IndiaC 1.14 Portugal 0.09 Austria 0.45 AustriA 1.02 Pakistan 0.09 Pakistan 0.44 Pakistan 0.93 Above countries as a percentage of 4 Z 78Z 73% world exports
IMPORTERS Germany, Fed. Rep. 0.77 Germany, Fed. Rep. 2.75 Germany, Fed. Rep. 4.81 United States 0.68 United States 1.58 France 3.43 United Kingdom 0.41 France 1.40 United Kingdom 3.34 Netherlands 0.37 United Kingdom 1.26 Hong Kong 2.97 USSR 0.30 Japan 1.13 United States 2.85 Canada 0.27 Australia 0.24 Netherlands 1.10 Italy 2.12 Belgium-Luxembourg 0.23 Belgium-Luxembourg 1.01 USSR 2.00 Sweden 0.22 Hong Kong 0.94 Belgium-Luxembourg 1.75 Hong Kongd 0.20 Italy 0.91 Netherlands 1.61 South Africa 0.20 Canada 0.78 Japan 1.61 France 0.19 USSR 0.63 Canada 1.13 Italy 0.15 Australia 0.62 Australia 1 .1 1 Switzerland 0.15 Sweden 0.51 Austria 0.94 Austria 0.14 Switzerland 0.51 Singapore 0.88 Austria 0.48 Switzerland 0.86 Above countries as a percentage of 642 67Z 61% world importa
aDerived from imported of developed countries, Hong Kong and Singapore. b1981. c1980. dIncluden imports for re-export. - 43 -
TABLE 2. 17 - MAIN EXPORTERS AND IMPORTERS OF CLOTHING, 1963-1982 (Billion dollars)
1963 1973 1982
EXPORTERS Italy 0.34 Hong Kong 1.39 Hong Kong 4.73 Hong Kong 0.24 Italy 1.30 Italy b 4.41 France 0.20 France 1.04 Korea, Rep. of 3.86 Japan 0.20 Germany, Fed. Rep. 0.91 Taiwan 2.90 Germany, Fed. Rep. 0.15 Korea, Rep. of 0.75 Germany, Fed. Rep. 2.52 United Kingdom 0.11 Taiwan 0.71 Chinaa 2.20 Belgium-Luxembourg 0.10 Belgium-Luxembourg 0.57 France 1.82 United States 0.09 United Kingdom 0.44 United Kingdom 1.47 Netherlands 0.07 Netherlands 0.41 United States 0.99 Switzerland 0.04 Japan 0.37 Belgium-Luxembourg 0.75 Austria 0.04 United States 0.29 Romania 0.71 Yugoslavia 0.02 Poland 0.28 Netherlands 0.69 Portugal 0.02 Romania 0.25 Finland 0.65 Canada 0.01 Finland 0.21 Portugal 0.65 Taiwan 0.01 Chinaa 0.20 Yugoslavia 0.61 Above countries as a percentage of 74Z 72% 71% world exports
IMPORTERS USSR 0.52 Germany, Fed. Rep. 2.54 United States 8.79 United States 0.39 United States 2.17 Germany, Fed. Rep. 6.71 Germany, Fed. Rep. 0.26 USSR 1.06 USSR 2.68 United Kingdom 0.18 Netherlands 0.86 United Kingdoo 2.62 Netherlands 0.15 United Kingdom 0.82 France 2.60 Switzerland 0.09 France 0.59 Netherlands 2.13 Sweden 0.09 Japan 0.57 Japan 1.83 France 0.07 Belgium-Luxembourg 0.56 Belgiu_-Luxembourg 1.44 Belgium-Luxembourg 0.07 Switzerland 0.50 Switzerland 1.39 Canada 0.06 Sweden 0.40 Sveden 1.08 Norvay 0.05 Canada 0.33 Hong KongC 1.06 Singapore 0.03 Norway 0.21 Canada 0.84 Italy 0.03 Austria 0.20 Austria 0.78 South Africa 0.02 Italy 0.19 Italy 0.68 Hong Kongc 0.02 Hong Kong 0.12 Norway 0.66 Above countries as a percentage of 92% 88S 86Z world imports
aDerived from imports of developed countries, Hong Kong and Singapore. b1981. cIncludes import for re-export. - 44 -
Origins of imports into the developed countries 2.79. A geographic breakdown of the sources of the developed countries' imports of textiles and clothing is provided in Table 2.18. Between 1963 and 1982, the share of textile imports originating in the developed countries themselves declined from 80 to 71 per cent, with Japan and the EC sharing the decline. The nine point gain by other suppliers was divided about evenly between the developing countries and the Eastern trading area mainly China). Southern Europe and Hong Kong/the Republic of Korea/Taiwan increased their shares of the developed countries' textile imports from 3 and 2 per cent, respectively, in 1963 to 6 and 7 per cent, respectively, in 1982; over the same period, the combined share of India and Pakistan. declined from 9 to 4 per cent. 2.80. The gains of the developing countries as suppliers of clothing imports to the developed countries were much more impressive, with their share increasing from 21 per cent in 1963 to 54 per cent in 1982. It was not, however, a smooth increase; there was a sharp increase between 1963 and 1976, followed by four years of unchanged shares, and then another moderate increase in 1981. While all of the developed areas lost shares, the declines were much sharper outside North America. Shares of individual suppliers in the markets of United States and European Community 2.81. Between 1963 and 1973, the number of countries selling textile products to the United States increased from 85 to 114 (Table 2.19). All newcomers appear in the category of suppliers with shares of less than one per cent of the United States' import market, and six former members of that group moved up to the next category. From 1973 onwards, there has been virtually no change either in the total number of supplying countries, or in the number of countries with shares in the "1.0-4.9 per cent" and "5 per cent and above" categories. Of the six countries supplying 5 per cent or more of United States textile imports in 1982, three have been in that category since 1963 (India, Italy and Japan), whereas the other three (China, the Republic of Korea and Taiwan) had less than a 5 per cent share as recently as 1978. 2.82. As far as the number of countries is concerned, Table 2.20 reveals a similar pattern for United States clothing imports. The increase in the number of supplying countries between 1963 and 1973 was somewhat larger than in the case of textiles, as there was more movement of individual countries among the three market categories. From 1973 to 1982, there was virtually no change in the total number of supplying countries, nor in the distribution of that total among the three categories. There were, however, important changes in the group of countries with shares of 5 per cent or more of United States clothing TABLE 2.18.- ORIGIN OF IMPORTS OF TEXTILES AND CLOTHING INTO DEVELOPED COUNTRIES, 1963-1982
1963 1968 1973 1976 1978 1979 1980 1981 1982
TEXTILES TOTAL (billion dollars) 4.3 6.2 15.4 19.3 26.0 32.3 34.1 30.0 28.4 (percentage shares) Developed area 80 80 75 74 74 73 72 71 71 Canada 1 1 1 1 1 1 1 1 1 United States 6 6 6 7 6 7 7 -- 7 6 Japan 8 8 4 4 4 3 3 4 s EC (9) 58 57 56 54 55 54 53 51 51 (EC intra-trade) (38) (40) (41) (42) (43) (42) (41) (39) (39) Other Western Europe 7 8 8 8 8 7 8 8 8 Developing area 18 17 21 22 22 22 23 23 23 Southern Europe 3 3 4 5 5 5 5 5 6 Far Eastern supplier 2 3 6 6 6 6 6 7 7 India and Pakistan 9 7 4 4 4 4 4 4 4 Other Asia 2 4 4 4 4 4 4 3 Latin America I 1 2 2 2 2 2 2 2 Africa 1 l 1 1 1 1 1 1 1 Eastern trading area 2 3 4 4 4 5 5 6 6 China I 1 2 2 2 3 3 4 4
CLOTHING TOTAL (billion dollars) 1.5 3.1 10.4 17.6 25.1 30.7 34.6 33.3 33.1 (percentage shares) Developed area 77 69 54 46 46 46 45 40 39 Canada - 1 l l I I I - - United States 3 2 l 2 1 2 2 2 1 Japan 9 8 3 2 2 1 1 1 1 EC (9) 57 si 43 36 37 37 36 32 32 (EC lntra-trade) (33) (34) (32) (27) (27) (21) (27) (23) (22) Other Western Europe 8 7 6 5 5 5 5 5 4 Developing area 21 28 41 49 49 48 49 54 54 Southern Europe 2 4 8 8 8 8 8 7 8 Far Eastern suppliers 15 20 26 31 30 28 28 32 33 India and Pakistan - - 1 2 2 2 2 3 2 Ocher Asla 3 3 4 4 5 5 6 7 7 Latin America I 1 2 3 3 3 3 3 2 Africa - - - 1 1 2 2 2 2 Eastern trading area 2 3 5 5 5 6 6 7 7 China - 1 1 1 1 2 3 4 4
Hong Kong, the Republic of Korea and Taiwan. TABLE 2.19. - SHARE OF INDIVIDUAL SUPPLIERSIN THE IMPORTMARKET FOR TEXTILES IN THE UNITED STATES1963-1982 (Percentage)
1963 1973 1978 1982
VolumeIndex of total world trade in textiles: 1973.100 43 100 114 129
Total number of affairs 85 114 116 114
Suppliers each with 32 or more of total imports India 2S.4 Japan 19.1 Japan 21.3 Japan 19.4 Japan 23.7 India 11.9 Italy 9.1 China 8.6 United Kingdom 8.3 Germany. Fed. Rep. 7.8 India 8.3 Italy 8.4 Italy 7.1 United Kingdom 6.6 United Kingdom 5.7 Korea, Rep. of 6.5 Belgium-Luxemburg 5.0 Italy 6.3 HongKong 5.1 Taiwan 5.8 HongKong 5.7 India 5.3
5 suppllers 69.5 6 .suppliers 57.4 5 suppliers 49.5 6 suppliers 54.0 Suplliers each with 1-4.9% of total lmports Mexico 3.8 Begium-Luxembourg 4.9 Germany, Fed. Rep. 3.8 Hong Kong 4.4 -46- HongKong- 3.2 Bangladesh 4.3 Taiwan 3.7 UnitedKingdom 4.1 France 3. France 4.2 France 3.4 Canada 3.4 Portugal 3.0 Mexico 3.7 Bangladesh 3.4 France 3.3 Germany, Fed. Rep. 2.6 Canada 2.6 Mexico 3.2 Germany, Fed. Rep. 3.1 Pakistan 2.4 Netherlands 2.0 Brazil 3.0 Brazil 3.0 Netherlands 2.0 Netherlands 1.9 China 2.9 Pakistan 2.9 Switzerland 1.4 Brazil 1.7 Korea, Rep. of 2.7 B861adesr 2.3 Canada 1.0 Taiwan 1.6 Belgium-Luxembourg 2.3 Mexico 2.0 Korea, Rep. of 1.3 Canada 2.3 Belgium-Lluxembourg 1.8 Portugal 1.3 Pakistan 2.2 Peru 1.5 Iran 1.2 Switzerland 1.6 Thailand 1.4 Pakistan I.2 Iran I . S Switzerland 1.4 Irelamd 1.1 Netherlands 1.3 Netherlands 1.0 Colombia 1.1 Peru 1.1 9 suppliers 22.5 14 suppliers 33.0 16 suppliers 39.5 14 suppliers 35.6 Suppliers each with lessthan 1% of total imports 71 auppllers 8.0 94 suppliers 9.6 95 supliers 11.0 94 suppliers 10.4 - 47 -
imports; first the United Kingdom, then italy, and finally Japan saw their shares drop below 5 per cent, with the result that in 1982 there were no developed countries in the top category of clothing suppliers to the United States. 2.83. The corresponding figures for the European Community are more difficult to present because the ranking of suppliers obviously depends on whether or not intra-EC trade is included. We have done the calculations both ways. Tables 2.21 and 2.22 provide the ranking with intra-EC trade included, while Appendix Tables A.11 and A.12 give the rankings when intra-EC traded is excluded (the latter information can be read from Tables 2.21 and 2.22 by simply striking off the EC member countries; categorization by market shares. however, can be read directly only from the corresponding Appendix tables). 2.84. The pattern for textiles revealed in Table 2.21 and in Appendix Table A.11 is very similar to the pattern for the United States, namely a big jump between 1963 and 1973 in the number of countries selling textile products to the EC, after which the total number of suppliers. and the number of suppliers in each of the three market-share categories, remained virtually unchanged. There are, however, two important differences between the United States and EC tables. First, the EC buys textiles fr m a much larger number of countries than does the United States (137 versus 85 in 1963; 164 versus 1.14 in 1982); on .he other hand, all of the additional countries supplying textile products to the EC have shares of less than one per cent (that is, the number of countries with shares in excess of one per cent is virtually the same for the United States and the EC). 2.85. The other noticeable difference concerns the composition of the group of countries with 5 per cent or more of the textile import market. As was noted above, three of the six countries in that category for the United States in 1982 were newcomers to the category (China, the Republic of Korea and Taiwan). In the case of the EC, in contrast, Table 2.21 reveals a remarkable stability over the period 1963-82. In each of the years shown, Belgium-Luxembourg, France, the Federal Republic of Germany, Italy and the Netherlands are in the "5 per cent and above" category, while the United Kingdom and Switzerland are either in or very near that category over the 20 year period. 2.86. Another interesting feature concerns the ranking of textile suppliers of the EC when intra-EC trade is excluded. In 1982, eight countries supplied five per cent or more of the EC's imports of textiles from non-EC countries (Table A.11). Four of the eight are industrial countries, which means they either encounter no trade restrictions entering the EC (Switzerland and Austria, because of their EFTA membership) or only tariffs (the United States and Japan). Of the remaining four suppliers, three are part of the EC's special agreement with Mediterranean countries (see Chapter 3 for details). China was the TABLE2.20.- SHARE OFINDIVIDUAL SUPPLERSINTHEEXPORT MARKET FOR CLOTHING INTHEUNITEDSTATES, 1963-1982 (Percentages)
1963 1973 1978 1982
Volume indexof total world trade in clothing: 1973-100 29 100 172 195
Total number of suppliers 77 117 116 117
Suppliers each which 5% or more of total imports Japan 26.5 20.1 24.1 Hog Kong 24.1 Italy 24.3 Taiwan 16.9 Taiwan 17.8 Taiwan 18.9 16.0 Japan 11.5 Korea, Rep. of 17.3 Korea, Rep. of 17.3 6.9 Korea, Rep. of 11.3 Japan 5.1 China 7.8 United Kingdom 5.9 Italy 5.5 5 suppliers 79.6 5 suppliers 65.3 4 supplliers 64.3 4 suppliers 68.1 Suppliers each with 1-4.9% of total imports France 3.9 Mexico 4.6 Philippines 3.6 Philippines 3.3 Germany, Fed. Rep. 2.? Singapore 3.8 Mexico 3.4 Japan 3.1 Taiwan 1.7 Canada 2.9 Italy 3.2 Italy 2.5 Switzerland 1.6 Phillipines 2.6 India 2.8 Singapore 2.1 Jamaica 1.4 France 2.5 France 2.3 India 2.0 Belgium 1.2 United Kingdom 2.3 Singapore 2.1 Mexico 2.0 Austria 1.2 1.5 United Kingdom 1.4 Domenican Republic 1.4 GO Korea, Rep. of 1.0 lsrael 1.5 China 1.1 Macao 1.3 Portugal 1.0 Thailand 1.2 Uruguay 1.0 Sri Lanka 1.3 Germany, Fed. Rep. 1.0 ThaiIand 1.0 Thailand 1.2 Bazil 1.0 Romania 1.0 France 1.1 Macao 1.0 Canada 1.0 9 suppliers 15.7 Il suppliers 24.9 12 supplliers 23.9 12 supplliers 22.3 Suppliers each with less than1% of total import 63 suppliers 4.7 101 supplliers 9.8 100 suppliers 11.8 101 suppliers 9.6 TABLE 2.21. - SHARE OF INDIVIDUAL SUPPLIERSIN THE IMPORTMARKETFOR TEXTILES IN THEEUROPEAN COMMUNITY 1963-1982 (Percentages)
1963 1973 i978 1982
Volume Index of total world trade in textiles: 1973-100 43 100 114 129
Total number of suppliers 137 168 164 164
Suppliers each with 5% or more of total imports Belgium-Luxembourg 16.9 Germany, Fed. Rep. 17.2 Germany, Fed. Rep. 15.3 Germany, Fed. Rep. 15.2 France 13.0 Belgium-Luxembourg 13.6 Belgium-Luxembourg 12.3 Italy 12.6 Italy 11.1 France 11.4 Italy 12.3 Belglium-Luxembourg 11.4 Germany, Fed. Rep. 9.8 Netherlands 10.7 France 10.0 France 8.7 NetherIands 9.7 Italy 10.1 Netherlands 8.0 Netherlands 6.8 United Kingdom 7.9 United Kingdom 5.4 Switzerland 5.0
7 suppliers 73.4 5 supplier 63.0 6 suppliers 63.3 5 suppliers 54.7 Suppliers each with 1-4.9% of total Imports China 4.4 United Kingdom 4.7 Switzerland 3.8 Switzerland 4.4 United States 3.8 United States 3.5 United States 3.8 United Kingdom 4.3 Austria 2.3 Switzerland 3.2 Austria 2.5 United States 3.4 HongKong 2.0 Iran 2.7 Iran 2.2 Austria 2.6 Iran 1.9 Austria 2.1 India 1.9 Japan 2.2 Japan 1.9 Portugal i.6 Irelard 1.8 Portgal 2.1 Ireland 1.1 Ireland 1.5 Greece 1.6 China 2.1 India 1.5 Portugal 1.6 Greece 1.9 Greece 1.2 Spain 1.4 Turkey 1.9 Hong Kong 1.1 Japan 1.4 India 1.9 Japan 1.1 Turkey 1.3 Ireland 1.8 Taiwan 1.1 China 1.1 Spain 1.5 Pakistan 1.0 Brazil 1.2 Korea, Rep. of 1.0 Pakistan 1.2 Korea, Rap. of 1.0 Taiwan 1.0 7 suppliers 17.4 12 suppliers 25.3 14 suppliers 26.4 16 supplier 34.5 Suppliers each with less than 1% of total Imorts 123 suppliers 9.2 151 suppliers 11.7 144 supplier 10.3 143 suppliers 10.8 -50 - only country with a 5 per cent or larger share of EC textile imports that is neither a developed country nor a member of a special preferential agreement with the EC. 2.87. The trend in the number of countries supplying clothing to the EC market is similar to those described above for the United States and for EC textile imports: a big jump in the number of supplying countries between 1963 and 1973, followed by relative stability in terms of numbers of countries, both overall and in the number in each market-share category. A partial exception to this generalization occurred sometime between 1973 and 1978 in the ranking when intra-EC trade is included (Table 2.22), but not when intra-EC trade is excluded (Appendix Table A.12). Between those two years the number of countries with 5 per cent or more of EC clothing imports declined from six to four (and the aggregate share supplied by countries with shares of 5 per cent or more declined from 64 to 45.5 per cent), while the number of countries with shares between 1 and 5 per cent increased from 13 to 20 (and the aggregate share supplied by countries in that category increased from 24.8 to 44.3 per cent). Among the principal beneficiaries of this "spreading around" of the business of selling clothes to the EC were the Republic of Korea, the United Kingdom, Greece, India, Hungary and Tunisia.
2.88. Finally, in contrast to textiles, two clothing exporters which are neither industrial countries nor members of a special arrangement with the EC had import shares of 5 per cent or more in 1982 - namely Hong Kong and the Republic of Korea. If intra-EC trade in clothing is included, Italy, the Federal Republic of Germany and France are also in that top category; if such trade is excluded, the only other country with a share of 5 per cent or more is Greece (Appendix Table A.12), which in 1982 was in the transition period to full EC membership. Trade balances 2.89. Trade balances in textiles and clothing of the major country groups and areas for 1981, the most recent year for which complete data are available, are given in Table 2.23. (Appendix Table A.19 includes the corresponding figures for 1963 and 1973; additional estimates for the Eastern trading area countries are given in Appendix tables A.20 and A.21.) The table also includes trade balances for two major inputs into textiles and clothing (textile fabrics are, of course, an input into clothing), as well as for all manufactured goods and for total merchandise trade. 2.90. Data on trade in inputs is interesting because the trade balance on an input may be related to the trade balance on the more processed versions: to take just one of the many possible interrelationships, it is possible that an increase in the trade surplus on fibres will result in a partially offsetting increase in the deficit on fabrics or clothing because the foreign buyers of the fibres use them to make fabric or clothes which are then sold on the world market. TABLE 2.22. - SHARE OF INDIVIDUAL SUPPLIERS IN THEIMPORT MARKETFOR CLOTHING IN THE EUROPEAN COMMUNTTY, 1963-1982 (Percentages)
1963 1973 1978 1982
Volme index of total world trade in clothing: 1973-100 29 1i0 172 195
Total number of suppliers 118 164 166 162
Suppliers each with 5% or more of total imports Italy 21.3 Italy 17.2 Italy 18.9 Italy 18.0 16.3 12.1 9.9 Hong Kong 10.0 Belgium-Luxembourg 11.3 France 11.4 Germany, Fed. Rep. 8.9 Germany, Fed. Rep. 7.8 France 9.4 Germany,Fed. Rep. 9.2 France 7.8 France 5.9 Germany, Fed. Rep. 8.2 Belgium-Luxembourg 7.7 Korea, Rep. of 5.8 Netherlands 6.8 Netherlands 6.4
6 suppliers 73.3 6 suppliers 64.0 4 suppliers 45.5 5 suppliers 47.5 Suppliers each with 1-4.9% of total imports United Kingdom 4.6 Yugoslavia 4.3 Korea, Rep. of 4.6 Greece 4.2 Austria 3.8 United Kingdom 2.9 Belgim-Luxembourg 4.6 United Kingdom 4.2 Switzerland 3.3 Taiwan 2.3 United Kingdom 4.6 Belgium-Luxembourg 3.4 Japan 2.5 Greece 2.0 Greece 4.3 Netherlands 3.0 United States 2.4 Korea, Rep. of 1.8 Netherlands 3.7 Yugoslavia 2.7 1J Ireland 1.8 Portugal 1.8 Yugoslavia 3.0 Portugal 2.7 Sweden 1.7 Hngary 1.7 Austria 1.9 India 2.2 Austria 1.6 Taiwan 1.8 Austria 2.1 1.5 India 1.7 Taiwan 2.1 Ireland 1.4 1.7 Tunisia 2.0 Poland 1.2 Hungary 1.5 China 1.6 Spain 1.2 Tunisia 1.5 Romania 1.5 Switzerland 1.1 Portugal 1.5 Turkey 1.4 Spain 1.3 1.4 Switzerland 1.3 1.3 United States 1.1 United States 1.2 Ireland 1.1 Israel 1.2 Poland 1.1 Spain 1.1 Malta 1.0 Switzerland 1.0 Macau 1.0 1.0 7 suppliers 20.1 13 suppliers 24.8 20 suppliers 44.3 20 suppliers 41.3 Suppliers each with less than 1% of total, imports Morocco105 suppliers 6.6 145 suppliers 11.2 142 supplier 10.2 137 suppliers 11.2 - 52
2.91. From the figures in Table 2.23, it is evident that the developed countries as a group had a trade surplus in three of the four "textile and clothing complex" categories in 1981; nonetheless, the combined export surplus on fibres, machinery and textiles was only about half the deficit on trade in clothing. On the other hand, all the developed areas shown in the table (except Canada) had a surplus on trade in total manufactured goods, while all the developing country areas shown in the table had a deficit in their total manufactures trade. TABLE 2.23. - TRADE BALANCESa OF MAJOR AREAS IN SELECTED COMMODITY GROUPS, 1981 (Billion dollars)
Textiles Clothing TextileFibres MachineryTextile ManufacturesAll Commodities
Developed countries 3.2 -16.8 2.6 2.9 193.9 -77.9 of which: United States 0.5 -6.9 3.0 -0.3 8.9 -45.4 Canada -1.1 -0.6 -0.2 -U.2 -12.6 3.4 Japan 4.2 -1.2 -1.6 1.3 118.3 11.1 Western Europe 1.3 -7.6 -1.5 2.4 105.9 -34.8 BC (9) 1.8 -5.4 -1.3 1.4 103.4 -27.4 Developing countriesc -3.1 12.1 -0.4 -3.5 -207.7 6.4 of which: Southern Europe 1.4 2.2 -0.7 -0.5 -5.6 -31.5 Middle East -4.1 -1.5 0 -0.3 -71.1 87.4 East & South East Asia 3.0 13.7 -1.7 -0.9 -9.5 -10.8 Latin America -0.6 -1.0 1.4 -1.1 -60.4 -16.0 Africa -2.7 -1.2 0.7 -0.7 -59.8 -16.6 Eastern trading area 0.3 1.8 -2.0 -0.3 -9.0 2.2 USSR -1.9 -2.6 0.7 -0.5 -27.7 6.2 Eastern Europe 0.5 2.1 -1.2 0.5 21.6 -3.0 China 1.6 2.3 -1.5 -0.2 -2.9 -1.0
aF.o.b.-c.i.f. for developed countries (except Canada) and Southern Europe; f.o.b.-f.o.b. for Canada and the other areas. bIncluding a surplus of nearly $3 billion for Australia, New Zealand and South Africa. CImports of developing cauntries are derived from trading partners' returns. For the USSR, developing countries are not completely broken dawn by destination. Therefore, part of the USSR's exports to developing countries is included in the total for developing countries only. dIncluding the other centrally planed economies in Asia. - 53 -
2.92. The figures on trade balances in manufactures and in total merchandise trade are useful in putting the industry-specific trade balances in perspective, as well as in providing a reminder of the point that in a multilateral trading system involving the exchange of thousands of products, a concern with the trade balance in any particular product line can be inconsistent with a desire to take advantage of the benefits of international specialization. Moreover, it is important to keep in mind that a complete picture of a country's commercial relations with the rest of the world requires not only data on merchandise trade, but also on trade in services (including worker remittances) and on capital flows. Relating trade to production and consumption 2.93. Research on international trade often includes attempts to relate a country's imports and exports to its domestic production or consumption. The best known example involves calculating what have come to be known as "import penetration ratios". Among the various ways of defining such a ratio, the simplest is the ratio of imports to production. During the 1970s, for example, the value of this ratio in the United States ranged from 3.5 to 5.2 per cent for textiles, and from 6.8 to 19.4 per cent for clothing. 2.94. There are, however, several conceptual and empirical problems associated with the use of such ratios. A discussion of these problems, plus statistical tables containing figures under different definitions of the ratios, are provided in Appendix IV.
E. TRADE POLICIES 2.95. Trends in world trade in textiles and clothing are influenced by underlying economic forces (such as differences in the relative amounts of physical capital, labour and labour skills between countries) and by countries' policies, in particular their trade policies. More so than in most other industries, trade in textiles and clothing - and thus the pattern of production and employment in those industries around the globe - has been influenced by government intervention. This holds whether we view it in terms of the length of time that restrictions have been widely used (leaving aside the earlier infant-industry protection, in the developed countries it is fifty years for textiles), or in terms of the level of restrictions in force at any point in time, or in terms of the number of different policies simultaneously influencing the level of imports. - 54 -
2.96. In the context of the GATT this attitude has manifested itself in two ways. One is the decision at the beginning of the 1960s to create a separate set of rules to govern trade in textiles and clothing. Originally intended to be temporary and to apply only to products made of cotton, that separate set of rules - currently referred to as the Multi-Fibre Arrangement, or MFA - is now in its twenty-third year and covers trade in textiles and clothing of all major fibres. The other manifestation is the variety of restrictive measures - high tariffs, licensing requirements and other border measures - which countries continue to apply to imports of textiles and clothing generally (but not always) in conformity with the rules of the General Agreement. These and other policy developments are examined in detail in Chapter 3.
F. OTHER FACTORS 2.97. Trends in the four factors discussed above - demand, technology, trade and trade policies - are not the only ones that influence the level of activity in the textile and clothing industries in each country. Other factors which are often mentioned as affecting production and employment, mostly via their influence on trade flows, include exchange rate movements, debt-service problems, secular trends in the relative costs between countries of inputs (labour, capital, land, electricity, transport and so forth) and certain domestic policies (for example, regional development programmes). 2.98. Domestic policies which influence the pattern of international competitiveness in textiles and clothing are examined in Chapter 3, along with traditional trade policies (that is, border measures). Although space limitations preclude a detailed discussion of the other factors just mentioned, a few remarks on the effects of exchange rate movements on trade in textiles and clothing would be worthwhile. 2.99. As was noted in the introduction, the principal concern in this study is with developments and policies which are relatively specific to textiles and clothing, as opposed to general developments or policies which affect large sections of the economy (for example, the entire manufacturing sector). On a simple level, this would seem to argue against discussing exchange rate movements, since a change in the exchange rate affects all tradeable goods industries. But it is also true that not all tradeable goods industries or firms are necessarily affected to the same extent by an exchange rate change. In particular, it is often argued that output and employment in firms producing homogenous, highly standardized tradeable goods will be more sensitive to exchange rate over-shooting and under-shooting than is the case with firms selling in markets in which brand differentiation and other forms of non-price competition play an important role. This is, of course, an empirical issue, and thus one that can be resolved only by examining past experience. As a recent International Monetary Fund study makes clear, the analysis of the impact of exchange rate fluctuations on trade is extremely difficult.17 - 55 -
2.100. The textile and clothing industries produce goods ranging across the entire spectrum, from highly standardized items to expensive speciality fabrics and designer clothes (and specialized textile machinery, if we consider the entire textile and clothing "complex"). It is also characterized by a very wide range of initial capital requirements for starting up a production unit - from an automated textile plant the size of a football field to a dozen second-hand sewing machines - a characteristic which can be important in determining firms' responses to movements in exchange rates that are expected to be "medium term" in duration (say one to four years). A priori, therefore, we would expect firms in the textile and clothing industries to exhibit a wide range of experience in the face of the sizeable movements in exchange rates since the mid-1970s. 2.101. As we have seen already in this chapter, even under the best of circumstances, it is very difficult to determine the relative importance of the different forces influencing trade flows at any point in time. This is particularly true when a country's currency is believed to have a particularly "strong" or "weak" exchange rate. In any case, there has been relatively little, serious product-specific empirical work on this question. However, there are some empirical results available in a recent publication by the United States International Trade Commission. For our purposes, the key conclusion that can be drawn from the USITC study is that it is impossible to generalize about the likely impact of exchange rate changes on trade in textiles and clothing, either overall or as regards trade in particular products between particular countries. G. INVESTMENT 2.102. The factors examined in the preceding sections influence the level of activity in the textile and clothing industries in two ways. One is the impact in the short-run, defined as the period during which the firm's capital stock is constant. The other impact occurs through the effect of those factors on expectations and thus on the level of business investment in plant and equipment. 2.103. It is apparent from Appendix Chart A.3 that in the OECD countries there was a high rate of investment in both textiles and clothing during the years 1969-74. A similar investment boom also occurred in several other industries during that period, which is why the figures on investment shares in Table 2.24 do not indicate a dramatic increase for textiles and clothing between 1963-68 and 1969-74. Following the sharp increase in petroleum prices and the 1975 recession, gross investment in textiles and clothing declined considerably faster than manufacturing investment (Table 2.24 and Appendix Table A.22).19overall 56 -
TABLE 2.24. - SHARE OF TEXTILES AND CLOTHING IN MANUFACTURING GROSS FIXED INVESTMENT IN SELECTED DEVELOPED COUNTRIES, 1963-1980 (Percentages)
1963-68 1969-74 1975-80 T C T C T C
United States 3.9 0.8 4.5 1.0 2.8 0.7 Japan 5.4 0.5 4.6 0.5 2.5 0.5 EC (9) 6.0 1.3 4.6 1.1 3.5 0.9
2.104. Investment levels in textiles and clothing have thus declined both absolutely and relatively in the developed countries since 1974. The OECD has partly attributed the severity of this decline to the heavy investment in the earlier period, which had been stimulated by selective investment incentives wage-induced labour-saving innovations and overly optimistic projections of demand. 2.105. In most of the developed countries for which data are available, a high and increasing proportion of the reduced investment activity since 1973 has been in machinery and equipment (Appendix Table A.23). In order to get an idea of world investment in machinery and equipment, a proxy was used, showing exports of textile machinery by the seven major exporting countries at constant prices (Appendix Table A.24). The figures suggest a very rapid expansion between 1966 and 1974, followed by a sharp contraction in 1975-78, some recovery between 1979 and 1981 and a strong set-back in 1982. Judging by these figures, world gross fixed investment in textile machinery and equipment (largely labour-saving, especially in developed countries) was not lower in the late 1970s than in the early 1960s, though well below the all-time peak of 1969-74. 2.106. In the absence of depreciation data, it is difficult to know whether the lower level of investment expenditure since 1974 has been sufficient to increase the capital stock or not; that is, to know whether there has actually been some net investment in textiles. Available time-series in the United Kingdom, the Federal Republic of Germany, Italy and Japan suggest that the gross capital stock has continued to rise in these countries, despite reduced investment and widespread scrapping. In many more countries, the ratio of gross capital to labour has been rising in this period.22 Although reliable statistics are scarce, it appears that the gross capital stock in textiles is also growing in developing countries. However, gross values are virtually meaningless as a measure of the production potential of the capital stock, and, in a long-established industry such as textiles, the gross value of the capital stock accumulated over the years tends to be high in relation to its net value.23 - 57 -
2.107. The alternative measure of production capacity in textiles is the number of spindles and looms installed. Appendix Chart A.4 shows the long-term changes in short-staple spinning and weaving capacities in the world. The total capacity of short-staple spindles has expanded almost continuously since the mid-1960s, while that of cotton-type looms has showed rather large fluctuations over the post-war period. Such aggregate figures, however, conceal the substantial shift in geographical distribution of spinning and weaving capacities during the period. It is clear from Appendix Table A.25 that the relative weight of the world textile capacities has moved from the developed to developing countries and, to a lesser extent, the Eastern trading area. 2.108. The textiles sector has a highly diversified capital stock, in which old vintages of machinery can be found in many enterprises alongside the most modern equipment. Even in the production of a single homogeneous product, the nature of the machinery used in production, its age-structure and labour requirements can vary significantly from one firm or plant to another. This phenomenon is illustrated by the intense trade in second-hand machinery.24 - 58 -
FOOTNOTES TO CHAPTER 2 ¹Maizels, 1963, p.335. 2See Maizels, 1963, pp. 46-47, and Paretti and Bloch, 1955. 3See Tanzi, 1983. 4Since 1975 the share of the clothing industry has expanded rapidly in Sri Lanka, Morocco, Tunisia, Haïti and, among the countries not listed in Table 2.6, Macao, Maldives, Mauritius, and some in the Caribbean area. 5In several countries, highly capital-intensive synthetic fibre production may be included under textiles (for example, AIgeria and Greece) and as a result, the share of textiles in value added is higher than in employment. 6The best fits (the sample size is 52) were found with an exponential function where y1 is the share of textiles and clothing in manufacturing production and y2 in employment, whereas x is the level of per capita GNP:
y1 = 54.1 - 11.7 (log x) y2 = 84.4 - 18.8 (log x) t value = (-5.78) t value = (-8.03) r = 0.40 r = 0.56 Chart 2.1 shows the average of production and employment shares. The maximum is estimated to be around 5-6 per cent for output and somewhat more for employment (the figures for Hong Kong are much higher because of the absence of agriculture and mining). It is difficult to say what the minimum might be: at present output shares below 1 per cent and employment shares not much above 1 per cent are observed in several small high-income countries. As a share of manufacturing employment, the figures would be 1-2 percentage points higher for most East European countries, the difference being probably significantly larger for the USSR. 8 Production of synthetic fibres is important in a few developing areas (for example, the Republic of Korea and Taiwan) and India has developed a sizeable textile machinery industry, mainly for the domestic market.
9Synthetic fibres are one of the two broad categories of man-made fibres, the other being cellulosic fibres. Synthetic fibres, such as nylon, polyesters and acrylics are manufactured from inorganic materials. Cellulosic fibres, which include rayon and acetate, are produced from vegetable derivatives. - 59 -
10FAO, World Apparel Fibre Consumption Survey.
For certain purposes, for example, estimating the domestic "job displacement" effect in the clothing industry of an increment in clothing imports, it may be important to take into account the difference in unit values between foreign produced and domestically produced versions of a particular product. See, for example, international Ladies Garments Workers Union, 1983. 12This can be explained, in part, by the fact that in these two countries clothing prices have increased much less rapidly than overall prices (see Appendix Table A.3). The smaller the price increase, the larger is the volume figure obtained when the current value figures are deflated by the price indices. Scattered evidence on increases in producer prices and import prices during the latter part of the 1970s and early 1980s point to larger price increases than are indicated by the clothing component of the United States' consumer price index; if trends in the clothing CPI are too low, that would overstate the estimated "constant price" increase in United States clothing demand in those years (this would, in turn, cause the figures for the developed countries as a group to be overstated). 13Keesing (1983) has recently pointed out the increased importance of institutional arrangements and the marketing aspects of developing countries' exports of manufactured consumer goods (e.g. apparel, footwear, radios, watches, television sets, cameras, etc.) to industrial countries. He notes: "Although some developing economy manufacturers distribute their own products ..., most exports of finished consumers goods are made to buyers' orders. Production is not begun until the exporting enterprise receives an order complete with a letter of credit or equivalent commitment to pay for the goods. The buyer specifies in full detail the design of the product, the materials to be used, the numbers and sizes to be made, and such other matters as the way the product will be labelled, packed and shipped. Designs and requirements change from order to order." (pp.338-9). 14For a detailed discussion of the methodological problems involved in the accounting procedure, see Martin and Evans (1981). 15See Krueger, 1980. 16See United States Department of Labor, 1974 and 1977. The latter reports: "New technology is not expected to have a major impact on the level of employment of sewers and stitchers, who make up about 50 per cent of the total apparel industry work force and constitute more than two-thirds of the operatives category. ... The extent to which technology will bring about a decline in the relative importance of this key occupational group is uncertain. One readily apparent impact of new technology on sewing and stitching occupations is the decline in relative importance of manual skills as automatic equipment increasingly performs production tasks". (p. 8) - 60 -
17See IMF, 1984. 18See USITC, 1983. The Commission's staff carried out an econometric analysis of the impact of the dollar's exchange rate on United States trade in six products (including polyester staple fibre, and denim), generally covering the period 1977-82. The study's Executive Summary (pp. 1-9) includes the following observations, "The Commission's analysis of the six products revealed that, although changes in exchange rates influenced trade, other trade factors were often more important. Variations in competitors' prices, product demand, local production, and manufacturing costs also played a key role in trade fluctuations. The Commission's investigation indicates that the assumption that trade in primary homogeneous products is generally more sensitive to exchange-rate changes than is trade in heterogeneous products is not necessarily correct when individual products are analyzed. The econometric analysis indicates that trade in primary homogeneous products (magnesium and polyester staple fiber) may not be more sensitive to exchange-rate movements than trade in intermediate products (denim and brass strip) or in consumer products (bicycles and pianos). The results of the econometric analysis show that changes in bilateral exchange rates did not adversely affect U.S. exports of polyester staple to Canada and Hong Kong during 1977-82. Trade flows were influenced primarilv by factors that are indigenous to the two markets.
Changes in bilateral exchange rates were found to have significantly influenced U.S. exports of denim to Italy, but not those to the United Kingdom." 19OECD figures on the volume of gross fixed investment for 1970-74 and 1975-78 show that between the two periods investment in textiles and clothing production declined in every OECD country except Ireland, Greece and Norway (in the latter, textile investment did decline); see OECD (1983, p. 63). 20OECD, 1983, p.62. 21Since exports from the Federal Republic of Germany, Switzerland, United States, United Kingdom, Japan, France and Italy represent about three-quarters of all textile and clothing machinery sold in the world, they provide a good proxy for the evolution of world investment in machinery and equipment. The coverage of this proxy can be further improved by adding the most important segment missing, namely United States domestic shipments (not available for 1981 and 1982). 22See OECD, 1983, op.cit. p. 66. - 61 -
23The gross value (at book values or at replacement prices) includes all equipment actually possessed, even if it is fully amortised. This value increases with gross investment and decreases with scrapping or physical disposal. Net values are adjusted for depreciation (including technological obsolescence). 24When second-hand equipment is sold, it is removed from the capital stock of the seller, but appears as "new investment" in the capital stock of the buyer. - 62 -
CHAPTER 3: EVOLUTION OF POLlCIES AFFECTING TRADE IN TEXTILES AND CLOTHING
3.1. This chapter is divided into four sections. The first provides a brief overview of textile trade policies prior to the Second WorldWar. The second section covers trade policies introduced during the period 1948-1961 to aid domestic producers of textiles and clothing. The third section deals with border policy developments since 1961, that is, since the introduction of special measures - involving a formal. departure from the basic articles of the General Agreement - governing an important part of world trade in textiles and clothing. Post-war domestic policies, and policies which have had incidental effects on the textile and clothing industries, are considered very briefly in the fourth section.
A. POLICIES PRIOR TO THE SECOND WORLD WAR 3.2. Although the world textile market was still dominated by the United Kingdom in the period preceding and immediately following the First World War, a number of other countries had come to the fore in the nineteenth century, mainly as a result of deliberate government encouragement. By the end of the nineteenth century, example.for the United States had become a major textiIe producer under the highly protective tariffs.2 Apart from, countries located in Westerh Europe and North Americ. which had come to acconnt for about 85per cent of world output of cotton textiles by 1913, the only other are a show rapid expansion was apan. Within the group of countries that wen' among the first to industrialize, only in the United Kingdom and Japan was the vigorous expansion of the domestic industry geared to thosand dependent on selling overseas. 3.3. During the Great Depression the value of textile trade slumped by over one-half, and the proportion or textiles in total trade in manufactured. goods sank from 30 to 22 per cent between 1929 and 1939. While the United Kingdom remained a leading exporter of tep quality yarns, fabrics and wool tops, it had increasing difficulty in Competing with Japan in selling the plainer, cheaper kinds of cotton cloth and rayon piece goods.
3.4. The United Kingdom's reaccion as its markets shrack and competition increased, particularly from Japan. was to "protecr and hold", one key step being the enactment of the scheme for Imperial Preferences in 1932. Prior to that France had become (in 1931)the first country to make major use of quotas as a commercial policy instrument. Other countries soon followed with policies designed to protect their domestic market shares. New restrictive measures in the textile field soon began to focus almost exclusively on Japan, and by 1936 .Japanese exports of cotton textiles were subject to quantitative restrictions in 40 out of 106 markets - apart from protective and discriminatory tariffs, and exchange control measures.3 63 -
3.5. Developments in United States/Japanese trade relations are particularly interesting as precursors of post-World War II policies. In April 1935 the US Tariff Commission began an investigation into the rise of imports of Japanese cotton cloth. In December the Japanese Ambassador reported that the industry had agreed to voluntarily restrict its shipments to the United States. However this "unilateral" decision failed to reduce Japanese exports, and in 1936 the President accepted a Tariff Commission recommendation for selective tariff increases on cotton cloth. When these also failed to stem the stream of imports, attention turned to "a solution of our trade problems by voluntary and amicable agreement between the two governments, or perhaps, and more effective, between the two industries.4 ... the procedure should be one of private and voluntary negotiation". 3.6. United States and Japanese trade associations subsequently reached a two-year "gentleman's agreement" (later extended through 1940) whereby Japan limited its shipments from January 1937 to the 155 million square yards already on order, and to 100 million in 1938; in return the American negotiators5agreed not to press their Government to impose formal restrictions. A separate three-year agreement limited Japan's exports of hosiery to the United States beginning January 1937, while another inter-industry agreement was arranged to regulate Japanese shipment of velveteen and corduroys for a two year period beginning in March 1937.
3.7. It is apparent from this very brief survey that most of the attitudes towards competitive newcomers, structural adjustment and protection against imports - including the use of "voluntary" export limitations - that were to characterize post-World War II trade in textiles and clothing were already evident in the inter-war period. B. POLICIES 1948-1961 3.8. At the beginning of the post-war period, trade in textiles and clothing (along with trade in most other products) was governed by complex trade régimes, many dating back to the defensive trade and payments measures introduced in the 1930s. Post-war balance-of-payments difficulties in a number of countries, including most West European countries, were invoked to justify the existence of high nominal tariffs, complicated customs administration, import licensing procedures and a wide range of quantitative restrictions. In addition, a large share of the trade of many countries was governed by bilateral arrangements.
3.9. Trade restrictions affecting these two industries were reduced, to an extent, as part of the more general liberalization efforts in the 1950s under the auspices of the GATT and the Organization for European Economic Cooperation. Implementation of the EC customs union and the EFTA also began near the end of this period. Trade in textiles and clothing among developed countries in North America and Western Europe generally benefited from these liberalization efforts. Restrictions on imports from Japan and many East European and developing countries, in contrast, not only were not eased, but in many instances were made more restrictive in the course of the 1950s (see Appendix V). - 64
3.10. In 1959 industry-to-industry consultations with Hong Kong, India and Pakistan led to agreements for voluntary export restraint of cotton fabrics from these countries entering the United Kingdom. Imports from Japan were regulated by quantitative restrictions which were continued even after Japan's accession to the GATT, by virtue of the United Kingdom's invocation of Article XXXV. In Western Europe, the industry was protected in the early 1950s against import competition by severe quantitative restrictions justified under Article XII of the GATT to safeguard the balance of payments. After 1955 most of the general quantitative restrictions on a large range of industrial goods were dismantled, with the principal exception of those on textiles, which continued in force in violation of GATT rules and became known as "hard core" residual restrictions. They were supplemented by other arrangements, one of the better known being the Noordwijk Agreement, established by a majority of the European producers in 1956, designed "to stop the re-exportation to each other of finished goods processed from 'abnormally low priced' grey fabrics imported from Asian sources."7 3.11. At the urging of American officials, Japan agreed in January 1957 to a "voluntary" five-year limitation on cotton textile exports to the United States. In a similar action, the Government of Italy informed United States officials that it would restrain its exports of velveteen to the United States to a specific level in 1957. Both of these accords were "concluded" without the finding of injury required under existing domestic legislation in the United States. These agreements set the pattern for subsequent agreements concluded by the United States, as well as by other major importing countries within the framework of the LTA and MFA. 3.12. One of the central issues debated in the period leading up to the LTA and the MFA, was that of market disruption. At the Fifteenth Session of the Contracting Parties in 1959, the United States delegate stated that sharp increases in imports over a brief period of time and in a narrow range of products could have serious economic, political and social repercussions in the importing countries, and officially proposed that the GATT study the problem posed by "the adverse effects of an abrupt invasion (by sharp increases in imports) of established markets". 3.13. The secretariat's subsequent study based on information notified to the secretariat (that is, information in addition to that available regarding measures invoked for balance-of-payments reasons or under Article XXXV) found that many countries were attempting to restrict imports they feared might disrupt their markets.8 Among the items discriminated against, textiles loomed large and Japan was the principal target, though some references were also made to restrictions directed towards Hong Kong and certain East European countries. 3.14. A GATT Working Party was subsequently established to pursue the matter and reported in November 1960 that a problem did exist and that it could be called 'market disruption'. Its report added that "there were political and psychological elements in the problem" which, in the absence of adequate safeguards, made it unlikely that the countries concerned would abandon the "exceptional" measures they were employing outside, or in contravention, of the General Agreement. - 65 -
3.15. In an attempt to assist in the resolution of this situation, the GATT secretariat offered the following definition of market disruption: "(a) In a number of countries situations occur or threaten to occur which have been described as "market disruption". (b) These situations generally contain the following elements in combination: (i) a sharp and substantial increase or potential increase of imports of particular products from particular sources; (ii) these products are offered at prices which are substantially below those prevailing for similar goods of comparable quality in the market of the importing country; (iii) there is serious damage to domestic producers or threat thereof; (iv) the price differentials referred to in paragraph (ii) above do not arise from governmental intervention in the fixing or formation of prices or from dumping practices. In some situations other elements are also present and the enumeration above is not, therefore, intended as an exhaustive definition of 'market disruption'." 3.16. Subsequently entitled "Avoidance of Market Disruption", the above definition was formally adopted by the CONTRACTING PARTIES on 19 November 1960.9 Relative to GATT's regular safeguard clause (Article XIX), the concept of market disruption introduced three fundamental changes. First, it would not be necessary for the allegedly injurious increase in imports to have already occurred - a potential increase could be sufficient to justify additional restrictions. Second, imports of the product from particular sources could be singled out as the source of the problem, rather than imports of the product in general; the logical corollary was that the additional restrictions could be applied on a country-specific (that is, discriminatory) rather than MFN basis. Third, the existence (size) of a price differential between particular imports and goods of comparable quality sold on the domestic market could be used in determining the need for additional restrictions.
C. POLICIES 1961 TO PRESENT 3.17. Although the practice of applying more than one type of trade restrictive measure to textiles and clothing has characterized the entire post-war period, the situation became particularly complicated after 1961 when a new textile and clothing régime was created alongside the existing rules of the General Agreement. Discussion of policies since 1961 is further complicated by the fact that only about half of the Contracting Parties have chosen to participate at one time or another in the special régimes, and only seventeen Contracting Parties (counting EC member states individually) have ever imposed import restrictions under the special régimes (those seventeen include, of course, most of the leading importers of textiles and clothing). - 66 -
3.18. For expositional as well as analytical purposes, in describing the post-1960 policy developments, countries have been divided into four groups. They are: (1) the eight current developed country participants (the EC counted as one participant) in the Multifibre Arrangement (however Japan and Switzerland do not currently apply MFA restrictions on imports); these countries have chosen to rely on the special set of rules to govern their trade in textiles and clothing; (2) Australia, New Zealand and Norway; the rules of the General Agreement are in principle applicable to the textile and clothing trade of these three countries; Australia and Norway participated in the special arrangements until the mid-1970s, while New Zealand has never participated in the special arrangements; (3) the developing countries; many of these countries participate in the MFA, but they do not invoke the MFA to justify import restrictions; most of their non-tariff restrictions are covered by Article XVIII(b) of the General Agreement (three developing country members of the MFA are not contracting parties to the General Agreement - El Salvador, Guatemala and Mexico); and, (4) the Eastern trading area countries; all four East European contracting parties (Czechoslovakia, Hungary, Poland and Romania) participate in the MFA as "exporting countries"; this is also true of China, which recently joined the MFA (but is not a Contracting Party) and claims treatment equivalent to that accorded to other participating developing countries at similar stages of development; the trade policies of the East European countries other than Czechoslovakia (a founding member of the GATT) are governed by their protocols of accession to the GATT. 3.19. It is hoped that by bringing out the parallels and contrasts in the experiences of these four groups of countries, this approach will aid efforts to understand past developments, as well as the implications of alternative future rules for regulating policies in the textile and clothing area. (1) THE EIGHT CURRENT DEVELOPED COUNTRY PARTICIPANTS IN THE MFA 3.20. A key feature of "multiple measure" trade régimes is, of course, the way the various measures interact and reinforce one another. From an expositional viewpoint, however, these régimes are far easier to describe if each type of measure is considered individually. This section on the policies of the current developed country participants in the MFA is therefore divided into six parts: tariffs, the LTA and MFA, policies governing outward processing trade, the EC-Mediterranean agreements, safeguard/anti-dumping/countervailing duty actions, and other border measures. The ways in which the different measures act and interact are analyzed in Chapter 4. - 67 -
(a) Tariffs
3.21. There is no fully satisfactory way of presenting a summary picture of a country's tariffs. Both of the methods used for calculating averages of individual tariffs - simple averages and trade-weighted averages - are subject to well-known biases. Another major problem involves the choice between nominal (actual) tariffs, and estimate of the effective rate of protection of value added (effective tariffs)10; because estimates of effective tariffs are not available on a systematic basis, most of the data in this section refer to nominal tariffs. Comparisons across countries are difficult because of the heterogeneous nature of the textile and clothing classifications. Converting specific duties to ad valorem equivalents presents yet another set of problems, and the farther back in time we go, the less adequate are the data. Because of these and other problems, the following figures should be viewed as indicating only rough orders of magnitude.
3.22. Estimates of pre-Kennedy round nominal and effective tariff averages in the United States, Japan, the EC and the United Kingdom for various categories of textiles and clothing are given in Table 3.1. With only two exceptions (both in Japan), the estimated effective rates exceed the estimated nominal rates, usually by a very sizeable margin. For the countries shown in the table, duties on textiles and clothing are generally higher (always higher in the case of fabrics, hosiery and clothing) than the corresponding nominal and effective rates for manufactures as a whole.
TABLE 3.1. NOMINAL AND EFFECTIVEMFN TARIFF RATESa IN SELECTED DEVELOPED COUNTRIES, 1962 (Percentages)
United States Japan EC United Kingdom Nominal Effective Naminal Effective Naminal Effective Naminal Effective
Thread and yarn 11½ 32 2 1 3 3 10½2 28 Textile fabrics 24 50½ 192 49 17½ 44½ 20½ 42 Hosiery 25½ 48½ 26 61 18½ 41½ 25½ 49½ Clothing 25 36 25 421 18½ 25 25½ 40½ Other textile articles 19 22½ 15 13 22 39 242 42½ Industrial manufactures cambined 11½ 20 16 29½ 12 18½ 15½ 28
aThe calculations, which are lighted averages, exclude duty-free categories.
3.23. Table 3.2 offers a comparison of pre- and post-Tokyo Round average tariffs on industrial finished products as compared with textiles and clothing in the eight developed areas.11 It is apparent from the figures that the weighting pattern used to calculate the averages frequently has a strong effect on the resulting averages. The - 68 - simple averages suggest that the United States, Canada, Japan and the EC made fairly large reductions in their tariffs on textiles and clothing during the Tokyo Round. With the exception of the EC, the proportional TABLE 3.2. - PRE-TOKYOROUND AND POST-TOKYO ROUND TARIFFS IN EGHTDEVELOPED AREAS (Percentages)
United States Canada Japan EC Pre Post Pre Post Pre Post Pre Post
Textiles (excl. fibres) and clothing Weighted average 23½ 19 24 21½ 14 11½ 15 11½ Simple average 19 10 19 14½ 14 10½ 14 10½ Manufactures (excl. petroleum) Weighted average 7 5 13½ 8½ 10 5½ 8½ 6 Simple average 11 6 13 7½ il 6½ 9½ 6½
Austria Finland Sweden Switzerland Pre Post Pre Post Pre Post Pre Post
Textiles (excl. fibres) and clothing Weighted average 30½ 30 30 29 13 12½ 10½ 8½ Simple average 20½ 18½ 30½ 30 13 12 8 6 Manufactures (excl. petroleum) Weighted average 14½ 12½ 7½ 6 6 4½ 3½ 2½ Simple average 12 8½ 14 12 6½ 5 4 3 reductions are much smaller when calculated on the basis of weighted averages. Switzerland's reductions were moderate (however, Swiss tariffs were/are the lowest among the eight countries, both before and after the Tokyo Round cuts), while Austria, Finland and Sweden made only token tariff reductions. 3.24. Based on the weighted average figures for the eight developed areas as a group, reductions in tariffs on textiles and clothing (excluding fibres) negotiated during the Tokyo Round (17½ per cent) amounted to only about one-half the reductions on industrial products as a whole (excluding petroleum); the difference was less sharp in the case of simple averages. Generally speaking, in all eight areas the post-Tokyo Round tariffs on textiles and clothing are between two and three times higher than the tariffs on manufactured goods as a whole. - 69 -
3.25. As for the most tenuous comparison - across countries - the figures for the unweighted averages suggest that the Tokyo Round tariff cuts brought the average level of tariffs on textiles and clothing in five of the areas more or less into line with one another (the high tariff countries - the United States and Canada - having made larger cuts).
3.26. Switzerland remains the low-tariff country, while Austria and (especially) Finland are the above-average tariff countries among the eight. On the basis of weighted averages, however, post-Tokyo Round tariffs on textiles and clothing in North America (and Austria and Finland) are substantially higher than those of Japan, the EC and Sweden, while the latters' tariffs are above those of Switzerland.
3.27. Disaggregated figures for tariff averages, corresponding to the aggregate figures for textiles and clothing in Table 3.2, are given in Table 3.3. Reading the figures from left to right reveals a clear tendency for tariffs to rise with the stage of production in each of the eight areas. This is consistent with the figures in Table 3.1, which showed effective rates of tariff protection in excess of the nominal levels.
TABLE 3.3. PRE-TOKYO ROUND AND POST-TOKYO ROUND AVERAGETARIFF LEVEIS FOR TEXTILESAND CLOTHINGIN EIGHTDEVELOPED AREAS (Percentages)
Made-up Fibres Yarns Fabrics articles Clothing
S W S W S W S W S W
United States Pre 5½ 7 13½ 14½ 19 16 16½ 13½ 24 27 Post 3 3½ 8 9 11½ îl1 8½ 7½ 12½ 22½ Canada Pre 3 4 14½ 16 21 25½ 18½ 23 23 25½ Post 2 3 9 13 14' 21½ 14 20 20 24 Japan Pre 4 9 7½ 12 1 0½ 13 14½ 18 17½ Post 3 ½ 7 6½ 9½ 9½ 9½ 11½ 13 14 EC Pre 3 ½ 7 8 13 14½ 13 11½ 16 16½ Post 3 5 7 9½ 10½ 9 7½ 12½ 13½ Austria Pre 4 0 8 8½ 26 27 22 25½ 32 37 Post 2½ 0 6½ 7 21½ 23½ 19 22½ 30½ 37 Finland Pre 3 ½ 10 6½ 30½ 29 27½ 22 41 40½ Post 1½ 9½ 6½ 30 28½ 26½ 19 39½ 39 Sweden Pre 2 8½ 9½ 13½ 14 11 8½ 14½ 14½ Post 1½ 6½ 7½ 13 13 10 8 14 14 Switzerland Pre 2½ 0 5 4½ 8½ 10½ 8 4 11½ 13½ Post 2 0 4 3½ 6½ 8½ 6½ 3½ 9 il
Note: S = simple average; W = average weighted by MFN impor 3. 28. Another intecesting dimention of e z. .'.. J; dispersion, indicated in Table The. . gt -suggestthat in :î .l the countries the Kennedy ct.., .1!(U.k.:.: l. I.UL, ' r L sizeable reduction in the number of resitsin exeeus perofcent20 There was relatively little change in the .dispersion of the Swedish Swiss tariff. (both of which i Lrc- 1, îb f, tarrifsinexcess of ;iu cent) , and virtuaLly no change int : u s case. (where three-quarc of the tariffs on textitles and .aforming exceed 25 per cent) . Whenthe Tokyo Round cuts are completed none ofthe tariffs on textiles... cloching will exceed 15 per cent
TABLE3.4. - DISPEERSION OF TARIFFS ON .½< w-. !1.,.'.I;iS, .Li'ïC DEVELOPED AREAS
(cf'8,d ' !)
United States MEN taroff lavel ------(a) (b) (c: (0 'r" (c) (a) (b)
M.]- 3 4 ".à 3 j, ).1 - 5.0%, ' i6 t$?2,' 5 .5 9;, 5.1 - 10.0Z 8, 19i' ." . i ', i. 17 1 V)' 10).1 -^ 15.0% 591 20îi 14 5O1 - i.., 15.1 . 28') i7 1&? 'v. 1 0.1 - :Z5.% 19 13? -, O U\wr 25` O 20 2 (I I ci
Austrid r z. Si>. erl.i-i mN tarif level (b) (e) tL) (.:) _. 19 9 1 0.1 - 5.m0 5 --'4 5.1 - 10.0% 8 12 i ` . 9 `" l': ~~~~~il1 10.1I - .0% 12i 15 15.1 - 0.0%' 1'2 13 -- i ,' , 10. ._ 20.1 - 25.0% 10lh 16 i 1. hVer 25% 33'. 18
-7- 'I--. ' -- ' -I (a) pre:e.d Roundo; (0) pre-Toky&. --,- .";: he tk, calcuLitens nnitheRound e(b) pre-Tokyo0.r*. a.;y ..;: . i: iffifu; 11 cD5X: I are nomparabltly capara>Figure insection (b)and (c) tc . 3.29. Finally, therehe of questionof the numberof tariffswhichi. . bound. For the countrshownin fsois 3.4,the proportion oftariffso til on textiles and clothinmaining unbound éter thk To yo Routadgesu;.; from zero (Switzerland)1to i. 2p r cent (Japan), e ptfcerFirandltcd - 71 -
(6.5 per cent unbound), Sweden (11.2 per cent unbound) and Austria (11.3 per cent unbound). Compared with the figures for industrial products as a whole, the percentage of unbound tariffs on textiles and clothing is similar or smaller, again with the exception of Finland (6.5 versus 2.6 per cent), Sweden (11.2 versus 2.2 per cent) and Austria (11.3 versus 3.7 per cent). 3.30. The discussion up to this point has been concerned with MFN tariffs. In the case of non-MFN tariffs, there are two main types: Article XXIV arrangements (customs unions and free-trade areas), and various preferential arrangements extended by developed to developing countries; prior to the entry of the United Kingdom into the EC, there was also the Commonwealth preference system. 3.31. With regard to Article XXIV arrangements, the EC customs union agreement was fully implemented by 1968, while the EFTA treaty had been fully implemented by the end of 1966. Barriers to trade in non-agricultural products between the EC and EFTA were phased out in the 1970s. At the beginning of the 1970s the EC also negotiated regional agreements with countries in the Mediterranean basin. 3.32. The Generalized System of Preferences (GSP) was introduced between 1971 and 1972 in Austria, the EC, Finland, Japan, Sweden and Switzerland, in 1974 in Canada and in 1976 in the United States. The complexity of the GSP coverage of textiles and clothing, plus the fact that many quantitative or country limitations are applied in certain schemes, as well as the autonomous nature of GSP treatment which makes it liable to frequent changes, combine to make it difficult to generalize about the impact of GSP on these products. However, it may be stated that textiles and clothing are often either excluded from the GSP, or are subject to higher GSP rates or more rigorous, quantitative or country limitations than are other industrial products.12 In renewing their GSP schemes for the 1980s, the EC and the United States adopted GSP policies to strengthen differential treatment between competitive countries and others, on a product-by-product basis, and Japan and Switzerland introduced provisions to enable them to introduce such differential treatment in certain circumstances. 3.33. Special preferential treatment granted recently to least-developed countries by Austria, the EC, Japan, and Switzerland covers whole or a majority of textiles and clothing items. In those markets, the least-developed countries benefit from unlimited duty-free tariff treatment, except in Austria where GSP rates are one-half the MFN rates. Developing countries in Africa, the Caribbean, and the Pacific area benefit from duty-free entry into the EC under the Lomé Convention. (b) The LTA and MFA 3.34. Early in 1961 the United States proposed that a conference between exporters and importers of textiles be convened to seek means for simultaneously encouraging international trade in textiles and clothing and avoiding undue disruption of established industries in the 72 - importing countries. A meeting was held under the auspices of the GATT in July 1961, and from that session there emerged the Short-Term. Arrangement Regarding International Trade in Cotton Textiles (the STA), based largely on United States proposals. 3.35. The STA adopted the previously mentioned Decision on Market Disruption as its basis, and outlined three goals: to increase significantly access to markets that were then restricted, to maintain orderly access to markets that were relatively open, and to secure a measure of restraint on the part of the exporting countries in order to avoid disruption. It was to last for a year beginning in October 1961, and a Provisional Cotton Textiles Committee was established to work out a longer term solution to the perceived problems. By February of 1962, the text of the Long-Term Arrangement Regarding International Trade in Cotton Textiles (LTA) was completed. The Long Term Arrangement 3.36. The initial LTA entered into force in October 1962 for a period of five years. As with the STA, it contained provisions for liberalizing existing restrictions as well as for imposing new ones. Countries maintaining restrictions outside the GATT framework were required to relax them progressively (this affected primarily the West European countries). New restrictions were permitted only when the importing country was facing, or was threatened with, a situation of market disruption for products or sources hitherto unrestrained (Article 3). These could be employed either with the agreement of the exporting country or unilaterally in cases of disagreement. Quota levels could not be less than the amount of actual imports during the previous period, and under normal circumstances, the quotas were to be increased by 5 per cent a year. 3.37. A major feature in the LTA was the provision in Article 4 permitting bilateral arrangements on other terms "not inconsistent" with the LTA's objectives. This enabled countries to impose restrictive measures even when they were not threatened with situations of market disruption. The need for an orderly development of trade could thus be made the basis for regulating and controlling aggregate trade in cotton textiles and clothing. Moreover, the regulation could be extended to sources with small shares of the market. 3.38. The LTA was extended in 1967 for three years, and again in 1970 for a similar period (a final extension of three months took it to the beginning of the MFA in 1974). Whereas the individual members of the EC had signed the original LTA and the 1967 extension, the EC as such acceded to the LTA in 1970. The main Articles of the LTA, together with a description of the differing approaches made by the importing countries to its implementation, can be found in Appendix VI to this study. 3.39. The use of the Arrangement by the importing countries varied. In the first phase, many European participants maintained some of their - 73 -
existing "residual" restrictions, while enlarging the quotas according to their commitments; a number of quotas on cotton textiles were eliminated. Canada and the United States depended to a greater degree on the use of the LTA safeguard provisions. The former negotiated a number of agreements for specific products (including non-cotton items). The United States at first resorted to many unilateral restraints, which were subsequently converted into bilateral agreements applying aggregate ceilings to the entire range of cotton textiles. It also negotiated a number of voluntary export restraint arrangements on non-cotton products with Asian suppliers. 3.40. During the later phases of the LTA, the developed countries chose to rely mainly on bilateral agreements with their principal suppliers. The product coverage varied from the total range of cotton textiles in the agreements of the EC (with the exception of cotton yarn) and of the United States, to selected items in those of the other importing countries. Background to the MFA 3.41. Developments in the 1960s gradually brought countries to the view that the LTA was no longer adequate for regulating international trade in textiles and clothing. The single most significant factor was the increased use of synthetic fibres, especially polyester and acrylic (see Table 2.8 in Chapter 2). At the same time, developments in knitting technology, using continuous filament synthetic yarns, stimulated the knitwear industry. 3.42. Against the background of the LTA, these developments had an important impact on the textile industry in the developed countries, particularly the United States. They also had the effect of putting exporters of synthetic products in a more favourable position than those of cotton products. As a result, pressure developed for the imposition of restrictions on non-cotton products. The European industry was not similarly affected, being protected by the "hard core" residual restrictions. Although the United States negotiators obtained additional voluntary export restraints on non-cotton products from some of the Asian suppliers, the pressure in Congress for quotas did not abate. This led to the United States taking the initiative in bringing the whole textile problem to the GATT. 3.43. Attempts to deal with these problems in the GATT proceeded in stages. A Working Party studied the entire textile situation, including developments in the industry, structural changes that had taken place, patterns of international trade and commercial policies adopted in different countries. This was followed by a new mandate for the Working Party asking it to identify and examine the problems affecting trade in textiles, and to suggest possible multilateral solutions to these problems, with the ultimate objective being the expansion of trade. The conclusion was that a new arrangement rather than an enlarged version of the LTA would be preferable, and that its product coverage should include the textiles of cotton, man-made fibres and wool. The need to refine the definition of market disruption, and the importance of an effective mechanism of international surveillance, were also noted. 3.44. The further a.Liberationsofthe working Party led to the establishment of Negotiating Groupto formulate the text of thenew agreement. The Group met frequently in the latter halfof 1973 and by year end had agreed on che text of the newarrangement, more commonly referred to as che Multifibre Arrangement. The terms or reference of the Negotiating Group required only that it report the terms of the new arrangement to the Council; this icdid and the report was adopted by the Council. In this process, the Council did not take any position on the relationship of the Arrangement with theGeneral Agreement. The framework of the MFA
3.45. the MFA is modeiled on linesthe of the LTA with numerous refinements and a few significantinnovation.It is generally viewed as a more balanced arrangement with respect to the rights and obligations of the exporting andimporting participant. than theLTA
"to achieve the expensionof r ! .tr(,d the deduction of ba.î.-c ; to such tradeandthe progression. Liberalization of themovieof trade in textile products . while of the same . i casuringthe orderlyand equitable development lfiof. rani- and ziC)1*!n of disrupoive effects in individual :*ç and on individual linesof production inborn importing and exporting countries".
A principal aim was the ecounomic development of the developing countries. and a substantialtarreaseinnhsta' i i:u-v *.... i t.*;- t ` : % ` clothing. 3.41. The product coverage was 1Ilcin include textilesand clothing made of wool and manmade * :as welI as andcottonbiend thereof. Itexcides ds iliîu t st', ' t . **o. c -î!e industry productsas well as tradition ethnichands.Inproductssuchproducts have been properly certified ItX -C- i d é* fra*r.e-~v:*dt 1S-, waste and soforth although the -- A d mechanismthe;'t of m L 'be applied to them in a situationt'-q1Aft t disroption.
3.48. There are two setsofbalanced might and obligation in the MFA` First, whl!e partipats ;atez.perfumedto i \. <.:'-.w *..- a mechanisms ni certain ef ned -..r ;.;,.,à . .î'` requpridtetn pursue apncourage; stracturalesuo.i . A: lurai adjusimentof theconim tht r ght atry toimposeng count i ztei restrictionobligatiorcto by the h,ttvin ia rofpect tLe pro% sions c; Annex B dealingua ith base lavel. adnîflexibilityofes anr bihiIi .n tfeatuotas. These itacureconsiderableimprovements overMt*';M v ot;,ç Cho [mo tn articipants riscptîrri :`'ii.
3.49. A nator MnnovasioneilrLhe >nA wal tht cceatiol of a multilateral surveillance TnstitutSsion - the lBxtileurB)illaoce .odv (TStt - te - 75 -
supervise the functioning of the Arrangement. Participants are required to report safeguard actions to the TSB, which reviews their conformity with the provisions of the Arrangement. It is also the principal forum for dispute settlement. 3.50. The treatment of restrictions is set out in Articles 2, 3 and 4, which form the core of the MFA. Article 2 deals with the phasing out of pre-MFA restrictions. Article 3 covers situations of actual market disruption, and can - in the event that a mutually agreed solution is not possible - involve the unilateral imposition of import restrictions. It is in connection with Article 3 actions that the TSB plays a key role because it is required to make recommendations on actions taken unilaterally. Article 4 deals with situations involving a real risk of market disruption. From the viewpoint of the MFA, only bilateral agreements are possible under Article 4 (that is, the invokation of "real risk" of disruption to justify a unilateral restraint would fall outside the scope of the MFA). TSB reviews of Article 4 agreements may result in recommendations to the parties concerned. 3.51. Pre-MFA restrictions must be notified within sixty days of a country's accession to the MFA, or eliminated. (For reasons of equity, non-contracting parties which join the MFA are required to justify their restrictions to the TSB along the lines required by GATT from Contracting Parties.) Unilateral restrictions not justified under the GATT are to be terminated within a year, unless they are included in a programme of phase-out or subsumed by bilateral or unilateral measures in accordance with the MFA. The programmed phase-out is to be conducted in stages within a maximum period of three years. with a major effort being concentrated in the first year. Similarly the bilateral arrangements are either to be terminated, or modified to conform with the MFA, within a year. These provisions are more exacting than the corresponding ones of the LTA, which merely urged the participants to progressively relax restrictions not justified under the GATT through annual increases in access. 3.52. In situations of market disruption, the importing country is required to consult with the exporting country. The consultations may result in agreed measures, conforming to the prescriptions in Annex B of the MFA with respect to base levels (the size of the quota in the reference year), growth rates (the annual increase in the size of the quota), and flexibility (the right of the exporting country to "trade off" part of a quota on one product against the quota on another product, or to use part of one year's quota for a particular product in either the preceding or subsequent year). In case no agreement is reached, the importing country is permitted to impose unilateral restrictions, but in such cases it is required to notify the actions to the TSB.
3.53. The MFA spells out in more detail than did the LTA the system of bilateral restraint arrangements that are permitted when risk of market disruption is claimed. The MFA requires them to be more liberal on overall terms than the measures meant for situations of disruption. - 76 -
3.54. Diagnosing a situation of market disruption has always been difficult. The negotiators made considerable efforts to evolve objective criteria, but had to be satisfied with refining the LTA definition. The situation of market disruption was directly related to the existence, or threat, of serious damage to the domestic industry which could be assessed by examination of various factors such as sales, market share, profits, employment, and production. The damage must be clearly connected with a sharp and substantial increase in imports from a particular source, and/or at prices lower that those prevailing in the market for similar products from domestic as well as other import sources. It is also stipulated that the economic interests of the exporting countries should be taken into account when determining whether a situation of market disruption exists. It may be noted at this point that experience in applying the concept of market disruption has not only failed to reduce the degree of subjectivity surrounding it, but has uncovered new problems related to the workability of all the requirements which a country wishing to claim market disruption is supposed to satisfy. 3.55. Annex B of the MFA stipulates that new quotas should be large enough to accommodate the actual trade level reached during the twelve- month period terminating two or three months prior to the month when the consultations were sought. When a restraint is renewed, the new quota should not be lower than the previous one. In the case of continuing quotas, the annual growth should not be less than 6 per cent. 3.56. Annex B also provides that a particular quota can be exceeded by 7 per cent provided there is a corresponding reduction in another quota (this is called the "swing provision"). Up to 10 per cent of the unused portion of the previous year's quota can be "carried over", or an advance utilization ("carry forward") of up to 5 per cent from the following year's quota is provided for; combined use of carryover and carry forward is set at 10 per cent of the quota. These flexibilities were introduced to partially offset the rigidities of the quota system, thereby increasing the -extent to which exporters could respond to changing market conditions. 3.57. In "exceptional" circumstances, when a recurrence or worsening of disruption is anticipated, growth can be reduced below 6 per cent and swing reduced from 7 to 5 per cent. 3.58. At the request of the Nordic countries, differential safeguard treatment is provided for importing countries with small markets, high levels of imports and low domestic production. The purpose is to protect their "minimum viable production" of textiles and clothing. The annual growth rate of quotas can be reduced below the minimum of six per cent in such cases. 3.59. There are provisions in the MFA for protecting and improving the situation of the exporting participants. It provides for higher quotas and liberal growth for developing countries whose exports are already - 77 -
restrained. It stipulates that the past performance criterion should not be applied in determining quota levels for segments of trade in which the developing countries are new entrants, and that a higher growth rate should be granted in such. cases. It urges "special consideration" in respect of restrictions on cotton textiles from countries which are major cotton producers, when fixing quotas and growth rates. It also exhorts the participants to refrain from restraining the trade of small suppliers in normal circumstances. 3.60. The fact that the provisions with respect to base levels, growth rates and so forth are explicit has not prevented differences of opinion on their application. 3.61. A Textiles Committee was established as a management body consisting of all member countries. It is required to analyze the current situation of world production and trade in textiles and review the operation of the MFA. It is the final arbiter under the MFA for interpreting the provisions of the MFA, and is a court of appeal for disputes that cannot be resolved in the TSB. 3.62. The first phase of the MFA lasted from the beginning of 1974 to the end of 1977. Almost all developed countries, and developing countries which were important exporters of textiles or clothing (including some countries which were not GATT Contracting Parties) joined, for a total of 42 participants (with the EC as one participant).13 General trends in the first phase 3.63. A few trends can be identified from the manner in which the eight developed countries used the MFA. The early years were a period of transition, during which an important part of the work programme centred on the implementation of Article 2 (phasing out of pre-MFA restrictions), and the TSB played an active role. Existing régimes were allowed to continue while they were progressively supplanted by the MFA system. Participants were not fully familiar with the intricacies of the Arrangement and there were frequent disagreements in bilateral consultations during the initial period. This is apparent from the frequency of recourse to unilateral measures under Article 3. As experience accumulated, there was an increased understanding of the functioning of the MFA and the participants increasingly sought mutually acceptable solutions to their problems bilaterally rather than unilaterally. This process brought into prominence the type of anticipatory action envisaged in Article 4, which became the principal instrument for regulation of trade. 3.64. Most of the developed country participants preferred highly selective coverage of items in which they either faced or anticipated certain problems, rather than more comprehensive limitations. The United States alone continued to employ a comprehensive approach, extended to the entire range of MFA products, though in certain cases - 78
only a distinct sector of trade, such as cotton textiles, was restricted. The United States and the EC restrained both textile and clothing imports. The smaller West European countries, in contrast, directed their efforts mainly to the clothing industry and, occasionally, to made-up items. This difference is explained primarily by the fact that the latter countries' import markets for textiles were dominated by ocher developed countries, particularly those countries with which they had free trade agreements. 3.65. On the surface, the fact that the MFA extended coverage to textiles and clothing of wool and man-made fibres, as well as of cotton, would suggest that the number of restrictions would be likely to increase. But this ignores the long history of restraints on wool (and later man-made fibre) products which existed outside the GATT system. It is thus possible to describe the period of MFA I as one of "relative liberalization" of trade in textile and clothing in most of the importing countries, in that this period witnessed enhanced discipline in the regulatory measures compared to the autonomous and arbitrary methods of the past. With only a few exceptions, participants respected the obligations of the MFA and its norms in regard to base levels, annual growth and flexibility of quotas. By the end of MFA I, Japan was the only developed country whose exports were subjected to MFA quotas. 3.66. The MFA urges importing countries to avoid restraints, in normal circumstance, on the exports of countries whose share accounted for only a small percentage of total imports. In many instances, this exhortation was not observed on the grounds that chere existed a threat of what later became known as "cumulative disruption" (see below). As a result, some very small suppliers were restrained near the end of the MFA I period.
Renewal of 1977 3.67. While the MFA was negotiated against a background of sustained growth, culminating in the boom year of 1973, its renewal came up for consideration at a time when the world was still recovering from the sharp 1975 recession - a recovery which, moreover, was less pronounced in the textile and clothing industries than in many other parts of the economy. Table 3.5 gives a composite picture of the statistics through 1976 (plus the 1977 figures, which may to a degree have been anticipated). - 79 -
TABLE 3.5. - TEXTILES AND CLOTHING DEVELOPMENTSIN THE UNITEDSTATES AND THE EUROPEAN COMMNLY, 1974-1977 (Annual average rates of change and percentages)
UNITED STATES EUROPEAN COMMUNITY
1974 1975 1976 1977 1974 1975 1976 1977
Production Textiles -7 -8 10 0 -4½ -71 10 -2½ Clothing -2' -5½ 17 6½ -3½ -2 4 -1 Employment Textiles -5 -10 6 0 _5½ -6 -4 -4 Clothing -5 -8½ 5 0 -6 -6½ -3 -5 Consumer expenditure Clothing -1 3½ 5 5½ 0 2 1
Total imports Textiles 3 -24 34 8 17½ 15½ 12 Clothing 7 10 41½ 14 21½ 19 17 14 Imports from Textiles 28½ -33' 42 2 24 -3½ 30 15 developing countriesa Clothing 15½ 15 43½ 13 35 24½ 27 12½ Total exports to all Textiles 46½ -9½ 21½ -½ 17k -4 10½ 12½ destinationsa Clothing 45½ 1 33 19½ 14 14 10½ 20 Share of developing Textiles 49½2 43½ 46 43½ 16½ 16 18 19 countries in total Clothing 77½j 81 82 81½ 34 35½ 39 38½ imports (percentages) Share of developing Textiles 51½ 50½ 53½ 54 countries in Extra-EC Clothing 72½ 74 75k 75k trade (percentages)a
aIndicates figures calculated from data in current dollars. 3.68. Initially most of the participants, including the United States, were inclined to favour a simple extension of the MFA. When negotiations began in mid-1977, the EC took a different view, however. After three years of recession and rising imports, the EC member countries felt the imperative need to "stabilize the market". The EC, with support from some other importing countries, recommended that the market for certain products with a high rate of import penetration be - 80 - stabilized by means of global ceilings for imports determined at 1976 levels. This implied a "freeze" in the growth of imports from all sources and cutbacks in the exports of some individual supplying countries. It was stated that the redistribution of import opportunities, necessitated by "globalization", would favour the small suppliers at the expense of the dominant ones. The growth rate of imports from all sources would be aligned to that of consumption. The intention was to vary the annual rate of growth of imports in inverse proportion to the rate of penetration of imports from all sources. 3.69. A Protocol of Extension, to which a set of Conclusions was appended, was adopted on 14 December 1977, and MFA II came into effect for a period of four years from 1 January 1978. 1977 Protocol Extension 3.70. The most important aspect of the Protocol and the attached Conclusions related to the special problems of the EC. It was recognised that the problems should be resolved bilaterally under Articles 3 or 4 of the MFA. A provision for mutually acceptable solutions was introduced, including the possibility of "jointly agreed reasonable departures" from particular elements in particular cases. Such departures were to be of a temporary nature and the participants were to revert to the MFA framework in the "shortest possible time". 3.71. The provision for reasonable departures was a significant change in the application of the MFA. The MFA requires bilateral agreements under Article 4 to be more liberal than the measures taken under Article 3 (which can be unilateral or bilateral). The "jointly agreed" solutions permitted derogations from the requirements (for example, regarding base levels and growth rates), which nonetheless continued to be applicable to unilateral measures. This led to the anomalous situation whereby bilateral arrangements could be less liberal in terms of market access than unilateral measures, even though they involved greater security of access. 3.72. There were forty-two participants in MFA II. Australia did not subscribe to the 1977 Protocol, choosing instead to regulate imports through tariff quotas; Norway proceeded to negotiate bilateral agreements with the intention of joining, but decided against it when negotiations failed, turning instead to Article XIX of the General Agreement (see below). Trade policies in the second phase 3.73. In contrast to the MFA I period, there was a general trend towards intensification and proliferation of restrictions in most of the importing countries under MFA II. The focus of restraints shifted progrresively from textiles towards clothing, this being the area in which the developed countries were most conscious of the competitive pressure from the exporting countries in the 1970s. Bilateral agreements under Article 4 were the main instrument for regulating trade (thus there were very few unilateral actions during MFA II). Some - 81 -
importing countries were able to satisfy their needs by the wide use of the "reasonable departures" clause, and the exporting countries were induced to accept the bilateral agreements by the expectation that such agreements would involve less uncertainty than unilateral measures. Meanwhile, the phasing out of MFA restrictions against imports from Japan continued. 3.74. The practice of "departures" in the bilateral field was the dominant issue of this phase as all the importing countries resorted to departures from the MFA norms to varying extents. This was particularly true of the norms in Annex B. Generally such departures, introduced as the agreements were renewed, consisted of reductions in quotas compared to their previous levels or actual trade, denials or reductions in the degree of flexibility, and frequent use of growth rates below 6 per cent in circumstances which would not have been deemed acceptable before the introduction of the "reasonable departures" clause. The most extensive use of departures was made in the agreements negotiated by the EC and Sweden. 3.75. Even though the special provisions regarding the least developed countries were reaffirmed in the Protocol, many exporting participants with very small shares in imports were subjected to restrictions, based on the contention that a small addition to an already large volume of imports from low cost suppliers can be, in and of itself, disruptive (for all practical purposes, "low cost suppliers" became synonymous with developing countries when competition from Japan in textiles and clothing ceased to be a major issue). In applying the MFA, the possibility that an increase in imports from another developed country could be, in and of itself, disruptive seems not to have been considered by importing countries, except in the case of products from Japan. 3.76. The broad use of "reasonable" departures (rather than being limited to "particular elements in particular cases" as envisaged in the Protocol of Extension), was viewed by many participants as upsetting the balance of rights and obligations contained in the MFA. Since the departures were "agreed to" by both parties, this development also eroded the role that had been envisioned for the TSB, namely the enforcement of the criteria in Annexes A and B of the MFA. Negotiations for Renewal in 1981
3.77. The negotiations for renewal in 1981 took place against a background of general monetary restraint in the industrial countries, as they sought to bring inflation under control following the return to double-digit price increases in 1979-80. The general economic climate was one of low overall growth, and declining growth in production and trade in manufactured goods. Developments in production, employment and so forth in the United States and the EC during the MFA II period are outlined in Table 3.6. - 82 -
TALE 3.6. - TEXTILES AND CLOTHING DEVELOPMENTS IN THEUNITED STATES AND THE EUROPEAN COMMUNlTY, 1978-1981 (Anual average rates of change and percentages)
UNITED STATES EUROPEAN COMMUNITY
1978 1979 1980 1981 1978 1979 1980 1981
Production Textiles 2½ 5½ -4½ -2 -3 5 -3-52 Clothing 0 0 -5 -5 -5 5 -5 -8 Employment Textiles 1 -1 -4½ -2 -4½ -4½ -6 -6½ Clothing 0 -2 -3 -2 -4½ -1 -4½ 48½ Consumerexpenditure Clothing 9 4 î½ 7 2½ 2½ 2 -1½ Total imports Textiles 28½ - il 21 23½ 27 6 -17½ Clothing 48½ 0 13 17 22½ 29½ 14½ -I1 Imports from Textiles 26½ 102 9½ 17 20½ 34 9 -19½ developing countries Clothing 51 1½ 14 15 19½ 35 19 -5½ Total exports Textiles 13½ 43 14 -½ 20½ 20½ 5s -13 Clothing 7½ 33 27 3 21½ 24 10½ -l11 Share of developing Textiles 42½ 47½ 47 45½ 18½ 19½ 20 19½ countries ln total Clothing 82½ 83½ 84½ 83 37½ 39 40½ 43½ sports (percentages)a Share of developing Textiles 53½ 53 51½ 51 countries in Extra- Clothing 74½ 74½ 74 75½ trade (percentages)a
aIndicates figures calculatedfrom data in current dollars.
The second Protocol 3.78. The participants agreed late in December 1981 to renew the MFA for a further term of four years and seven months. This was based on certain understandings regarding its operation in the third phase. Efforts were directed primarily toward reconciling the main concerns of the importing countries with the developing countries' desire to restore discipline to the Arrangement. The solution was found by reiterating full support for the discipline of Annex A and procedures of Articles 3 and 4, and by recognising that the MFA provisions pertaining to base levels, growth rates and flexibility are in the nature of rights belonging to the exporting countries, which can be waived only under specific circumstances. The provision for "reasonable departures" was not included in the protocol for MFA III. - 83 -
3.79. The EC's concern with the market access enjoyed by the "dominant suppliers" was accommodated by an expression of goodwill on the part of the latter in seeking mutually satisfactory solutions. Another proposal of the EC concerning quota levels was that while the past levels should continue to be the basis for future access, the current level of imports in previously under-utilized quotas for highly sensitive products should be regulated in such a manner as to prevent sharp and substantial increases in imports. This innovation, which came to be known as the "anti-surge procedure", was incorporated in the Protocol, with the proviso that if it was invoked, any resulting solution would include "equitable and quantifiable compensation" to the exporting country. 3.80. The clear obligation in the MFA that the use of quantitative restrictions must be accompanied by suitable economic and social policies to facilitate timely adjustment in the domestic industry, was reinforced under MFA III. To this end participants have established a permanent Sub-Committee of the Textiles Committee to monitor adjustment policies and measures on a regular basis. 3.81. MFA III took effect in January 1982 and thus far forty-one countries and territories have become members. As in the previous period, bilateral agreements under Article 4 of the MFA (as opposed to actions under Article 3) are the principal instrument for regulating trade in textiles and clothing under MFA III. Evolution of restrictions in the six countries 3.82. Japan and Switzerland have not imposed any quantitative limitations under the MFA. The other six current developed country participants have imposed such limitations, each adapting its system to its perception of the changing situation during the lifetime of the MFA. Details of each participant's arrangements will be given in an Appendix. A brief summary is provided in this section. 3.83. Most of the developed countries in the MFA currently maintain quantitative restrictions on imports of textiles and clothing from exporting areas which are not members of the MFA - in particular, Taiwan, certain countries in Eastern Europe, and China (as a result of its entry into the MFA in January 1984, China has become entitled to the same treatment as other MFA members). In most instances, these restrictions have been notified to the TSB and are included in the following pages. 3.84. Austria has consistently followed a highly selective system of restrictions covering a few products from each source. This may reflect the fact that a major part of its imports come from other industrialized countries, and thus only certain items are eligible for restraint. Compared to the situation prior to the MFA, the number of countries under restraint has decreased. The products under restraint have remained the same, with occasional liberalization. It can be seen from Table 3.7 that the focus on restrictions has shifted lately to clothing, compared to the first phase when textiles and clothing were almost equally restricted. - 84 -
3.85. Under the LTA, Canada relied on Article 3 type bilateral agreements, with a parallel system of general import permits for products facing serious competition from a number of sources. On accession to the MFA, the system was dismantled and replaced by a limited number of bilateral arrangements for some specific products. Following a substantial rise in imports, Canada felt that the situation could not be handled under the selective approach of the MFA, and proceeded to invoke Article XIX of the GATT in 1976 to introduce global quotas for virtually the entire range of apparel products.
TABLE 3.7. - EVOLUTION OF AUSTRIA'S RESTRICTIONS (Figures in brackets indicate number of products under quota. Pre-MFA restrictions cover all types of restrictions including LTA restrictions)
PRE-MFA MFA I MFA II MFA IIIa
ALL MFA Czechoslovakia PRODUCTS Japan Hungary
COTTON Egypt Pakistan TEXTILES India AND Korea, Rep. of CLOTHING Pakistan
SELECTED Philippines Egypt(l) Brazil(2) Brazil(2) TEXTILE Poland India(4) India(l) PRODUCTS Romania Japan(3) Korea, Rep. of(1)
SELECTED Poland Korea, Rep of(1) India(1) India(l) MADE-UP Romania PRODUCTS
SELECTED Poland Hong Kong(4) Hong Kong(3) Hong Kong(4) CLOTHING Romania Korea, Rep. of(5) India(2) India(2) PRODUCTS Macao(1) Korea, Rep. of(7) Korea, Rep of. (8) Singapore(l) Macao(l) Macao(3) Philipines(l) Singapore(l)
alncludes all agreements reviewed by the TSB as of 31 March 1984. 3.86. Canada signed the 1977 Protocol of Extension (that is, the MFA II agreement) in October 1978, after negotiating a series of bilateral agreements with a larger product coverage than was the case under MFA I. As is apparent in Table 3.8, the emphasis continued to be on the clothing sector, but a few selected textile items were also included. The range of restrained supplying countries was expanded. 85 -
TABLE 3.8. - EVOLUTION OF CANADA'S RESTRICTIONS (Figures in brackets show the number of categories subject to quotas or fixed consultation levels)
SECTORS PRE-MFA MFA I MFA II MFA III
Brazil(l) Brazil(1) Brazil(l) YARN China(l) Hong Kong(I) Korea, Rep. of(1) Egypt(l) Japan(1) MAlaysia(l) Greece(l) Korea, Rep. of(2) Philippines(l) Hong Kong(l) Malaysia(l) Singapore(l) Mexico(1) Portugal(l) Spain(l) ART. XIX quota on acrylic Global quota for yarn 1976-78 cotton yarn on other suppliers 1973-74
China(1) Hong Kong(1) China(2) China(2) Hungary(l) India(1) Hong Kong(4) Czechoslovakia(l) FABRICS India(l) Japan(3) India(l) India(l) Japan(3) Korea, Rep. of(3) Japan(3) Korea, Rep.(3) Korea, Rep. of(5) Poland(l) Korea, Rep. of(4) Poland(4) Poland(l) Romania(1) Poland(4) Romaia(2) Romania(1) Uruguay(1) A.. XIX quota on double knit fab- rics 1976-79
China(3) China(l) China(4) China(4) Hong Kong(l) Hong Kong(1) Hong Kong(4) Czechoslvakia(l) MADE-UP Hungary(2) Japan(2) India(l) India(l) GOODS Japan(2) Poland(2) Korea, Rep. of(2) Korea, Rep. of(2) Korea, Rep. of(2) Pakistan(l) Poland(3) Poland(2) Poland(3) Romania(2)
ART. XIX quota on shirts Bulgaria(4) 30.11.1971 to 31.12.1978 China(12) Czechoslovakia(2) China(l) China(l) Bulgaria(8) Hong Kong(13) Hong Kong(2) Japan(l) China(21) India(6) Japan(l) Korea, Rep. of(2) Hong Kong(24) Indonesia(l) CLOTHING Korea, Rep. of(1) Singapore(l) India(6) Korea, Rep. of(15) Malaysia(l) Korea Rep. of(19) Macao(7) Singapore(l) Macao(10) Malaysia(3) Malaysia(2) Philippines(12) Poland(7) Romania(7) Phippines(10) Singapore(8) Romania(8) Thailand(7) Singapore(7) Sri Lanka(2) Thailand(5)
ART. XIX quota on 17 clothing items 29.11.1976 to 31.12.1978
aIncludes all agreements reviewed by the TSB as of 31 March 1984. - 86 -
3.87. Under MFA III, some of the agreements contain an aggregate or group ceiling with a mixture of individual quotas and consultation levels. The new base levels generally show some increases, except a few cut-backs in the case (particularly) of East European suppliers. Annual growth of 6 per cent is usually provided, with lower rates for some products from some countries. The treatment of flexibility has varied widely according to product sensitivity, particularly since MFA II. In order to deal with situations involving previously under-utilized quotas, Canada has used the anti-surge procedure in one of its agreements. 3.88. The European Community used the phase out mechanism of the MFA to eliminate a large number of restrictions maintained outside the GATT framework by the member States; some quotas were converted into bilateral agreements (arrangements with Poland, Romania and Hungary are discussed in more detail in the section on the Eastern trading area countries). Although the situation was to change subsequently, Table 3.9 shows that there was a substantial element of liberalization under MFA I. 3.89. The Community adopted comprehensive product coverage for agreements beginning in 1977, though quotas were maintained for selected products throughout the MFA. Products restricted during MFA II increased in number considerably relative to MFA I, and the increased number of restraints has been, more or less, maintained during MFA III. A similar situation also pertains with respect to country coverage, as is apparent in Table 3.9. 3.90. The EC used the 'reasonable departures' provision of the first Protocol to cut back quota levels of a few suppliers. Such cuts have again been made with respect to East Asian partners under MFA III. The growth rates of the EC's quotas in the most sensitive group of categories have been drastically reduced since the beginning of MFA II. Outside this group growth rates varied according to product and supplier, generally below (but occasionally exceeding) 6 per cent. The flexibility provisions in the Agreement have been somewhat circumscribed during this period. Current agreements provide for the possibility of using the "anti-surge" mechanism, but it has not been invoked to date. 3.91. Finland did not use the LTA. Its pre-MFA restrictions were con- fined to East European countries and China. During the MFA period, it has continued with a selective restraint system, concentrating on a few clothing items. As is apparent from Table 3.10, the number of restricted sources increased in the second phase and since then the country and product coverage have remained essentially unchanged. Finland has utilized the MFA provision which allows countries with small markets to grant "low" growth rates for quotas in order to sustain a minimum viable level of production. TABLE. 3.9. - EVOLUTIONOF THEEUROPEAN COMMUNITY'SRESTRlCTlONS
PRE.-MFA MFA I MFA Il MFA III SUPPLIER _-_ _---_-- rC G RH I F 1 R 1 DK CICQ IR rt C QQ CQq cq Rq
Argentina - SC. (Tex. 2) Tex (1) lA NA grazil QA (c) (Tex. 4) (Tex.5;cln.5) Tex (t); cIo (4) SC (Tex.h; clo. ) cIn (3) bulgarla QI (A) nQ OR (11) qI CO (2J) Sc (Tex.>;cia.4) Tex (Z): cIo (A) SC (Tex.6; clo.ll) Tex (<); cIo (3) SC (Tx.4; cIo. I0> Tex (7>; cI" (4) China QR QR (5) q2 (1à) :q (2') Xc (Tex.?;cin. I) Tex (1); ciO (9) Sr (Tex.5; ca.>7) clo lS) SC (Tex.4; clo.6) cio (5) Calambln QR (c) QR (c) Sr (tex.4) SÇ (Tex.]) a <5> Sc (Tex.2) Cechaaxovak - QR (19) QR Bq QR (15) QR rQ (2J) SC (Tex..1;clo.9) Trx (2); cIo (ln) SC (Tex. 19; cIo.22) Tex (11): cIo (4) SC (Tex.i3: cio.22) Tex (190; cIo (4) rayrt I.TA _ qq (M (Ç) - St. (Tex.I) Tex (2); cIo (1> SC (Tex.I; ca.l1) Tex (1) llanî Ka s LTA QR (13) _R nR CIA> Mq (2A) sr. (Tex..1:I0 . 13) cia (3) ,CC (Tex.9, clo.3S) Trx (I) SC (Tex.6; clo.34) Tex (2); ao (3) Rsngury - QR (2n) QI li QR (IS) OR (15 QI (24) .q (2) ,c (Tex );cla. I l) Tex (t): cIo (9) IC (Tex.12; clo.l9) Tex (2); cIO (1) SC (Tex.9; cla. IS) Tex (2); cI" (3) I.TA - qî (A) LTA ct (25) SC (Tex.4;cln. 1) cio (3) SC (Tex.5; clo.9) cIo (4) SC (Tex.]; clo.10) cIO (<) Indnn"ts - SC (ci,.3) Sc (clo.4) Tex (2) .Ipan LIA PQ (A> OR ( 1 0)) ni (6> OR (16) ITA .t (Ci)A>.¶C (Tex.?) rin (2) qt (10> KaorCA, Rep. n( I.TA - qR (A) qx (A> qR (4) qt (C) _ Sc (Tex.6s:rlo. In) cIo (1) SC (Tex.14. CIO.3I Tex (3>; cIo (.13 Sc (Tex.14; clo.32) Tex (2) *a (5) QI qI Sc ria Sr cio Sc (5> BQ (c) Ce (21) (clo.I) (3> (Tex.2; c10.21) (6) (Tex.3; c10.21) cIo (ln) M qR (r) Ce (21) Çc
1. lMring tiodpre-aFA permiA, ALnrt froa tte IsA restr Community ef the ltuvil ou tnixCoLTnItyof member (
4.o rQ eenate thp nuaborooi cAtpesfrtesd.iotallte e memb thioae sea StnQet Andumb Ihe sosaeredrieaonectd morea ortmar, mbethe atespr Storpo. - 88 -
TABLE 3.10. - EVOLUTION OF FINLAND'S RESTRICTTONS (Figures in brackets indicate number of products under quota)
PRE-MFA MFA I MFA II MFA III
AGGREGATE China China TRADE OF Romania Romania ALL MFA FIBRES
TEXTILE PRODUCTS
MADE-UP India(1) China(3) ARTICLES
ALL CLOTHING PRODUCTS
SELECTED Hong Kong(2) Hong Kong(5) China(6) CLOTHING Macao(2) India(2) Hong Kong(3) CATEGORIES Korea, Rep. of(8) India(3) Macao(3) Korea, Rep. of(5) Malaysia(l) Macao(5) Romania (4) Pakistan (1) Singapore (l) a Romania(4) Sri Lanka(1) Thailand(2) Thailand (2)
aThe MFA II agreement with Sri Lanka is yet to expire.
3.92. Prior to the MFA, Sweden maintained restrictions on imports from several suppliers. In the initial period of the MFA, it placed restraints on selected clothing and made-up items, as is evident in Table 3.11. Since MFA II, it has switched to a comprehensive system covering sixteen clothing and five made-up product groups. There is either an aggregate ceiling with individual quotas or individual quotas on some -categories and the rest are grouped together under a common limit. - 89 -
TABLE 3.11. - EVOLUTION OF SWEDEN'S RESTRICTIONS (Figures in brackets indicate number of products under quota. Pre-MFA restrictions cover all types of restrictions including LTA restrictions)
PRE-MFA MFA I MFA II MFA IIIa
TEXTILES Japan
ALL CLOTHINC Mauritius long Kong Pakistan AND MADE-UPS India Sri Lanka (COMPREHENSIVE) Korea, Rep. of Malaysia Macao Malta Mauritius Pakistan Philippines Singapore Sri Lanka Thailand Yugoslavia
SELECTED Hong Kong(1) Hong Kong(1) Brazil(2) Brazil(2) MADE-UP India(l) India(l) Malaysia(l) CATEGORIES Macao(1) Japan(1)
SELECTED Hong Kong(7) Hong Kong(9) Brazil(6) Brazil(6) CLOTHING India(2) Korea, Rep. of(3) Malaysia(5) Indonesia(5) CATEGORIES Korea, Rep.of(2) Macao(4) Macao(3) Malaysia(4) Malaysia(l) Malta(l) Singapore (3) Pakistan() Singapore(5) Sri Lanka(3) Thailand(4)
aThe results of the renegotiation of agreements with Hong Kong, India, the Republic of Korea, Macao, Malta. Mauritius, Philippines, Singapore, Thailand and Yugoslavia in third phase are not yet available. 3.93. Under MFA i there were a few instances of cut-backs in the base levels of the quotas. Under MFA II Sweden (which has made use of the "minimum viable production" provision) made frequent use of the provision for reasonable departures to make repeated cut-backs. Growth rates which were of the order of 3 to 4 per cent in MFA 1, were reduced thereafter to nominal levels which seldom exceeded I per cent. In general, where flexibility is permitted it is set at low levels. Very low growth rates and very small flexibility continue to apply in MFA III - 90 -
agreements. Sweden has also included an anti-surge mechanism in two of its current bilateral agreements, similar to that of the European Community. (Sweden's arrangements with Poland, Romania, and Hungary are discussed in more detail in the section on the Eastern trading area countries.) 3.94. The United States had consistently followed a system of aggregate control of trade in textiles and clothing prior to the MFA. Pre-MFA restrictions consisted of agreements negotiated under the LTA on cotton textiles and agreements with major Asian suppliers on textiles other than cotton concluded outside the GATT. During MFA I a large number of restrictions were eliminated, others were converted into comprehensive multifibre agreements, and s. others continued on cotton products, being confined mostly to a few cotton producing countries. 3.95. Under MFA II there is some evidence of aggregate controls being dismantled in favour of quotas on selected categories. This process has been carried forward during the current phase. This has also involved large suppliers, though in their case a considerable number of categories continued to be subject to specific limits. 3.96. The bilateral agreements continue to be comprehensive in product coverage. Previously, there were consultation levels for unrestrained categories which could not be exceeded without agreement by the importing country. In many of the current agreements, these levels have been replaced by consultation procedures which are meant to be invoked in the situations defined in the MEFA. 3.97. Although there have been recent actions involving textiles (from the Republic of Korea, Thailand and China), these are exceptions, it being evident from Table 3.12 that the majority of United States restraints are now on clothing. 3.98. There are a few instances of the United States reducing quotas. The growth rates in the aggregate have always remained at 6 per cent or more, except in the agreements with Fast Asian countries. The wool sector has always been given a low growth of one per cent. As was noted above, however, this is generally compensated by higher rates elsewhere. The flexibility provisions are generally in conformity with the MFA. There were a few instances of their reduction during MFA Il. Quota utilization rates 3.99. Many discussions of the MFA system implicitly assume that all the quotas are fully filled each year. In fact, that is the exception rather than the rule. In this section we review briefly recent data on quota utilization rates in five of the developed country participants in the MFA. - 91 - TABLE 3.12 - EVOLUTION OF TRE UNITED STATES RESTRICTIONS (Figures in brackets indicate number of categories under restraints)
PRE-MFA MFA I MFA II MFA IIIa
AGGREGATE Hong Kong Colombia Hong Kong Malaysia TRADE OF Japan Hong Kong India Philippines ALL MFA Korea, Rep. Japan Korea, Rep. Poland FIBRES Macao Korea, Rep. Macao Singapore Malaysia Macao Philippines Singapore Malaysia Poland Taiwan Mexico Singapore Philippines Taiwan Singapore Romania Taiwan Thailand COTTON Haiti Brazil AND MMF PRODUCTS COTTON Brazil Brazil Brazil Pakistan PRODUCTS Colombia Czechoslovakia Pakistan Czechoslovakia Egypt Egypt India El Salvador Pakistan Greece Poland Haiti Hungary India Jamaica Malta Mexico Nicaragua Pakistan Peru Philippines Poland Portugal Romania Spain Thailand Yugoslavia ALL Colombia Colombia CLOTHING Malaysia India Romania Romania Thailand SELECTED Belize (1) China(13) China(31) PRODUCT Costa Rica(2) Dominican Rep.(4) Costa Rica(1) CATEGORIES Italy(1) Haiti(5) Haiti(10) Japan(10) Hong Kong(33) Mexico(9) Hungary(3) Sri Lanka(4) Indonesia(3) Yugoslavia (1) Japan(8) Korea, Rep.(35) Mexico(9) Mauritius(15) Sri Lanka(15) Taivan(35) Thailand (21) Yugoslavia(1)
aIncludes all agreements reviewed by the TSB as of 31 March 1984. - 92 -
3.100. Evidence on quota utilization rates by selected textile exporting countries for the period 1979 to 1982, drawn from information supplied by five importing participants (Canada, the European Community, Finland, Sweden and the United States), is presented in Tables 3.13, 3.14 and 3.15. In interpreting these tables it should be noted that the calculations for the individual developed country participants are not strictly comparable because of some differences in the available basic data. Details about the data base and the methodology used for calculating the utilization rates are given in the "Technical Notes" section at the end of the study. 3.101. Table 3.13 provides simple averages of the individual utilization rates for 21 selected supplying countries for each importing area (provided. there are quotas) and each year under inspection. Judging from the 1982 figures, four points are particularly noteworthy: - As a general rule, average quota utilization rates are below 100 per cent. In fact, out of a total of 70 observations, there are only two cases in which, on average, imports under the quota systems attain (Indonesia/United States) or, due to flexibility provisions, exceed (Pakistan/Canada) the quotas granted. In only two additional cases (Hong Kong/United States; Hong Kong/Sweden) does the average quota utilization rate exceed 90 per cent.
- The average quota utilization rates exhibit a wide spread, ranging from 1.9 per cent (Yugoslavia/United States) to 106.0 per cent (Pakistan/United States). In well over half of the observations, the average quota utilization rate falls short of 70 per cent.
- Similarily, for any given supplying country, the performance with respect to the individual importing areas differs widely. For example, in 1982 Thailand fulfilled the quotas granted by Sweden, on average, by 90 per cent, but the quotas granted by Canada by only one-third. Yugoslavia provides for an even more extreme example.
- Looking across the importing areas, it is apparent that the average quota utilization rates are usually higher for Sweden and the United States than for the others covered in the table. These observations indicate that full quota utilization is the exception rather than the rule. - 93 -
TABLE 3.13. - SIMPLE AVERAGE QUOTA UTILIZATION RATES IN TEXTILES AND CLOTHING BY SELECTED SUPPLYING COUNTRIESa FOR FIVE IMPORTING COUNTRIES, 1979-1982 (Percentages)
1979 1980 1981 1982
Hong Kong Unites States 83.4 86.1 90.1 90.8 Canada 76.9 66.4 67.7 75.8 EC 68.2 65.8 59.6 52.6 Finland 93.4 73.0 78.0 75.2 Sweden 85.8 69.4 94.8 Korea, Rep. of United States 77.1 85.0 95.3 87.3 Canada 62.2 42.9 57.6 71.2 EC 75.0 69.5 70.0 61.7 Finland 38.7 45.0 54.6 Sweden 84.5 85.0 71.6 Macao United States 88.7 79.7 84.7 81.4 Canada 73.3 58.1 56.8 53.1 EC 74.0 67.4 61.1 66.8 Finland 51.8 73.1 80.3 65.8 Sweden 89.6 93.0 89.2 87.0 Singapore United States 54.6 53.4 61.3 66.1 Canada 35.3 39.9 33.7 43.8 EC 69.9 63.2 52.6 40.2 Finland 24.9 16.8 0.0 Sweden 101.8 92.3 83.6 Sri Lanka United States 81.2 80.6 83.3 EC 44.6 69.2 56.3 41.8 Finland 69.7 Sweden 89.5 89.8 85.8 Thailand United States 70.2 73.4 82.0 77.3 Canada 127.8 65.3 48.0 33.3 EC 81.6 107.4 74.6 74.6 Finland 79.9 95.4 82.7 55.0 Sweden 107.4 98.4 89.6 Indonesia United States 100.0 EC 74.1 72.5 Malaysia United States 73.5 74.9 79.7 87.5 Canada 43.0 50.7 82.0 EC 65.6 63.3 56.9 51.0 Finland 70.2 56.9 98.5 Sweden 83.5 93.7 79.8 India United States 70.9 78.1 87.0 80.9 Canada 61.6 65.5 45.0 EC 66.8 71.4 62.0 51.6 Finland 72.9 56.1 38.6 49.7 Sweden 97.0 91.9 93.3 85.8 (Table continued on next page) - 94 -
TABLE 3.13. - SIMPLE AVERAGE QUOTA UTILIZATION RATES IN TEXTILES AND CLOTHING BY SELECTED SUPPLYING COUNTRIESa FOR FIVE IMPORTING COUNTRIES, 1979-1982 (continued) (Percentages)
1979 1980 1981 1982 Pakistan United States 97.4 60.2 78.9 59.7 Canada 105.3 102.7 97.5 106.0 EC 53.6 77.9 60.0 68.5 Sweden 51.8 70.8 79.0 Philippines United States 37.3 39.6 45.9 45.6 Canada 69.3 50.6 47.5 47.1 EC 73.4 86.7 74.3 66.2 Sweden 91.1 59.4 79.3 Brazil United States 23.1 17.4 39.5 39.8 EC 61.7 56.3 47.2 43.3 Sweden 54.1 49.1 Colombia United States 56.2 56.0 71.9 46.9 EC 64.7 75.4 35.3 35.4 Mexico United States 56.9 71.6 56.0 33.9 EC 35.1 30.4 5.1 6.0 Bulgaria Canada 46.1 23.8 11.4 33.0 EC 42.3 45.3 35.6 32.7 Czechoslovakia Canada 102.0 70.5 60.5 69.5 EC 62.4 64.2 Hungary Canada 168.8 57.0 5.0 75.0 EC 54.7 55.4 39.5 32.5 Poland United States 20.2 32.8 28.4 24.2 Canada 78.4 52.6 51.2 54.3 EC 68.2 58.9 45.5 32.9 Romania United States 68.3 39.7 78.3 64.4 Canada 89.6 134.6 37.9 33.0 EC 57.0 46.5 39.7 50.0 Yugoslavia United States 16.1 0.8 0.4 1.9 Sweden 82.8 68.7 75.8 73.5 China United States 87.1 91.3 77.7 Canada 169.8 99.1 115.1 64.2 aSupplying countries have been included in this table when they have a restraint with more than one of the five importing areas for which quota utilization data have been received. The above data are of limited comparability in terms of quota definitions, product categories and time periods covered. They should be taken therefore as only rough indications of the relative performance of supplying countries in the five import markets. - 95 -
TABLE 3.14 - UNITED STATES - QUOTASa AND QUOTA UTILIZATION RATESb BY SUPPLYING COUNTRIES, 1979-1982
IMPORTS QUOTAS
Total textile Total under Quotas filled Average quota and clothing quota Total over 90% utilization rates categories number % of value Trade Per cent of trade Simple weighted Million $ Million $ of total Number under quota average average
Japan 1979 1980 557 189 33.9 s 39.1 43.2 1981 5 49.0 . . . 1982 769 410 53.3 Il I 1.5 63.1 71.1 Hong Kong 1979 556 1 150 73.9 28 14 74.1 83.4 93.1 1980 1 771 1 392 78.6 29 12 71.2 86.1 95.6 1981 29 18 . . . 90.1 1982 2 113 1 599 75. 26 20 94.1 90.8 100.0 Korea. Rep. 1979 852 613 71.9 .1 10 47.8 77.1 85.3 1980 1 035 770 74.4 25 15 69.8 85.0 94.0
1981 . . . 25 18 95.3 1982 1 404 1 072 76.4 32 20 84.9 87.3 96.2 Taiwan 1979 I 147 795 69.3 19 12 69.8 85.3 86.0 1980 1 470 950 64.6 20 15 88.9 96.7 102.1 1981 25 17 89.8 1982 I 882 . .307. 69.4 29 21 94.5 94.4 106.5
Macao 1979 78 68 87.2 13 8 67.4 88.7 95.S 1980 103 81 79.0 13 7 77.6 79.7 97.9
1981 13 a 84.7 . . . 1982 134 101 75.7 13 8 84.1 81.4 93.9
Singapore 1979 139 110 79.2 9 2 33.8 54.6 85.1 1980 154 124 80.6 9 38.4 53.4 88.1
1981 ...... 10 4 61.3 1982 185 160 86.3 il 5 48.3 66.1 80.1 Sri Lanka 1979 1980 65 52 80.6 5 2 17.9 81.2 80.5 7 4 1981 ...... à 80.6 1982 106.4. 77 74.5 7 3 20.8 83.3 85.7
Thailand 1979 78 55 70.5 13 5 37.9 70.2 80.9 1980 79 57 71.9 13 4 48.8 73.4 76.6 1981 13 6 82.0 1982 138 99 71.8 14 4 39.9 77.3 83.2 Indonesiae 1979 1980 1981 1982 65 45 70.0 2 2 100.0 100.0 100.0
Malaysia 1979 34 69.9 6 2 40.9 73.5 80.0 1980 39 18 46.7 6 3 64.6 74.9 84.8 1981 .i.i 8 4 79.7 1982 67 67.6 8 4 30.4 87.5 85.8.i à Maldives 1979 1980 1981 1982 1 1 100.0 100.0 100.0
India 1979 319 119 4 1 70.0 70.9 93.6 1980 347 108 31.3 4 2 82.8 78.1 85.3 4 1981 . à.. . 2 ... 87.0 . 1982 287 109 37.9.9. 4 1 7.3 80.9 75.37;. Pakistan 1979 82 43 S2.4 7 2 18.4 97.4 92.2 1980 87 38 43.1 7 2 65.1 60.2 83.9
1981 7 3 ... 78.9 . 1982 105 53 51.1 10 2 37.1 59.7 85.1si Philippinesf 1979 214 177 82.5 83 4 7.5 37.3 63.6 1980 241 196 81.6 77 7 16.1 39.6 65.9
1981 ...... 74 1S ... 45.9 1982 279 241 86.3 75 il 22.0 45.6 70.0
(Table continued on next page) - 96 -
TABLE 3.14. - UNITED STATES - QUOTASa ANDUTILIZATIONQUOTA RATESbBY SUPPLINGCOUNTRIES, 1979-1982 (continued) IMPORTS QUOTAS
Total textile Total under Quotas filled Average quota and clothies quota Total over 90% utilization rates categories number % of value Trade Per cent of trade Simple weighted Million $ million $ of total Number under quota average average
Mauritiust 1979 1980 1981 ...... 1 1 100.0 98.4 98.4 1982 13 1 1I 100.0 100.0 100.0 Brazile 1979 90 24 26.8 18 1 3.S 23.1 35.2 1980 92 22 23.5 1a - - 17.4 27.6 1981 ...... 18 2 ... 39.5 1982 92 I1 12.2 4 - - 39.8 43.3 Colombia 1979 S3 17 32.3 S - - 56.2 62.0 1980 43 14 32.9 S - - 56.0 52.7 1981 ...... S I - 71.9 1982 S3 21 *0.1 5 1 7.8 46.9 43.5 Costa Rica 1979 1980 *0 18 45.7 1 1 100.0 102.6 102.6 1981 ...... 1 1 100.0 97.1 97.1 1982 46 19 40.7 1 - - 88.3 88.3 Dominican Rep." 1979 76 39 51.6 4 4 100.0 116.8 112.1 1980 90 41 45.7 4 3 80.5 96.7 99.7 1981 ...... 4 2 ... 56.6 ... 1982 124 *6 36.7 4 I Sl.9 78.3 88.9 Haitie 1979 65 20 31.5 S I S3.3 68.3 84.6 1980 74 22 29.4 S I 57.3 51.8 76.3 1981 ...... 1 .. 2. 1 .. 1982 86 32 36.8 7 - - 48.9 65.5 Mexico 1979 253 141 S5.7 9 - - 56.9 64.3 1980 283 161 57.0 9 2 10.2 71.6 70.9 1981 ... . . 9 1 ... 56.0 .. 1982 218 99 45.4 9 - - 33.9 38.6 Poland 1979 63 31 49.4 36 2 29.5 20.2 74.2 1980 5S 26 47.3 22 1 20.0 32.8 58.0 1981 ...... 23 2 ... 28.4 1982 46 30 6.9 23 2 26.0 24.2 60.5 Romania 1979 46 10 22.6 4 1 30.3 68.3 74.7 1980 44 6 14.6 4 - - 39.7 46.6 1981 ...... 6 4 78.3 ... 1982 66 26 39.5 6 3 74.9 64.4 84.9 Yugoslavia 1979 19 1 4.5 1 - - 16.1 16.1 1980 12 - 0.6 1 - - 0.8 0.8 1981 ...... 1 - - 0.4 0.4 1982 9 - 2.4 1 - - 1.9 1.9 China 1979 1980 407 100 24.5 6 3 72.1 87.1 93.7 1981 ...... 10 6 ... 91.3 1982 893 459 51.4 20 8a6.5 77.7 75.4
Comprising spacific limits and agreed limits. Imports(by date of export) charged to quotas, unadjusted for flexibility provision, by agreement years. cIncluding non-MFA fibres and products. dweighed by value of imported in each calendar year. eAgreement years which do not correspond with calendar years. fTotal number of quotas are in fact 116. Number of quotas givenrefers to those actually utiltzed. Quotas refer to the 'knitwear group', comprising10 categories. 97
TABLE 3.15. - EUROPEANCOMMUNITY QUOTAS AND QUOTA UTILIZATION RATESa BY SUPPLYING COUNTRIES ES 1979-1982
IMPORTS QUOTAS
Total textile Total under quota Total Quotas filled Average quota and clothings numberc over 90% utilization rates categories Trade Per cent % of trade Simple weighted Million ECU Million ECU of total Number under quota average average
Hong Kong 1979 1 297 1 197 92.3 42 il 68.9 68.2 90.8 1980 1 454 1 397 96.1 46 il 43.5 65.8 84.8 1981 1 667 1 583 95.0 46 7 31.5 59.6 80.1 1952 1 724 1 632 94.7 46 4 35.4 52.6 79.0 Korea, Rep. 1979 588 525 89.4 44 14 53.4 75.0 91.3 1980 669 594 88.9 4S 18 78.9 69.5 93.7 1981 914 839 91.8 46 17 78.7 70.0 94.7 1982 940 893 95.1 48 10 46.9 61.7 89.4 Macao 1979 156 137 87.5 22 10 60.6 74.0 93.8 1980 220 167 76.0 23 9 20.4 67.4 92.1 1981 249 198 79.6 26 4 12.4 61.1 81.9 1982 270 213 78.9 26 8 48.1 66.8 86.1 Singapore 1979 116 99 84.9 14 4 61.4 69.9 95.2 1980 126 104 82.4 14 3 59.1 63.2 86.4 1981 137 108 78.6 14 - - 52.6 69.8 1982 128 97 75.6 14 - - 40.2 61.9 Sri Lanka 1979 29 14 47.7 5 1 43.8 44.6 79.1 1980 45 22 50.0 5 1 41.9 69.2 102.0 1981 55 21 37.7 5 2 77.9 56.3 88.3 1982 63 16 26.0 5 1 49.4 41.8 74.0 Thailand 1979 131 72 55.4 8 2 70.6 81.6 89.3 1980 158 87 55.5 9 4 22.9 107.4 106.6 1981 193 117 60.7 il 2 31.9 74.6 80.7 1982 227 144 63.3 il 3 18.8 74.6 82.5 Indonesia 1979 1980 1981 36 23 62.8 2 1 56.4 74.1 76.2 1982 45 22 48.9 3 1 36.4 72.5 78.1 Malaysia 1979 78 57 73.6 10 1 18.1 65.6 77.7 1980 79 60 75.3 10 1 19.9 63.3 73.3 1981 9S 65 68.4 10 - - 56.9 63.2 1982 95 66 69.3 10 - - S.0 59.2 India' 1979 557 321 57.6 14 3 14.9 66.8 77.4 1980 664 338 50.9 14 3 23.2 71.4 78.8 1981 716 358 50.0 14 4 37.6 62.0 75.2 1982 688 280 40.8 14 3 22.8 51.6 69.6 Pakistan 1979 192 71 37.0 8 1 74.6 53.6 84.1 1980 253 80 31.6 8 2 26.1 77.9 89.6 1981 250 79 31.6 8 1 6.3 60.0 75.3 1982 273 100 36.7 8 2 76.8 68.5 89.4 Philippines 1979 106 31 28.7 9 3 32.7 73.4 80.5 1980 119 69 58.2 il 6 52.9 86.7 87.3 1981 148 83 56.2 12 1 3.4 74.3 70.0 1982 155 100 64.6 13 1 7.6 66.2 64.2 Egypt 1979 119 46 38.5 2 2 100.0 106.9 108.2 1980 147 48 32.4 2 1 69.1 82.1 85.7 1981 175 53 30.2 2 1 75.0 76.3 83.9 1982 197 73 37.3 2 1 78.7 88.5 102.6 Argentina 1979 114 18 16.1 2 - - 39.4 54.2 1980 108 22 2O.S 2 1 36.9 68.0 60.7 1981 134 18 13.3 2 - - 32.6 30.8 1982 122 24 20.1 2 1 35.5 63.1 54.1 (Table continued on the next page) - 98 -
TABLE 3.15. EUROPEANCOMMNITY- QUOTAS ANDQUOTA UTILIZATION RATESa BY SUPPLYING COUNTRIES 1979-1982 (continued)
IMPORTS QUOTAS
Total textile Total under quotas Total Quotas filled Average quota and clothing number over 90% utilization rates categories Trade Per cent % of trade Simple weighted Million ECU Million ECU of total Number under quota average average
Brazil 1979 228 158 69.2 13 3 40.4 61.7 78.6 1980 257 185 71.9 13 1 39.2 56.3 81.1 1981 259 190 73.6 13 - - 47.2 73.5 1982 293 220 75.2 13 1 42.3 43.3 86.6 Colombia 1979 36 26 70.5 2 - - 64.7 70.1 1980 42 32 77.1 2 - - 75.4 77.8 1981 31 24 79.4 2 - - 35.3 38.6 1982 28 19 63.5 2 - - 35.4 35.5 Mexico 1979 49 il 22.1 2 - - 35.1 46.9 1980 54 10 19.2 2 - - 30.4 36.2 1981 30 2 6.1 2 - - 5.1 6.7 1982 34 2 6.4 2 - - 6.0 9.8 Peru 1979 67 23 34.0 3 2 95.1 93.8 122.7 1980 66 18 26.7 3 - - 67.3 74.0 1981 74 22 29.2 3 1 65.5 68.6 82.1 1982 85 26 30.1 3 1 71.1 64.6 93.5 Bulgaria 1979 45 21 46.7 13 1 32.8 42.3 77.2 1980 48 23 48.0 13 2 35.8 45.3 76.6 1981 42 24 55.8 14 2 31.0 35.6 52.3 1982 51 26 50.9 14 3 48.8 32.7 64.6 Czechoslovakia 1979 1980 1981 169 134 79.1 41 4 22.0 62.4 73.4 1982 186 147 79.3 41 10 40.9 64.2 78.7 Hungary 1979 238 166 61.2 33 4 36.4 54.7 71.4 1980 248 15 62.7 34 4 30.2 55.4 67.1 1981 251 153 60.9 34 - - 39.5 51.5 1982 257 15 60.2 33 1 0.9 32.5 43.2 Poland 1979 184 125 67.8 30 S 5.8 68.2 69.1 1980 194 128 65.8 30 1 0.9 58.9 62.0 1981 175 117 66.9 31 1 4.1 45.5 46.6 1982 .160 105 65.6 31 1 5.0 32.9 35.0 Romania 1979 259 198 76.3 31 S 31.9 57.0 76.0 1980 246 177 72.1 32 2 13.0 46.5 70.3 1981 248 181 73.2 32 - - 39.7 61.4 1982 307 223 72.6 32 5 17.5 50.0 73.4
aImports charged to quota unadjusted for flexibillty provisions. blncluding non-MFA fibres and products. eExcluding regional quotas. dweighted by value of lmports to each year. For two quotas where quota/import rate was distorted by handloom imports the quota/licence rate was taken. The trade weighted average quota utilization rate could ont, however, be adjusted for handloom Imports. 1979 and 1980 refer to EC(9); 1981 and 1982 refer to EC(10). - 99 -
3.102. This conclusion is supported by the findings for the years 1979 to 1981. In general, the picture is not much different from that described for 1982. However, it appears that the average quota utilization rates are highly volatile over time. In part, this simply reflects the fact that the performance in one year is not independent from the performance of the preceding year, due to flexibility provisions. A systematic trend towards either higher or lower quota utilization rates can hardly be discerned. If anything, there exists a certain tendency towards lower utilization rates in the two more recent years, except for the United States. Yet not much can be read into this information given that it is based on only four years' data and, moreover, that these observations refer to a period in which economic activity ranged from relative prosperity to recession. 3.103. As mentioned above, the information discussed thus far is based on averaging quotas in a way which attaches an equal weight to each individual quota. Of course, this procedure shapes the results of the calculations in a particular way as compared to a different weighting scheme. Which one of the various weighting possibilities produces "true" averages cannot be answered in a general manner. It depends on the issue under investigation. One alternative to the simple averages in Table 3.13 is to weight the quota utilization rates by actual trade flows, so that the weighting scheme tends to reflect the "interest" of the exporting countries with respect to the individual product categories. It goes without saying that this methodology has its own shortcomings because the amount of imports for each individual product category is not independent from the size of the quota granted even if a quota is not fully utilized. 3.104. Tables 3.14 and 3.15 present more detailed information on textile imports under quota, and quota utilization rates for the two largest import markets under inspection, notably the United States and the European Community. These two tables employ slightly different samples of textile exporting areas than those shown in Table 3.13. As is evident from these tables the share of textile imports subject to quota, as a proportion of all textile imports (including non-MFA fibres and products) differs widely across the five importing areas, from 6 to over 90 per cent in the case of the European Community and from 0.6 per cent to more than 80 per cent in the case of the United States. For any given exporting area, there tends to be little change in these shares over time. But there are exceptions where the shares decreased or increased significantly, say by more than ten percentage points, between the earliest and the latest year of observation, notably in the case of the United States. These shifts over time reflect both changes in demand and supply patterns and changes in the number of product categories under quota. 3.105. In 1982 the share of quotas filled over 90 per cent was roughly one-third for the United States and roughly one-sixth for the European Community, given the respective samples of supplying countries. In earlier years the picture was not dramatically different. - 100 -
3.106. For both importing areas, quota utilization tends to increase with the importance of the product category for the exporting country. In consequence, the trade weighted average quota utilization rates are generally higher than the simple averages, in a number of cases, by a substantial margin (for example, more than ten percentage points). Yet, average quota utilization rates of 100 per cent (or more) remain the exception. The earlier findings with respect to the spread of quota utilization rates and the development of quota utilization rates over time are, by and large, corroborated by the figures in Tables 3.14 and 3.15. 3.107. In Chapter 4, we consider the possible reasons why a quota would not be fully filled. A Digression: the structure of current bilateral agreements of the EC and the United States 3.108. As noted above, bilateral agreements under Article 4 have become the preferred mode for controlling trade under the MFA. Because the MFA's rules govern only the general framework of bilateral agreements, it is necessary to examine particular agreements to get an idea of their specific contents. Most of the restraining countries have adopted a uniform format for such agreements. The agreements of the European Community and the United States are described briefly below, based on information currently available to the GATT secretariat. It must be emphasized that these descriptions are neither definitive nor exhaustive.
3.109. The European Community has used the same format for all the bilateral agreements negotiated under Article 4 of the MFA since 1977. It contains an undertaking on its part not to introduce QRs under Article XIX of the GATT or Article 3 of the MFA. The agreements are applicable .o the total range of the MFA products, which are divided into 114 categories and are grouped together according to their perceived sensitivity. The original five groups were reduced to three in 1983, and each sub-divided into textile and clothing items; Group I is considered to be the most sensitive.
3.110. Though the product coverage is comprehensive, restraints are placed on selected categories and may vary with each exporting country, depending upon its importance in the bilateral trade. The largest number of restraints are usually found in the agreements with East Asian and East European suppliers. 3.111. The quotas at the Community level are further sub-divided for each member State. There is a provision for transfer of unutilized quotas from one member State to another on request. In addition to the quotas at the Community level, the unrestrained categories may be restricted for one or more member States, if imports in that particular member State or States are causing problems.
3.112. The remaining categories are subject to what is known as the "basket exit procedure". Should the exports from a given country reach a specified percentage of the total imports of the product into the Community in the previous year, the EC can call for consultations with a - 101 - view to arriving at an agreed quota level; in the absence of agreement a quota may be imposed unilaterally. The procedure can also be activated for a single member State, if imports reach a prescribed share of total imports. In practice, the basket exit mechanism has not been used in an automatic manner. Quite often, imports well in excess of the threshold have not resulted in a call. During the period, calls for consultations have generally been issued when the imports have far exceeded the trigger points. Moreover, in such cases, quota levels have generally been well above the current trade levels. Nonetheless, there were nearly two hundred calls under MFA II agreements. 3.113. In addition to the Community and country quotas, the member States may, if approved by the Commission, apply Article 115 of the Treaty of Rome to restrict imports of the products under quota from other member States. The application of this Article prevents free circulation and entry via another member State. 3.114. At the present time, the quota levels can be adjusted, up to 5 per cent, by carrying over from the previous year's unutilized portion, and up to 5 per cent by advance drawing against next year's quota. Except for the most sensitive categories it is also possible to transfer quotas from one category to another, up to the same extent, in a year. Lower rates apply to large suppliers and countries in the Eastern trading area. The annual growth rates vary from category to category within agreements and from agreement to agreement. The Community had made it clear at the beginning of MFA Il that "they could not live up to new commitments which would result from the maintenance of a 6 per cent growth rate". Their idea was to vary the rate "in inverse proportion to the rate of penetration of imports from all sources". As a result, the rates have varied since then f rom as low as 0.1 per cent in the most sensitive categories to well above the prescribed rate of 6 per cent in others. However, most quotas have growth rates below 6 per cent. 3.115. The bilateral agreements of the United States also involve comprehensive product coverage, which divides all the MFA products into 108 categories. The categories are usually placed in three groups; one for textile items, another for apparel products and a separate group for woollen textiles and clothing. A few agreements are limited to cotton products or clothing items. 3.116. The standard pattern of the comprehensive agreements was to provide ceilings for the aggregate trade as well as for imports in each of the three groups. Some individual product categories are also restricted by specific limits. The present trend is to move away from aggregate ceilings, and in some cases also group limits, while maintaining individual product limits. 3.117. The categories not restrained by specific limits were subject to consultation levels which were of two types. The minimum consultation levels remained constant in all the agreements: a million "square yard equivalent" (SYE) for non-apparel categories, 700,000 SYE for clothing categories and 100,000 SYE for all the wool products. in some cases. the minimum levels had to be enlarged to accommodate the current trade, and these became designated consultation levels. The minimum as well as designated levels could not be exceeded without the agreement of the - 102 -
United States. Even though there is no set provision for growth in the "levels" they were administered flexibly, and there is no reported instance of a request by an exporting country for an increase being turned down. Nevertheless, for all practical purposes, the consultation levels could have a restrictive effect on trade. 3.118. The consultation level system has been replaced in most agreements by consultation procedures during the third phase of the MFA. The new mechanism does not contain indicative levels. If situations or threats of market disruption arise with respect to any unrestrained category, consultations can take place for the purpose of arriving at a mutually agreed quota. In most agreements, the United States can impose a unilateral quota according to agreed formulae. 3.119. The United States announced a new system in December 1983 for deciding whether to seek consultations with respect to unrestrained categories. The consideration of a possible case of market disruption will start when the import-to-production ratio is at least 20 per cent, or the increase in imports in the past twelve months has been at least 30 per cent and the exports of the particular supplying country equals at least one per cent of domestic production of particular product or category. 3.120. Annual growth rates are applied to the ceilings at the aggregate, group and category levels. The rate for the woollen product group and categories is generally set at one per cent, and is generally compensated by other provisions of the agreement. For Hong Kong and the Republic of Korea, the growth rates for all products are considerably lower than the 6 to 7 per cent growth contained in most other agreements. The flexibility provisions are generally in conformity with the norms contained in Annex B of the MFA, except in the cases of Hong Kong and the Republic of Korea. Summary comments on the LTA AND MFA 3.121. The LTA and MFA I played an important rôle in the elimination of numerous residual restrictions maintained in contravention of GATT rules. Those restrictions covered a wide range of products, with quotas that rarely kept pace with the growth of international trade. Some restrictions were removed, beginning with those covering trade in cotton products, and later those covering trade in wool and man-made fibre products. Others were replaced by bilaterally negotiated quotas with considerably higher levels and annual growth rates. A large measure of transparency, together with a less arbitrary approach to restrictions, was introduced into trade in textiles and clothing. World exports of textiles and clothing expanded steadily during the period up to 1977 (albeit at a slower pace than would have occurred without any restrictions). 3.122. On the other side of the balance sheet, it is necessary to take into account the following points:
- The LTA and MFA were intended to be temporary adjustment measures for the industries in the developed countries; they have now been in force for twenty-three years, and since 1977 the level of restrictions applied under the MFA has increased. - 103 -
- The concept of "market disruption" has tended to be applied in a loose rather than strict way to justify additional restrictions, and through the use of bilaterally agreed arrangements under Article 4 of the MFA, it has been possible to base new restrictions on an even more nebulous definition of what constitutes market disruption. - An objective examination of evidence of market disruption has been further complicated by the tendency to apply the restrictions to narrow product categories (Article 5 of the MFA specifically mentions the need to avoid "over-categorization"). - Application by importing countries of a concept of "cumulative disruption" - if the cup is full, one more drop can cause it to overflow - has resulted in restrictions being imposed on developing countries which are relatively insignificant suppliers of the particular produc(s). - The point just mentioned acquires added importance from the fact that - with the exception of certain restrictions by the United States on imports from Japan - the developed country members of the MFA do not, in practice, apply MFA restrictions on their mutual trade in textiles and clothing; in 1980, that mutual trade (excluding EC intra-trade) accounted for 26 per cent of world trade in textiles and 20 per cent of world trade in clothing; if EC intra-trade is included, the figures are 45 and 39 per cent, respectively (see Tables 2.10 and 2.11). - While bilateral agreements under Article 4 are intended to improve the security of market access for the exporting countries. the fact that a number of them include provisions for consultations that can result in additional products being brought under restraint has become a source of uncertainty. - The effectiveness of the TSB was eroded during the MFA II period because of the "reasonable departures" clause in the MFA II Protocol. 3.123. An overall evaluation of the LTA and MFA would include, in addition to the above points, Chapter 4's analysis of the effects of those arrangements. Two points are clear at this stage, however. First, MFA II and III have been much more restrictive than the LTA and MFA I. Second, any judgement about the merits of the LTA and the MFA in its different versions requires making an explicit assumption about what would have been the policies in the absence of those two arrangements. - 104 -
(c) Outward processing trade 3.124. Various developed country participants in the MFA engage in outwardd processing trade" (OPT). In this section we focus on the OPT tariff provisions of the United States and the EC. 3.125. Outward processing trade refers to the temporary export of materials for processing abroad, after which the goods re-enter the exporting country subject only to a tariff on the foreign value added. As far as textiles and clothing are concerned, the economic significance of such trade is three-fold: it involves a developed country sending materials to a developing country or to one of the Eastern trading area countries for the labour-intensive part(s) of the production process, it may increase the use of fabric produced in developed countries, and it may result in MFA quotas being larger than they would be in the absence of these special tariff provisions. Such outward processing trade constitutes a rapidly growing part of the manufactured exports of some developing countries, including the Mediterranean countries and Eastern Europe. 3.126. Both the United States and the EC provide special tariff provisions to facilitate such trade. The United States maintains a tariff régime only, making no distinction between textiles and clothing imports entering under the Tariff Schedule of the United States (TSUS) Item 807, and imports subject to bilateral quantitative restrictions. The EC additionally includes OPT quotas in its bilateral restraint agreements under the MFA or otherwise. Those quotas that are established outside the quantitative limits established under the MFA agreement are specified in bilateral agreements with Pakistan. Sri Lanka, Singapore and Thailand. Whether in fact the existence of OPT leads indirectly to larger quotas, or whether it has an effect on quota utilization, are subtle questions which cannot easily be answered. (Despite the importance of the quota aspect, it is important to keep in mind that special tariff treatment is the feature of OPT.) 3.127. Any United States firm may engage in OPT provided that certain conditions are met. The tariff provision includes sewing, hemming or stitching of fabric, but any operation that essentially changes the form of the exported components disqualifies it. This means that the fabric must aiready be cut and that no embroidery. weaving or knitting of materials may be undertaken if it is to re-enter the United States under 807. 3.128. OPT in the United States has increased steadily since the late 1960s, but the total remains relatively small, at around 5 per cent for textiles and clothing combined. However, imports of clothing under 807 account for 8-10 per cent of total United States clothing airports. Mexico accounts for the largest share of OPT imports into the United States (nearly 70 per cent of Mexico's clothing exports to the United States enter under item 807). Other important suppliers include the Dominican Republic, Haiti, Costa Rica, El Salvador and Colombia. - 105 -
3.129. Common tariff procedures for the EC's OPT were established in 1975. OPT is available only with supplying countries tha have signed bilateral textile trade agreements with the Community. Prior authorization is required in order to engage in OPT, but the method of distributing the licences is left to the discretion of the member States. Although the EC's OPT regulations are more liberal than United States provisions, in that the cloth does not have to be cut before being sent abroad for processing, the EC regulations are more strict in other regards: in particular (1) only established clothing firms can engage in OPT trade; (2) the re-imported p-oducts "must be in free circulation", and be of Community origin: however, they receive preferential treatment only if re-imported into the member State for which the OPT authorization was issued; and (3) the "maximum processing level" undertaken in third countries can consist of "processing from woven or knitted fabrics" into clothing. Fully fashioned knitwear from Community yarn is also considered qualified for OPT. In other words, the United States is more strict about what processing can be done outside the United States, whereas the EC is more strict about who can engage in OPT and the origin of the fabric used. 3.130. For the EC as a whole, an estimated 6 per cent of textile and clothing imports consist of OPT. The share for clothing imports alone is between 10 and 11 per cent. About 45 per cent of the EC's OPT in textiles and clothing involves Yugoslavia, about 40 per cent other Eastern European countries (Romania, Hungary and Poland) and the remaining 15 per cent Greece (now in the EC), Malta, Portugal, Spain, Tunisia and Cyprus. 3.131. In the absence of solid information on the impact of the OPT tariff provisions on the size of the MFA (and other) quotas, it is not possible to judge the impact of OPT on the level of world trade in textiles and clothing. (d) EC agreements with certain Mediterranean countries and Portugal 3.132. The European Economic Community has established special relations with countries of the Mediterranean basin and Portugal through various types of agreements with trade provisions. One important aspect of these agreements is that industrial products, including textiles and clothing, from the Mediterranean countries are granted access to the EC markets free of quantitative restrictions. The other is the abolition or phasing out of tariffs. 3.133. Since 1978, however, quantitative restraints have been applied on the exports of textiles and clothing to the EC from Cyprus, Greece (until 1980), Malta, Morocco, Portugal, Spain, Tunisia and Turkey. Relying on the argument of possible resort to the safeguard clause, the EC persuaded the above supplier countries, with the exception of Turkey, to accept a voluntary limitation of their exports. In informal "joint action memoranda", note verbale" or "exchange of letters", the partner countries agreed not to exceed certain quotas, whereas the EC guaranteed 106 -
not to apply any safeguard measures.25 In 1978 and 1979, quotas were introduced and extended until 1981. In 1982, all the arrangements were re-negotiated. These countries accepted arrangements only for a shorter period, until 1983 or 1984, claiming that the arrangements were temporary in nature and contrary to the rules of the agreements (it may be noted that the EC has agreements with Egypt and Yugoslavia under the MFA). Several safeguard measures on imports of certain textiles from Turkey have been taken under the EC/Turkey Association Agreement since 1978. 3.134. The arrangements which have been concluded with the Mediterranean countries and Portugal are more generous, in most respects, than the formal MFA agreements which the EC has concluded with most developing countries. The most obvious advantages that these countries enjoy are as follows: (i) with certain exceptions, tariffs on imports of textiles and clothing have been abolished; (ii) with the exception of the arrangement with Portugal which covers 16 categories, all the other arrangements cover very few items, much fewer than do the majority of the twenty-six MFA agreements which the EC has concluded with developing countries and Eastern trading area countries; (iii) for the 1983-1986 period, the growth rates for exports from the Mediterranean suppliers are substantially higher; (iv) more generous flexibility provisions (swing, carryover and carry forward); and (v) more generous arrangements for OPT trade. 3.135. From the viewpoint of the exporting countries, an important "less favourable" aspect of these agreements is the absence of a body with functions similar to those of the MFA's Textiles Surveillance Body. 3.136. The share of the seven countries (Cyprus, Malta, Morocco, Portugal, Spain, Tunisia and Turkey) in the EC's imports of textiles and clothing from non-EC countries increased from 11.3 per cent in 1973 to 15.1 per cent in 1978 and 17.7 per cent in 1982. Moreover, while the EC market has been contracting since 1980, and while other suppliers have been selling less to the EC, these countries managed to achieve a sizeable 13 per cent increase in exports of textiles and clothing in 1982 over 1981. (e) Safeguard, anti-dumping and countervailing duty actions 3.137. Since the late 1950s, Article XIX has been invoked with respect to textiles or clothing once each by three of the eight current developed country participants in the MFA: the United States, on wilton and velvet carpets (1962-1973; principally affected countries - EC, Japan and Sweden); Finland, on women's panty hose (1976-1979; principally affected countries - Singapore and United Kingdom); and the EC (United Kingdom), on yarn of synthetic fibres (February through December 1980; principally affected countries - United States, Canada and Japan). 3.138. Canada, in contrast, has used Article XIX more extensively in textiles and clothing. There were seven Canadian actions between 1970 and 1979 involving yarns, double knit-fabrics and clothing, and - 107 - affecting developing countries, East European countries and developed countries. The most important action was the one in force from November 1976 through December 1978 covering a range of clothing items; in that instance, the principally affected exporters were Austria, the United States, Hong Kong and the Republic of Korea. 3.139. Turning to anti-dumping and countervailing duty actions, it is necessary to preface the discussion by noting that the data described below refer only to actions notified to the GATT secretariat under the Anti-Dumping and Subsidy/Countervailing Duties Codes; it must be kept in mind that some Code participants notify only their actions against other Code participants. (At the present time, there are thirty participants in the Anti-Dumping Code and thirty participants in the Subsidy and Countervailing Duties Code, in each case the EC members representing ten of the thirty.) 3.140. From the early part of 1980 through the end of 1983, the United States, Canada and the EC (among the eight MFA participants covered in this section) notified the GATT secretariat regarding the initiation of anti-dumping actions on yarns, fabrics or made-ups (synthetic baler twine, ropes, towels, sheets and pillowcases). Four of the five United States actions involved the imposition of definitive (final) anti-dumping duties (the affected countries were Japan, China twice, and the Republic of Korea) , and one against Taiwan is pending. Three of the seven anti-dumping actions reported by Canada were terminated by findings of no injury (the exporting countries involved were France, Italy and Spain in two instances, and Japan and the Repub c of Korea in the other), while two against the Republic of Korea and Brazil ended with the imposition of a definitive duty. The remaining two are outstanding (one involving Portugal, Italy and the Netherlands, and one involving the Republic of Korea). Of the three anti-dumping actions initiated by the EC against exports from the United States during this period, two resulted in the imposition of a definitive duty, and one in a finding of no dumping. 3.141. Turning to countervailing duties, the secretariat's records indicate that between early 1980 and the end of 1983, the only notifications of the initiation of actions on textiles or clothing (by countries covered in this section) were received from the United States and Japan. Of the six United States actions, two resulted in the imposition of a definitive countervailing duty (Peru twice), one resulted in a "price undertaking" by the exporting country (Mexico), one resulted in a finding of "no subsidy" (India), one was withdrawn (China), and one is pending (Pakistan). The single Japanese case, involving carded cotton yarn from Pakistan, was terminated on the basis that "the Pakistani Government has partly abolished the subsidies and they now have little effect on exports to Japan."
(f) Other border measures
3.142. Switzerland has notified the GATT that it maintains certain provisions concerning imports of textile and clothing products, the most important of which (for the purposes of this study) is the one applicable to trade with East European countries. In the case of - 108
imports from these countries, the Swiss authorities can compare prices of comparable domestic and imported goods and may refuse permits if the price margin exceeds 10 per cent for cotton fabrics, 12 per cent for woollen fabrics and 20 per cent for clothing and other finished articles. If the aim of the provision can be achieved otherwise, for example by a balanced exchange of textile or clothing products, the provision can be waived. Switzerland has also notified an "administrative surveillance arrangement" with Hong Kong which, as yet, involves no restraints. 3.143. Certain other actions in the textile and clothing area have come to the attention of the secretariat. It goes without saying that the following brief list is illustrative rather than comprehensive: - According to press reports, in May 1983 the Republic of Korea's cotton yarn producers began to restrict exports to Japan, in return for an agreement by the Japan Spinners' Association to withdraw anti-dumping charges; the agreement is scheduled to run for three years. - In Japan there is both an import surveillance system and an administrative guidance system with respect to textile and clothing imports; the impact on the level of imports is not easy to judge; a recent description seems to conclude that the impact has not been large. - The press also reported that in January 1984 the United States Department of Commerce terminated an antidumping investigation of imports of lightweight polyester fabrics from Japan, following an agreement by the Japanese Government "to limit such shipments to 150 million square yards a year . The agreement was described as "a 'voluntary' restraint arrangement, within the context of an existing textile trade agreement between the two countries." - There are occasional allegations that certain developed country members of the MFA have used customs procedures to obstruct imports of textiles and clothing. - According to EFTA's 1982 Annual Report (p. 16), "The export of textiles from Portugal to certain EFTA countries has in varying degrees been restricted by 'voluntary restraint agreements"'. (2) AUSTRALIA, NEW ZEALAND AND NORWAY 3.144. Australia and Norway participated in the LTA and MFA I, but did not participate in MFA II, and are not currently participating in MFA III. New Zealand did not participate in the LTA, nor in the MFA. Thus the rules of the General Agreement are in principle applicable to the trade in textiles and clothing of these three countries. - 109 -
3.145. The examination of their trade policies on textiles and clothing begins with a (combined) discussion of the tariffs of the three countries. This facilitates the comparison of their tariff structures, both among the three and vis-à-vis the tariff structures of the eight developed country participants currently relying on the MFA to regulate trade in textiles and clothing. Particular elements in each country's import régime are then examined individually. (a) Tariffs 3.146. Table 3.16 provides data on Norway's pre- and post-Tokyo Round tariff rates for textiles and clothing combined, and for all manufactured goods. Because of revisions in the Australian and New Zealand tariff régimes, only post-Tokyo Round tariffs are available for them. TABLE 3.16. - TARIFFS IN AUSTRALIA, NEW ZEALAND AND NORWAY (Percentages)
Australia New Zealand Norway Post-Tokyo Post-Tokyo Pre-Tokyo Post-Tokyo Round Round Round Round
Textiles (excl. fibres) A B and clothing Weighted average 21½ 18½ 17 19 18½ Simple average 30½ 21½ 38½ 18 16½ Manufactures (excl. petroleum) Weighted average 12 11î 17 4 3 Simple average 15 12 20 9 7
A = all tariffs. B = excluding additional duties charged on imports above base quotas. 3.147. The figures in Table 3.16 indicate, first of all, that Norway's tariff reductions on textiles and clothing during the Tokyo Round were minimal. On the basis of weighted averages, the level of tariffs on textiles and clothing is about the same in all three countries, whereas the unweighted averages show New Zealand with substantially higher tariffs. With the exception of the weighted average for New Zealand, post-Tokyo Round tariffs on textiles and clothing are - as in the case of the developed countries participating in the MFA - substantially higher than the average tariff for manufactures as a whole. A comparison of Table 3.16 and Table 3.2, suggests that Norway's average post-Tokyo tariffs on textiles and clothing are roughly at the same level as Canada's, while Australia's and New Zealand's tariffs are at the high end of the spectrum, with Austria and Finland. - 110 -
3.148. Tariff data for five product categories in the textile and clothing area are given in Table 3.17. As with the other eight developed country areas (Table 3.3), there is a clear escalation of tariff levels with the stage of production, implying high effective rates of protection for made-up articles and clothing. The Australian and New Zealand nominal tariffs on clothing are the highest among the eleven developed country areas. In the case of Australia, two series of tariff averages are provided. The first series includes additional duties charged on imports above specified quota levels, which for many items are sufficiently high as to restrict above-quota imports to negligible levels, so that this series is not comparable to that provided for Norway and New Zealand. (The Australian "tariff-quota system" is discussed in detail in the next section.) The second series excludes the above-quota duties from the tariff averages. It should also be emphasised that these series refer to fiscal year 1980/81, the last year for which trade data needed for calculating the weights were available in GATT Tariff Study files. From January 1982, certain changes were made in the tariff schedules, including the replacement of existingbase tariff rates by a uniform rate of 50 per cent for clothing items. TABLE 3.17. - AVERAGE TARIFF LEVLS FOR TEXTILES AND CLOTHINGU IN AUSTRALIA, NEW ZEALAND AND NORWAY (Percentages)
Fibres Yarns Fabrics Articles Clothing
S W S W S W S W S W
Norway Pre 3 0 4 4 17 16½ 18½ 18 22½ 22 Post 2½ 0 4 4 16 15 16½ 17 20 21½ Austraila Post A 5½ ½ 9½ il 21: 1ii 17 18½ 47 SO½ B 5½ ½ 7 10½ 14½ 11 13 16½ 34½ 454 NewZealand Post 0 0 7 8½ 21 15½ 22½ Il 77½ 96
S = simple average; W = average wighted by MEN imports. A = all tariffs B = excluding additional duties charged on imports above base quotas. 3.149. On the question of tariff bindings, there are noticeable differences between the three countries covered in this section, and the eight developed country participants in the MFA. Among the latter group, the two countries with the largest share of unbound post-Tokyo Round tariffs on textiles and clothing are Austria and Sweden (just over 11 per cent in each case). In Norway, in contrast, the corresponding figure is 33.8 per cent, in New Zealand it is 65 per cent, and in Australia it is 90 per cent. - 111 -
3.150. All three countries established tariff-preference schemes for developing countries. Australia first introduced special preferences for developing countries in 1963, then replaced them with a revised scheme in 1974. New Zealand and Norway's GSP schemes were established during 1971-72; Norway has also introduced preferential arrangements for the least developed countries. 3.151. The general comments made on the GSP schemes of the other eight developed countries, regarding the generally less favourable treatment of textiles and clothing under these schemes, appear to be applicable also to the Australian, New Zealand and Norwegian schemes. Under the Australian scheme, for example, most textile and clothing products have been covered by GSP since 1981, but the GSP rates vary and generally involve a quantitative restriction. 3.152. Brief mention should also be made of two regional preferential arrangements involving Australia and New Zealand. One is the "Australia-New Zealand Closer Economic Relations Trade Agreement". This agreement was concluded in March 1983, replacing the New Zealand Australia Free Trade Agreement (NAFTA), and has as its objective the elimination of most tariffs and quantitative restrictions in trans-Tasman trade by 1988. Under the NAFTA, preferential access was available for selected textiles and clothing items in each country. However, parts of these industries, under the new agreement, are excluded from the general liberalization programme. This applies in particular to apparel items, where, "following the New Zealand review of its Textile Industry Plan [see below] and before 1988 the Member States shall mutually determine the arrangements for reducing tariffs ... [and] for liberalising import licensing and tariff quotas." 3.153. The other regional agreement is the "South Pacific Regional Trade and Economic Cooperation Agreement". This agreement entered into force in January 1981. It provides for the duty-free and unrestricted access to the Australian and New Zealand markets, a non-reciprocal basis, of exports from the Forum Island countries. In the case of textiles and clothing, however, the complete liberalization of imports from these countries applies only to selected (mainly textile) items. For the majority of items, while import duties have been reduced or eliminated, the normal global quota/licensing conditions apply. (b) Other import measures and the use made of the tariff-quota system in Australia 3.154. The discussion of Australia's other import measures can be divided conveniently into two periods - 1961 to mid-1976, when Australia effectively participated in the LTA and MFA I, and the period since mid-1976 when Australia's trade policies for textiles and clothing have been governed solely by the General Agreement. 3.155. Australia dismantled its comprehensive licensing régime by 1960. It no longer had quantitative restrictions on textiles and clothing just prior to the LTA and thus had no commitments to enlarge access during the LTA period. The first restraints were imposed on a few cotton - 112 -
products f rom Hong Kong in 1968, but these had lapsed by the time the MFA came into force (Article XIX safeguard actions taken during this period are described below).
3.156. At the .beginning of MFA I, Australia negotiated agreements with four suppliers (Hong Kong, India, Republic of Korea and Macao) involving application of export restraints on a range of clothing -items. These arrangements were for a year and were designed to deal wich situations of market disruption. They were supplemented by unilateral licensing restrictions (under the same provision of Article 3) on clothing imports from the Philippines and Singapore. With the exception of the Hong Kong agreement, these measures were allowed to lapse after a year.
3.157. in December 1974, the Australian government imposed global "tariff quotas" - outside the MFA - on certain textile items, and these were extended to additional items in 1975. Of the fourteen import categories on which this action was taken, only one involved bound tariffs, in respect of which Article XIX was invoked. 3.158. The tariff-quota system has become the predominant form of protection to the textiles and clothing industries since 1974/75.42 It involves a two-tier tariff: the "base" tariff applies to imports up to a specified level (volume in almost all cases) and is expressed in ad valorem terms. Imports above this "base quota" level are subjected to an additional specific ("penalty") duty, expressed in dollars per unit. The ad valorem eqtuivalents of the penalty duties have usually been very high. For example, the Australian Industries Assistance Commission estimated in 1976 that the ad valorem equivalents of the penalty rate of $2 per square metre on terry towels ranged from 55 to 287 per cent, and the ad valorem equivalents of the penalty rate of $2.50 per garment on brassieres ranged from 67 to 457 per cent, depending on the f.o.b. import prices of individual items. For this reason, base quota levels have rarely been exceeded by a significant margin. Thus in most cases the protective effect of the tariff-quota system has tended to be equivalent to that achieved by conventional global quotas. In mid-1976, all bilateral restrictions under the MFA were replaced by tariff quotas. The Australian government justified this action by the need for more restrictive measures than those provided under the MFA "in order to overcome serious damage to domestic producers". 3.159. It should be emphasized that under Australia's tariff-quota system, both the base tariff and the penalty duties apply uniformly to imports from all sources - except for some imports under preferential and regional arrangements with developing countries and New Zealand - although the incidence of specific duties is higher on cheaper imports. 3.160. Australia did not accede to MFA II. In 1977-78, the tariff-quota system was extended to several other textiles and clothing items, bringing the total number of import categories covered by tariff quotas to forty-six, of which three were notified under Article XIX because of tariff bindings. - 113 -
3.161. In early 1975, products to which the tariff-quota system applied accounted for 20 per cent of domestic production of textiles and 40 per cent of domestic production of clothing; by 1978, the respective proportions had increased to 30 per cent and 90 per cent. In 1978, those items of textiles covered by the tariff-quota system received, on average, protection equivalent to a tariff of 42 per cent; this compared to an average tariff of 17 per cent for non-quota items. In the case of clothing, the rates were 80 and 31 per cent, respectively. Among individual products within these sectors, rates of protection expressed in tariff equivalents ranged from 1 to 80 per cent for textiles and from 26 to 105 per cent for clothing. 3.162. Between 1978 and 1981, the item coverage of tariff quotas remained unchanged, but most quotas were adjusted at six-monthly intervals on the basis of advice from the Textiles, Clothing and Footwear Review Committee, which had been established in 1977 for this purpose. Over this period, quota levels were increased in about a quarter of the quota categories and reduced in one-sixth of them. 3.163. From January 1982, this "temporary assistance" regime for textiles and clothing was replaced by a seven year programme of assistance, in which: (a) tariff quotas have been applied to an increased range of clothing and household textiles products; (b) quotas have been replaced by production bounties for most yarns (thus in principle allowing one of the three Article XIX actions, on wool worsted yarns, to be disinvoked): and (c) most textile fabrics (except those of woven synthetic fibre) have been quota-free, although still subject to duties. The new programme allows for a controlled increase in imports, the rate of which is determined by the application of a "quota expansion factor" averaging about 2 per cent per annum and a "market growth factor", based on advice received from a newly established Advisory Committee. 3.164. The procedures for allocating quotas were also changed in the post-1982 programme. Between 1974 and 1977, quotas were allocated solely on the basis of historical import performance. Then, towards the end of 1977, the government introduced a number of administrative changes "aimed at removing some of the inequities and rigidities which had developed in the system". These changes included: (a) the introduction of a moving base; (b) recognition of imports at penalty duties as providing base performance for future quota entitlements; (c) provisions for the transfer of unused quotas; and (d) the introduction of a reserve equal to 15 per cent of total quotas for claimants suffering from anomalies in the quota allocation system. (This last amendment was mainly intended for the benefit of those local firms that had invested in OPT production facilities before the introduction of quotas; unlike the other quotas, the "anomalies reserve" was country specific.) 3.165. Under the administrative arrangements in the present seven year programme, the "anomalies reserve" was abandoned and, in effect, replaced by an auction system. In this system, the government offers a proportion of the total quota for sale by tender, in which bidders - 114 indicate the ad valorem premium, over base tariff rates, that they are prepared to pay for a quota allocation. All quotas continue to be specified in volume terms, but quota categories have been broadened to include more items per category. As with the base quota (which is still allocated according to historical performance), the tender quota is valid for one year, but the allocation is determined seven months in advance. 3.166. From 1982 to 1984, the proportion of the overall quota which was allocated by tender rose f rom 15 to 20 per cent, and the total quota itself was increased. Nevertheless, the tender premium bids for most quota categories increased in this period, suggesting a further upward trend in nominal rates of protection. 3.167. Australia has invoked Article XIX of the General Agreement seven times on textiles and clothing items since the late 1950s. As noted previously, Article XIX actions were taken in order to introduce tariff-quotas on bound items in March 1975, July 1976 and March 1978. The four other instances involved global quotas, two of which occurred before the LTA (three months in 1958, and from May 1961 through December 1964), and two during the LTA (1967-72 and 1969-72). 3.168. Since the beginning of 1980, Australia has initiated thirteen anti-dumping actions (but no countervailing duty actions). Eight of those actions resulted in either the imposition of a definitive duty (Israel, Republic of Korea three times, and Taiwan twice) or a price undertaking by the exporting country (France and China); one involved a finding of no injury (the United States), one a finding of no dumping (Italy), and three were resolved in 'other ways" (China, Japan and Taiwan). 3.169. As already noted, when Australia first introduced tariff quotas in December 1974, the government referred to the rapid growth of imports and the harm done to the domestic industry. As can be seen in Table 3.18, the value of imports of clothing increased in 1974 by 128 per cent (those from developing countries by 159 per cent) while domestic production declined in real (constant price) terms by 14 per cent; in the case of textiles, import growth amounted to 37 per cent (cur-ent prices), and domestic output fell by 26 per cent. In the same year, consumer expenditure on clothing in constant prices declined by 2 per cent. Since then, while there have been marked fluctuations from year to year, especially in the first, ew years, import growth in value terms has been considerably reduced. In 1975, imports actually declined substantially in value terms, whereas domestic production grew strongly, reversing the decline of the previous year. 3.170. From 1977, when Australia had expanded the tariff quota system to cover most of the clothing sector and a third of textiles (see above), domestic clothing production grew at an annual average rate of 7 per cent up to 1981 (the last year for which data are available) while imports grew by just under 10 percent annually in current value. In this period, the falling trend in employment bottomed out and in 1980 there was a small increase, while consumer expenditure on clothing recovered somewhat. Textiles production, after an expansion in 1975-76, 115 -
showed Iittle change on average over the next five years, while employment declined further. From 1977 to 1981, the value of imports Increased by an average of 12 per cent per year.
TABLE 3.18. - TEXTILE AND CLOTHING DEVELOPMENTS IN AUSTRALIA, 1974-1981 (Annual average rates of change and percentages)
1974 1975 1976 1977 1978 1979 1980 1981
Production Textiles - 26 25 5 - 7½ 5 - I - 1 1 Clothing - 14 7' - 5 1 8!5 7i 10!½ 2' Employment Textiles O -.19 1!- - 8'5 - 3!C - 3-' . Clothing - 1Pi -18 - 11' - 6h' - 3½ 0 2 ... Consumer expenditure Clothing - 2 - 3'! - 3! - ' I 1 5' 5 Total imports Textiles 37 -35 33½ - '! 16 l5c 12½ 4' Clothing 128 -18 29 5!5 14 - 4 7½ 24 Imports from Textiles 4 ' -40 44 4 19 27 17 1 developing countries a Clothing 159 -25 27 4!> 2l' -10 8 32½ Total exports a Textiles 21 -34'> 16 -10'^ 94 70 21' 8½ Clothing - 3' -15 2 -1l0' - 4 62½* 15'< -26' Share of developing countries in Textiles 27 25 27 28 29 32 33'i 32 total imports (percentages) a Clothing 6S'> 63 62 61 65 6fi' 61il 65½
a Indicate figures calculated from data in current dollars.
3.171. The developing countries' share of imports of clothing declined from 68½ per cent in 1974 to 62 per cent in 1976, the period in which Australia maintained restrictions under MFA I. Thereafter. there was some recovery to over 65 per cent in 1981. In the case of textiles, the developing countries' share of imports grew steadily from 25 per cent in 1975 to 33½, per cent in 1980, before declining somewhat in 1981. 3.172. The number of countries supplying textiles and clothing to Australia increased significantly between 1973 and 1982, and at a faster rate after 1978, when the country was no longer a number of the MFA. (See Appendix Tables A.13 and A. 14) This upward trend contrasts with the stagnation in the number of suppliers to industrial members of the MFA after 1973, described in Chapter Il. In the case of textiles, the number of suppliers declined between 1963 and 1973, but for clothing there was a steady increase throughout the whole period. Looking at the distribution of suppliers of textiles by share of the import market, the largest increase was in the category of suppliers with less than 1 per cent; there was little change in the number supplying from 1 to 4.9 per cent of imports, and the number of suppliers with at least 5 per cent of total imports rose from four in 1963 to seven in 1982, of which four - 116 -
were developing country newcomers. In the case of clothing, the most notable development was a sharp decline between 1978 and 1982 in the number of countries supplying 5 per cent or more of imports (from seven to four). The remaining large suppliers are all developing countries. (c) Non-tariff measures: New Zealand 3.173. New Zealand did not participate in either the LTA or the MFA. Throughout the period since 1961, imports of textiles and clothing have been subject to import licensing arrangements, the majority of which involve global quotas. These arrangements date back to 1938, when a comprehensive licensing system applicable to all categories of imports was introduced for balance-of-payments reasons. As a member of the GATT, New Zealand initially invoked Article XII to cover its licensing system, but disinvoked it in 1971. Since then, the declared purpose of the import licensing system - which has been maintained without "GATT cover" - has been to "protect domestic producers from import competition in order to foster the diversification of industryy and the development of investment, production and employment." Tha New Zealand government has committed itself in general terms to gradually replacing its import licensing régime with a régime based on the tariff. 3.174. Import quotas for textiles and clothing items are expressed in value terms and, with the exception of licences covering some trade under the regional agreement with Australia, apply to imports from any source. Licences are valid for one year, beginning 1 July. Annual global quota levels are generally specified in advance, as a percentage of their value in the preceding licence year. The percentage change in quotas usually applies across-the-board to all categories of licensed imports. 3.175. Between 1961 and 1979, import licensing applied to virtually the entire clothing sector and the majority of textiles items. Throughout this period, only some 2 per cent of domestic clothing consumption was imported and "most fabrics and yarns made in New Zealand ... had the bulk of the internal market reserved for them." In 1980 the import régime for textiles and clothing was modified in a number of ways, following recommendations by the Industries Development Commission, elaborated in the 'Textile Industry Plan'. The textile industry had been selected for study, "because it is an industry which has grown up under a high level of protection and yet has experienced low growth". The main changes were in the quota allocation procedure and the product coverage of the licensing. 3.176. Prior to 1980, global quotas applied to most textiles and clothing items and were allocated among domestic importers (mostly traders, but also some producers) almost entirely on the basis of historical import performance. This system was amended to allow 10 per cent of annual quotas for clothing to be auctioned by tender. This change was designed to increase competition in the importing sector and ta allow a better assessment of the import protection rates associated with the quantitative restrictions. - 117 -
3.177. The second major change under the Textile Plan was the liberalization of border protection for selected products. The objective of this partial liberalization was to "arrestt the downward trend by redirecting surtt to the areas of the industry with the best long-term potential," such as wool-based products, knitwear and apparel. The liberalization effort largely focused on the lowering of protection on raw materials, thus raising the effective protection on finished products, especially clothing. In addition to tariff reductions, licensing requirements were eliminated for woven non-woollen fabrics and synthetic varns, and quotas were significantly expanded for woven woollen fabrics. In addition, border protection was removed from certain made-up textiles and clothing items for which domestic production was insignificant, such as plain sheets and towels and babies' and young infants' clothing. 3.178. As a result of these measures, the proportion of textile imports subject to licensing declined substantially, to about 30 per cent (by value) while in the case of clothing it remained as high as 90 per cent. In both industries, however, the proportion of imports subject to licensing is higher than the average for all imports, which was recently estimated to be about 23 per cent. % 3.179. Apart from the liberalization specific to textiles and clothing, quotas on all categories of consumer goods were expanded each year between 1980-81 and 1982-83. However basic quota levels in 1983-84 were maintained at their values in the previous year. 3.180. In the area of textiles and clothing, New Zealand has invoked Article XIX once, from April 1975 through March 1976. This action involved woven polyester fabrics, and the principally affected countries were Japan and the United States. In the notification period covered in this study (1980-1983), there have been no notifications of countervailing duty actions by New Zealand (it is not a member of the Anti-dumping Code). 3.181. Available data are insufficient to examine trends in production and employment, even in the way that was done for Atstralia. However. it can be seen from Table 3.19 that import growth was not perceptibly affected by the liberalization measures from 1980, although a sharp increase in imports of clothing was recorded in the previous year. The share of developing countries in total imports of textiles rose from 34 per cent in 1974 to a peak of 38 per cent in 1978, before declining back to its previous level. In the case of clothing, the developing countries' share fluctuated considerably between 1974 and 1979, but then rose to 38 per cent in 1980 and 59½ per cent in 1981. 3.182. The number of countries supplying textiles and clothing increased significantly between 1964 and 1978; thereafter, the number of clothing suppliers continued to increase, but the number of countries supplying textiles remained unchanged. (See Appendix Tables A.15 and A.16) Compared to Australia, there were considerably fewer suppliers of textiles and clothing in 1982. -118 -
TABLE 3.19. - TEXTILE AND CLOTHING DEVELOPMENTS IN NEW ZEALANID, 1974-1981 (Annual average rates of change and percentages)
1974 1975 1976 1977 1978 1979 1980 1981
Total imports Textiles 56 -42 21'x - 4 22½5 30' - 5 24 Clothing 60' -26½ - i'5 17 - 8' 122 15' 5 Imports from Textiles 70 -46 38 -10'5 39'i 22 - 4½1 - 2l developing countries Clothing 77 -38 16' 14'i -22 76 68 65 Total. exports Textiles -17'i 12 54 23'à 16½ 10 30½ I Clothing 15 65 168 37 - 2'5 8' 32 14! Share of developing countries in TextiIes 34 3l'i 36 33'5 38 35's 36 34 total imports (percentages) Clothing 39'i 33'5 39'5 38' 33 26 38 59½,
aAll figures calculated from data in current dollars. 3.183. In the case of textiles, the number of suppliers with shares of 5 per cent or more of total imports remained largely unchanged between 1964 and 1982. but their combined share of imports fell from 86½ per cent to 63 per cent in this period. largely because of the decline of the United Kingdom as a supplier. The UK's decline was even more pronounced for clothing Imports. Of the seven clothing suppliers with import shares of at least 5 per cent in 1982. five were developing countries, compared to a ratio of two out of five countries in the same category in 1978. (d) Non-tariff measures: Norway 3.184. To terms of the LTA and MFA, Norway's experience has been similar to Australia's. Both participated in the LTA and MFA I. but not in MFA Il and lII. 3.185. At the beginning of the LTA, Norway used various methods for regulating textile imports. The entry of cotton textiles from some of the Eastern trading area countries was subjected te Import licensing. while cotton as well as non-cotton textiles from some other countries of the Eastern trading areawere controlled by quotas. This pattern remained unchanged throughout the LTA. 3.186. In addition, there were residual quantitative restrictions on Imports from Japan and the Republic of Korea. Norwav, along with Denmark and Sweden, had undertaken to enlarge zecess by 3 per cent annually under the LTA and this was fulfilled for those residual restrictions. Some imports from Japan were liberalized, and half-way through the first phase of the LTA the previous restrictions on the Republic of Korea's exports were replaced by a quota on cotten fabrics. The quota Ievel was increased again when the Republic of Korea became a member of the GATT. - 119 -
3.187. Norway had also negotiated a bilateral agreement with Hong Kong for certain apparel products in 1962. It remained effective throughout the LTA, with some changes in product coverage. Shortly before the MFA came into force, Norway had also negotiated bilateral agreements with Malaysia and Singapore for export restraints on shirts which continued well into the MFA period.
3.188. Norway joined the MFA at its inception and proceeded to renegotiate the existing arrangements with the countries outside the Eastern trading area. The past unilateral quotas on Macao were replaced by a new bilateral agreement. New agreements were also reached with the Philippines and Sri Lanka. Unilateral measures were taken against India and Thailand, but were later replaced by bilateral agreements. Later, the quotas on imports-from the Eastern trading area countries were also renewed. Thus, by the end of MFA I, while confining the product coverage mostly to clothing items, Norway had extended the field of restrictions more widely. 3.189. At the beginning of MFA II, Norway negotiated bilateral agreements with six developing countries with the intention of continuing to participate in the MFA. Because its efforts for a satisfactory arrangement with Hong Kong were not successful, Norway ultimately decided against continued participation in the MFA. In July 1978 (seven months after MFA II came into effect), Norway notified the Contracting Parties that it had decided to invoke Article XIX of the General Agreement and to introduce global quotas on nine product groups (mostly clothing items) beginning in 1979.
3.190. A dispute between Norway and Hong Kong concerning the size of the latter's quota under the Article XIX global quota ultimately led to the establishment of a GATT panel. The Panel's report (L/4959 of 24 March 1980) contains the following description of the details of Norway's global quota system: The size of [the] quotas [on the nine product categories] had been calculated on the basis of average imports in 1974-76 from .e countries included in the quotas, i.e. all countries except the six developing countries as well as EEC and EFTA countries. The allocation of the quotas among importers was based on their import share in 1976-77 from the countries included in the global quota system. Each importer is free to choose from which country (included in the system) he prefers to import. The six developing countries mentioned are the ones with which Norway had concluded long-term bilateral agreements prior to its decision not to participate in MFA II; they were India, Malaysia, the Philippines, Singapore, Sri Lanka and Thailand. The bilaterals with the first two countries expired at the end of 1981, and the remaining four expired at the end of 1982. Upon expiration of the bilateral agreements, Norway increased its global quotas to take account of trade from these countries. Imports from other EFTA countr es and the EC have throughout this period remained free of duties and quota restrictions in accordance with existing agreements. - 120 -
3. 191 . The decision of the Panel was that, by reserving part of the quotas for those six developing countries, Norway's "Article XIX action was not consistent with Article XIII" (the latter Article requires non-discriminatory administration of quantitative restrictions). The Panel recommended that Norway "either terminate its action under Article XIX or make it consistent with the provisions of Article XIII."
3.192. There are indications that Norway plans to re-join the MFA when it is able to conclude bilateral agreements with its principal suppliers.
3.193. In the period 1980-83, there were no notifications of anti-dumping or countervailing duty actions by Norway.
3.194. During the period of Norway's accession to MFA 1, domestic production of textiles increased slightly on average, whereas clothing output declined sharply (sce Table 3.20). In both industries, employment declined in this period, but the decline was more pronounced and persistent in clothing. This occurred at a time when consumer expenditure on clothing, after an initial decline, was growing by 6 per cent annually. During the same period, annual import growth in current value rerms averaged 12½ per cent for textiles and 24 per cent for clothing, with imports from developing countries rising more rapidly than those from other sources up to 1977.
TABLE 3.20. - TEXTILE AND CLOTHING DEVELOPMENTS IN NORWAY, 1974-1981 (Annual average rates of change and percentages)
1974 1975 1976 1977 1978 1979 1980 1981
Production Textiles - 1 - 6'5 5 6'5 -10 i 4 - 34 Clothing - 9' - 4 -11 - 3'5 - 6 - 6 - 2' - : Employment Textiles 1 - 9 - 2 3 - 3 - 3 3 - 7 Clothing - 7 _ 5! - 5 - 3 - 9' - 2' -13'l 0
Consumer expenditure Clothing - 1!5 6'i 6 6' - 4 2 3½ - 1! Total imports Textiles 24!i 2! 8! 15 1 14! 16 -15½i Clothing 21' 28! 18 29 1' 19'5 20! - 7 Imports from Textiles 33'i 4 19! 9! - 1' 18 27! -12 developing countries Clothing 32 48 35 24 -18 13 30' - 3 Total exports Textiles 24 1Il 5!5 6 2!5 21 16 -20 Clothing 17½ 3 16 13 9' 35!i 24 -17 Share of developing countries in Textiles 9'l 10 il 10'i 10 10! 114 12 total imports (percentages) Clothing 18 20!i 23! 22' 18 17 18½ 19½
aIndicate figures calculated from data in current dollars. - 121 -
3.195. Over the period 1978 to 1981, textiles production declined overall, although rising briefly in 1979 and 1980, and the downward trend in clothing output continued. The employment picture was also similar to that in the preceding period, with textiles employment rising in only one year and that in clothing declining in each of the three years to 1981. Consumer expenditure on clothing was less buoyant. In value, imports continued to increase, if at a lower rate than in the preceding period, up until 1981, when imports of both textiles and clothing declined in value terms. Imports of textiles from developing countries performed slightly better on average than those from industrial countries in this period, whereas for clothing, the developing countries share dropped suddenly in 1978 (the first year ouside the MFA) and stabilised at about this level thereafter. 3.196. The number of countries supplying imports of textiles and clothing to Norway increased throughout the period 1963 to 1982. (See Appendix Table A.17 and A.18) In the case of textiles, there was a more rapid increase before 1973 than subsequently. In contrast to Australia and New Zealand, there were no developing countries among the largest suppliers and only two (China - not an MFA member - and India) among the seventeen countries with 1 per cent or more of total imports. The same picture emerges in the case of clothing, except that one developing country (Hong Kong) had an import share above 5 per cent throughout the whole period. The number of suppliers of clothing increased by only one between 1978 and 1982. There was some increase in the number supplying 5 per cent or more of total imports, but this was matched by a reduction in the category with import shares between 1 and 4.9 per cent. In both textiles and clothing, the change in the profile of suppliers was almost entirely confined to the category having a share of imports below 1 per cent. (3) DEVELOPING COUNTRIES 3.197. The following discussion of the developing countries' trade policies on textiles and clothing is divided into two sections, one on tariffs and one on non-tariff measures. (a) Tariffs 3.198. The difficulties encountered in measuring tariff protection in developing countries are similar in nature to those experienced with respect to developed countries, but are greatly accentuated due to the lack of uniformity in available analyses of tariff structures, the mixture of specific and ad valorem rates, and the "exemptions loophole", that is, unpublished exceptions made on an ad hoc basis. Moreover, the processing of the tariff data is more difficult because none of the developing countries are members of the GATT Tariff Study Group. - 122 -
3.199. Chart 3.1 offers a general picture of the tariffs currently imposed by 21 developing areas on imports of textiles and clothing. Differences in the general level of import duties on textiles and clothing are large. In most cases average tariffs range from 25 to 75 per cent. Chart 3.2 provides tariff data for five parts of the "textile sector". As in the developed countries, tariffs on fabrics and clothing tend to be higher than tariffs on other textile products. (Hong Kong and Macao do not appear in the charts because they have no tariffs; Singapore is also duty-free except for a low tariff on clothing.)
CHART 3.1. - AVERAGE TARIFF LEVELSaFOR TEXTILES AND CLOTHING: 21 DEVELOPING MARKETS IN THE EARLY 1980s (Percentages)
~~~~~~~~~~~~~~~ 0S
-
aUnweighted averages of ad valorem duties. - 123 -
CHART 3.2. - AVERAGE TARIFF LEVELSa IN THE "TEXTILE SECTOR": 21 DEVELOPING MARKETS IN THE EARLY 1980s (a) Fibres, yarns and Fabrics (Percentages)
IND
PAK 150. PER AR 50. PAK ARS KOR Es SPK 100. FABRICS LSR
0 116 TH
50. 50 IRI FIBRES Tu PAK COL m SPMMAL 116 A S
EG ,~PT TIM ~~~~~~~~~~~-PrS ISE 0 RAL STM 0
aUnweighted averages of ad valorem duties. - 124 -
CHART 3.2. - AVERAGE TARIFF LEVELSa IN THE "TEXTILE SECTOR": 21 DEVELOPING MARKETS IN THE EARLY 1980s (b) Made-up articles and clothing (Percentages) PAL
150 ~~~i i
lu
j aUnweighted averages of ad valorem duties. - 125 -
3.200. On the basis of the very limited data presented in Table 3.21, it appears that the level of average tariffs on textiles and clothing is higher than those applied to other manufactures, at least in some of the developing countries (of the six countries covered in Table 3.21, this is true of Argentina, Brazil, Colombia and Israel).
TABLE 3.21. - SIX DEVELOPING MARKETS: SECTORIAL DIFFRENCES IN AVERAGE TARIFF LEVELSa (Percentages)
Argentina Brazil Colombia Israel Malaysia Spain
1976 1960 1973 1975 1979 1967 1969 1977 1974
All goods .. 60 20b 36 26
Manufactures .. .. 57 78 21c 15c 17 of which: Textiles & clothing 93 .. 25 Textiles 107 .. 91d 4948 92 22 . 22 Clothing 200 .. 106 86 83 110 26d 28 Footwear .. 120 (102b) 70 55 .. .. 20 Basic metals 4Qb .. .. 39 21 Iron and steel .. 65 34 ...... 12 Non-electricalmach. 98 47 38 26 21 56 il 17 Electrical mach. 89 52 56 34 32 133 19 23 Transport equipment 80 40 43 43 37 115 .. 26 23
a Uweigted averages of legaltariffs. 1972 tariffs. c Excluding duties on the beverages and tobacco industries. dIncluding footwear. 3.201. The rate of tariff escalation and its emphasis (on one or another level of fabrication) varies considerably from one market to another and from one fibre to another. A detailed breakdown of tariff averages, as shown in Table 3.22, shows little uniformity in the escalation rates among fibres but indicates clearly that in most markets escalation is much slower for man-made fibres (there are even cases of "negative" escalation) than for natural fibres. 3.202. A large majority of the developing countries have bound only a small percentage of their tariffs on textiles and clothing, often less than 4 per cent. And of course no tariffs have been bound by countries which are not GATT members. (Me- ne Other All Wool Cotton Huevb KI- All tariff) All KowIWool Cotton Sru 44 Other All Wool Cotton Ihi. Other trial Other. Argentina (1982) 31 2 2 0 1 24 3 3 J ) 36 Y% i1 Yi 38 38 »5 35 31 38 Brazil(1983) 7-925 55 55 si 1 55 As 54 68 99 un7 105 102 95 Îî 69 [oz tri~ Colombia(1982) Ç 21 19 Y1 3l 35 66 (A 43 60 îï3 go 14 62 92 il 60 91 91 goTe1 I 28 _Ç 60 63 64 41 i 12.5 l215 tu 96 12w) Egypt(1982) C lez2 O] I4S India(1983) 66' ~~~~~~u 60 40 Ili)<5 MI' <
Unweighted eeged awrw"e of ad vidorme <8< . aq per theLatest available tariff pcmi~,A definition of the product clarification used can be foundin the Technical Notes. Mainly products for indrirLd tmie BTNliai. SA.0".1.09.I0; '.I6I,2I-7 CThe tariff rate on old clothing(BTM No 62.01). whidhis varible has not been includedincalculating this average. Inadditionto the alomr rgten rore.OCr4, therearea tc1
(b) Non-tariff measures 3.203. In addition to the usual conceptual and definitional problems, any discussion of non-tariff measures in developing countries must contend with (i) the frequent complexity of the trade régimes, in terms of the number of measures and the frequency with which those measures change, (ii) the widespread practice of granting discretionary exemptions, and - a point not unrelated to the first two - (iii) a serious lack of information.60 3.204. From the viewpoint of this study, a further difficulty concerns the problem of determining the extent to which the non-tariff measures on textile and clothing products are, or are not, part of more general import-restriction schemes - in other words, how industry-specific ;he known measures are. In general it should be noted that the restrictions have been justified on balance-of-payments grounds (Article XVIII), which in principle apply across the board to all imports. 3.205. First, there is the problem of identifying the NTMs. It is presumed that a substantial fraction of the quotas actually imposed are not formally reported as 'quotas' but rather embodied in other NTMs; a licensing system or state trading can be used to administer quotas. There is also the difficulty of knowing whether a licensing system is or is not a trade barrier, that is, whether it refers to 'automatic' or 'non-automatic' licensing. And in some cases, it is impossible even to reduce to a simple definition/classification certain eclectic restrictions displaying a number of different (' racteristics. 3.206. The coverage of the data shown in Table 3.23 also needs some qualifications. There exist quite a number of sources on the NTMs imposed by developing countries on imports of textiles and clothing. Though useful for keeping track of what is happening in the field, these sources (generally issued by trade partners) offer an incomplete product coverage, or give a too loose definition of the NTMs. On top of that, such information could be considered "not entirely impartial". Thus the information in Table 3.23 has been taken entirelv from GATT documents, that is, from reports or notifications sent to GATT or MFA bodies by the restricting countries themselves. It must be stressed that this table is not intended to be a comprehensive listing of NTM measures in developing countries. 3.207. Of the twenty-two markets appearing in Table 3.23, four (Hong Kong, Macao, Malaysia and Singapore) have reported no restrictions on imports of textiles and clothing. 3.208. 'Quotas' have been seldom notified as such. Only three countries (Spain, Yugoslavia and Tunisia) have formally notified quotas on textiles and clothing, most of them defined in terms of import values and by product (not by exporting country). Straight import 'prohibitions' and the de facto equivalent, 'suspensions in the delivery of import licenses', which can be considered extreme cases of quotas, are found much more often: nine out of 18 countries have reported them. In five countries (Brazil, India, Pakistan, Tunisia and Turkey) prohibitions or licence suspensions apply to a wide range of products. - 128 - TABLE 3.23,- NON-TARIFF MEASURES ON IMPORTSOF TEXTILES AND CLOTHING',Tz BY DEVELOPING MARKETS (0DD-1983 OR NI.U=T DATE)" (Numbr et BTR 4-digit positions effected) Type FIBRES YARNS FABRICS MADE-UPS cLTZG Ne Man- Indus- wool cotton Other WoolCotton Other Wool Cotton made Other trial Other (31 (4) (41 [Il] (31 t23 (SI [ai (2 (33 (23 (121 (171 (si (153
Argentina L I I 2 2 3 1.
India L . 2 (s> 1 * ÎP * (2> I~ 3 2 3 3 a 13
Il (3> <4) <2> 1 a 1
Korea. Rep. R <3 ( <2 16 <3) 2) 56 <2
Macao
Malaysia
Mexico, L t 3 2 12 3 1) 1 1 <1 1 & 6(3
Nigeria L 4 2 ci) 16<3> 2 i 11- (l> 7 <3 46(l> 16<1>
4 3 2 C1) <1> (1) <2> <3> S <2> <2> Pakistan L 9 7- ~, 2> (1) 16(1> 2 M1 7.
Peru p 4
Philippines 2 2 2 1 2 (1> 3-(l)
Portugal s 2 3-(2 3.<2> 2 3 2 1.2 1 7'<1> t4
Singapore
Subla L ST <-i1> ia 2 3 3 2 &
Sri Lanka t 3 2 7
1 1 I~~~~~~~~
1> Tuoisai 2 ~~~~~~2
i i 2 i i 1 i 3 3
Turkey 1 2 ci) Y 4 i 2 3 a i 2 1. 106<4 à Yugoslavia a.2 <1) 3 <3> (2 & (a)
"'This table slows, for each beading (wool fibres, fibres fibres, and the number of 4-disit positiobe which are affected by or another type of 3.209. Another feature from data in Table 3.23 is the clear escalation of barriers from unprocessed or semi-processed textile inputs to processed consumer goods. Non-industrial made-ups and clothing items are entirely - or almost entirely - restricted, by one non-tariff measure or another, in ten of the countries examined here, while restrictions to fibre imports are less frequent. 3.210. Although the country coverage differs somewhat for statistical reasons, a comparison of Tables 3.22 (on developing country cariff levels) and 3.23, reveals a modest positive correlation between the level of tariffs and the number of NTMs on textiles and clothing. Whether this derives from efforts by governments to channe' at least part of the importers' potential monopoly profits to public coffers, or is mainly geared to offer higher protection to the industry, or results merely in redundancies in protection, would be difficult to ascertain. 3.211. Seven developing countries (as defined in this study) have signed the Anti-dumping Code thus far, but none have notified actions under it on textiles and clothing. The Subsidy and Countervailing Measures Code has been signed by ten developing countries, but only Chile has made use of counteryvailing duty actions on textiles and clothing products in the period 1980-1983. Secretariat records indicate that (i) Chile notified the initiation of 29 actions, all involving developing countries, and (ii) that in every instance the final outcome is listed in the "other" category (as opposed to the imposition of a definitive duty, a finding of no injury, and so forth). No developing country has notified an anti-dumping action on textiles or clothing during 1980-1983, nor do secretariat records show an invocation of Article XIX action by a developing country. (4) TRADE POLICIES IN THE EASTERN TRADING AREA 3.212. For the four Eastern trading area countries which are GATT contracting parties - Czechoslovakia, Poland, Romania and Hungary - relatively more Information is available on trade policies than for the other centrally planned economies. Because the Pe.ple's Republic of China has only very recently joined the MFA. information on its trade policies vis-à-vis textiles and clothing is still relatively limited. 3.213. When judging the likely impact of the policies outlined briefly below, it should be kept in mind that - depending on the degree of economic centralization - the classic trade policy instruments will not play the same economic rôle as they do in decentralized market economies. 3.214. The most readily available data concern Hungary's tariffs (Hungary is the only Eastern trading area country which participates in the GATT Tariff Study group). Pre- and post-Tokyo figures are given in Table 3.24. With respect to the post-Tokyo Round tariffs, 4 per cent of the tariffs on textiles and clothing remain unbound, as against 7.3 per cent for all industrial products. - 130 - TABLE 3. 24. - HUNGARY'S PRE-TOKYO ROUND AND POST-TOKYO ROUND AVERAGE TARIFF LEVELS (Percentages) All manufac- Fibres Yarns Fabrics Made- Clothing tures (excl. petroleum) S w S w S W S W S S w Pre 9½ 2' 24 20' 35!< 28!, 46 '8'- 36!< 31!. 27' 20 Post 6 2 9 6 12;s 14 11' 10'- 14 16 12 10 S = simple average; W - ave age weighted by MFN imports. 3.215. Czechoslovakia, Hungary and Poland introduced tariff-preference schemes for developing countries in the 1970s. Each has also introduced special preferences for imports from the Ieast developed countries. As in the case of the developed countries' CSP schemes, the extent to which the developing countries' exports of textiles and clothing may have benefitted from these schemes is difficult to determine. 3.216. Poland and Romania negotiated their accessions on the basis of "import quantity commitments". China applies import duties on a two-tier basis. a general rate and a minimum rate; the minimum rate is applied to goods from countries with which China has concluded reciprocal cormereial treaties, and the general rate applies to all other countries. 3.217. In the area of textiles and clothing. extensive bilateral agreements involving quantitative restrictions are maintained by Poland; import restrictions have been justified in recent years on the grounds of balance-of-payments constraints and the external restrictions on the availability of new credits. Romania maintains no quota restrictions but requires licensing for all textile products from all sources. Hungary maintains restrictions on rayon wool (woollen and cotton types) and tops from Norway; textile quotas maintained against Sweden as part of the lorg-term agreement signed in 1973 were subsequently discontinued as the new agreement came into force in 1982. China maintains a non-discriminatory impcrt licensing system for imports of man-made fibres and their products including tops, yarns, threads, as well as piece-goods, clothing, knitted garments, skirts, socks and stockings, and mosquito nets. 3.218. The four East European GATT members have each signed the Anti-dumping Code, but not the Subsidies and Countervailing Duty Measures Code. There have been no notifications of anti-dumping actions by these countries on textiles or clothing. - 131 - 3.219. Although the emphasis in this section on the Eastern trading area countries is on their import policies for textiles and clothing, a few remarks are in order regarding the regulation, under their protocols of accession, of Poland, Romania and Hungary's exports of textiles and clothing by certain importing countries. 3.220. Poland acceded to the GATT in 1967 and joined the MFA in December 1974. The most recent review of Poland's Protocol of Accession was in 1978. At that time, the EC, Norway and Sweden reported that they were applying discriminatory quantitative restrictions on imports from Poland, including textiles and clothing. While the present status of the QRs notified by the EC in 1978 is not clear, it appears that all the EC's QRs on MFA textiles and clothing have been converted to MFA bilateral restraints since 1979. Norway (which is not a current MFA participant) does not have a current bilateral textile agreement with Poland, and therefore may still be applying the discriminatory QRs permitted under Poland's Protocol of Accession. The exact nature of Sweden's textile and clothing police vis-à-vis Poland is not clear. but it dees notify its value quotas to the TSB each year. 3.221. Romania acceded to the GATT in 1971 and joined the MFA in January 1975. In 1983 the EC, Nerway and Sweden notified that they were applying discriminatory QRs on imports from Romania, including imports of textiles and clothing. Since 1978, the EC lias MFA bilateral agreements with Romania, but these MFA bilaterals have not superseded all of the discriminatory QRs on textiles the EC was maintaining under Romania's Protocol of Accession. Norway (which is not a current MFA participant) does not have a bilateral textile agreement with Remania; for the time being. it applies discriminatory QRs, exclusively on textiles and clothing. under Ronania's Protocol of Accession. Sweden has no MPA bilateral agreements with Romania; it pplies discriminatory QRs on textiles and clothing. under Remania's Protocol of Accession. 3.22. Hungary acceded to the GATT in 197.3 and joined the MFA in March 1974. Most recently in 1984, the EC and Norway notified the application of discriminatory QRs under Hungary's Protocol of Accession. The EC has had an MFA bilateral agreement with Hungary since January 1978, but it also maintains an extensive list of QRs on imports of non-MFA textiles and clotting from Hungary under the Protocol of Accession. Norway' s imports of textiles and clothing from Eungary are still covered by the discriminatory QRs permitted under Hunsary's Protocol of Accession. 3.223. The conclusion of this examination of the current status of the EC, Norway and Sweden's measures regarding textile and clothing imports from Poland, Remania and Hungary is that there appear to have been - and in some instances still are - certain quantitative restrictions that are not covered by the MFA nor by Article XIX. It is difficult to say to what extent this is also true of trade with the other Contracting Party from Eastern Europe, namely Czechoslovakia. - 132 - D. OTHER POLICIES 3.224. This final section examines two categories of measures which fall outside the traditional definition of "trade policies for textiles and clothing". One involves sectoral and general support programmes. Although there is a range of opinion on whether policies applied under such programmes should be considered "trade policies", there is little doubt that they can influence the outcome of changes in policies imposed at the border, and therefore warrant mention in a study such as this one. The second category includes policies whose effects on the textile and clothing industry are "incidental", but which nonetheless arise in discussions of appropriate trade policies for textiles and clothing. (1) Sectorial and general support programmes 3.225. The motivations behind domestic policies which are alleged to have an impact on the pattern of production and trade in textiles and clothing are often not easy to determine, in part because there can be more than one motivation at work, and in part because the relative importance of the different motivations can shift during the lifetime of a particular programme. 3.226. Most domestic policies in the developed and developing countries which are explicitly or de facto specific to textiles or clothing are intended to achieve one or more of three goals. The first is increased efficiency, and includes domestic measures ranging from policies to help the textile or clothing industry to modernize, to policies intended to facilitate the flow of labour and capital from these industries to other industries where they can be employed more productively. Development of depressed regions is a second goal (for the purposes of this study, regional policies are of interest only if they have a "reasonably" specific impact on the textile or clothing industry). The third goal is protection of existing jobs and capital values, and involves using domestic measures as substitutes for restrictions at the border.61 3.227. One reason why it is often difficult to sort out which motivation (goal) is dominant in any given programme, is that one of the principal arguments for "temporary" protection against imports is that it will provide the "breathing space" and financial resources necessary for the domestic industry to modernize and thus regain its competitiveness. The distinction between the second and third goals can also be blurred, given that many textile and clothing firms are already located in economically depressed areas. 3.228. It is not difficult to understand the efficiency and regional development motivations for domestic policies. The motivation behind the use of domestic policies as a substitute for restrictions at the border is less straightforward. In general, it appears that this is most likely to occur in one of the following situations: (i) when tariff increases are ruled out by bindings; (ii) when border measures are ruled out by customs unions, free-trade areas and preferential arrangements; and (iii) when an important part of the output of an 133 - industry is exported, in which case import barriers are not helpful and open export subsidies run a risk of provoking retaliation. 3.229. In textiles and clothing, these factors have played a highly differentiated rale: the first was relevant essentially to trade between industrial countries, which in general is subject only to MFN tariffs; the second was particularly relevant to much of intra-Western European trade and notably to intra-EC trade; and the third concerned a small number of traditional textile and clothing exporting countries in Western Europe and among the developing countries. Sectorial programmes in industrial countries 3.230. Although some major sectorial programmes were launched well before the 1974-75 recession, the majority date from the second half of the 1970s. Sectorial programmes have been applied on an important scale by a number of countries, including the United Kingdom, Italy, France, Japan, Canada, the Netherlands, Belgium, Sweden and Norway. In most cases, these programmes were accompanied by trade measures, and they TABLE 3.25. DOMESTICMEASURES IN THETEXTILEAND CLOTHING AREA IN DEVELOPED COUNTRIES Emploment Investment Marketing R & D Specific Assistance Creation Specific General Regional & export intervention United States x x x x x Canada x x x x x Japan x x x x EC x x x Belgium x x x x Dermark x x France x x x x x Germany, Fed. Rep. x x Ireland x x x x x Italy x x x x x x x Netherlands x x x x United Kingdom x x x x x Austria x x x x x Finlad x x x Norway x x x x Sweden x x x x x x x x Switzerland x x x aSpecific to textile and clothing sectors that do not fit clearly into other columns such as nationaliz- ations and specific emergency plans by govenments. There may be double counting, e.g. Austria grants assistance for security of supply which is also In recognition of difficulties in rural areas (regional policy). bFive-year programme ceased at the end of 1982; some other programmes terminated in 1983. - 134 - tended to be supported (and/or duplicated) as well by measures in the areas of regional and manpower policies. More recently, it appears that there may have been a turning away from such programmes, even though many remain formally in existence. Various reasons account for this, including budgetary stringency and evaluations of the results to date of sectoral programmes directed to declining industries. In addition, the enforcement of the EC competition rules has been an important factor in the member countries.63 3.231. One source of information on domestic measures in the textile and clothing area are the recent .submissions by MFA participants to the GATT Textile Committee's Sub-Committee on Adjustment. By combining that information with Information available in two other recent studies we have been able to prepare a rough categorization of current programmes in the developed countries which have, to a greater or lesser degree an impact on the developed countries' textile and clothing industries.64 Domestic policies in developing countries 3.232. Generally speaking, the background to and objectives of domestic policies in textiles and clothing have been different in developing countries. The most important difference was related to the fact that instead of being viewed as "declining" or "sunset" industries, they have been considered growth industries, central to the development process. The mix of trade policies applied has varied greatly from country to country and over time. By and large, countries concentrating on the domestic market have relied on border measures to protect their market for textiles and clothing. The approach of countries engaged in export-oriented growth, in contrast, has been directed at reducing policy biases against exports. At the same time, reliance on domestic policies - for example, investment incentives and subsidies, industrial estates, tax holidays, and so forth - varied greatly from one country to another. When such policies were applied on a large scale, their coverage has tended to include, at least initially, the textiles and clothing industries. 3.233. Based on scattered evidence, two recent trends in the domestic policies of developing countries can be discerned. On the one hand, the more advanced developing country exporters of textiles and clothing have tried to move not only "up-market", but even out of these industries. They have been motivated by actual or threatened difficulties in export markets, adverse wage cost developments and, more generally, their development philosophy. One should not exaggerate the scope of this move, however. At most it has limited further expansion in the sector.65 3.234. The second trend has been in the opposite direction. Several countries in Asia (for example, Sri Lanka, Thailand, Mauritius, Maldivia, Indonesia) have promoted the development of clothing industries geared to exports and transforming imported yarns and fabrics. The instruments included export processing zones, investment incentives and tax holidays. In contrast with some of the more advanced - 135 developing countries however, there has not been a serious attempt to develop backward linkages into textiles or synthetic fibres. Domestic policies and the problem of selectivity 3.235. As noted above, the motivations behind the more general domestic policies have not been not directly related to the competitive position of the textile and clothing industries per se. Regional policies were meant to improve the geographical balance of the economy by promoting the development of backward and/or depressed regions. Social and manpower policies were aimed at improving welfare and employment conditions. Industrial and technology policies pursued a variety of objectives, including the promotion. and diffusion of new technologies and the strengthening of industrial and corporate structures. 3.236. In many developed countries, depressed and/or backward regions tend to be relatively more dependent on the textile (but not clothing) industries; also, the sector often employs a high proportion of women, elderly workers racial minorities and immigrants, and people with limited skills.66 Given these characteristics, it is hardly surprising that even ostensibly "non-selective" measures have often benefited disproportionately the textiles and clothing enterprises and/or their workers. As a result of these and other factors, the distinction between general and selective policies has become blurred. The same social, political and economic factors which contrived to put textiles and clothing among the most protected industries in terms of border measures, have also provided them with a high priority in respect of domestic policies, whenever these were applied on a relatively large scale. 3.237. The extent to which these remarks also apply to the developing countries' domestic measures is difficult to judge because of the lack of systematic data. It may be the case that, because the clothing industry in many developing countries is world market competitive, it is less of a magnet for domestic aid. The textile industry in some developing countries may, in contrast, more closely resemble the problem industries in the developed countries. In any case, it is clear that, as in the industrial countries, there is the problem of where to draw the line on the spectrum running from subsidy programmes designed specifically for textiles and clothing to subsidy programmes available to a broad cross-section of industries. For example, both the regional development programmes in the developed countries and the infra-structure support programmes in developing countries often fall - in effect if not by intention - between those two extremes. (2) Policies with incidental effects on the textile and clothing industries 3.238. The policies covered (very briefly) in this section can be divided into sector-specific policies and general policies. At one time or another, policies in both categories have been included in arguments made for import restrictions on textiles and clothing. 136 - 3.239. Government policies that increase the cost of specific material inputs into textile and clothing production constitute the first category. A well known example involving the United States is the impact on United States cotton textile producers of the price support system for cotton (one part of which involves quota limitations on imports of cotton). Between 1956 and 1964 the system also involved subsidizing exports of cotton, while still requiring domestic textile producers to purchase their cotton at the United States support price. 3.240. Similar situations prevail in some developing countries, where high levels of protection of synthetic fibre production act as a "tax" on domestic textile production. 3.241. Both situations, which can be best understood in terms of the concept of the effective rate of protection of value added (in the textile industry in the two examples cited above), illustrate one of the most common ways in which protectionism spreads. If textile producers are granted tariff protection to compensate them for having to purchase fibres at prices above the world market, then of course the next step is to grant protection to clothing producers to compensate them for having to buy fabric at prices above the world market level. In addition to multiplying the inefficiencies caused by reduced international specialization, this approach does nothing to assist firms that would-be able to export if they could purchase their inputs at world market prices. 3.242. The general policies which comprise the second category include environmental and safety regulations, as well as employment-related issues (minimum wages, social security contributions, equal pay regulations, overtime regulations, and so forth) which, by increasing the cost of labour, are alleged to be especially burdensome for labour-intensive industries. 3.243. The issues involved in the debate over these policies are fundamental, but for the purposes of this study their key feature is that they are not textile or clothing industry policies.67 This holds even if, as in the case of some of the employment-related policies, the effective incidence on the textile or clothing industry is above the average for the economy as a whole. To attempt to "compensate" the textile or clothing industries by granting protection against imports only shifts the burden to other parts of the economy. Import restrictions do nothing to help export-oriented textile or clothing firms and, of course, do nothing to assist other industries which also find that the incidence of these general policies on their costs of production are also above the average for the economy as a whole. 3.244. To the extent that such general policies are creating economic distortions, the solutions must be sought at the general policy level, not at the industry-specific level. - 137 - FOOTNOTES TO CHAPTER 3 ¹According to Hanson (1980), a free trade policy was pursued by Western Europe between 1860-1880, thereafter, with the notable exception of the United Kingdom, the Continent returned to protectionism. Throughout the period from 1860, the United States maintained a highly protective system, which reached its pre-World War II apogee with the passage of the Hawley-Smoot Tariff in 1930. ²The period of restriction began in 1808 when the importation of foreign goods was first impeded and soon severely curtailed. Until the Tariff Act of 1913, which substituted high ad valorem duties for the specific system previously in operation, protection of the industry had been refined to the point where the cotton tariff schedule had become a "highly intricate one with duties varying according to the count of threads per square inch, the number of yards to the pound, the bleaching, colouring, and staining, and finally with a most elaborate fence system of value points. Just what the whole intricate array signified could be known only to persons conversant in the every detail: that is, chiefly to the manufacturers themselves". (Taussig, 1914, p. 434.) For a review of the early history of textile policies, see also International Labour Organization (1937), League of Nations (1942), Kroese (1954), Maizels (1963), Hunsberger (1964) and Brandis (1982). Trends in trade in the nineteenth century are discussed in Hanson (1980). ³See the Monthly Record, Manchester Chamber of Commerce, 30 September 1936. 4Comment by Dr. C.T. Murchison, President of the US Cotton Textile Institute, Inc., New York Times, August 23, 1936, quoted in Hunsberger, (1964, p. 316). 5This would have required, under the US Trade Agreements Act of 1934, the finding of injury before trade concessions could be withdrawn, modified or by-passed. "The U.S. Government clearly favoured the unofficial approach of 1937, else anti-trust law would have been used to prevent it." See Brandis, 1982, p. 7. 6The programme of trade liberalization got underway in the latter half of 1949. In September 1950, a Code of Liberalization came into force containing a commitment to remove restrictions to 75 per cent of imports on private account from other member countries in each of three categories (foodstuffs, raw materials and manufactured goods). The programme also included a common list of products which all countries were to free from quota restrictions in the course of achieving the specified degrees of liberalization (the list included textiles). The Code was changed from time to time as new decisions regarding trade liberalization were taken by the OEEC Council. The last collated version of the Code was published in July 1960. - 138 - Quantitative restrictions covering textiles (as well as other products) which had not been liberalized under the OEEC Code or through Contracting Parties to the GATT disinvoking Article XII, were subsequently known as "residual restrictions" (the restrictions which remained on non-agricultural products were largely directed against consumer goods produced in Asia). These 'hard-core' restrictions which continued to be maintained in breech of the General Agreement became subject to a series of examinations, consultations and negotiations in the GATT (for example, the work of Committee III (1959), Working Group on Residual Restrictions (1965), and Joint Working Group on Import Restrictions (1970), and so forth). During the 1955 'major' review of the General Agreement several countries attempted to devise and suggest ways for legalizing discriminatory measures against third countries. After lengthy discussions about legitimizing new safeguard proposals, the Contracting Parties to the GATT concluded that Article I of the General Agreement (which obliges members to grant unconditional m.f.n. treatment) as well as the other Articles proscribing and restricting discrimination, should not be tampered with or altered in any substantially important manner. BISD, Summary Records 9th Session (GATT Archives); BISD, 2nd Supplement, pp.119; BISD 3rd Supplement pp.139-141; Patterson (1966), pp.281-83. 7Patterson, 1966, p. 308. 8GATT document L/1164, 17 May 1960. 9GATT BISD 9th Supplement, pp. 26-28. 10Although the fascination with effective tariffs evident in the second half of the 1960s cooled considerably as a series of conceptual difficulties and estimating problems were uncovered, the basic insight - that while a tariff on output subsidizes domestic production of a good, tariffs on inputs tax production - remains valid. See, for example, Johnson and Grubel (1971). 11The figures in Table 3.1 and 3.2 are not strictly comparable because of differences in averaging methods and weighting patterns. Note that weighted average figures will exceed the comparable simple average figures if - despite higher tariffs - imports are relatively larger in the high-tariff categories. 12Textiles and clothing are generally excluded from GSP treatment in the United States (this is also true of the recently established Caribbean Basin Economic Recovery Act). In the EC, the GSP scheme was linked to the MFA. For products covered by the MFA, duty-free access is granted under ceilings or quotas to countries having concluded bilateral agreements with the EC. For non-MFA products duty-free entry is granted to all beneficiaries under individual country ceilings or quotas. In Japan clothing is covered by its GSP scheme, but 10 textile items are excluded from it, while the preferences (duty-free or 50 per cent of m.f.n. rates) for those covered are granted under ceilings. Canada's GSP scheme applies to selected textile products without limitation, although some products only benefit from partial tariff reductions. - 139 - The schemes of Finland, Norway and Sweden provide for duty-free access without limitations; however, a number of textile and clothing items are excluded from each country's GSP scheme. In Switzerland, GSP rates on textiles and clothing are positive, while most other industrial products have been granted GSP duty-free treatment. In Austria GSP rates on textiles and clothing are 65 per cent of MFN rates instead of 50 per cent for most other industrial products. Textile and clothing products are excluded from the tariff reductions on imports by the United States from many Caribbean countries, that came into effect on 1 January 1984 under the Caribbean Basin Economic Recovery Act. 13Argentina, Australia, Austria, Bangladesh, Brazil, Canada, Colombia, Egypt, El Salvador, European Community, Finland, Ghana, Guatemala, Haiti, Hungary, India, Israel, Jamaica, Japan, the Republic of Korea, Malaysia, Mexico, Nicaragua, Norway, Pakistan, Peru, Philippines, Poland, Portugal on behalf of Macao, Romania, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Trinidad and Tobago, Turkey, United Kingdom on behalf of Hong Kong, United States, Uruguay, Yugoslavia. 14Nicaragua and Spain together with Australia and Norway did not participate in MFA II. New participants during this period were Bolivia, Czechoslovakia, the Dominican Republic and Indonesia. 15Argentina, Austria, Bangladesh, Brazil, Canada, China, Colombia, Czechoslovakia, Dominican Republic, Egypt, El Salvador, European Community, Finland, Guatemala, Haiti, Hungary, India, Indonesia, Israel, Jamaica, Japan, the Republic of Korea, Malaysia, Maldives, Mexico, Pakistan, Peru, Philippines, Poland, Portugal on behalf of Macao, Romania, Singapore, Sri Lanka, Sweden, Switzerland, Thailand, Turkey, United Kingdom on behalf of Hong Kong, United States, Uruguay, Yugoslavia. 16Recourse by MFA members to their GATT rights in the field of textiles was debated both in the TSB and in the Textiles Committee during the MIFA I. Two divergent opinions emerged in both TSB and the Textile Committee: (a) that GATT parties maintained their rights to resort to GATT procedures (Article 1:6) under the Arrangement, and (b) the measures outside the Arrangement had the effect of nullifying the objectives of the Arrangement (Article 9:1) and should be resorted to only after all possibilities in the MFA had been exhausted. These views were reconciled in the first Protocol of Extension by the participants agreeing to "refrain" from taking actions outside the MFA before exhausting its relief measures. It was reiterated in the Second Protocol. (This question also arose in connection with Australia's invokation of Article XIX; see below.) 17The regional shares of total imports above which consultations may be sought, Germany 28.5 per cent, United Kingdom 23.5 per cent, France 18.5 per cent, Italy 15 per cent, Benelux 10.5 per cent, Denmark 3 per cent, Greece 2 per cent and Ireland one per cent. - 140 - 18Englert, 1981. 19GATT document COM.TEX/10, paragraphs 15 and 87. 20The United States has been investigating possibilities of replacing Tariff Item 807 with an 809. The major difference between the two tariff structures is that under B07 the garments imported into the United States are often made from foreign fabrics, whereas those imported under 809 would be made from United States' fabrics and therefore imported at lower tariff rates. 21In order of the value of their dutiable exports of garments to the United States in 1978 under tariff item 807.00: Miexico ($46.1 million), Dominican Republic ($14.8 million), Haiti ($11.0 million), Costa Rica ($10.1 million), .1 Salvador ($8.8 million), Colombia ($7.9 million), Barbados ($4.2 million), Jamaica ($4.0 million), Nicaragua ($3.1 million), Belize ($2.4 million), Honduras ($1.0 million), Guyana ($0.9 million) and other Caribbean ($1.0 million). The data on dutiable imports from these countries are from Bolin, 1979, Table 1. Data on all imports into the United States under tariff item 807.00 (USITC, 1979), Table 2, in Keesing and Wolf, 1980. 22Council Directive 79/119/EEG, 18 December 1975 and Council Regulation, EEC, 636/82 of 16 March 1982. 23See, Schatz and Wolter, ILO, 1982, p.250. Information on OPT is most readily available with regard to the Federal Republic of Germany. Between 1980-82, 9-10 per cent of apparel imports consisted of OPT compared to 3-5 per cent between 1970-72. The Netherlands has extensive OPT as well; between 1980-82, OPT in clothing amounted to 39-40 per cent on average. France is a relative newcomer to OPT but is expanding its turnover quickly; between 1977 and 1979 the share of OPT under value-added customs duties in total imports of ladies' clothing increased from 5 per cent to more than 7 per cent, the increase being most pronounced for Morocco, Tunisia and Portugal. 24Ashoff, 1983. 25Ashoff, 1983, p. 21. 26Details of these arrangements, such as product coverage, growth rates, flexibility provisions, etc. are based on information from Textiles: le contenu des nuveaux accords de la CEE de 1983 à 1986, Promèthèe, 1983. 27The secretariat does not have any information indicating that the EC has applied quantitative restraints on imports of textiles and clothing from any of the other Mediterranean basin countries. 28The United States anti-dumping action against the Republic of Korea, in which case a definitive duty was imposed on October 27, 1983, was terminated by a finding of "no injury" on December 5, 1983. - 141 - 29As regards the Canadian action which involved both Portugal and the Republic of Korea, the case against Portugal was withdrawn on July 9, 1982, but one against the Republic of Korea resulted in the imposition of a definitive duty. 30Includes textile products and apparel. 31The Japan Economic Journal, 28 February 1984. 32Textile Asia, November 1983, p. 62. 33See Yamazawa, 1983. 34Wall Street Journal (international edition), 30 January 1984. 35Reports of limitations on the number of customs points have been made, for example, by countries exporting to Italy. More recently, there were press reports that the Canadian Government had reduced the number of customs officers authorized to clear imported clothing (see The Times of London, 9 September 1983). 36South Africa applies a wide range of duties on textile and clothing goods but any attempt to estimate tariff averages or present a range would be extremely difficult due to the "specific" nature of the tariff rates (expressed in m² or kg. rather than value). Quantitative restrictions were virtually all abolished by January 1980. An import licensing system is in effect, however, to monitor the imports of certain commodities. On most textile and clothing products containing at least 35 per cent wool, restrictions are maintained under Article XX(b), wool labelling regulations. In addition, South Africa maintains a liberal/discretionary licensing system on both textile and clothing products. 37The simple averages for clothing are lower than the weighted averages because of the existence of concessional "By-law"items with negligible import levels. The gap between the two averages is much smaller, however, when penalty duty rates are included (i.e., in the A series). See notes on Table 3.16 in Technical Notes. 38See Industries Assistance Commission, Annual Report 1980-81, September 1981. 39See GATT document L/54751Add.1. 40See GATT document L/5488. The countries are the Cook Islands, Fiji, Kiribati, Nauru, Niue, Papua New Guinea, Solomon Islands, Tonga, Tuvalu, Vanuatu and Western Samoa. 41COM.TEX/SB/196. 42Note that Article XIII of the General Agreement applies to tariff-quotas. 43Industries Assiotance Commission (IAC), Annual Report, 1975-76 (p. 98). Unless other-wise indicated all factual and empirical information in this section has been taken from this source. - 142 - 44See IAC, op. cit., 1980-81, p. 119; and IAC Report, Textiles, Clothing and Footwear, Part A: General, No.240, 29 April, 1980. 45COM/TEX/5, 25 February 1975, p. 8. 46The "tariff equivalent" of a quantitative restriction is that nominal ad valorem tariff rate which would restrain imports to the same level. 47IAC, op. cit., 1979-80, p. 97, 1980-81, pp. 65, 113; and IAC Report, No. 240, op. cit., pp. 56-61. Other major industries protected by quantitative restrictions, including tariff quotas, during this period were: footwear, passenger motor vehicles, refrigerators and washing machines. 48IAC Report, No.240, op. cit., p. 156. 49IAC, Annual Report, 1982-83, p. 85. 50It must be emphasized that trade data, being expressed in current prices, is most difficult to interpret, especially in relation to production and consumption data in constant prices. 51"Replies to Questionnaire on Import Licensing Procedures", L/5172/Rev.2, 26 August 1983, p. 1. 52Industries Development Commission, The New Zealand Textile Industry Plan, Report No. 9, August 1979, p. 27. 53Working Party on Structural Adjustment and Trade Policy, Exchange of Information, New Zealand, Spec(82)6/Add.2, 25 February 1982, p. 14. 54"Guide to Import Licence Tendering", October 1982. The price signals emerging from the tendering scheme have so far been too erratic to determine implicit tariff rates, according to the Department of Trade and Industry. 55Spec(82)6/Add.2, op. cit.. 56To facilitate its adjustment, the domestic woollen fabrics industry was assisted by a four year production bounty which declined from 25 per cent in the first year to 10 per cent in the last year (1983/84). 57Department of Trade and Industry estimates. 58L/5172/Rev.2, op. cit., 26 August 1983. Note, however, that this estimate includes petroleum imports. 59Most of the 21 developing areas selected for analysis in this section were chosen because they presently supply about 1 per cent or more of total exports of textiles or clothing to the developed economies. For Malaysia, Sri Lanka and Thailand, the selection criterion was their recent quick penetration of the world market. - 143 - Finally, six other countries (Argentina, Colombia, Egypt, Indonesia, Nigeria and Peru) have also been included. Despite their relatively low share of international trade in textiles and clothing and slow export growth, the large absolute size of their textiles and clothing output enables their industries to be ranked among the biggest in the developing areas. All selected countries or areas are both MFA and GATT members or, when underlined, participate in one of these Agreements, with the exception of Morocco and Taiwan. Though complying with one or another of the selection criteria used, two countries will not be surveyed here: Greece, because of its recent integration within the EC, and Iran, for lack of information. 60Some of these issues are discussed in Tvnowski (1983). 61A fourth goal - to offset the negative impact on the textile or clothing industry of policies which are either economy-wide (for example, pollution control regulations) or specific to other industries - is considered in Section (2) below. 62The successful adjustment performance of countries refraining from ambitious sectoral programmes - Switzerland and Germany - has also served as an example of those favouring government intervention - to promote growth industries. 63For a detailed presentation of this issue, see de la Torré (1983, especially pp. 126-138). 64See Lanner (1983) and de la Torré (1984). 65For example, Macau, Malaysia and Thailand have each notified the Textile Committee's Sub-Committee on Adjustment of various actions being taken to limit further expansion of textile and/or clothing production. 66For a discussion of these and related issues, see OECD (1983, especially pp. 72-76). 6 See OECD (1978) for a discussion of some of the basic issues involved. 68 In the case of pollution control policies, it should be noted that the OECD countries have adopted the "polluter pays principle", which states that trade restrictions should not be raised in order to allow producers to pass along the costs of meeting pollution control standards. See Barde (1976). - 144 - CHAPTER 4: THE ECONOMIC IMPACT OF POLICIES AFFECTING TRADE IN TEXTILES AND CLOTHING 4.1. The analysis in this chapter is concerned with the impact of the policies described in Chapter 3 on production, employment, trade and so forth in (i) the textiles and clothing industries, and (ii) the economy as a whole. 4.2. There is a large amount of literature that deals in a general way with many of the issues that arise in connection with textiles and clothing - the effects of tariffs and quotas, the political economy of commercial policy making, structural adjustment, the impact of commercial policies on economic development, and so on - but this is not the place to attempt a review of that literature. The focus, instead, is on those issues that are particularly important in the analysis of policies affecting trade in textiles and clothing (for example, the interaction between trade measures when two or more are applied simultaneously, and the trade diversion caused by discriminatory trade policies). Thus an effort has been made to keep the policy analysis close to what has actually been occurring in the textiles and clothing area as summarized in the statistical tables in Chapter 2 and the policy analysis in Chapter 3. 4.3. Because of data limitations, the extraordinary complexity of the policies in the textile and clothing area, and the absence of credible analytical techniques capable of isolating the separate effects on production and trade of trade policies, changes in technology, demographic developments and other factors, it would be an insurmountable task to attempt to quantify the specific effects of the trade policies. Granting these limitations as far as comprehensive quantification is concerned, there is still a considerable amount to be learned from applving modern economic analysis to trade policies in the,' textiles and clothing sectors. 4.4. This chapter focuses on the "effects" of trade policies (for example on the level of imports), as opposed to the "benefits and costs" of those policies (that is. their impact on the income of certain groups and on national income). Following a general discussion of the impact of tariffs and quotas on domestic costs and prices, an analysis has been made of the effects of the existing systems of restraints on trade in general, and on the pattern of trade from the textile and clothing exporting countries, leaving a detailed discussion of the impact on production and employment in the importing countries until the end. The chapter closes with a few brief comments on the benefits and costs, and a mention of some of the up-to-date surveys of work on this issue. 4.5. The approach in this chapter is to take tariffs as the representative" protective measure, and ro begin with a situation in which they are the only restriction. We then consider the impact of bringing quantitative restrictions into the picture, treating both the situation in which the quotas are administered by the importing country and the situation in which the responsibility for distributing the quotas is given to the exporting countries. In each instance, a distinction is made between non-discriminatory and discriminatory application of the restrictive measures. - 145 - (a) TARIFFS 4.6. As was noted in Chapter 3, the eight developed country participants in the MFA do not apply quantitative restrictions on their mutual trade in textiles and clothing (with the exception of a few QRs imposed by the United States on imports from Japan). Moreover, Japan and Switzerland do not impose MFA QRs, nor are all imports of textiles and clothing from developing countries - including those which participate in the MFA, as well as those which do not - subject to QRs by the six other developed country participants. For all such trade, it is the level of the eight developed countries' tariffs that matters, though where there is a possibility of a QR being imposed, the resulting uncertainty can have an effect on the level and pattern of trade. The level of tariffs can be significant, for as the tariff data in Chapter 3 show, tne developed countries' MFN tariffs on textiles and clothing are substantially higher than their average tariffs on manufactured goods in general, and the tariffs tend to rise with the level of processing. 4.7. Tarif fs on textiles and clothing fall into three general categories: MFN tariffs, zero duties in the context of customs unions and free trade areas, and preferential tariffs granted by developed to developing countries. MFN tariffs 4.8. The logical place to begin the analysis of any trade restriction is its impact on the price of the product in question, since all the other effects stem from that change in price relative to the prices of other products. A tariff on imports of a product generally causes the domestic price of that product (that is, of both the imported version and of domestically produced close substitutes for the imported version) to be higher than it would have been in the absence of the tarif f (however, as we will see below, if a QR is also being applied, the tariff may have no effect on the domestic price). This statement regarding the price effect of a tarif f applies equally to situations in which the domestic price of the product is (i) rising faster than the general price level, (ii) rising more slowly than the general price level, or (iii) declining absolutely (in other words, the mere existence of either of the latter two situations cannot be invoked to defend the view that the tariff - or a QR - is having no effect on prices). For ease of exposition, however, the subsequent discussion generally refers only to "the increase in price caused by the tariff". 4.9. A similar consideration holds as well for related statements regarding production or employment. For example, the observation that the tariff-induced price increase leads to an increase in production of textiles or clothing refers equally to situations in which the production increase is larger or smaller than the concurrent increase in GDP, as well as to situations in which production of textiles and clothing is declining but at a slower pace than would have occurred in the absence of the tariff. (To the extent that structural rigidities create more problems during an absolute decline in production or employment than during an increase, however, it is important to be specific about which situation is being discussed). - 146 - 4.10. The existence of a tariff on imports causes consumers to buy more of the domestically produced version than they would have otherwise, which in turn supports domestic production and employment in the textiles or clothing industry, and puts upward pressure on domestic costs of production (and thus on the price of the domestic version). Imports of the affected product are reduced by the sum of (i) their loss in market share, and (ii) the overall reduction in consumption of the textile or clothing product due to the higher price relative to other goods and services purchased by consumers. (The possibility that the increase in employment - as distinct from production - may only be temporary is considered below.) 4.11. In considering the extent of the increase in the relative prices of textiles products and clothing, it is useful to keep in mind the previously mentioned point that the tariff data in Chapter 3 indicate that the tariffs on textiles and clothing in the developed countries are considerably higher than the average tariff for manufactured goods as a whole. Customs unions and free trade areas 4.12. Subject to certain exceptions noted in Article XXIV of the General Agreement, the formation of a customs union or free trade area involves the eventual elimination of duties and other restrictive regulations - including quantitative restraints - on substantially all trade between the partner countries. As with all types of such measures, the elimination of tariffs in a customs union or free trade area causes both trade creation and trade diversion - terms which can be defined broadly as the "suppression of tariff-protected activities" and the "expansion of tariff-protected activities", respectively, in the partner countries.³ 4.13. Post-war examples of regional integration efforts include the EC and the EFTA, plus a number of arrangements among developing countries, such as the Central American Common Market. For the purposes of this study, it is the former two areas that are of primary interest. 4.14. There is little doubt that the formation of the EC and EFTA gave a big boost to intra-area trade in textiles and clothing, as less efficient producers inside each area were exposed to unrestricted competition from more efficient producers in other member countries. Some insight into the effect of the tariff changes can be gained from the figures in Table 4.1, which refer to the growth of intra-area trade in textiles and clothing in the EC and EFTA, the growth of trade between the EC and EFTA (before and during/after the establishment of free trade in manufactured goods between the two areas in stages between 1974 and 1978), and trends in trade between each of them and the United States. (Japan and the developing countries cannot be included in this comparison because several of their textile and clothing products were subject to QRs in Western Europe during at least part of the period covered in the table.) 4.15. The figures in Table 4.1 for the 1962-72 period indicate that intra-area trade in textiles and clothing expanded between two and three times faster than either trade with the United States or trade between - 147 the two areas. With the exception of EFTA-US trade in textiles, the situation was generally reversed in the 1974-82 period, when trade between the EC and EFTA expanded more rapidly than trade within either area. The dismantling of barriers to non-agricultural trade between the EC and EFTA offers a plausible explanation for developments in the latter period. In general, these figures suggest that "tariffs matter" for trade in textiles and clothing, at least when they are the only restriction on imports. TABLE 4.1. - AVERAGE ANNUAL GROWTH RATES OF EC AND EFTA TRADE IN TEXTILES AND CLOTHING, 1962-1972 AND 1974-1982 (Percentages) 1962-72 1974-82 Textiles Clothing Textiles Clothing EC intra-trade 142 23 5 9 EFTA intra-trade 16 25 6 EC's trade with US Exports 9½ 6 7 7 Imports 9½ 10 2½ 14 EFTA's trade with US Exports 5 8 -2 4 Imports 8 3½ 2½ 14½ EC's trade with EFTA Exports 5 8 5½ 13½ Imports 4 9 10½ 13½ Note: 1962-72 = EC(6) + EFTA(9); 1974-82 = EC(9) + EFTA(7). The first full calendar year of reductions in tariffs on trade between the EC and EFTA was 1974, and the first full calendar year with zero tariffs on textiles and clothing was 1978. Because of differences between the two time periods shown in the table in (i) the country composition of the EC and EFTA, and (ii) inflation rates, the figures for the two periods are not comparable. 4.16. Although researchers have devoted a considerable amount of effort to the very difficult task of quantifying the trade creation and diversion effects of West European integration, there are no fully reliable estimates available for textiles and clothing alone.4 - 148 - Preferential trading arrangements 4.17. The complexity of the GSP treatment which the developed countries have granted to the exports of various groups of developing countries is such that it is very difficult to say anything specific about the impact of those arrangements on the level of trade in textiles and clothing. Judging from the brief description in Chapter 3 of these GSP schemes, it seems unlikely that the overall impact has been important, since most developed countries either limit the degree of tariff preference granted to textile and clothing products or exclude them altogether from the schemes (a modest qualification to this generalization is noted below in the discussion of quota premia). Equally important is the fact that the tariff-preference schemes granted to developing countries differ in a fundamental way from zero tariffs in a customs union or free trade area, in that quantitative restraints on un arts can be used in the former case but not in the latter. 4.i8. In the case of the EC's agreements with certain Mediterranean countries and Portugal, the figures mentioned in Chapter 3 (paragraph 136) suggest that the agreements have stimulated exports of textiles and clothing from those countries to the EC. There is no information on the balance between the trade-creating and trade-diverting effects of these agreements.5 (b) QUANTITATIVE RESTRICTIONS 4.19. There are two principal types of quota systems, both of which are currently being used in the textile and clothing area. One involves global quotas, in which the total amount of a product that can enter the country from all sources is fixed at a certain level. New Zealand's quota system is of this type, as are Norway's quotas imposed under GATT's Article XIX safeguard clause. Because of the high level of the "penalty" rates, the Australian tariff-quota system also closely resembles a global quota régime. 4.20. The other system involves bilateral (disciminatory) quotas with some countries but not with others, which means that the total amount of imports of the products from all sources is not fixed in advance. As is evident from the description of the LTA and MFA in Chapter 3, the countries not subject to bilateral quantitative restraints may or may not be important suppliers to the market in question. 4.21. As compared with a tariff, a quantitative restraint under either of these two alternative systems has three distinctive features: - declines in the world market price of the product have no impact on the volume of imports and no impact on the price paid by consumers in the importing country; up to a limit, the same is true of increases in the world market price; - with a tariff, the spread between the world market price and the domestic market price is captured automatically by the government of the importing country (as tariff revenue), whereas the question of who captures the spread when quotas are used depends on how the system is administered; and - 149 - - a quota system generally is much more complicated than a tariff system, both from the viewpoint of the importing country and from the viewpoint of the foreign exporters who must "live with it". Global quantitative limitations 4.22. When a quantitative restriction is applied along with a tariff, the increase in the domestic market price ig determined by whichever of the two is actually restricting the trade. (Normally it is assumed that the QR is the binding restriction, but the data presented in Chapter 3 on quota utilization rates raise some doubts as to whether that is always the case.) If the quota is the binding restraint, then its impact on the domestic market price cf the product produces the same effects as were described above for a tariff, namely decrease in imports equal to the sum of the increase in domestic production, and the decline in domestic consumption due to the higher price. 4.23. The way in which the import licences are allocated is important because the licences connected with a binding quota generally have a value - commonly referred to as the "quota premium" or "quota rent" - equal to the difference between (i) the domestic market wholesale price of the product in the importing country and (ii) the c.i.f. supply price (inclusive of any tariff duties) of the imported version. That is, if the quantitative restriction is binding, in the sense that imports would be larger if there were no QR, then it must be the case that the tariff-inclusive foreign supply price is lower than the domestic market price; in that cage the licence generally will have a value because possession of it allows the holder to import the product and pocket the difference. 4.24. Under these circumstances, whoever receives a licence free of charge receives a potential windfall gain; to realize that gain, the licence must either be used to import the product, or be sold or traded to someone who intends to use it. Licences under global quota systems are typically allocated (free of charge) to importers on the basis of historic market shares, the opportunity to capture the quota premium offsetting, to a greater or lesser extent, the impact on profits of limiting the quantity the importer can import. An alternative is for the government to auction the licences, as is done for a portion of the textile and clothing import licences in Australia and New Zealand. In this case the government captures the quota premium.7 4.25. Note that the higher the importing country's tariff, the smaller is the quota premium. Thus, for example, tariff preferences for developing countries on textile or clothing products which are also subject to quantitative restraints, may increase the quota premium accruing to the exporters. The same conclusion holds for MFN tariff reductions. 4.26. It should be noted that regardless of who receives the quota licence, the domestic market price rises in response to the reduced volume of imports, just as it does in a situation in which a tariff is the binding restriction. - 150 - 4.27. As long as the import licences under a global quota system are not tied to particular exporting countries, the quota system itself may not always have a major impact on the geographic pattern (as opposed to level) of imports. As under free trade or MFN tariffs, the importers have an incentive to buy from the lowest cost foreign suppliers. With limited exceptions, the licences issued under the Australian, New Zealand and Norwegian quota systems are not tied to specific exporting countries. 4.28. There will, however, be an impact on the product mix of textile and clothing imports, unless the global quotas cover all textiles and clothing items. If they do not, then the exporters (and the importers in the country imposing the quotas) will have an incentive to shift to textile and clothing products not subject to quotas. Bilateral quantitative restraints: the LTA and MFA 4.29. There are two fundamental differences between a global quota system that does not depend on allocation of quota licences to different exporting countries and the bilateral quantitative restraints used under the LTA and MFA. One is the element of discrimination inherent in a bilateral QR system, and the other is the decision taken under the LTA and MFA to make the exporting countries responsible for administering the licence system (which means they are export licences rather than import licences). 4.30. The discriminatory nature of the LTA and MFA restraint systems means that they have a pronounced impact on the geographic origin of imports into the developed countries that apply them - especially so since the developing countries have been singled out for discriminatory treatment precisely because they are so called "low cost suppliers" (it will be recalled that, with the exception of some Japanese exports to the United States, the eight developed country participants are not applying QRs on their mutual trade in textiles and clothing). It is impossible to quantify the extent of the trade diversion caused by the MFA because we cannot create a hypothetical "MFN tariffs-only" world against which to comp r present situation. However, the statistics in Chapter 2, as well as evidence on the size of the quota premia in some developing areas, suggests that it could be extensive. 4.31. It is not just that exports of clothing and textiles from the developing countries as a group are smaller than they would be if MFN tariffs were the only restrictions. The way in which the MFA quota systems are operated also affects the pattern of export supply within the developing country group; similarly, it affects individual firms' shares of their country's exports subject to MFA quotas. These effects are the direct result of the non-competitive allocation of the quotas from the developed to the developing countries, and of the administrative allocation of licences by governments in the developing countries to actual and potential producers or traders. 4.32. The allocation systems are not completely rigid, of course. Under the developed countries' bilateral schemes newcomers can (at least in principle) expand their sales until they are brought under - 151 - quantitative restraint. Similarly, the exporting countries' systems for allocating licences to domestic firms producing for export usually involve setting aside a portion of the licences for new producers. But the evidence indicates that the degree of flexibility on these points in current systems is modest. While market shares of exporting countries and exporting firms may not be frozen, they exhibit considerable stickiness. 4.33. This brings us to one of the most common questions concerning the operation of the LTA and MFA: relative to an MFN tariff-only situation, or a global quota with licences not tied to particular exporting countries, does the MFA increase or decrease the number of developing countries which export textiles and/or clothing?8 4.34. Those who believe that the LTA and MFA quota systems have increased the number of developing country participants in world trade argue that open competition for access to the developed countries' markets would result in a few large, efficient developing countries capturing even larger shares than they now have under the MFA. The opposite view stresses that the existing system fossilizes trade and protects the market shares of traditional suppliers from intense competition from a multitude of currently small, and potential new, suppliers. 4.35. It is not possible to give a definitive answer to this question. What is clear from Tables 2.19 to 2.22 is that in the cases of the United States and the EC, all of the increase in the number of supplying countries occurred under the LTA; under the MFA, the number of suppliers has remained virtually unchanged. As is apparent f rom the figures in Appendix Tables A.13 to A.18, in the case of Australia and Norway, which participated in the LTA and MFA I, as well as New Zealand, the picture is more mixed. The number of countries selling textiles to Australia was the same in 1978 as in 1963; then, between 1978 and 1982 there was a modest increase; in the case of clothing, the number of suppliers increased steadily between 1963 and 1982. Although Norway's experience resembles more closely that of the United States and the EC, there were increases in the number of suppliers of both textiles and clothing after 1973. In New Zealand's case, the number of suppliers continued to increase through 1978 for textiles, and through 1982 for clothing. 4.36. It is possible, however, that the view that in the absence of the MFA the import market of the developed countries would be dominated by a small number of exporting countries, and that this would block the development of other exporting countries, is both too narrow and too static. First, to the extent that their market shares are smaller in textiles and clothing, the more successful exporting countries have additional labour and capital to invest in other product areas, thereby increasing the difficulty of other countries gaining a foothold in those other product areas. A second point, relevant to a situation where there was open competition among developing countries to export textiles and clothing to the developed countries, is that while it is true that many of the advanced developing countries are currently major exporters of clothing or textiles, they will continue to climb up the income - 152 - ladder. With rising wages they will begin (are beginning) to loose comparative advantage, first in the least skill-intensive segments of these and other industries, later in a broader range of labour-intensive activities, thus making room in a natural way for countries from below. Third, under any quota system there will be, under strict efficiency criteria, a global misallocation of resources, a reduction in the market for foreign suppliers, and distortions in the share of individual suppliers. 4.37. Under a quota system in which licences are given to the exporting countries for distribution among their exporting firms not only do the domestic prices in the importing country rise, but there is also a worsening of the importing country's terms of trade (this is in contrast to a situation involving only a tariff, or a global quota system with the licences allocated to importers, where the importing country's terms of trade either remain unchanged or improve). Under the MFA, the exporters receive a price for their products more or less equal to the domestic market price in the importing country, minus any tariff duty; exactly how close the price received by the exporter is to the actual market price in the importing country depends, among other things, on the exporter's knowledge of the price expected to prevail at the time the goods are delivered, the extent to which that price expectation turns out to be accurate, the size of the quota and the degree of competition among importers. 4.38. This terms of trade loss for the importing country is of course a terms of trade gain for the exporting country, or more accurately, for the exporting firms which receive a share of the export licences free of charge. It seems likely that the opportunity to capture the quota premium is viewed by established exporters as partially compensating for the disadvantage of having their exports subject to quantitative restraints, and thus reduces their opposition to participating in the bilateral quantitative restraints. This reduced opposition by the established exporting firms, in turn, is a plausible explanation of the importing country's willingness to incur a terms of trade loss on their textiles and clothing trade. The importing country's decision to have the exporting countries handle the distribution of the licences may also be motivated in part by a desire to minimize its own part of the not insignificant administrative costs involved in operating a system as complex as that which has evolved under the LTA and MFA. 4.39. As was noted in the discussion of global quotas, to realize the potential windfall gain, the recipient of the quota licence must either use it, or trade/sell it to someone else. In the case of developing countries which do not allow export licences to be freely traded, the analysis of the effects of the licence allocation system would be more complicated.9 4.40. Some indication of the value of the export licences - that is, of the quota premia - is available for Hong Kong, the Republic of Korea and Taiwan. For example, Jenkins (1982, p. 48) has estimated that in 1979 the average value in the three exporting areas of a licence to export outwear to Canada was equal to 16 per cent of the average landed cost per unit, while licences for exporting shirts with tailored collars to Canada had a value equal to 24 per cent of the average landed price - 153 - per unit. In the case of outwear, the value of the licence was equal to three-quarters of the tariff revenue per unit collected by the Canadian government, whereas in the case of the shirts the licence value exceeded the tariff revenue by one-third. 4.41. Several other points regarding operation of the bilateral restraints under the LTA and MFA are worth noting briefly: - the need to develop an "equitable" system for distributing the quota licences runs the risk of drawing the exporting country's textile and clothing firms into cartel-like agreements; - new firms, which are not able to get on the allocation list for the export quota licences, or which receive only a token number of licences, will find it more difficult to compete with the old established firms, and therefore will find it more difficult to get established in the industry;10 - bilateral export restraints can be applied to particular products in specific instances of market disruption, or - as has been occurring more frequently in recent years - they can be applied in a more "comprehensive" way to broader product categories, in which case they begin to take on some characteristics of a commodity agreement; - tariff reductions (either MFN, under preferential agreements or under OPT) on textiles and clothing subject to binding MFA restraints have no impact on the domestic market price in the importing country; however, they do increase the value of the quota premium (which, it will be recalled, is equal more or less to the difference between the wholesale price in the importing country, and the tariff-inclusive price at which the product is available from the exporting country). - because of the complexity of administering export restraints under the LTA and MFA, the exporting countries with a large turnover have an incentive to invest in an administrative infra-structure that will allow them to minimize the losses and maximize the gains from having to do business under such a system, a factor which may favour larger exporters in certain circumstances; - protection in the developed countries, in general, reinforces protectionist and pro-import-substitution groups within the developing countries because it helps foster a fear of being "clamped down on" as soon as they become competitive in any industry; while any system of restraints would have this effect, the LTA/MFA could be said to contribute, in addition, to a bilateral approach towards management of trade relations in both developed and developing countries which goes beyond textiles and clothing. - 154 - A digression: possible reasons for quota underutilization 4.42. The preceding discussion of the operation of the bilateral restraints provides a convenient opportunity for returning to a question raised in Chapter 3, namely why are many of the quotas not fully utilized? 4.43. There are many answers to this question. The following brief discussion is intended as an illustrative rather than exhaustive list of possible reasons for quota under-utilization. 4.44. Redundancy. Quantitative export restrictions can become temporarily redundant when a recession in the importing country leads to a sharp reduction in demand. The weak demand during the early 1980s is cited by many exporting countries as being an important reason why they were unable to fill their quotas in recent years. 4.45. On the other hand, quotas are sometimes redundant because of supply bottlenecks in the exporting country. Thus a boom in the exporting country may "deflect" supply from the export market to the domestic market. In other instances, insufficient investment, high levels of protection of inputs, or a lack of spare parts adversely affects export performance. 4.46. Quotas based on historical export patterns may become irrelevant either because an exporting country "grows out" of a quota or because it deliberately restricts exports of certain textile products. More generally, erosion of comparative advantage can explain underutilization of quotas in particularly labour-intensive product categories in the case of fast growing developing countries. 4.47. Technological developments have affected patterns of trade and quota performance. Low count cotton yarn used to be imported by the EC, for example, while the domestic industry in the importing countries produced high count yarn. With the progressive switch to open-end rotor spinning, a much more capital intensive process, the domestic industries have switched over to low counts because rotors cannot spin high counts. This could explain, for example, the low quota utilization rates of traditional suppliers of low count yarn, such as Pakistan, and the high utilization rates of Brazil and Peru for exports of high count yarn to the EC. 4.48. Induced mismatch of demand and supply. Bilateral quotas are sometimes established for products that are expected to be important in the future in order to ensure future access to restricted markets. On the other hand, rapid changes in fashion in the face of limited flexibility of quotas are likely to lead to an underutilization of quotas which are based on historical demand patterns (Cable, 1981). 4.49. The probability that supply does not meet demand during the quota period increases as the quota system becames disaggregated, extensive, complicated, intransparent or rigid. Swing provisions and carryforward and carryover are seen as important because demand for clothing keeps shifting and it is essential to be able to switch exports - 155- into items that are currently in demand. Yet, as was described in Chapter 3, flexibility provisions have been reduced by a number of importing countries during MFA II and III. 4.50. Also, the way in which restraints for exports to the European Community are divided up between each member State on a predetermined bass impairs the prospects for an exporting country to fill its overall quota for the EC. Each quota is subdivided on the basis of previous market share, with the larger markets having the largest shares and the smaller countries often being left with such small ones that are not economically viable for exporters. 4.51. Reduced competitiveness of the exporting country Quotas reduce efficiency of firms to the excent that they reduce output volume to a point where economies of scale can no longer be fully reaped. Quotas also impair efficiency of firms in the exporting countries via the disincentives for investment and modernization created by the uncertainty over future market access. 4.52. Quota utilization performance can be impaired if an exporting country does not have the experience, skill and administrative capacity to efficiently handle quota allocation. Because of the complexity of the schemes, transaction costs are increased. Firms suffer from the lack of transparency of the quota system and the way it is operated; moreover, firms often will be faced with filling small quotas with high administrative and marketing costs. Likewise, importers incur higher costs if supply is fragmented. Buyers for large stores and retail chains need very large quantities of standardized products. 4.53. Conclusions It has been asserted that the underutilization of quota implies that the bilateral agreements do not restrict trade. As the preceding discussion has shown, this may or may not be the case. There are many factors which can explain the observed underutilization, and the causes can differ from exporting country to exporting country, from. import market to import market, from product to product, and from one time period to another. Other effects of the LTA/MFA systems 4.54. Another possible effect of the LTA/MFA arrangements is that they cause an increase in the general level of protection in the world economy by creating a precedent for other product areas. This is another example of a proposition which cannot be definitively supported or rejected. 4.55. There is the obvious point that during the 23 years since the signing of the LTA, no similar special system of rules has been created for any product outside the textile and clothing area. On the other hand, there is the question of the extent to which the discriminatory bilateral QRs under the LTA and MFA have "inspired" the proliferation of VERs and OMAs since the early 1970s covering footwear, steel and automobiles and a variety of other products. This could occur both on the side of the importing countries as other import-substitute industries argue "if textiles and clothing get special help, why not - 156 - us?", and on the side of the exporting countries, especially if the older established firms are concerned about competition from newcomers and/or the government has an administrative apparatus (including experienced personnel) available to administer VERs in other product areas. 4.56. As regards the future, consider the following recent news item. Under the headline "Steelmakers Seek Multilateral Accord to Resolve Crisis in World Industry" an article in the International Herald Tribune of 14-15 January 1984 included the following remarks: It is not surprising, ... that amid all this turmoil many U.S., European, and Japanese steelmakers will say, in a candid moment, that a multilateral steel agreement is needed to rescue them.... Such an accord could take numerous forms. It could follow the lines of the Multilateral Fiber Agreement, which essentially allows industrialized countries to restrict imports from less-developed countries. 4.57. In addition to the "equity" and "demonstration effect", the LTA and MFA may have contributed to a misallocation of resources within developing countries by inducing then to shift labour and capital from the textile and clothing industries to other industries where their comparative advantage could be smaller; this could have the effect of increasing competition in other product lines in the markets of the developed countries, as well as reducing the range of products which the developing countries import from the developed countries. Australia, New Zealand and Norway 4.58. As can be sean from the preceding discussion, the quota systems operated by Australia, New Zealand, and Norway allow prima facie for competition among supplying countries for the restricted markets. Depending on rigidities inherent in the operation of any quota system, this means that relative shares of the supplying countries are influenced by price competition. It also of course means that since the quota system is administered at the importing end, the quota premia go to the importers and the price received by the exporters is correspondingly smaller than it is when the system is administered by the exporting country. 4.59. On the other hand, as the remarks above indicate, the existence of a global quota or tariff quota system has not prevented an increase in the number of supplying countries. 4.60. While some of the points discussed under the LTA and MFA could be said to be particular to the MFA regime, there are a number of other points that could apply to any quota system. For example, a quota may be divided-up into excessively small units as a result of "overcategorization", or the existence of the quota could have effects on economies of scale and efficiency of the exporting firms. In other words any quota system will have certain incidental effects beyond the simple restriction of imports. A key factor under any system is the - 157- size of quotas relative to the level of consumption in the importing country. Developing country trade regimes 4.61. To the extent that a discussion of the trade regimes of the developing countries could be considered relevant to an analysis of the impact "of the existing system of restraints and restrictions relating to textiles and clothing", a general comment on three common features of their commercial policies is in order. One is the practice of having more than one type of import restriction applied to a particular product; second is the relative frequency with which these multiple measures change; and third is the widespread use of discretionary exemptions. At the same time, it must be added that the record of developed countries is, as we saw in Chapter 3, far from perfect on these points. 4.62. It should be recalled that, as was noted in Chapter 3, many of the developing countries maintain comprehensive import licensing schemes for which, in most instances, balance-of-payment justification is invoked. These licensing schemes restrict imports not only of textiles and clothing, but also of many other products, and it is difficult to determine whether imports of textiles and clothing are affected more or less than imports of other products. Eastern trading area regimes 4.63. Little can be said by way of an analysis of the trade effects of the trading systems of Eastern trading area countries, beyond noting what has happened to trade flows. 4.64. The Eastern trading area as a group was a net exporter of textiles and clothing in both 1973 and 1980. While the small net surplus of textiles remained (in relative terms) almost unchanged, the trade surplus in clothing widened sharply from 15 per cent of exports (or $270 million) in 1973 to 36 per cent (or $1,800 million) in 1980. The difference in the development of the textile and clothing trade surplus is mainly due to the slow growth of clothing imports. Exports and imports of textiles of the Eastern trading area expanded both at about 14½ per cent per annum between 1973 and 1980, marginally above the growth in world exports of textiles (13½ per cent per annum). Clothing exports and imports of the Eastern trading area, however, expanded by 16 and 11½ per cent annually, the latter figures being well below the 18 per cent average annual increase for the world as a whole. 4.65. Between 1973 and 1980 trade with third countries expanded faster than intra-area trade for both textiles and clothing. Intra-area textile trade grew by 9½ per cent while imports from third countries expanded by 16½ per cent (at annual rate). The difference in the growth rate for clothing imports is somewhat smaller as intra-area expanded by 10½ per cent annually and imports from other areas by 15 per cent annually. - 158 - 4.66. On the basis of available data for individual countries, it appears that the trends observed in the trade of textiles and clothing in the Eastern trading areas a group conceals sharply diverging developments among the countries. In Czechoslovakia imports of textiles and clothing expanded by only small fraction of that of world trade , whereas the expansion of Hungary's imports exceeded that of world trade for both textiles and clothing. The growth of Poland's imports of textiles and clothing remained somewhat below that of world trade. In Czechoslovakia, the trade surplus in both textiles and clothing increased in relative terms (that is, as a percentage of total exports), while in Poland the small textile surplus increased, but the large clothing surplus diminished (in relative terms). In Hungary the small surplus on textile trade surplus turned into a small deficit, while the surplus in clothing trade - although increasing absolutely by $120 million between 1973-1980 - declined in relative terms. The impact of restrictions on production and employment 4.67. The analysis in the preceding pages has considered the impact of restraints on domestic costs and prices, and on the pattern of trade in textiles and clothing , particularly that of the exporting developing countries. We now turn to the question of the impact of those import restraints on production and employment in the importing countries. 4.68. The tariffs, global quotas and quantitative restraints discussed above were introduced for the purpose of increasing the levels of domestic production and employment in the textile and clothing industries above what they would have been in the absence of those policies. 4.69. In the case of production, the higher price for domestically produced textiles resulting from tariffs, global quotas or bilateral restraints will result in some combination of increased earnings for labour and capital in the textile industry, and increased output as additional resources are attracted into the industry. As long as the restrictions on clothing imports are more than sufficient to offset the higher cost of the textile inputs, the production effects will be similar in the domestic clothing industry. 4.70. Provided there is freedom of entry for labour and capital into both industries, as time goes by any above-average earnings resulting from the higher prices will attract new factors into the industry, and thus those earnings will be competed back to a more competitive level. Each industry will end up with more labour and capital (and thus more output) than before but labour and capital's per unit earnings are likely to be not very different from the pre-tariff levels. In other words, in the short-run protection affects mainly wages and profits, whereas in the medium term it affects primarily the pattern of production ("where people work") in the economy. 4.71. In additicn to the effect on the level of production, there could also be effects on the pattern of production, depending on the items on which the import competition tends to be concentrated. When a quota is imposed on imports of a product that is available in several - 159 - versions that vary in terms of quality - that is, in terms of the value added per unit and thus in terms of price per unit - the exporting firms have an incentive to move up the quality scale in order to get as much value added per unit as possible into the volume they are allowed to ship to the importing country. 11 Furthermore, several governments in the exporting countries give firms producing high-valued versions preferential treatment when allocating textile and clothing export licences, a practice which reinforces the firms' own profit-maximizing incentive to up-grade the quality of its products. 4.72. Such a change in the quality mix of imports of the restricted product would cause import competition to be concentrated at the upper end of the quality spectrum. It is also widely alleged that the "up-grading" effect reduces the supply of childrens' clothes (causing their prices to rise relative to the prices of adult clothing) because exporters find it more profitable to fill their quotas with adult clothing. 4.73. The existence of incentives for up-grading the quality of exports under quota does not necessarily mean that it occurs in practice. It is argued, for example, that in the developed countries the retail chains which import directly, as well as many of the large import houses, continue to emphasize low- and medium-cost clothing, thereby countering the exporters' desire to up-grade. Some researchers have found evidence that supports the existence of up-grading, 12 while others report that the available evidence on this issue, especially if it is used to generalize about developing country exporters as a group, is not particularly convincing one way or the other. 4.74. In so far as the effects on employment, as distinct from the production effects, are concerned, it is to be expected that, at least in the short-run, granting protection will cause employment in industries such as textile and clothing industries to be larger than it would otherwise have been. This being said, there remain two important questions. First, what is the impact on the trend in employment in those industries in the medium-and longer-term? Second, what is the impact of the protection of textiles and clothing on employment elsewhere in the economy - in other words, what are the general equilibrium effects of protecting a particular industry. 4.75. Over the medium and longer term, if the industry is a large enough employer of labour and/or capital, its expansion could influence the relative cost of its inputs raising the relative wage of the factor which it employs relatively intensely. This would, in turn, induce the industry to adopt production techniques that were less intensive in the now relatively more costly factor. While it seems doubtful that such variations in employment, even in the case of industries as large as textiles or clothing, could have a lasting influence on the relative price of labour, it is worth considering the possibility of an impact on wage levels in a particular region of a country in the medium term. 4.76. The evidence in Chapter 2 pointed to a substantial increase in labour productivity in the developed countries' textile industries. This may have been the result of basic developments in those economies - 160 - that were not influenced by the level of protection granted to the textiles industry. Alternatively, protection may have speeded up the substitution of capital for labour. For example, if the way in which wages in textiles (and clothing) are determined allows the workers to capture part of the initial increase in profits in the domestic industry caused by the increased protection, the longer those higher (than otherwise) wages are maintained, the greater will be the incentive for the f irms to adopt more labour-saving investments. Similar developments could be expected in a situation in which the pace of labour-saving technological innovation is speeded-up by the availability of increased profits following the introduction of higher barriers to imported textiles and clothing. This latter effect is reinforced if the industry views the protection as at least semi-permanent and thus as providing more "security" concerning the industry's future prospects. 4.77. In this case, the industry would end up not only with a larger-than-otherwise level of production, but with a more capital-intensive production process - that is, with fewer employees per unit of output. These two effects pull in opposite directions as far as total employment in textiles and clothing is concerned, and depending on the details of the situation the net effect could go either way. 4.78. It is difficult to assess the relative importance of these various effects. However, the empirical evidence in table 2.3 (Chapter 2) indicates that employment in textiles in the developed countries has been declining at an accelerating rate throughout the post-war period, at a time when textiles was one of the most heavily protected manufacturing sectors in the developed countries. This trend is much less evident in the case of the clothing industry - where employment in the industrial countries increased between 1953 and 1973, but at a slower rate than output (see Tables 2.2 and 2.3) - but this almost certainly reflects primarily the generally acknowledged fact that the scope (at least up to now) for labour-saving innovation is much smaller in the clothing industry than in the textile industry. 4.79. In this connection, it should be noted that trade restrictions will protect existing levels of employment only so long as the number of employees per unit of output is constant - as is usually the case in the short run. But should it develop that protection indirectly stimulates increases in labour productivity, the link may be turned inside out because, unless the rising labour productivity is at least compensated for by the increased output from the industry, protection will have caused employment in the protected industry to decline. In any case, as technological change progresses (with or without a boost from import restrictions), trade policies originally intended to "protect jobs" become more and more policies that "protect machines" instead. 4.80. The impact of the protection of textiles and clothing on employment in the rest of the economy is easy to answer. To the extent that, on net, the protection succeeds in keeping the level of employment in textiles or clothing higher than it would have been, employment elsewhere in the economy will be smaller. - 161- 4.81. This is not all, however. Regardless of what happens to employment in the textiles and clothing industries, the smaller-than-otherwise imports of textiles and clothing due to protection will reduce the number of job openings in the export industries because - in the absence of a permanent change in international capital flows - any decline in a country's imports will be matched by a decline in exports.13 This general proposition - that any action which reduces a country's imports will also reduce its exports - has been cast in bold relief recently by the severe debt service problems among developing countries. Shortages of foreign exchange in the heavily indebted countries have forced sizeable cutbacks in imports, leading to lower employment in the export industries in the industrial countries.14 4.82 There is, of course, the possibility that trading partners would retaliate for the imposition of higher import restrictions on textiles and clothing by raising their own barriers. But as far as the restricting country's exports are concerned, the retaliation is almost beside the point because its exports will decline in any case. All the retaliation does is speed-up - and call attention to - the decline. A final note 4.83. As was indicated at the beginning of this chapter, the analysis has focused on the effects of the various policies affecting trade in textiles and clothing, as opposed to the benefits and costs of those policies. A fair amount of academic research has been done on this latter topic, and the results of those efforts to quantify the benefits and costs obviously are relevant to trade policy decisions.15 4.84. Regarding that literature, it should be noted that virtually without exception analysts have found that the medium and longer-term costs of tariffs and quotas to the society exceed the benefits, normally by a very large margin - a conclusion which the above analysis implies would also apply to textiles and clothing. - 162 - FOOTNOTES TO CHAPTER 4 ¹Despite occasional claims to the contrary, it remains true that there is a strong presumption that imposing a tariff causes the domestic price of the imported good and its domestic counterpart to increase. The fact that in most developed countries, tariffs in the "trade sensitive" areas of textiles and clothing remain well above the average for all manufactured products indicates that policy makers believe that tariffs (above a certain level, at any rate) make a difference. That belief is supported by data presented below on the trade effects of West European integration. Another approach to this question is to try to specify in a rigorous way the conditions under which the imposition of a 15 or 20 per cent tariff would not lead to an increase in the domestic price of the product (except, perhaps, in the very short term). Those conditions are likely to be much less realistic than the condition underlying the analysis that predicts a price increase. ²In addition to protecting domestic producers from foreign competition, tariffs also serve other rôles, one of the most important being - in the case of many developing countries - a resource of revenue for the government. In practice, however, the situation is complicated bv various factors that serve to reduce the amount of duty collected; these include tariffs so high that little or no trade takes place, the frequency of exemptions from the obligation to pay the tariff, and the simultaneously application of restrictive import licensing schemes. ³See Kindleberger (1968, pp. 183-89); as his analysis makes clear, the concepts of trade creation and trade diversion are not as straightforward as they might appear. 4Truman (1975) has estimated that over the period 1960-68, the formation of the EEC had a positive impact on trade with non-members in textiles and clothing-plus-shoes; and that the same was true of EFTA in the case of clothing-plus-shoes; in the case of textiles, his calculation indicate a negative impact on EFTA's trade with non-members. However, other calculations indicate that between 1960 and 1968 EFTA's imports of textiles from third countries increased by 50 per cent, only moderately less than the 63 per cent in the EC's imports of textiles from third countries. 5For a general discussion of some of the issues involved see Langhammer (1981). 6There are relatively few instances of a QR being imposed on a product with a zero tariff. Some GSP treatment of textiles and clothing may fall in this category, as does most trade under the EC's agreements with the Mediterranean countries and Portugal. See for example Wolf et al. (1984), Feenstra (1982), Jenkins (1982) and Falvey (1979). Jenkins (1982, pp. 12ff) notes that the prices of cheap versions rise more than prices of high cost versions as a result of this process. - 163 - 7If all the import licences are auctioned, the quota system is equivalent to a variable tariff, in which the "tariff" is always adjusted so as to permit a predetermined quantity of imports. 8From a purely economic point of view, this is not an important question because what matters is the efficiency with which countries use their resources, not who exports what. At the same time, it is obvious that it is important from a political economy viewpoint and that this warrants an attempt to find an answer. 9See Hamilton (1983) for a brief description of the export quota allocation systems for clothing in the ASEAN countries. 10This is a standard effect of voluntary export restraint agreements. For example, last November, the International Herald Tribune (2/11/83) ran an article under the heading "After Car-Export Pact, Real Battle Will Be for Share of Higher Quota". As to the domestic effects in Japan of the agreement, which involved Japan's VER on automobiles to the United States, the artilcle included the following remarks: "while the government-to-government talks are over, another set of negotiations will now begin, and they promise to be far more spirited and intricate than those conducted by the trade officials. The Japanese auto companies must now fight it out among themselves and with the Ministry of International Trade and Industry to determine what shares of the export total each company is to be allocated. Because it is estimated that the leading Japanese companies can make a subcompact car for $1,500 less than Detroit, the profitability enjoyed by Japan's automakers in the United States is unusually high. ... The lure of the high profitability of the U.S. market, and the prospect of getting more of it, will animate the coming fight among the Japanese companies for larger shares of the export allocation. The two companies with the most to lose in the lobbying for favorable quota allocations are Isuzu Motors Co. and Suzuki Motor Co. Both companies were planning to begin much higher production next spring to supply subcompacts to General Motors Corp." There is no reason to believe that the situation is any different in the textiles and clothing industries of developing countries. 11See, for example, Falvey (1979) and Jenkins (1982). 12See Liu and Mok (1980) - 164 - 13See GATT (1982, pp.15-18) and Clements and Sjaastad (1984) for an explanation of the way in which import taxes become taxes on exports. Note that the general proposition that "a tax on imports is a tax on exports" does not depend for its validity on there being tariffs on inputs into production for export; it would be fully valid in an economy in which only final consumption goods were subject to tariff. Consider also, for example, the following quotation from Pelzman (1983, p. 538): "Restraining the LDC's capacity to export their major export items to the United States is bound to have serious repercussion on U.S. sales of these other manufactured goods. This in turn will have an impact on these industries' employment. For example, in the chemical and allied products sector, 15 percent of their employment is export-related. In machinery it is 21 percent and in transport equipment it is 15 percent. ... These export-related jobs are distributed ascross all states. For example, in Virginia, which was shown to be adversely affected by a 30 percent tariff reduction in textiles, 10 percent of the manufacturing employment is dependent on exports. The story is the same for South Carolina and North Carolina where 10 and 8.4 percent respectively of the manufacturing employment is dependent on exports. ..." 14See, for example, Dhar (1973); in this article the author estimates that in 1982 and 1983 nearly 400,000 jobs were lost in American industry as a result of debt-related cutbacks in Latin America's imports. 15See Wolf et al. (1984) for a recent survey of the literature in this area. - 165- CHAPTER 5: ECONOMIC CONSEQUENCES OF ALTERNATIVE FUTURE TRADE POLICIES GOVERNING TEXTILES AND CLOTHING 5.1. The third part of the terms of reference for this study calls for an examination of the "consequences for economic and trade prospects in ... countries [participating in textiles and clothing trade] of a phasing out on the basis of the provisions of the General Agreement, or of the continued maintenance, of the restraints and restrictions applied under the existing textile and clothing regimes, principally the MFA". 5.2. Even though the specific concern is with the textile and clothing industries, future developments in those two industries cannot be considered in isolation from broader developments in the economy. Demographic and technologial trends, for example, will influence the demand for products of these industries and the productivity of their workers, and policy developments in other industries and the level of overall economic activity will influence the ease with which structural adjustment in the textile and clothing industries will occur. 5.3. A "look at the future" requires attempting to anticipate three distinct aspects of the future course of events. One involves future trends in basic economic and demographic characteristics of the main geographic areas, such as population and labour force growth, per capita income growth and the pace of technological change. The second involves the future course of economic policies in the main geographic areas, in particular trade policies and sectoral/general support programmes. The third aspect is the way in which the first two aspects will inter-act to determine the future pattern of world production and trade in textiles and clothing. 5.4. Some of the factors involved are easier to deal with than others. Projected population growth rates, including both total population and the working age population (15-65 years), offer a relatively reliable "window" on the next two or three decades. On the other hand, trends in per capita income growth have varied considerably over the past fifty or sixty years, as have the pace of productivity growth and trends in labour force participation rates. Also the future course of overall trade and structural adjustment policy is inevitably influenced by the macroeconomic environment, just as it influences that environment. 5.5. The purpose of these brief introductory remarks is to make explicit the speculative nature of the contents of this chapter, and to provide a rationale for the way in which the chapter is structured. 5.6. The first section considers trends in the factors that will play a major role in determining the demand for the output of the textiles and clothing industries in the two decades following the expiration of MFA III (our arbitrarily chosen time horizon). The second section examines the major factors that will influence the prospects for the textiles and clothing industries in the main geographic areas, including both "real" developments (such as technical change and labour force growth) and government policies. This section culminates in the analysis of the two major commercial policy options specified in the study's terms of reference. - 166 - (A) The demand for textiles and clothing 5.7. In the section "trends in demand" in Chapter 2, it was noted that final consumer demand for the output of the textile and clothing industries can be divided into three categories; clothing, household textiles, and a miscellaneous grouping that includes automobile tyres, sporting equipment and so forth. The shortcomings of relying on fibre consumption data to estimate (past) trends in the final consumption of these products were noted in the course of that discussion, and those same problems would of course apply to using projections of fibre demand as a proxy for projections of final consumer demand for textiles and clothing.¹ As in Chapter 2, therefore, the focus in this chapter is on final consumer expenditure, the only difference being that this time it is the future rather than the past that interests us. 5.8. As clothing will continue to be the most important source of textile demand in the developed countries, and even more so in the Eastern trading area and the developing countries, it can be assumed that developments in the demand for clothing will be the dominant factor determining the demand for the output of the textile industry. In analyzing the factors influencing the future aggregate demand for (expenditure on) clothing, it is useful to distinguish between (a) population growth and (b) trends in per capita expenditure on clothing. 5.9. Table 5.1 provides figures on the United Nations' latest projections of population increases in the next two decades. According to the estimates, 850 million people will be added to the world's population between 1985 and 1995, while the number of people of working age will increase by an estimated 600 million (all of the latter people have, of course, already been born). The figures also indicate that, out of each 1,000 people added to the world's population between 1985 and 1995, 45 will live in the developed countries, 209 will live in the Eastern trading area countries (177 of those in Asia), and 746 will live in the developing countries. (The average annual population growth rates underlying these projections are 0.7 per cent in the developed countries, 1.1 in the Eastern trading area, and 2.2 in the developing countries.) 5.10. The impact which this population growth has on the increment to aggregate demand for clothing (and other products which use textile inputs) in the various geographic areas depends, of course, on the growth of per capita expenditure on clothing. That, in turn, depends on certain other factors, of which the most important is the future growth of per capita income. There is no doubt that the level of per capita income in the developing countries as a group will remain well below that of the developed countries over the next two decades, as will the per capita level of expenditure on clothing. But if the growth rate of per capita income is about the same in the developing countries (as recent projections of income growth combined with the above-mentioned population growth figures imply)², then the coincidence of higher population growth rates and similar per capita income growth rates in those countries will mean (other things being equal) a relatively stronger growth of demand for clothing (and other products incorporating textiles) in the developing countries than in the developed countries, with relative demand growth in the Eastern trading area countries falling in between.³ - 167 - TABLE 5.1. - INCREMENT IN WORLD POPULATION BY AREAS, 1985-2005 Additional Additional Population Working Age Population 1985-1995 1995-2005 1985-1995 1995-2005 850 882 600 650 million million million million (Percentage distribution of increment) Developed countries 4.5 3.0 3.4 3.1 Developing countries 74.6 78.1 70.3 78.2 Southern Europe 2.2 2.0 2.1 2.0 Asia 37.9 36.1 39.9 41.3 Latin America 12.0 12.6 11.4 12.4 Africa 22.5 27.4 16.9 22.5 Eastern trading area 20.9 18.9 26.3 18.8 Europe (incl. USSR) 3.2 2.7 2.2 2.3 Asia 17.7 16.2 24.1 16.5 TOTAL WORLD 100.0 100.0 100.0 100.0 Additional Working Age Additional Population Population 1985-95 1995-2005 1985-95 1995-2005 Developed countries-- SouthernEurope Africa Developing countries Latin America Asia Eastern trading --> Asia arts E USSRe - 168- 5.11. In discussions of the impact of higher per capita incomes in the developed countries on the demand for clothing, the widely accepted hypothesis is that rising per capita incomes are likely to result in an absolute increase, but a relative decline, in clothing expenditure. The historic experience in the last decades shows that the share of clothing expenditure in total consumption has been falling significantly in almost all developed countries (see Appendix Table A.4). 5.12. However this trend is considerably weaker if the analysis refers to clothing expenditure expressed in constant prices. For a large number of developed countries, among them the United States, the United Kingdom, Canada, Austria and Sweden, the volume of clothing expenditure increased faster than total private consumption in the 1970s. This raises the question to what extent the observed trend in expenditure measured in current prices is not largely due to the relative price decline, rather than to a decline in the volume of clothing demand. 5.13. Other factors also influence per capita expenditure on clothing, including the age structure of the population, female labour force participation rates, and the price of clothing relative to other consumer goods and services. 5.14. The slowdown in population growth in the developed countries, has led to an ageing of the total population, a development which will tend to reduce the proportion of national income spent on clothing. On the other hand, if the trend toward increased female employment continues, this development will stimulate expenditure on clothing. Past experience shows that the higher clothing expenditure in households with two wage earners is not limited to absolutely higher clothing expenditure, but involves as well a significant relative rise. That is, the share of clothing expenditure in the combined income is much higher than in the single wage earner households.4 Regarding the future prospects, increased labour force participation by women is expected to continue but in many countries, especially in Scandinavia, the participation rates are already so high (above 70 per cent) that a limit might soon be reached. 5.15. In the developing countries the deceleration of population growth is projected by the UN to be less pronounced than for the industrial countries. This implies that the ageing process and the shift in the age composition will be of minor importance for those countries in the next two decades. 5.16. The rôle of price developments in the determination of clothing demand in the industrial countries is a controversial issue in the economic literature. Some studies indicate that relative prices are important, whereas other studies (mainly European) conclude that, according to the available data, prices are rather insignificant in comparison with other factors in explaining clothing demand.5 5.17. On the whole, it appears that it is very difficult to forecast the demand for clothing, or textiles, with any precision because so many factors, partly of conflicting influence, are involved. This holds equally for demand projections for individual countries and for - 169 - projections for whole regions. Available econometric studies have had little success in capturing the weight of the various determinants of clothing demand. This explains the present dearth of quantitative long-term projections in this area, and it may also explain why past long-term quantitative forecasts in this area have usually been inaccurate. But from the preceding discussion it can be concluded, with some measure of confidence, that the demand for clothing and textiles will expand more rapidly in the developing countries than in the developed countries for the remainder of this century. (B) International competitiveness 5.18. The pattern of world production and trade of textiles and clothing in the coming decade will be determined by a combination of "real" developments affecting relative costs of production in different areas, and government policies. It should be added that, in the first instance, there is no reason why the pattern of production and trade would be affected by the differences in the growth of demand in the main geographic areas just discussed. That is, leaving aside transportation and communication costs (which are natural trade barriers) and artificial trade restrictions, the fact that all textile and clothing products are tradeable means that the geographic pattern of world demand and the geographic pattern of world production can be completely different; production in excess of domestic demand in one location is shipped to locations where demand is in excess of domestic production. This is, of course, what is meant by international specialization. It is only when policies enter the picture - for example, a policy of adjusting restrictions on imports so as to insure that domestic producers supply a certain share of the growth in domestic demand for clothing and textile products - that a link is forged between the geographic pattern of demand growth and the geographic pattern of production growth. 5.19. There are four main factors to consider: technical change, trends in the relative costs of labour, corporate strategies, and government policies. 5.20. Leaving aside policies for the moment, it is likely that three categories of developments will play key roles in influencing the pattern of international competitiveness in the coming decades. One is the pace, nature and international mobility of technological change. Here there is little to add to what was covered in Chapter 2 and Appendix III. In the textile and clothing area, technology is internationally mobile, not the least because most of the new machinery/ideas are developed by firms which themselves are not textile or clothing producers. Thus they have no incentive to withhold new discoveries - quite the contrary, in fact. The real unknowns are (a) the nature and pace of the innovations; (b) the pace at which those available innovations will actually be introduced; this is influenced to an important degree by interest rates, and by the demand for capital by other industries in those countries where the level of interest rates does not, by itself, insure that all demands for capital are met; and (c) the extent to which technological developments involve additional training of the labour force. - 170 5.21. Cost-reducing technological innovations in transportation, to the extent they occur, will reduce that natural barrier to trade, and the virtual certainty of continuing innovations in international communications - for example, along the lines of the already commercially available capability of transmitting patterns and designs around the globe instantaneously, or holding a television conference via satellite involving people from two or more locations around the globe - will further shrink the "commercial distance" between different geographic areas. 5.22. Given the international mobility of textile and clothing technology, and the expectation that natural barriers to trade, such as transport and communication costs, are likely to continue to decline, the international competitiveness of textile and or clothing production at any given location will, even more than in the past, depend on trends in the relative costs of the various basic inputs. In other words, textile and clothing production is likely to become more footlose than in the past. 5.23. This second set of developments that will influence international competitiveness concerns trends in the relative costs of labour, capital, energy and so forth in the main geographic areas. Table 5.1 includes figures on the projected increase in the working age population for the periods 1985-1995 and 1995-2005; for the world as a whole, the estimated increases are 600 million and 650 million respectively. Out of every 1,000 persons added to the population of people 15 to 65 years of age between 1985 and 1995, 703 will live in developing countries and another 241 will live in the Eastern trading area economies in Asia; 34 will live in developed countries and 22 in Eastern Europe and the USSR. For the 1995-2005 period, the picture remains more or less the same, except for a shift between the developing countries and the centrally planned economies in Asia. These figures plus the previously mentioned figures on population growth rates (which together indicate that not only is the developing countries' share of the increase in working age population absolutely large, but also that it is larger than in the past) suggest that there is upward pressure on relative wages for unskilled and semi-skilled workers in the developed countries and in Eastern Europe (including the USSR) compared to the rest of the world. 5.24. This consideration is supported by two points. First, to the extent that the income and labour force projections hold, the growth of labour productivity will be somewhat more rapid in the developed countries than in the developing countries (assuming that the creation of new jobs keeps pace with the growth of the labour force). Second, it is likely that the additions to the labour force will be based towards high skilled labour in the developed countries, but towards low-skilled labour in the developing countries. 5.25. If these assumptions are correct, and if it is correct to assume that the relatively high degree of international mobility of capital will tend to keep differences in capital costs between countries from widening substantially, then there will be a continuing shift in comparative advantage in low-skill labour-intensive industries away from the developed countries (and also perhaps from the East European - 171 countries and the USSR). This trend may be partially offset by the increasing degree of automation, particularly in the textile industry, but is is not likely that differences in wage costs across the entire spectrum of the textile and clothing industries will be fully offset by this development. 5.26. At any rate, there is little indication that the comparative advantage of the developing countries, as a group, in low-skill intensive industries will deteriorate in the years to come. Of course, this does not exclude that a number of fast growing developing countries will switch to more knowledge-intensive production. In fact, this process which is already under way is likely to continue. But their place with respect to low-skill intensive industrial activities will be taken by other developing countries which are still in the early stage of industrialization. 5.27. The third set of developments likely to influence international competitiveness in the future can be grouped under the heading "corporate strategies in the textile and clothing industries in the developed countries". This encompasses a number of business strategies, including decisions to move into speciality fabrics and higher fashion clothing, engage in OPT, engage in direct foreign investment, and so forth, as weil as decisions about the pace at which the firm will adopt new technologies. 5.28. Case studies strongly suggest that flexible, innovative and well managed firms in the developed countries have a good chance to survive and expand in the face of competition from developing countries. To be sure it is impossible to design a blueprint for success or to generalize, since the necessary response to import competition differs for the individual stages of the textile complex and, furthermore, since this response depends heavily on the relative strength of competitive pressures, government policies, and a host of country-commodity-firm- specific idiosyncracies (Shepherd, 1981, pp. 31-41). But successful textile or clothing firms in the developed countries usually exhibit some or all of the following features: professional management in an environment frequently characterized by family ownership; strong emphasis on cost and quality control, notably continuous modernization of the production process, internationalization of production and of marketing (OPT; foreign direct investment); a high standard of industrial engineering; substantial investment in training and motivating employees; emphasis on the high quality/high fashion/brand label edge of the market in both design and marketing; and attractive servicee package" for customers. 5.29. More generally, the degree of success of a country's textile and clothing industries in adjusting to import competition depends on the perception of the adjustment process. This point is neatly summarized in the following quotation from a recent study of the United States textile industry, "In some respects the problems facing the Japanese textile complex have been identical to those facing the U.S. complex: growing comparative disadvantage in labor cost, reduced employment - 172 - and number of firms, increasing government regulations, increasing imports, and a host of new competitors in foreign markets. Unlike the U.S. firms, however, Japanese firms were faced with a currency whose value was rising sharply (affecting export adversely) and by major reductions in Japanese tariff protection. Despite this situation, the Japanese textile complex actually gained strength and increased control over global textile complex activities. There was nothing magical or mystical about how they did it. The Japanese firms simply made a deliberate decision to streamline and upgrade their domestic complex and to pursue the shifting comparative advantage to developing countries through direct foreign investment." (Freeston and Arpan, 1983, p. 59.) 5.30. In contrast, evidence suggest that, unless the competition on the domestic market is vigorous, a protective climate weakens the incentives to upgrade, innovate and invest (Lloyd, 1982). 5.31. In addition to these "real" developments, the pattern of production and trade in textiles and clothing in the future will also be influenced by government policies. Monetary and fiscal policies will influence textiles and clothing to the extent that they affect the overall rate of economic growth, since that growth rate will influence both the growth of demand for clothing and textile products, and the ease of structural adjustment in those two industries. From the viewpoint of this study, however, it would be more useful to focus on trade policies and "domestic" policies that have a relatively direct impact on the economy's structural flexibility. 5.32. As to the likely impact of the general policy situation in the developed and developing countries on future patterns of production and trade in textiles and clothing, there is not much to say beyond (a) the more those policies are geared to reducing structural rigidities and facilitating structural adjustment in general, the easier will be the adjustment processes in the textile and clothing industries, and (b) the greater is the "liberal trade" component in those adjustment-promoting policies, the greater will be thg volume of world trade in all products, including textiles and clothing. 5.33. This brings us to policies specific to textiles and clothing, in other words, to the final question: what might happen under the two broad policy options specified in the terms of reference. 5.34. A useful way of organizing the following remarks is first to consider the possible effects of the two options on the textile and clothing "importing countries" (to use the MFA terminology), and then to consider the possible effects on the "exporting countries". (Although these terms are used frequently because they are convenient, it is important not to lose sight of the fact that most countries are both importers and exporters of textiles and clothing - in other words, that there already exists a fair amount of intra-industry specialization in these two industries.) - 173 - (C) Impact from the viewpoint of the importing countries (a) Consequences of continuing the present system of restraints and restrictions 5.35. Drawing on the analysis in Chapter 4, plus the first part of this chapter, a continuation of present policies beyond July 1986 might be expected to have the following effects on the economies of the importing countries: - a continuation of past trends in textile production, as the developed country textile industries continue to remain heavily dependant on the growth of domestic clothing production, perhaps modified in an upward direction by increased use of OPT (by clothing firms in the EC, and by both clothing and textile firms in the United States); - increases in domestic consumption of clothing in the developed countries would be "shared" among domestic and foreign producers, the degree of sharing being dependant on how comprehensively the restrictions are applied, the growth rates applied to existing quotas, and the degree of flexibility (swing, carryover and so forth) allowed. - a continuing trend toward automation in both industries, leading to a further decline in the labour input per unit of output (judging from the analysis in Chapter 4, it is difficult to predict whether this process would be faster or slower under an extension of the MFA); the net impact on employment in textiles will continue to be negative as long as the growth of domestic demand falls short of increases in productivity; the outlook for employment in the clothing industry is less clear; - the prices of clothing and household textiles would be higher than otherwise; to the extent that this holds in particular for lower quality classes of clothing and textiles, it implies a regressive effect on the income distribution; - because the level of imports of textiles and clothing is lower than otherwise, the developed countries' experts to the developing countries will be lower (a direct result of the fact that the developing countries wil' have smaller foreign exchange earnings), and therefore production and employment in the developed countries' export industries will be smaller; - the full integration of Spain and Portugal into the EC would effect conditions of competition within the EC and EFTA, whether or not the MFA is continued; the effect of this development on third countries could be greater if the MFA is continued; - 174 - (b) Consequences of bringing textiles and clothing under the General Agreement 5.36. As the analysis in Chapter 3 made clear, trade in textiles and clothing is subjected to a variety of restraints and restrictions covered by the MFA regime, by articles of the General Agreement, or otherwise. Given this situation, the concept of "bringing textiles and clothing under the General Agreement" raises the key issue of the objective or goal of such a step. Would it be to bring such trade under the liberal precepts of the GATT - which would imply a change in policies (to "reasonable" tariff levels, combined with a strict observance of the conditions under which recourse to the provisions of the General Agreement, such as Artcle XIX, can be made) that would amount to an overall reduction in the level of protection of textiles and clothing and the elimination of discrimination - or would it be a search for a conventional "legal cover" for existing protection? The following remarks are based on the assumption that it would be the former 5.37. Possible effects on the importing countries: - the share of domestically produced clothing in domestic consumption in the importing countries would decline; the final outcome would depend on the pace of automation and corporate strategies (e.g., decisions to move into high fashion, and so forth) in the developed country clothing industries; - employment in the clothing industry would decline faster, as the impact of automation was re-inforced by increased import competition; - prices of clothing to consumers would decline, or increase less fast; some increase in developing country production costs (supply prices) would be possible as a result of the increased import demand in the developed countries, but this effect is likely to be small because, as discussed earlier, relative wage structures are unlikely to change significantly, and because of the international mobility of capital which would reduce likelihood of capital costs in developing countries rising sharply relative to capital costs in developed countries; this not to say that changes in the world level of interest rates would not influence the cost of capital, and thus the ability of the developing countries to take advantage of the opportunities created by trade liberalization in textiles and clothing. - the impact on the textile industry is more difficult to predict; it would depend on the extent to which corporate strategies (for example, toward OPT) would be affected by a phasing out of the MFA, but much more importantly on whether developed country textile producers were able to increase their sales to developing countries (where the expansion in clothing production would be occurring); that, in turn, would - 175 depend on their underlying comparative advantage vis-a-vis developing country textile firms, as well as whether there was a reduced reliance on import-substitution policies in a number of developing countries; in general, it is not implausible to assume that more international specialization in textile production could involve the developed countries concentrating in those textiles than can be produced relatively more cheaply by capital-intensive factories, and the developing countries specializing in textiles whose production is relatively intensive in low-skilled labour. - output and employment in activities in which the industrial countries are internationally competitive would expand more quickly than otherwise, and overall economic growth would accelerate due to the efficiency gains from increased international specialization. (D) Impact from the viewpoint of the exporting countries 5.38. (a) Consequences of continuing the present system of restraints and restrictions: - overall, the growth of production of textiles and clothing remains dependent on growth of domestic demand (in the developing countries themselves) plus whatever share of the growth of demand in the developed countries is allocated to imports; - continuing pressure on size of quotas granted to the major exporting countries, in order to "make room" for new exporters among the developing countries; - generally negative impact on .he economic growth rates of the developing countries, both ri) as a result of constraints imposed by the MFA on thei- ability to specialize more fully in those products for which they have the greatest comparative advantage (in this context, the important rôle [actual and potential] of the textile and clothing complex in the manufacturing sector of many developing countries bears re-emphasis), and (ii) because of the "spillover" effect of a continuation of the MFA on the developing countries' attitudes toward import-substitution and their general ability to base development strategies on increased international specialization; - continuing adverse impact on investment opportunities in developing countries resulting from the uncertainty created by the threat of new restrictions. 5.39. (b) Consequences of bringing textiles and clothing back under the General Agreement, (as in the discussion of the impact on the importing countries, it is assumed that this step involves a reduction in the level of restrictions): - 176 - - overall, a substantial increase in clothing production and exports, at least in the standard items; - a likely redistribution of clothing production and exports among developing countries in accordance with relative costs, marketing skills, and so forth; - a more competitive export marketing structure within each exporting country (that is, new firms wishing to get established in textiles or clothing production would not be restrained by the need to obtain quota licenses); - a terms of trade loss on textiles and clothing trade, reflected in a reduction in average unit values of exports of textiles and clothing to developed countries (but only for firms that currently get quota licenses free of charge; firms which currently have to purchase licenses would not experience a decline in net price); - developments in the textile industry, not only in the importing countries, but also in the exporting countries would depend on, among other things, whether the exporting countries' trade policies were changed; note that to the extent that the exporting countries' clothing firms are forced to purchase inefficiently produced higher-cost fabrics, their ability to compete with innovative developed country clothing firms would be reduced, or would continue to be circumscribed; - there would be a substantial reduction in the longer-term degree of uncertainty facing potential investors in textiles and clothing production in developing countries; - increase in overall imports from developed countries due to (i) higher foreign exchange earnings and (ii) higher rates of economic growth in the developing countries; this would be a particularly crucial factor at the present time for those exporting developing countries suffering from severe debt service or balance-of-payments problems. 5.40. Two final observations are in order. First, it is important to recall again that what happens in the textile and clothing area is influenced not only by policies specific to those two industries, but also by general trade policy developments in the developed countries and in the developing countries. Second, should a decision be made to bring trade in textiles and clothing under the General Agreement (in the "spirit" assumed in the preceding analysis), it is for the governments to decide how that transition can best be made and what interim measures would be needed. The experience with 23 years of "temporary" measures in the form of the LTA and MFA suggests that, if there is to be any real change, particular attention would have to be paid to the credibility of the transitional measures. - 177 - FOOTNOTES TO CHAPTER 5 See Cable and Baker (1983, p. 9) for a survey of recent projections of fibre demand through 1990. In what is described as a "conservative estimate of fibre demand, 1980-90" their figures show fibre demand growing at average annual rates of 1.8 per cent in the developed countries, 2.5 per cent in the centrally planned economies, and 3.9 per cent in the developing countries. 2The World Bank (1983, p. 27) estimates, as its central projection, that between 1985 and 1995 real gross domestic product will grow at an average annual rate of 3.7 per cent for the developed countries and 5.5 per cent for the developing countries. Together with the population projections from the United Nations quoted above, these figures imply an average annual per capita income growth of 3.0 per cent for the developed countries and of 3.2 per cent for the developing countries. 3The World Bank Report does not offer projections of income growth in the Eastern trading area. However, projections of the United Nations (1982, p. 8) for the period 1980-2000 indicate, in their medium variant, that average annual growth of income can be estimated at 4.4 per cent in this area between 1985 and 1995. Combined with the population estimate already mentioned this would amount to an annual growth of per capita income of 3.3 per cent during the period under inspection. 4In the United Kingdom, a comparison between one-worker and two and more worker households (with two adults) showed that while total expenditure in the second household type was on average 16 per cent higher than in the first, clothing expenditure was 27 per cent higher. UK, CSO, Family Expenditure Survey 1979, p.18. The higher "income-elasticity" of clothing expenditure in the "additional" income could also explain, at least partly, the by far larger increase in women's wear than in men's and boys' wear throughout the last two decades in both nominal and real terms. (This was observed in the United States, the United Kingdom, the Federal Republic of Germany and France; research did not include other countries). 5See Houthakker, Taylor (1966); Deaton (1975); Powell, Wilson, Van Hoa (1978, pp. 109-120); Dumard (1967, p. 76); Kuster, Badin (1970, p. 67); National Economic Development Office (1974, p. 27); Giersch (1978). OECD (1983), working with a variety of econometric models, stresses the importance of relative prices but judge the findings "extremely sensitive to the estimation form" and concludes that "in view of the variety of factors at play, attempts to separate price and income elasticities rarely yield unambiguous results". 6For the period 1985 and 1995, the average annual rate of growth of labour productivity, implicit in the projections, is 3.2 per cent for the developed countries, 2.9 per cent for the Eastern trading area, and 2.9 per cent for the developing countries. 7Freeston and Arpan, 1983, pp. 56-65; de la Torré et al., 1978, pp. 14-25. 8See International Trade 1981/82, (pp. 15-18) for a discussion of the point that a tax on imports is a tax on exports. - 178 TECHNICAL NOTES (a) General This section explains the concepts and definitions employed in the report and comments on the general comparability and coverage of the data. The report is based on a large body of statistical material drawn from standard international sources such as the United Nations Statistical Office and the OECD, as well as national statistics and responses to various questionnaires. Sources used in compiling the tables shown in the main text are given in part (d). To the extent permitted by the data, the years covered in the report were selected with a view to illustrating developments before and during the STA/LTA periods, by means of benchmark years 1953, 1963 and 1973, and where necessary to the analysis, either the entire MFA period from 1974 to 1982, or selected years. The country groupings adopted in the report generally follow those in earlier studies and are as follows: Developed countries North America - Canada and the United States Japan Western Europe European Community - Belgium-Luxembourg, Denmark, France, the Federal Republic of Germany, Ireland, Italy, the Netherlands and the United Kingdom. Other Western Europe - Austria, Finland, Norway, Sweden, Switzerland. ANZSA - Australia, New Zealand, South Africa. Developing countries Southern Europe - Malta, Greece, Portugal, Spain, Turkey, Yugoslavia. Asia - countries in South, East and West Asia Latin America - countries in South and Central America Africa Oceania Eastern trading area - Albania, Bulgaria, Czechoslovakia, German Democratic Republic, Hungary, Poland, Romania, USSR, China, Mongolia, North Korea and Vietnam. ANZSA and Oceania are included in the area totals but are not systematically reported separately. - 179 - Given the lengthy period covered in the report and for reasons of statistical convenience, the European Community has generally been treated according to its membership at the end of 1980, that is, excluding Greece. Exceptions have been annotated. Following the practice in GATT, International Trade, data on world trade in textiles and clothing includes exchanges between member States of the Community. Textile industry refers to the International Standard Industrial Classification, Rev.1. (ISIC) major group 321: spinning, weaving and finishing; the manufacture of made-up textile goods except wearing apparel; knitting mills; the manufacture of carpets and rugs; cordage rope and twine industries; the manufacture of textiles not elsewhere specified. Clothing industry - ISIC major group 322. The manufacture of wearing apparel except footwear. Manufacturing industry - ISIC major division 3. Textiles - Standard International Trade Classification, Rev. 1 (SITC) division 65. Textile yarns, fabrics, made-up articles and related products. Clothing - SITC division 84. Clothing and accessories. Textile fibres - SITC division 26. Textile' fibres (not manufactured into yarn, thread or fabrics) and their waste. Textile machinery - SITC sub-group 717.1. Manufactures - SITC sections 5 (chemicals), 6 (manufactured goods classified chiefly by material), 7 (machinery and transport equipment) and 8 (miscellaneous manufactured articles) but excluding division 68 (non-ferrous metals). With regard to fibre coverage, the above definitions include all textile fibres and, in the case of clothing, leather, rubber and fur. Unless otherwise indicated, fibres covered by the various textile arrangements are not distinguished separately. Since the ISTC is an industry-based classification and the SITC is a product-based classification, the aggregates defined above are not strictly comparable. Thus knitting mills, which produce both fabrics and fully fashioned clothing and accessories are included in textiles in industrial statistics whereas in trade statistics knitted fabrics are included in textiles and knitted or crocheted clothing accessories are included in clothing. For manufactures as a group, the industrial classification is broader in scope than the trade classification. Therefore, where direct comparison of industrial and trade data was necessary - as for example in discussing the share of textiles and clothing in manufacturing production, employment and trade - ISTC major division 3 was adjusted by the secretariat to exclude food beverages and tobacco, non-ferrous metals and petroleum refineries, in order to make it more comparable with the trade definitions. Hence, in these instances, the shares given (particularly for developing countries) are higher than comparable data in most published statistics. - 180 Both the international trade and industrial classifications have been revised from time to time, which has affected the comparability of the data over the long term. For example, prior to 1963, the clothing industry was defined to include made-ups, leather and footwear. Adjustments were made, where possible, to bring the data in line with present definitions. Production (or output) generally refers to "value added", defined as the difference between the value of output (or sales) and the value of purchased inputs: For point-of-time comparisons - for example, when comparing the shares of textiles and clothing in manufacturing production in a given year - the data are in current prices converted to US dollars at current exchange rates. When assessing developments over time, the data are in constant prices and area aggregates are generally weighted by value added at 1975 prices and exchange rates. Employment may refer to all persons engaged (including working proprietors, active business partners and unpaid family workers) or simply wage earners and salaried employees. Comparisons at a point in time are based on data for all persons engaged. For developments over time the data usually refer to wage earners and salaried employees. Area aggregates are weighted by 1975 data for all persons engaged. Investment is defined as the value of (a) purchases of fixed assets and (b) own-account construction of fixed assets less the value of corresponding sales. The concept covers new and used assets. It should be emphasized that much of the data used in this report suffer from serious shortcomings. These are related to (a) the limited country coverage, especially for developing countries, and (b) the lack of inter-country comparability. For example, industrial statistics are usually collected by means of surveys, which can differ widely between countries in terms of definitions and methods of data collection. Thus, in many countries, establishments below a certain size are not always included in an industrial survey. This problem, while relevant to textiles, is more serious in the clothing industry, which normally comprises a large number of relatively small firms. In countries where the cut-off point is high - for example, at twenty employees in Italy and the Federal Republic of Germany - a significant number of establishments will fail outside the scope of the survey. Moreover, it is well known that a comprehensive coverage cannot even be achieved with all registered establishments. In developing countries, where statistical systems are less sophisticated, data may be even less representative to the extent that a significant amount of activity takes place outside the manufacturing sector proper. The trade data refer as far as possible to "special" trade (i.e. excluding re-exports) but there are exceptions, notably Hong Kong, Singapore, South Africa and the United Kingdom, where the data relate to "general" trade. Thus for example, Hong Kong's imports include a significant number of products (principally from China) which are for re-export; on the export side, however, depending on the context, data either include or exclude re-exports. Exports are valued f.o.b. and imports are valued c.i.f. with the exception of Australia, Canada, - 181 - South Africa, and countries of the Eastern trading area in Europe. For the United States, imports are value f.o.b. before 1979 and c.i.f. thereafter. In addition, countries of origin and destination are not uniformly treated. Because of these differences, tables ranking countries or giving relative shares should be treated with caution. Unless otherwise indicated, trade data are expressed throughout in current US dollars. Data in this form are not ideal for analysis of long-term developments, due primarily to the high inflation and exchange rate fluctuations prevalent since the early 1970s. However, the statistical difficulties encountered in trying to measure the volume of trade at the required level of detail are formidable. These difficulties can be briefly described as follows: First, the simple aggregation of quantities reported in national trade statistics becomes unsatisfactory as soon as the composition of the category, or the quality of the products included in it, varies over time. Since variations of this kind are frequent in trade in textiles and clothing, no meaningful assessment can be made on the basis of quantity data such as tonnage or square metres. Second, genuine quantum indices are normally not calculated in foreign trade. The available indices are usually derived from current values and price or unit value indices. The price indices are usually based on a sample of commodities which, if representative for the trade flow, provide the best basis tbr the assessment of volume changes. In practice, however, only a small number of countries collect export and import prices and only the Federal Republic of Germany calculates price indices by destination or origin. Unit value indices are more widely available but are known to have a bias corresponding to changes in quality and product mix as well as price, a bias which is particularly strong in an upward direction for textiles and clothing. Again, however, only a very few countries calculate unit value indices by origin or destination. The absence of area breakdown represents a serious weakness since for textiles and clothing the composition and quality of the products traded varies considerably according to its origin or destination. As a result, only rough estimates of volume movements at a highly aggregated level could be attempted. (b) Tariffs Among all border measures, tariffs are undoubtedly the most clearly defined and easily quantifiable. Even so, technical problems exist and become increasingly acute when the analysis is conducted across country, time or industry boundaries. The difficulties encountered in comparisons of tariff levels fall into three categories. First, distortions may result from differences in the method of assessing duties or in the basis for recording import statistics. For instance, in the United States, Canada and Australia, duties are assessed on an f.o.b. basis, which are generally higher than those calculated on a c.i.f. basis. Also there may be international (or inter-temporal) differences in the number of items (tariff lines) within - 182 - common BTN headings, which can influence the averaging of rates to a uniform nomenclature when unweighted averages are adopted. In the United States and Canada, a number of subdivisions in tariff items has resulted from the establishment of a concordance between national classifications and the Brussels nomenclature and the number of tariff lines tends to be correspondingly overstated. For Sweden and Japan, the number of tariff items is also overstated since they reflect subdivisions introduced merely for statistical purposes. Among developing countries, differences are particularly marked: the number of tariff lines in textiles and clothing varies, for example, from over one thousand in Argentina to less than 150 in India and the Republic of Korea. A second type of distortion may arise from the method adopted to obtain average tariff levels. None of the averaging methods can be considered to provide a wholly accurate picture. Unweighted averages give the same weight to all duty rates irrespective of the importance of the products concerned in imports. Since tariffs are commonly more detailed in "sensitive" industries with higher ducy rates, the unweighted averages tend to overstate the level of the tariff protection. Tariff averages weighted by a country's imports would tend to give more importance to sectors or products where the tariff protection is low and less importance to those facing high duties. (A tarif f schedule comprising only duty-free and prohibitive duties would yield a weighted average tariff of zero on that basis). The difference between the two averages increases with the heterogeneity of tariffs and is particularly relevant to the textile industry in most import markets. Lastly, there is the question of how to measure tariff protection: whether by nominal or effective, implicit or explicit rates, and so on. The theoretical issues involved are well known; more practical problems are discussed in the notes to specific tables and charts. (c) Quota utilization rates The basic data used in compiling Tables 3.13, 3.14, 3.15 and Appendix Tables A.26 to A.28 were supplied by five importing countries (Canada, the EC, Finland, Sweden and the United States) for the years 1979, 1980, 1981 and 1982. For Canada, data on original restraint levels, adjusted restraint levels, and permits issued against restraint levels were received. The United States and Finland supplied material on original levels, adjusted levels and imports charged. For the EC, quota utilization rates, in this case quota/licence and quota/import ratios, were received for Community-wide limitations (without a regional breakdown) and limitations affecting specific regions of the Community. In the case of Sweden, only quota!import ratios were received. The data cover agreements in force during UFA Il but, where possible, the secretariat has included non-member countries as well as, when applicable, non-MFA products. Quota utilization refers to imports (or in the case of Canada, permits) charged to quotas in heterogeneous quantity units (i.e. units, surface or weight). Imports are charged to quotas on the basis of date - 183 - of import with the exception of the United States where imports are charged to quotas by date of export. The product categories which form the basis of the various textile agreements vary between countries, and in the case of Canada, over time. The rates for the United States, Canada, Finland and Sweden were calculated from "adjusted" quotas (i.e. original quotas adjusted when swing, carry forward and carry-over was used). The rates for the EC were calculated on the basis of original restraint levels. The raw data consist of a great mass of detail which is not reproduced in the report. Except for dealing with the data virtually on a case-by-case basis some method of summarizing the data is necessary. The methodology adopted was to calculate "average" quota utilization rates. A fairly simplistic approach (and one followed due to data and time constraints) was to calculate simple averages. however, it should be emphasized that this methodology can be highly distorting especially where there are a large number of quotas with wide variations in quota utilization rates as the implicit assumption is that trade under each quota is equal. In order to make due allowance for the relative economic importance of the various product categories under restraint in any one year, some fom of weighting is necessary. Of the various methods available the secretariat calulated weighted average quota utilization rates using as weights the current value of imports in each product category under restraint. For the moment, only in the case of the EC and the United States where trade data by standard agreement categories are readily available has this exercise been attempted. (Given more time this could be done for Finland, but for Canada and Sweden the secretariat has reservations regarding the feasibility of such an exercise.) For t.e EC, imports can be matched for weighting purposes with quota/import ratios, as the data are given in calendar years. For the United States, however, imports are in calendar ears whereas as mentioned above, quota utilization rates are calculated on the basis of imports by date of export and, for some countries, "agreement" years do not correspond to calendar years. - 184 - (d) Tables and Charts: Sources and Notes Chapter One Table 1.1 - UNSO, weighting co-efficients; Yearbook of Industrial Statistics; OECD, National Accounts of OECD Countries, Labour Force Statistics. Chapter Two Table 2.1 - UN, Yearbooks of Industrial Statistics, Monthly Bulletins of Statistics; national statistics. 2.2 - UN, Yearbooks of Industrial Statistics; ILO, Yearbooks of Labour Statistics; GATT, Statistical Reporting Scheme; national statistics. 2.3 - UNSO and national statistics. Note: Production refers to value added at current prices converted to US dollars at current exchange rates. Employment refers to all persons engaged. 1953-1975 estimates are those used by the UN as weighting coefficients in their indexes of industrial production and industrial employment. 1980 has been provisionally estimated by the secretariat. Comparable statistics are not available for the Eastern trading area. 2.4 - UNSO and national statistics. Note: see note to Table 2.3. 2.5 - UNSO and national statistics. Note: see note to Table 2.3. 2.6 - UNSO; OECD, National Accounts of OECD Countries, Vol. 2, Labour Force Statistics; national statistics. 2.7 - Statistical Yearbook of the CMEA 1982, Moscow, 1982. 2.8 - CIRFS, 1983. 2.9 - OECD, National Accounts of OECD Countries, Volume 2; Eurostat, National Accounts ESA; national statistics. 2.10 - GATT, World Trade Networks. 2.11 - GATT, World Trade Networks. 2.12 - UN, Yearbooks of International Trade, Commodity Trade Statistics, Comtrade Data Bank; OECD; Foreign Trade Series IV; GATT, World Trade Networks. 2.13 - UN, Yearbooks of International Trade, Commodity Trade Statistics, Comtrade Data Bank; OECD; Foreign Trade Series IV; GATT, World Trade Networks. - 185 - 2.14 - UNSC Comtrade Data Bank; GATT, Worid Trade Necworks- 2.15 - UNSO Comtrade Data Bank; GATT, World Trade Networks. 2.16 - UNSO Comtrade Data Bank; GATT, International Trade. 2.17 - UNSO Comtrade Data Bank; GATT, International Trade. to 2.22 - UNSO Comtrade Data Bank. 2.23 - UN, Yearbook of International Trade Statistics, Commodity Trade Statistics and Monthly Bulletin of Statistics; UN/UNCTAD, Handbook of International Trade and Development Statistics; UNSO Comtrade Data Bank; OECD, Trade by Commodities series B and C; FAO, Trade Yearbook; national statistics. 2.24 - UN, The Growth of World Industry and Yearbook of Industrial Statistics; national statistics. Chart. 2.1 - Table 2.6. and World Bank, Population, Per Capita Product and Crowth Rates, 1977 2. - - Table 2.6. and World Bank, Population, Per Capita Producct and Growth Rates, 1977 2.3 - GATT, World Trade Networks; UNSO Unit Value Study. Chapter Three Table 3.1 - GATT Tariff Study files. Note: Calculations of effective rates of protection suffer from serious shortcomings since the value added under free-trade conditions cannot be established. Given these limitations, the figures In the table at besc illustrate rough orders of magnitude. Input and output coefficients have been derived from input-output tables for five EC countries pertaining to the year 1959. For tariffs, the Brussels nomenclature has been used and, force United States, a concordance established by the United States Committee for Economic Development to reclassify che United States tariff according to the BTN. For the United States also, adjustments were made to express tariffs on a c.i.f. basis and to take into account the Dillon Round reductions. Average tariffs were calculated first at the four-digit BTN level by weighting where necessary individual rates by national imports. Tariff averages at the category level were calculated by weighting four-digit BTN averages by combined imports into the United States, Japan, the EEC, the United Kingdom and Sweden. - 186 - 3.2 - GATT Tariff Study files. Note: Pre-Tokyo Round tariffs reflect in general the consolidated duties or the base rates used in the Tokyo Round. These may be higher than the actually applied MFN rates. Post-Tokyo Round tariffs reflect the rates shown in the new GATT Schedules. Averaging methods are those adopted in the Basic Documentation for the Tariff Study where more detailed explanations on the method for duty assessment and on the data coverage are reproduced. (See Basic Documentation for the Tariff Study, Summary by Individual Product Categories, Geneva, March 1974.) The weighted tariff averages have been calculated by weighting individual. rates within each category by individual market MFN imports in 1977 except for Austria and Canada where 1976 import statistics have been used. The Tariff Study definition of MFN imports for the purpose of tariff averaging, includes imports entering at MFN or GSP rates and it is important to note that imports from GSP countries are taken into account in the weighting pattern. The "simple" averages are arithmetic averages of all rates within the categories. Textiles and clothing, excluding fibres, cover four-digit CCCN headings in chapters 50 to 62 and headings 6501 through 6505 excluding 5001-03, 5301-05, 5401-02, 5501-04, 5601-04 and 5701-04. Petroleum products (CCCN 2710) have been excluded from manufactures. 3.3 -GATT Tariff Study files. Note: The averaging methods and the weighting pattern are the same as those used in Table 3.2. The category definition, in terms of CCCN headings, is as follows: Fibres: 5001-03, 5301-05, 5401-02, 5501-04, 5601-04, 5701-04 and 6301-02. Yarns: 5004-07, 5101-03, 5201, 5306-10, 5403-04, 5505-06, 5605-06 and 5706-07. Fabrics: 5009, 5104, 5202, 5311-12, 5405, 5507-09, 5607, 5710-11, 5804, 5808, 5907-08, 5911, 5913 and 6001. Made-up articles: 5801-03, 5805-07, 5809-10, 5901-06, 5910, 5912, 5914-17 and 6201-05. Clothing: 6002-06, 6101-11 and 6501-05. - 187 - 3.4 - GATT Tariff Study files; and E.H. Preeg, Traders and Diplomats (Brookings, Washington D.C.) for Pre-Kennedy Round period. Note: In this table the figures referring to the pre-Kennedy Round (column (a))are not strictly comparable to pre- and post-Tokyo Round information reported under columns (b) and (c). The pre-Kennedy Round tariff dispersion is reported at four-digit CCCN level. Instead of the distribution of individual tariff rates, as for pre- and post-Tokyo Rourd figures, column (a) shows the percentage distribution of arithmetic averages of dutiable rates within each CCCN heading in Chapters 50 to 63. 3.5 and 3.6 - UNSO Comtrade Data Bank; Tables 2.1, 2.2, 2.9 3.7 and 3.8 - GATT, COM.TEX/SB documents. 3.9 - GATT, COM.TEX/SB documents; Official Journal of the European Communities. 3.10 to 3.12 - GATT, COM.TEX/SB documents. 3.13 - Tables 3.14, 3.15; Appendix Tables A.26, A.27, A.28. 3.14 - USDC, Performance Reports; US General Imports of Cotton Manufactures (TQ 2709); US General Imports of Textile Manufactures, except Cotton (TQ 2751). 3.15 - Data supplied by the European Commission: microfiches series Eurostat, sce 21510. 3.16 - GATT Tariff Study files. Note: Averaging methods and category definitions used in this table are the same as those used in Table 3.2. The weighting pattern used in the calculation of weighted tariff averages is based on MFN and GSP imports in fiscal year 1980/81 for Australia and New Zealand and on MFN and GSP imports in 1976 for Norway. in the case of Australia, two series of figures are reported. The first series shows tariff averages of all tariff items within the product categories. The second series excludes tariff items corresponding to imports of textiles and clothing entering, with additional duties, above tariff quotas. Such above-quota items were identified from Industries Assistance Commission, Report No. 240, Textiles, Clothing and Footwear, Part A: General, 29 April 1980. - 188 - For Australia, tariffs exclude a 2 per cent revenue duty introduced in 1979. This duty was to be applied wherever the tariff classification provided for a duty-free rate or a duty-free "by-law" rate. In the Australian tariff, a "by-law" item allows a concessional rate of duty on imported goods. By-law items cover a wide range of goods, but the greatest proportion of by-law imports are goods "a suitable equivalent of which that is the produce or manufacture of Australia is not reasonably available". Although by-law items were recorded in the Australian Tariff Study file wherever by-law imports were reported in the Australian import statistics, it would appear that published statistics of by-law imports are incomplete and that consequently by-law concessional rates cannot be reflected in average tariff levels with total accuracy. It is important to note, in this context, that the number of by-law items in a given sector can have a strong effect on the heterogeneity of the tariff and consequently on the differences between the simple average levels and weighted average levels as reported in this table and in Table 3.17. 3.17 - GATT, Tariff Study files. Note: Averaging methods and product category definitions used in this table are the same as those used in Table 3.3. The weighting pattern used in the calculation of weighted tariff averages is the same as in Table 3.16. 3.18 - Appendix Table A.2; OECD, Indicators of Industrial Activity; UN, Yearbook of Industrial Statistics; UNSO, Comtrade Data Bank. 3.19 - UNSO, Comtrade Data Bank. 3.20 - Appendix Table A.2; OECD, Indicators of Industrial Activity; UN, Yearbook of Indastrial Statistics; UNSO, Comtrade Data Bank. 3.21 - Argentina - Nogués, Julio J., Caracteristicas factoriales asociadas a las exportaciones manufactureras: análisis del caso argentino, Ensayos económicos, Banco Central de la República Argentina, No. 11, September 1979. Brazil - Tyler, William G., Manufactured Export Expansion and Industrialization in Brazil, Kieler Studien, No. 134, Tübingen, 1976. Brazil - Macario, Santiago, Proteccionismo e Industrialización en América Latina, Boletin Económico de América Latina, Vol. IX, No. 1, March 1964. Colombia - IBRD, Colombia's Manufacturing Sector Development, and Changes in Foreign Trade and Financial Policies, Report No. 4093-CO, 21 January 1983. - 189 - Israel - Michaely, Michael, Israel, A special conference series on Foreign Trade Regimes and Economic Development, Vol. III, NBER, New York, 1975. Malaysia - IBRD, Malaysia's Manufacturing Sector: Development Issues and Policy Options, Report No. 3187-MA, 9 April 1981. Spain - Donges, Juergen B., Towards Spain's Accession into the EEC: Trade Growth and Policy Reform Implications, Kiel Working Papers, No. 94, September 1979. 3.22 - Argentina - Bundesstelle for Aussenhandelsinformation (BfA), Deutsches Handels-Archiv, Heft 10-1982. Brazil - AGENCO, Tarifa Aduaneira do Brazil, updated to 1983. Colombia - BfA, Deutsches Handels-Archiv, Heft 10-1981, updated to December 1982. Egypt - International Customs Tariff Bureau (ICTB), The International Customs Journal, No. 36, March 1982. India - BfA, Zoll- und Handels-Information, No. 12/83, April 1983. Israel - ICTB, The International Customs Journal, No. 41, September 1982. Korea, Rep. of - ICTB, The International Customs Journal, No. 80, November 1982. Malaysia - ICTB, The International Customs Journal, No. 12, October 1980, and 1st Supplement, April 1981; Mexico - BfA, Zoll- und Handels-Information, No. 36/1983, June 1983. Nigeria - BfA, Zoll- und Handels-Information, No. 19/1983, June 1983. Pakistan - Central Board of Revenue and Ministry of Commerce, Pakistan Customs Tariff and Import Trade Guide, November 1981. Peru - Ministerio de Economia, Finanzas y Comercïo (Dirección General de Aduanas), Arancel de Aduanas - Gravámenes por Partidas, January 1982. Philippines - ICTB, The International Customs Journal, No. 43, December 1982. 190 - Singapore - Trade Development Board, Singapore Trade Classification and Customs Duties, 1983. Spain - BfA, Zoll- und Handels-Information, No. 1/1983, January 1983. Sri Lanka - BfA, Zoll- und Handels-Information, No. 37/1983, August 1983. Taiwan - BfA, Zoll- und Handels-Information, No. 17/1983, May 1983. Thailand - Dhavil Wisuthachinda, Customs Tariff of Thailand, modified ur to 15 September 1981. Tunisia - ICTBD The International Customs Journal, No. 89, July 1981. Yugoslavia - ICTB, The International Customs Journal, No. 35, September 1980. Note: Data are unweighted averages of available ad valorem duties: specific duties maintained on top of, or instead of, the ad valorem tariffs have not been taken into account. The definition of the industrial product categories used, in terms of BTN headings, is as follows: TEXTILES BTN headings a. Fibres (including waste) - Wool 53.01-05 - Cotton 55.01-04 - Man-made 56.01-04 - Other 50.01-03; 54.01-02; 57.01-04; 63.01-02 b. Yarns - Wool 53.06-10 - Cotton 55.05-06 - Man-made 51.01-03; 56.05-06 - Other 50.04-08; 52.01; 54. 03-04; 57.05-08 c. Fabrics - Wool 53. 11-13 - Cotton 55.07-09 - Man-made 51.04; 56.07 - Other 50.09-10; 52.02; 54.05; 57.09-12; 58.04; 58.08; 59.07-09; 59.11; 59.13; 60.01 - 191 - d. Made-up articles - Mainly industrial inputs 58.05-07; 58.09-10; 59.01-06; 59.10; 59.12; 59.14-17 - Other 58.01-03; 62.01-05 CLOTHING (including accessories) 60.02-06; 61.01-11; 65.01-05 Table 3.23 - GATT documents as follows: Argentina COM.TEX/SB/899/Add.1 29.11.83 Brazil COM.TEX/SB/899/Add.4 29.11.83 Colombia COM.TFX/SB/809/Add.27 16.3.83 Hong Kong COM.TEX/SB/899/Add.9 28.11.83 India COM.TEX/SB/899/Add.11 29.11.83 Israel BOP/230 19.11.82 Korea, Rep. of COM.TEX/SB/899/Add.24 27.2.84 Macao COM.TEX/SB/809/Add.10 22.12.82 Malaysia COM.TEX/SB/809/Add.22 23.12.82 Mexico COM.TEX/SB/899/Add.13 30. 11.83 Nigeria BOP/233 28.9.83 Peru COM.TEX/SB/Add.14 7.9.83 Philippines COM.TEX/SB/742/Add.1 11.11.81 COM.TEX/SB/733/Add.17 5.11.81 BOP/208 2.10.80 Portugal L/5145/Add.2 28.4.83 Singapore COM.TEX/SB/899/Add.17 25.11.83 Sri Lanka BOP/235 22.9.83 COM.TEX/SB/809/Add.14 23.12.82 Thailand COM.TEX/SB/899/Add.19 29.11.83 Tunisia BOP/240 30.11.83 Turkey COM.TEX/SB/899/Add.20 29.11.83 Yugoslavia COM.TEX/SB/899/Add.22 29.11.83 For Pakistan: Government of Pakistan, Ministry of Commerce, Import Policy Order 1983 (Published in the Gazette of Pakistan, 1 July 1983). Note: Product categories as for Table 3.22. - 192 - Table 3.24 - GATT, Tariff Study files. Note: Averaging methods and product category definition used in this table are the same as those used in Table 3.3. The weighting pattern used in the calculation of weighted tariff averages is based on MFN and GSP imports in 1980. 3.25 - GATT, COM.TEX/W/32. Lanner, J., The Problems of the Textiles and Clothing Industries in the EFTA Countries, Economic Affairs Department, 1983. De la Torr-, J., Clothing Industry Adjustment in Developed Countries, Trade Policy Research Centre, London, 1983. Chart 3.1. and 3.2 - Table 3.22 Note: See note to Table 3.22. Chapter Four Table 4.1 - UNSO, Comtrade Data Bank. Chapter Five Table 5.1 and Chart 5.1 - UN (1982), Demographic Indicators of Countries; estimates and projections as assessed in 1980. - 193 - References Ashoff, G., 1983, "The Textile Policy of the European Community Towards the Mediterranean Countries: Effects and Future Options", Journal of Common Market Studies, September. Balassa, B., 1965, "Tariff Protection in Industrial Countries: An Evaluation", Journal of Political Economy, December. Baldwin, R.E. and Bale, M.D., 1981, "Policy Responses in the Old Industrial Countries: North America", in C. Saunders (ed.), The Political Economy of New and Old Industrial Countries, (London: Butterworths). Barde, J.-P., 1976, "National and International Policy Alternatives for Environmental Control and Their Economic Implications", in I. Walter (ed.), Studies in International Environmental Economics, (New York: J. Wiley). 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Denney and Arpan, Jeffrey S., 1983, The Competitive Status of the U.S. Fibers, Textiles and Apparel Complex: A Study of the Influences of Technology in Determining International Industrial Competitive Advantage, (National Academy Press: Washington, D.C.). Feenstra, R.C., 1982, "Voluntary Export Restraints in U.S. Autos, 1980-81: Quality, Employment and Welfare Effects", Columbia University, International Economics Research Center Paper No. 17, November. GATT, 1955, "The World Market for Textiles, 1938-53", Trade Intelligence Paper No. 4, (Geneva), March. GATT, 1959, "Pilot Study on Certain Cotton Products", Committee III, (Geneva), September. Giersch, R., 1978, Die Nachfrage privater Haushalte nach textilen Produkten, (Münster). Gold, B., 1981, "Technological Diffusion in Industry: Research Needs and Shortcomings", Journal of Industrial Economics, March. Hamilton, C., 1983, Voluntary Export Restraint on Clothing from Asia: Price Effects, Rent Incomes and Trade Barrier Formation, Swedish Agency for Research Cooperation with Developing Countries and the Tore Browaldh Research Foundation, mimeo., December. Hanson, J.R., 1980, Trade in Transition: Exports from the Third World, 1840-1900, (New York: Academic Press). Hoffman, K. and Rush, H., 1983, Microelectronics and Clothing: The Impact of Technical Change on a Global Industry, SPRU/University of Sussex, forthcoming. Houthakker, H.S. and Taylor, L.D., 1966, Consumer Demand in the United States 1929-1970, (Cambridge: Harvard University Press). - 195 - Hunsberger, W.S., 1964, Japan and the United States in World Trade, Council on Foreign Relations, (New York: Harper and Row). ILO, 1937, The World Textile Industry, No. 27, (Geneva). ILO, 1982, International Trade, Employment and Structural Adjustment: The Case Study of the Federal Republic of Germany, by Schatz, K.W. and Wolter, F., World Employment Programme Research, International Division of Labour Programme, (Geneva), October. International Ladies Garments Workers Union (ILGWU), 1983, Estimation of Apparels (Knit and Woven) Imports: Methodological Note, Research Department, April. International Monetary Fund, 1984, Exchange Rate Volatility and World Trade, Occasional Paper series, (Washington, D.C.), forthcoming. International Textile Manufacturers' Federation, 1981, International Textile Machinery Shipment Statistics, Vol. 4. Industrial Review to 1977 - Clothing, (London: National Economic Development Office), January 1974. Jenkins, G.P., 1982, Costs and Consequences of the New Protectionism: The Case of Canada's Clothing Sector (Ottawa: North-South Institute) as revised in 1982 for publication by Mcmillan for the World Bank. Johnson, H.G. and Grubel, H., 1971, Effective Tariff Protection (Geneva: GATT and the Graduate Insitute of International Studies). Keesing, D.B., and Wolf, M., 1980, Textile Quotas Against Developing Countries, Thames Essay No.23, (London: Trade Policy Research Centre). Keesing, D.B., 1983, "Linking Up to Distant Markets: South to North Exports of Manufactured Consumer Goods", The American Economic Review, May. Kindleberger, C.P., 1968, International Economics, (Homewood, Illinois: R.D. Erwin), fourth edition. Kroese, W.T., 1954, "The Past, Present and Future of the Cotton Industry (1904-1954)", I.F.C.A.T.I., Buxton General Assembly, May. Krueger, A.O., 1981, "LDC Manufacturing Production and Implications for OECD Comparative Advantage", in I. Levenson and J.W. Wheeler (editors), Western Economies in Transition: Structural Change and Adjustment Policy in Industrial Countries, (Boulder, Co.: Westview Press). Kuster, R., Badin, G., 1970, Die Bekleidungsindustrie in der Europäischen Wirtschaftsgemeinschaft - Analysen und Prognosen 1975, (Geneva), July. - 196 - Langhammer, R.J., 1981, "ASEAN Manufactured Exports in the EEC Markets. An Empirical Assessment of Common and National Tariff and Non-Tariff Barriers Confronting Them", Kiel Working Paper No. 122, (Kiel: Institut für Weltwirtschaft), May. Lanner, J., 1983, "The Problems of the Textiles and Clothing Industries in the EFTA Countries", Occasional Paper No. 2, (Geneva: EFTA), July. Laurence, R.Z., 1983, "The Myth of U.S. deindustrialization, Challenge November-December. League of Nations, 1942, The Network of World Trade: A Comparison Volume to Europe's Trade, (Geneva). Lin, T. and Mok, V., 1980, Trade Barriers and the Promotion of Hong Kong Exports, (Hong Kong: The Chinese University Press). Lloyd, P. J., 1982, The Australian Textile and Clothing Industry Group: Untoward Effects of Government Intervention, (Canberra: Department of Economics, Australian National University), mimeo. Maizels, A., 1963, Industrial Growth and World Trade, National Institute of Economic and Social Research, Economic and Social Studies 21, (Cambridge University Press). Martin, J.P. and Evans, J., 1981, "Notes on Measuring the Employment Displacement Effects of Trade by the Accounting Procedure", Oxford Economic Papers, Vol. 33, No. 1. Meade, J., 1951, The Theory of International Economic Policy, Vol. I, The Balance of Payments, (Oxford University Press). Metcalfe, J.S., 1981, "Impulse and Diffusion in the Study of Technical Change", Futures, Vol. 13, October. Nabseth, L. and Ray. G.F. (eds.), 1974, The Diffusion of New Industrial Processes - An International Study, (Cambridge University Press). OEEC, 1955, The Textile Industry in Europe, (Paris). 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US Department of Labor, Bureau of Labor Statistics, 1974, "Technological Change and Manpower Trends in Six Industries", Bulletin 1817. US Department of Labor, Bureau of Labor Statistics, 1977, "Technological Change and its Labor Impact in Five Industries", Bulletin 1961. Wolf, M., Glismann, H. H., Pelzman, J. and Spinanger, D., 1984, Costs of Protecting Jobs in Textiles and Clothing, Thames Essay, (London: Trade Policy Research Centre). World Bank, 1983, World Development Report 1983 (New York: Oxford University Press). Yamazawa, I., 1983, Japan's Adjustment to the Industrial Growth of the Asian NICs and ASEAN Countries, paper presented at a conference at the East-West Center in Honolulu, April 3-8. TEXTILES AND CLOTHING IN THE WORLD ECONOMY Appendices I-IV to the GATT Background Study Page I. Statistical Tables ...... 1 II. Charts ...... 32 III. Principal Technological Developments in Textiles and Clothing ...... 36 IV. Relating Trade to Domestic Production and Consumption ..... 56 Geneva, July 1984 84-1474 - 1 - APPENDIXTABLEA.1. - SHAREOF TEXTILES AND CLOTHINGINMANUFACTURING PRODUCTIONANDEMPLOYMENT 1975 Textiles & Clothing Textiles Textiles Clothing& United States 4.0 3.3 7.3 6.6 7.0 3.6 Canada 4.8 3.9 8.7 6.8 7.1 13.9 Japan 5.1 2.6 7.7 12.6 4.6 17.2 6.5 4.7 11.2 10.5 7.8 18.3 6.2 3.6 9.8 7.7 6.1 13.8 Germany,Fed. Rep. 4.3 2.6 6.9 4.9 4.8 9.7 Italy 10.1 3.6 13.7 1.7 9.8 23. Netherlands 4.3 1.8 6.1 6.1 4.1 10.2 United Kingdom 5.8 3.0 8.8 7.1 5.1 12.2 Austria 6.0 4.2 10.2 8 8.3 16.8 Finland 4.7 4.5 9.2 6.2 7.9 14.1 Norway 72.6 2.0 4.6 4.1 3.4 7.5 Sweden LS2. 1.7 4.2 3.3 3.1 6.4 Switzerland 4.6 4.7 9.3 6.1 4.1 10.2 Australia 5.1 3.8 8.9 6.0 6.0 12.0 South Africa 6.5 4.9 U.4 10.5 9.4 19.9 Greece 24.0 7.0 31.0 17.6 10.6 2S.2 Portugal 18.4 3.3 M.d 20.0 8.4 28L4 Spain 8.6 3.6 12.2 U.3 10.0 21.3 e2.9 1.2 22.1 20.6 14.3 34.9 Yugoslavia 11.6 4.8, 16.4 14.5 7.1 21.S Hong Kong 20.4 26.2 46.6 17.1 36.0 33.1 Korea,Rep, of 22.6 6.1 .5 2.6 S 39.1 Taiwan 17.8 2.3 M.1 23.1 7.3 30.4 lndia 17.0 6.8 M.8 26.2 U 3.5 39.7 Pakistan 38.9 0.3 39.2 6L8 0.9 63.7 25.5 0.3 25.8 37.3 3.2 40.5 lsrael 7.0 5.5 1.S2 9.7 10.1 19.8 Malaysia 7.3 L 9.0 9.3 5.2 14.5 Hrilippines 11.9 6.0 17.9 19.4 22. 41.4 Singapore 3.1 3.5 6.6 7.0 1.0 18.0 Sri Lanka 24.6 0.4 25.0 16.7 6.9 43.6 Thailand 20.7 9.5 30.2 .S 7 39.5 Argentina IL2.0 3.1 1S.1 11.3 4.8 16.1 Brazil 9.5 2.0 1.5 16.3 4. 20.5 Chila 10.3 2.0 14.8 7.9 2L7 Colombia 19.1 4.5 23.6 21.1 1.0.8 31.9 Dominican Republic 82 2.3 10.5 13.0 S.7 21.7 Guntumala 16O 4.6 26 ZL8 10.9 34.7 10.0 4.0 14.0 16.7 8 25.0 3.0 21.6 24.6 3.0 23.9 26.9 9.1 3.5 1L6 11.7 7.3 19.0 Peru 17.3 4.2 21.5 18.9 10.5 . TrinidadandTchago 0.7 9.6 10.3 ' 4 24.4 26.8 Uruguay .24.9 3.8 28.7 28 14.1 36.9 Algeria 16.0 12.9 28.9 8.0 1.1 19.1 Egypt 37.8 1.0 388 44.7 2.4 47.1 Iwory Coast 285 1.5 30.0 11.4 14.3 25.7 Kenya 9.3 4.4 13.7 1L4 2.4 24.8 2.9 25.7 28.6 5.3 26.3 31.6 19.2 2. 21.9 40.9 16.3 57.2 Nigeria.6 0.4 23.0 33.2 0.9 34.1 Dxists 11.8 8.6 M.4 13.6 M9 32.5 *AIl manufacturing exclusing foodboverages and tobacco, potrolasand non-ferrous metals. Notes:Estimatesof productionand employesare thoseused by the UN asweightingco-officiants intheri indicasof industrial production andindustrialemployment. Production refersvalueto totaladdedincludinghandcrafts and is generallyin factor wahes. Employment refers toallpersonsincludingengaged, working proprieters,activebusinesspartners,unpaid family workers aswell as employees. S|pm - 2 - APPENDIX TABLE A.2. - TOTAL CONSUMER EXPENDITURE AND EXPENDITURE ON CLOTHINGa IN SELECTED COUNTRIES, 1963-1982 (Annual average percentage rate of change in volume) 1963- 1973- 1974 1975 1976 1977 1978 1979 1980 1981 1982 United States Total 4.4 2.6 -0.6 2.1 5.S 5.0 4.5 2. 7 0.4 2.7 1.S Clothing 4.: 4.0 -1.0 3.7 4.8 5.7 9.1 4.1 1.6 6.8 1.5 Canada Total S.6 2 8 5.3 5.0 6.6 2.6 2.7 2.1 1.1 2.0 -2.1 Clothing 4.6 S.Sb 10.0 7. L 7.9 1.9 5.0 2.3 -0.2 4.4 . . Japa Total 8.7 3.0 -0.7 4.1 3.4 3.8 4.7 6.0 1.3 0.6 4.2 Clothing 6.9 0.3 -6.3 5.6 6.6 -1.9 2.5 2.1 -0.9 -4.7 0.5 EC (9) Total 4.5 2.2 1.2 1.7 3.7 2.7 3.9 3.9 1.7 0.3 0.3 Clothing 3.9 0.9 0.4 0.1 1.8 1.0 2.5 2.6 1.9 -1.3 -$.8 Belgium Total 4.6 1 9b 3.1 0.4 5.0 2.4 1.. 4.5 1.4 -1.4 -0.1 Clothing 3.8 1.7 6.7 -2.2 6.2 -1.8 -1.0 3.7 3.4 -0.7 -. France Total 5.2 3.4 2.9 3.4 5.6 3.1 5.2 3.6 1.7 2.3 3.4 Clothing 3.7 1.3 0.4 1.4 1.3 0.4 1.0 0.0 0.0 3.3 4.1 Germany, Total 4.8 L.8 0.4 3.5 3.8 3.8 3.6 3.1 1.3 -L.2 -2.3 Fed. Rep. Clothing 4.5 -0.1 0.0 3.4 0.8 2.1 L.7 -0.2 1.4 -3.6 -6.0 Italy Total 5.0 2.1 2.6 -1. 7 3.4 1.5 2.8 4.9 4.9 0.5 0.0 Clothing 4.5 0.8 1.9 -7.2 3.0 2.6 1.4 7.7 7.5 -5.8 -3.3 Netherlands Total 4.9 2.06 2.7 3.4 5.7 4.4 4.4 2.9 -0.4 -2.5 -2.0 Clothing 2.3 -0. 2 0.0 -2.7 7.3 -1.1 0.6 1.3 -'.0 -'.5 United Total 2.9 1.1 -2.0 -0.7 0.0 0.S 5.8 4.9 0.0 0.4 i.l Kingdom Clothing 3.1 2.5 -1.5 1.1 0.4 -0 8 9.4 6.6 0.7 2.7 4.1 Austria Total 4.6 2.5 3.1 3.2 4.5 5.7 -1.6 a.4 1.4 0.7 1.0 Clothing 6f.2 2.5 -0.a , I 2.8 2.6 - .6 7.3 5.' 2.5 2.2 Finland Total 4.7 2.4 2.2 3.1 0.9 -;.4 '.6 M.6 2.9 L.6 3.8 Clothing 3.211 -1.1 -13.9-l 2.2 -4.3 -3.0 5.1 8.6 Norway Total 3.5 3.2 3.8 S.'. , 6.1 6.9 -1.6 3.2 ' .3 1.3 1.3 Clothing 2.1 1.6 -1.4 6.3 6. I 6.5 -4.0 2.1 3.6 -1.7 -2.0 Sweden Total 3.1 1.4 4.5 3.0 4.1 -1.0 -0.9 2.7 0.2 -0.6 1.2 Clothing 2.1 4.4 11.9 3.4 6.9 2.9 0.9 5.2 3.7 1.S 3.9 Switzerland Total 4.2 0.8 -0.S - 2.9 1.0 3. I 2.2 1.3 2.6 0.5 -0.2 Clothing 2.6 -1.7 -4.0 -11.4 -3. 1.2 1.1 0.3 3.8 2.1 -2.7 Australia Total 4.9 2.7 3.1 3.2 2.5 1.4 3.3 1.8 3.4 3.6 2.6 Clothing 4.0 0.8 -2.2 -3.3 -3.4 -0.4 0.9 0.8 S.3 4.9 4.6 Greece Total .7.3 3,b -0.7 6.1 6.Z 4.9 6.5 Z.2 0.2 10.6 0.g -3.8 7.8 1.3 3.6 -10.0 Clothing 7.3 1.: India Total 3. 0.9 7.5 -0.1 10.1 3.5 -3.9 6.8 Clothing 36. 3.4 8.0 13.1 5.9 10.2 3.2 3.3 b lsrael Total 4. 6.6 0.3 6.1 4.9 8.3 6.2 -4.1 Clothing 3.S 9.1 1.6 11.8 0.3 18.8 -4.4 -9.5 Korea. Rep. Total 8.6 17 .ub 6.1 6.1 9.0 6.7 10.0 7.8 Clothing 10.1 4.0 a.2 4.6 9.1 3.8 9.7 -6.2 Mexico Total 57 1... '.5 4.9 4.0 4.a 7.4 8.7 6.5 Clothing 4. s -0.1 3.4 2.4 6.8 S.9 10.5 3.4 Singapore Total J.S 6.0 3.0 6.5 8.3 10.7 10.2 Clothing J.3 0.8 -1.4 7.8 9.9 8.5 11.7 14.7 Spain Total 6.3 2.66 4.1 2.0 4.3 2.5 1.15 0.9 0.7 Clothing 5.2 0.6 2.6 -0.3 5.6 1.9 -1.9 -4.0 Thailand Total 6.6 5.3 6.0 7.5 9.1 7#.0 6.2 5.1 Clothing .. . 6.5 3.9 10.4 5.2 9.6 9.9 4.2 4.4 aIncluding footwear. bFigures refer to years nearest those indicated. - . Snurces: 0CNational tecouats. Volume 2; Euros:at NaYionalokccounts ESA; UN, Tearbokcs of National Accounts Statiscies; national statistics. - -3 APPENDIX TABLE A.3. - IMPLICITDEFLATURS FOTTOTALEXPENDITURECONSUMER AND EXTENDITUREONCLOTHINGa, SELECTEDDEVELOPEDCOUNTRIES, 1963-1982 (Annual average rate of change) 1963- 1973- 1973 1982 1974 1975 1976 1977 1978 1979 1980 1981 1982 United States Total 3.5 7.6 9.8 7.8 5.3 5.8 6.9 9.1 10.1 8.5 5.7 Clothing 3.3 3.5 6.7 3.4 4.0 3.0 2.5 3.0 3.9 3.2 1.7 Canada Total 3.5 9.4 11.2 10.5 7.3 7.6 7.4 9.4 10.7 11.2 2.6 6.4 8.2 4.0 5.5 5.5 3.2 9.0 9.5 6.9 Japan Total 6.0 7.9 21.7 11.6 8.8 7.2 4.7 3.4 6.8 4.7 3.0 Clothing 6.4 6.7 22.4 6.8 6.8 6.2 3.4 3.9 5.4 3.6 2.9 Total 4.1 8.0 12.4 12.5 7.6 7.1 4.0 3.8 7.1 8.9 8.6 Clothing 3.4 5.9 10.3 9.1 6.2 6.4 5.7 3.7 c.7 3.6 ... France Total 4.7 11.0 13.7 11.2 9.8 9.0 8.7 10.4 13.1 12.6 10.8 Clothing 3.7 10.6 13.3 13.1 8.9 8.3 9.7 11.2 11.2 10.2 9.3 Germany, Total 1.3 5.0 7.4 5.9 4.2 3.6 2.8 4.1 5.5 6.1 5.3 Fed. Rep. Clothing 1.1 4.8 6.8 5.0 3.6 4.8 4.1 4.2 5.9 4.6 4.3 Italy Total 4.9 17.6 21.1 17.6 18.0 18.3 12.8 15.1 20.2 18.9 16.7 Clothing 5.1 18.0 22.1 18.2 16.5 22.3 14.9 13.2 19.2 19.3 16.6 Netherlands Total. 6.2 7.0 10.0 10.7 8.9 6.0 4.4 4.4 6.9 6.5 5.7 Clothing 6.6 7.1 12.6 11.7 6.1 6.9 5.4 1.7 9.5 3.5 ... United Kingdom Total 5.5 14.2 17.4 23e6 15.7 15.1 8.8 12.9 16.0 10.7 8.1 Clothing 4.1 9.0 1P.2 14.C 10.8 12.7 7.8 9.0 8.2 1.2 0.5 Ausstria Total 3.9 6.5 10.1 7.9 6.6 5.3 4.3 4.4 6.5 7.1 6.5 Clothing 3.0 4.8 10.0 5.8 4.3 4.5 2.8 2.4 3.2 3.4 7.4 Total 6.4 11.8 18.6 16.4 13.0 11.7 7.6 7.9 10.7 11.5 9.3 5.4 11.4 16.8 1.7.0 10.6 8.9 5.6 10.7 11.0 11.5 ... Total 5.4 9.6 9.3 11.6 8.7 8.6 8.2 5.1 9.8 13.8 11.8 Clothing 5.0 8.9 10.3 7.8 8.2 9.9 8.9 5.5 8.6 13.1 7.9 Total 5.3 10.3 9.2 10.9 10.7 10.4 11.1 7.4 11.7 11.7 10.0 Clothing 3.1 6.6 6.5 10.5 8.0 ` 6.5 6.3 4.3 6.4 6.3 4.7 Switzerland Total 5.0 4.6 10.1 6.6 2.3 1.2 0.4 4.5 4.6 6.5 5.5 Clothing 3.8 3.5 9.4 6.5 0.5 1.4 1.2 1.0 3.5 4.4 4.3 aIncludingfootwear. Source: See Appendix Table A.2. - 4 - APPENDIX TABLEA.4. - SHAREOF CLOTHINGa INTOTALCONSUMER EXPENDITURE IN SELECTEDDEVELOPED COUNTRIES,1963-1982 1963 1973 1974 1975 1976 19771978 1979 1980 19811982 United States 7.9 7.6 7.3 7.1 6.9 6.9 6.9 6.6 6.3 6.2 6.0 Canada 9.2 7.7 8.3 8.0 7.9 7.7 7.6 7.6 7.4 7.3 ... 9.9 8.7 8.3 8.0 3.1 7.6 7.4 7.1 6.9 6.4 6.2 Belgium 10.1 8.8 8.9 8.4 8.4 8.0 7.9 7.8 7.6 7.3 10.4 8.1 7.9 7.9 7.5 7.2 7.1 6.9 6.6 6.6 Germany, Fed. Rep. 10.4 10.1 10., 10.0 9.6 9.6 9.5 9.2 9.2 8.9 8.5 10.2 9.9 9.9 9.4 9.2 9.7 9.7 9.8 10.0 9.4 9.1 11.9 9.6 9.5 9.1 9.0 8.6 8.3 o.2- 8.0 7.6 United Kingdom 9.6 8.6 8.7 8.2 7.9 7.6 7.8 1.6 7.2 6.7 6.4 Austria 12.4 13.3 12.8 12.4 12.0 11.5 11.3 11.4 11.5 11.3 11.5 Finland 8.9 6.g 6.6 5.6 5.5 5.2 4.8 4.9 5.3 5.0 ,*11.3 3.6 9.2 8.9 8.9 9.0 8.8 8.7 8.8 8.4 7.9 Norway 10.3P 7.6 7.9 7.9 8.0 8.0 7.8 1.7 7.6 7.4 7.2 Switzerland 8.2 6.3 5.9 5.4 5.1 5.0 5.0 4.8 4.8 4.8 4.6 Constant prices United States 7.9 7.7 7.7 7.8 7.8 7.8 8.1 8.3 8.4 8.7 8.7 Canada 8.8 8.0 8.9 9.1 9.2 9.1 9.3 9.3 9.2 9.4 ... 9.9 8.4 7.9 8.0 8.3 7.8 7.7 7,4 7.2 6.9 6.6 9.0 8.4 8.6 8.4 8.5 8.2 7.9 7.8 8.0 8.1 *-. 9.4 8.1 7.9 7.8 7.5 7.3 7.0 6.8 6.7 6.8 6.8 Germany,Fed. Rep. 10.2 9.9 9.9 9.9 9.6 9.5 9.3 9.0 9.0 8.8 8.4 Italy 10.1 9.6 9.6 9.0 9.0 9.1 9.0 9.2 9.5 8.9 8.6 12.8 9.9 9.6 9.1 9.2 8.7 8.4 8.3 .8.1 8.0 Netherlands 7.8 8.0 8.0 8.2 8.2 8.1 8.4 8.5 8.6 8.8 9.0 United Kingdom 11.2 13.0 12.5 12.4 12.2 11.8 11.9 12.2 12.7 12.9 13.0 7.9 6.9 6.7 5.6 5.6 5.5 5.2 5.1 5.4 5.2 Norway 10.7 9.3 8.8 8.9 8.9 8.9 8.7 8.6 8.7 8.4 8.1 7.4 7.9 7.9 8.1 8.5 8.6 8.8 9.1 9.3 9.6 7.3 6.3 5.9 ,.4 5.2 5.1 5.1 5.0 5.1 5.2 5.0 aIncludingfootwear Source: See AppendixTable A.2. APPENDIXTABLEA.5.CONSUMER- EXPENDITUREHOUSEHOLDON- 5 - TEXTILESAINSELECTEDDEVELOPED1973-1982M,COUNTRIES, 1973-1982 L1-L981/2 1974 1975 1976 1977 1978 1971 0 98 9 181 1982 nual rate ofchangeinvolume Iin ou Utdrad Stata 0.4 -5.4 -3.8 3.9 3.8 3.6 0 -1.8 3.6 -6.9 1.4 10.0 -6.1 8.9 -2.8 -0.4 3.6 1.5 0.2 Italy 1.3 æ.6 -7.7 2.8 2.7 2.6 7.7 4.8 -4.5 5Bas 0.4 -13.3 -L2.9 21.6 2.2 14.1 3.S -.0.9 -6.5 3.1 o 1.7 6.8 O 12.7 1.4 1.4 4.2 2.3 9.8 6.3 -3.1 6.8 -v .7 3.3 0.4 4.2 F11 5.0 -4.8 5.0 -14.3 3.7 10.7 -[2.9 3.7 1.6 2.8 2.7 5.2 11.6 -4.4 2.3 -7.6 1.3 10.1 1.1 5.9 -L.0 -3.6 2.6 0.S -4.1 rF'it total consumers enditure1re ss States 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.5 1.0 0.9 0.9 0.9 0.8 0.8 0.8 0.8 Itay 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.7 0.6 0.7 0.7 0.8 0.7 0.7 0.7 1.0 0.9 0.9 0.9 1.0 1.0 0.9 0.9 Mmdm 0.8 0.8 0.7 0.7 0.6 0.6 0.6 0.6 1.1 1.1 1.0 0.9 0.9 0.9 0.8 0.8 1.5 15 1.4 1.5 1.4 1.5 1.4 1.4 1.2 1.2 1.2 1.2 1.1 1.1 1.1 1.0 stant price SUnited 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 Belsd3 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9 luy 0.9 0.B 0.8 0.8 0.8 0.8 0.8 0.8 0.7 0.6 0.7 0.7 0.8 0.8 0.8 0.7 adil KnoUn 0.9 0.9 1.0 1.0 1.0 1.0 1.0 1.0 Ausi 0.8 0.8 0.7 0.7 0.7 0.7 0.7 0.7 1.1 1.1 1.1 1.0 1.0 1.0 0.9 0.9 Fmy 1.5 1.5 1.3 1.5 1.5 1.5 1.3 Suad 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1i2 bl97> 0 rpm. S=ms: dOM kbLc«mi. , Vourcem aECD National Accnts.caolume2;EUROSTATNstatiotes cou. APPENDIXTABLE A.6. - SAARE OF TEXTILESINTRADE INMANUFACTURES, 1955-1982 (Percentages) 1955 1963 1973 1982 IMPORTS 1955 1963 1973 1982 WORLD 11.3 8.7 6.7 4.9 Developed countries 10.3 7.8 5.8 3.8 Developed countries 11.5 9.5 6.8 4.5 United States 4.7 3.5 2.8 2.0 United States 12.2 9.8 3.7 2.0 Japan 34.9 18.8 7.1 3.8 Japan 3.3 2.6 11.5 6.1 France 14.6 11.1 6.7 3.9 France 5.1 5.1 6.2 5.3 Germany, Fed. Rep. 5.9 4.2 5.2 3.7 Germany, Fed. Rep. 19.5 15.4 9.4 5.9 Italy 24.4 13.8 8.3 6.6 Italy 6.3 4.6 7.2 5.9 United Kingdom 13.5 7.8 5.9 3.2 Netherlands 11.1 16.6 7.6 5.0 Switzerland 7.1 7.0 6.0 4.1 United Klngdom 11.4 10.8 6.2 5.3 Developing countries 34.3 30.1 18.8 10.6 Developing countries 13.5 9.2 7.4 5.4 Southern Europe 21.3 18.8 12.1 9.2 Brazil ... 9.5 18.9 6.8 Hong Kong 31,7 18.8 14.2 9.8 e 35.2 26.8 24.3 17.4 India 66.2, 80.2 44.2 25.c (excluding jute textiles) 25.6 31.9 22.2 18.5c Korea, Rep. of ... 20.5 16.1 12.8 -6- Pakistan ...... 75.5 68.2 Taiwan ... 31.0 15.3 8.9 Eastern trading area 6.1 5.5 5.1 5.4 Eastern trading area 5.2 4.7 4.4 4.4 alncluding re-exports. Share of textiles in exports of manufactures (excluding re-exports) is as follows: 1963: 18.5%; 1973: 12.5%; 1982: 6.3%. bShare of total trade less principal non-manufactures. c1980. d1981. eIncluding imorts for re-export. Sources: UN, Yearbooks of International Trade, Commodity Trade Statistics, Comtrade Data Bank; OECD, Foreign Trade Services IV; GATT, World Trade Networks. APPENDIX TABLE A.7. - SHARE OF TEXTILESIN TOTAL MERCHANDISE TRADEa, 1955-1982 (Percentages) EXPORTS 1955 1963 1973 1982 IMPORTS 1955 1963 1973 1982 WORLD 5.6 5.0 4.6 3.6 Developed countries 6.7 5.2 4.2 2.9 Developed countries 4.6 4.8 4.3 3.1 United States 3.2 2.2 1.8 1.4 United States 3.5 4.5 2.6 1.5 Japan 29.3 17.0 6.6 3.7 Japan 0.4 0.7 3.6 2.0 France 10.0 11.1 6.7 3.0 France 1.5 2.5 4.2 3.8 Germany, Fed. Rep. 5.4 3.7 4.5 3.2 Germany, Fed. Rep. 5.1 6.4 5.6 3.8 Italy 16.3 11.1 7.3 5.9 Italy 2.3 2.3 3.7 3.5 United Kingdom 11.2 6.4 4.9 2.6 Netherlands 6.1 6.9 5.3 3.3 United Kingdom 2.1 3.4 3.6 3.8 Developed countries 3.7 5.3 7.4 6.1 Developing countries 9.2 6.2 5.1 4.1 Southern Europe 4.1 6.5 7.1 6.6 Brazil 0.3 3.8 2.8 HongKongb 24.2 15.8 13.2 9.0 18.5 15.9 17.2 13.7 India 33.0 34.2 23.6 15.2 (excluding jute textiles) 12.7 13.6 11.9 10.9 Korea, Rep. of ... 9.2 13.7 116d Pakistan ...... 47.4 41.9 Taiwan ... 11.8 12.8 8.0 Eastern trading area 3.2 3.6 3.4 3.8 Eastern trading area 2.7 2.9 3.1 3.1 aExcluding petroleum. bIncluding re-exports. Share of textiles in total exports (excluding re-exports) is as follows: 1963: 17.0%; 1973: 12.1%; 1982: 6.1%. c1980. d1981. elncluding imports for re-export. Source; See Appendx Table A.6. APPENDIX TABLE A.8. - SHARE OF CLOTHING IN TRADE IN MANUFACTURES, 1955-1982 (Percentages) EXPORTS 1955 1963 1973 1982 IMPORTS 1955 1963 1973 1982 World 1.9 2.7 3.6 3.9. Developed countries 1.6 2.2 2.3 1.9 Developed countries 2.0 3.2 4.5 5.2 United States 0.9 0.7 0.7 0.7 United States 3.9 5.7 5.1 6.0 Japan 6.4 4.2 1.1 0.4 Japan 1.1 0.5 5.8 6.9 France 2.2 3.6 4.1 2.7 France 0.6 1.9 2.6 4.0 Germany, Fed. Rep. 1.1 1.2 1.5 1.7 Germany, Fed. Rep. 2.1 5.1 8.7 8.3 Italy 3.6 8.8 7.1 7.2 Italy 0.6 0.8 1.5 1.9 United Kingdom 1.4 1.2 1.8 2.3 Netherlands 2.6 4.2 5.9 6.6 Switzerland ... 4.2 5.9 6.6 United Kingdom 1.8 4.8 4.0 4.2 Developing countries 4.0 7.8 14.2 13.6 Developing countries 1.4 1.7 1.6 2.2 Southern Europe 1.1 4.9 8.6 8.4 Brazil ... 7.4 1.3 d Hong Kong a 17.4 33.2 30.4 27.3b Hong Kong 1.8 2.7 3.1 6.2 India - 1.3 6.5 13.4 Korea, Rep. of ... 12.8 27.7 20.2c -8- Pakistan ...... 2.9 10.6 Taiwan ... 7.9 19.3 14.7 Eastern trading area 3.4 3.7 5.1 5.8 Eastern trading area 3.3 3.6 4.0 3.1 aIncluding re-exports. Share of clothing in exports of manufactures (excluding re-exports) is as follows: 1963: 39.2%; 1973: 38.0%; 1982: 35.9%. b1980 c1981. dIncluding imports for re-export. Source: See Appendix Table A.6. APPENDIX TABLE A.9. - SHARE OF CLOTHING IN TOTAL,MERCHANDISE TRADEa, 1953-1982 (Percentages) EXPORTS 1955 1963 1973 1982 IMPORTS 1955 1963 1973 1982 WORLD 1.0 1.6 2.4 2.8 Developed countries 1.0 1.5 1.6 1.5 Developed countries 0.8 1.6 2.9 3.6 United States 0.6 0.4 0.4 0.5 United States 1.1 2.6 3.5 4.6 Japan 5.4 3.8 1.0 0.4 Japan 0.1 0.1 1.8 2.3 France 1.5 3.6 4.1 2.0 France 0.2 0.9 1.8 2.9 Germany, Fed. Rep. 1.0 1.0 1.4 1.5 Germany, Fed. Rep. 0.5 2.1 5.2 5.3 Italy 2.4 7.0 6.2 6.4 Italy 0.2 0.4 0.8 1.1 United Kingdom 1.2 1.0 1.5 1.9 Netherlands 1.4 2.7 4.1 4.4 Switzerland ... 2.9 4.6 5.5 United Kingdom 0.3 1.5 2.4 3.0 Developing countries 0.4 1.4 5.6 7.9 Developing countries 1.0 1.1 1.1 1.6 Southern Europe 0.2 1.7 5.0 6.1 Brazil 1.5 0.5 Hong Kong b 13.2 27.9 28.2 24.9 Hong Kong e 1.0 1.6 2.2 4.9 India - 0.6 3.5 7.9d Korea, Rep. of ... 5.7 23.5 18.4 Pakistan ...... 1.8 6.5 Taiwan ... 3.0 16.2 13.3 Eastern trading area 1.8 2.4 3.4 4.1 Eastern trading area 1.7 2.2 2.8 2.2 aExcluding petroleum. bIncluding re-exports. Share of clothing in exports (excluding re-exports) is as follows: 1963: 36.0%; 1973: 36.7%; 1982: 34.6%. c1980. eIncludingimports for re-export. Source: See Appendix Table A.6. - 10 - APPENDIX TABLE A. 10. - SHARE OF WORLD IMPORTSa OF TEXTILES AND CLOTHING PURCHASED BY MAJOR DEVELOPED COUNTRIES, 1963-1982 (percentages) EC (9) Other UnitedbStates Canada Japan Total Intra Extra Europe Western Textiles 1963 10b 4 1 33 (23) (10) 10 1968 10b 4 1 35 (25) (10) 9 1973 75 3 5 39 (27) (12) 9 1976 3 3 40 (26) (14) 8 1978 6 3 4 41 (27) (14) 8 1979 5 3 4 43 (27) (16) a 1980 5 2 3 41 (25) (16) 8 1981 6 3 34 (21) (13) 7 1982 6 2 3 35 (22) (13) 7 Clothing 1963 3 35 (23) (12) il 1968 19b 3 I 36 (24) (12) 1973 17b 3 5 46 (26) (20) il 1976 4 4 48 (23) (25) il il 1978 22 2 4 48 (24) (24) 1979 18 2 5 51 (24) (27) 1980 17 2 4 49 (22) (27) il 1981 20 2 4 43 (19) (24) 10 1982 22 2 4 42 (18) (24) 10 aworld imports- are .based. on f.o.b. values, thereforee_ _ theare_>_of share_w __ _ of_ countries reporting in c.i.f. values is somewhat overstated. bf.o.b. Sources: UNSO Comtrade Data Bank; GATT, International Trade. APPENDIX TABLE A.11-SHAREOF INDIVIDUAL SUPPLIERS IN THE IMPORT MARKET FORTEXTILES IN THE EUROPEANCOMMUNITY (EXCLUDING BD INITRA-TRADE),1963-1982 (Percentages) 1963 1973 1978 1 Volume index of totalworld trade intextiles 1973-100 43 100 114 129 Total numberof suppliers 129 160 * IS6 156 Supplierseach with 5% or more of total imports Switzerland 16.8 United States 11.4 Switzerland 11.1 Switzerland 11.5 India 14.6 Switzerland 10.5 United States 10.1 United States 8.9 United States 12.7 Iran 8.8 Austria 7?t Austria 6.9 Austria 7.8 Austria 7.1 Iran 6.5 Japan 5.7 HongKong 6.6 Portugal 5.4 Inida S.5 portugal 5.6 Iran 6.4 China 5.4 6.2 Creec4 5.1 Turkey 5.1 7suppliers 71.1 5 suppliers 43.2 5 suppliers 41.2 8 suppliers 54.2 Supplierseach with 1-4%totalimports Portugal 3.0 India 4.8 Greece 4.7 India 4.9 China 3.0 Greece 4.1 Portugal 4.5 Spain 3.9 -11- Spain 2.9 Hong Kong 3.8 Spain 4.1 Brazil 3.1 2.5 Japan 3.6 Japan 3.9 Pakistan 3.1 Pakistan 2.5 Taiwan 3.5 Turkey 3.9 Korea, Rep. of 2.7 Yugoslavia 2.1 Brazil 3.1 China 3.2 Taiwan 2.5 Canada 1.7 China 3.0 Pakistan 3.0 Iran 2.2 Egypt 1.s Pakistan 2.8 Korea, Rep. of 2.9 Hong Kong 2.0 Afghanistan 1.3 Turkey 2.5 Brazil 2.5 Sweden 1.8 Czechoslovakia 1.2 Spain 2.5 HongKong 2.4 Czechoalvakia 1.4 Sweden 2.3 Taiwan 2.1 Thailand 1.4 Yugoslavia 2.1 Sweden 1.8 Egypt 1.3 Czechoslovakia 2.0 Czechoslovakia 1.6 Yugoslavia 1.3 Korea, Rep. of 1.2 Morocco 1.4 Morocco 1.2 Romania 1.2 Thailand 1.3 Israel 1.1 Canada 1.2 , Romania 1.1 Bangladesh 1.0 Morocco 1.0 Poland 1.0 10 suppliers 21.7 19 suppliers 46.7 16 suppliers 44.4 15 suppliers 33.9 Supplierseach with less than 1% total Imports 112 suppliers 7.2 136 suppliers 10.1 135 suppliers 14.4 133 suppliers 11.9 Source: UNSOContradeData Bank. APENDIX TABLE A.12.-SHARE OFINDIVIDUALSUPPLIERSTHEIN IMPORT MARKETFORCLOTHING IN THE EUROPEAN COMMUNITY (EXCLUDING ECINTRA-TRADE),1963-1982 (Percentages) 1963 1973 1978 1982 Voluem index of total world tradein clothing:1973-100 29 100 172 195 Total number of suppliers 110 156 L58 154 Suppliers each with 5% more of total imports Hong Kong 45.2 Hong Kong 27.9 HongKong 19.8 HongKong 17.7 Austria 10.5 Yugoslavia 9.9 Korea, Rep. of 9.3 Korea, Rep. of 10.2 Switzerland 9.0 Taiwan 5.3 Greece 8.5 Greece 7.5 6.8 Yugoslavia 6.0 United States 6.6 5 suppliers 78.1 3 suppliers 43.1 4 suppliers 43.6 3 suppliers 35.4 Suppliers each with1-4%of total imports Sweden 4.7 Greece 4.5 Austria 3.8 ugoslavia YUgoaIavm 4.7 yfflIvil ea, Rep. Korm, Rip. of iwan 4.2 Tatum tugal.6 Poruffl 4.7 1Uigaxy tugal.9 Porbial 4.2 India ndia 3.5 IJdis 3.8 CWA Hungary 1.6 1igwaxy ungary4.0 H&mary wan 3.5 Taiz 3.8 MrImg Austria1.4 itr1a Romania 3.6 PRmnla Aust 3.0 h"stria 3.8 Spuin Romania 1.2 PaMnIs Tunisia3.4 LXmIatà Tu 3.0 Insisa 3.6 1ermi Poland 1.2 polad 2.9 Portugal China 2.9 aOna 2.8 Prti 1.0 Spain 2.8 Spain Romania 2.6 PoEmwa 2.7 Muerlad Switzerland swtzerloed urkey 2.5 T1utiu 2.5 9 me United 2.1 lUdted States Macao 2.3 1fero 2.5 1963 5913 1918 5982 Volumeindexof total world trade in textiles:1973-100 43 IOD 114 129 Total number of suppliers 76 12 76 83 Suppliers eachwith 5% ormore of totalimports 24.3 Japan 25.4 Japan 22.1 19.4 United Kingdom 23.7 United Kingdom 11.6 United States 10.5 nited statesn 12.6 India 11.0 9.5 9.9 8.4 United States 10.1 7.5 9.4 hina 7.9 United States 7.4 China 6.8 Talwan 7.3 New Zealandla 6.0 New Zealand 5.9 Korea, Rep. of 5.5 4 suppliers 69.7 5 suppliers 61.4 suppliers« 64.7 7 suppliers 67.0 Suppliers each with 1-4.9% of total imports -13- I 4.6 Taiwan 4.9 Taiwan 4.8 United Kingdom 4.9 Italy 4.1 New zealnad 4.6 4.0 Italy 3.4 China 3.3 4.3 Germany, Fed. Rep. 3.6 Germany, Fed, Rep. 3.3 2.8 Germany,Fed. Rep. 4.2 Kortea, Rep. of 2.9 Incdia 2.5 Germany, Fed. Rep. 2.5 Italy 2.0 2.6 1.9 Belgium-Luxembourg 1.8 1.5 Italy 2.1 1.5 1.8 1.5 France 1.8 Bangladesh I.5 1.7 1.4 1.3 1.5 1.6 1.3 1.2 Pakistan 1.2 Czechoslovakia 1.1 Czechoslavakia 1.3 5.2 1.1 Canada 1.0 1.2 South Africa 1.0 Brazil 1.1 1.0 singapore 1.0 Il suppliers 26.3 12 suppliers 29.2 Il suppliers 26.5 12 suppliers 24.9 Supplierseach with less than 1% of total imports 61suppliersr 4.0 55 suppliers 9.4 59suppliers 8.8 64 suppliers 8.1 Source:UNSOContradeDataBank. APPENDIXTABLE A.14. - SHAREOF INDIVIDUAL SUPPLIERS IN THE IMPORTMARKETFORCLOTHING INAUSTALLA, 1963-1982 (Percentages) 1963 1973 1978 1982 Volum index oftotal world tradein clothing: 1973-100 29 100 172 195 Total numberof suppliers 56 69 73 83 Supplierseach with 5% or more of total imports UnitedKingdom 34,1 HongKong 29.6 HongKong 23.0 HongKong 24.0 Hong Kong 12.9 Taiwan 17.8 Taiwan 20.3 Taiwan 20.5 Japan 11.1 China 11.0 Korea, Rep.of 9.0 China .4.1 Italy 10.5 United Kingdom 10.1 United Kingdom 8.5 Korea, Rep. of 8.8 United States 6.3 India 5.8 China 7.7 New Zealand 6.1 India 6.1 5 suppliers 74.9 5 suppliers 74,3 7 supplier 80.1 4 suppliers 67.4 Supplierseach with 1-4.0% of total imports Switzerland 4.7 Korea, Rep. of 3.6 Italy 3.3 New Zealand 4.4 France 3.9 Japan 3.6 Philippines 2.6 India 3.9 -14- China 3.3 United States 3.4 Japan 2.5 Italy 3.7 Canada 3.3 New Zealand 2.9 france 1.6 Phillppines 3.0 Gernmy, Fed. Rep. 3.1 Italy 2.7 UnitedStates 1.6 United States 2.7 France 15 Japan 2.3 Germany, Fed. Rep. 1.2 Macao 2.2 UnitedKingdom 2.1 France 1.1 Malaysia 1.1 Indonesia 1.0 5 suppliers 18.3 7 suppliers 18.9 5 suppliers 11.6 11 suppliers 27.5 Suppliers each with less than 1% of total imports 46 suppliers 6.8 57 suppliers 6.8 61 suppliers 7.7 68 suppliers 5.1 Source: UNSOComtrade Data Bank. APPENDIX TABLE A. 15- SHARE OF INDIVIDUALSUPPLIERSIN IMPORTTHE MARKET FORTEXTILES IN NEW ZEALAND, 1964-1982 (Percentages) 1964 1973 1978 1982 Volumsindex of totalworld trdaein textiles 1973-100 43 100 114 129 Total number of suppliers 54 62 69 69 Supplierseach with 5% or more oftotalimports United Kingdom 35.2 Japan 19.8 Japan 17.6 Japan 16.3 Japan 16.0 Hong Kong 16.0 HongKong 15.7 United States 12.3 lndia 10.0 UnitedKingdom 14.4 United Kingdom 12,3 HongKong 12.1 HongKong 9.2 Australia 10.8 Australia 8.0 Australia 1().3 Australia 8.4 India 6.1 United States 7.5 United Kingdom 6.3 UnitedStates 7.5 United States w 6.1 India 5.6 China 5.6 Korea, Rep. of 5.0 6 suppliers 86.3 6 suppliers 73.2 7 suppliers 71.7 6 suppliers 62.9 Suppliers each with 1-4.9%of total imports -15- Germany, Fed. Rep. 2.2 China 4.9 China 4.0 Korea, Rep. of 4.8 Italy 2.0 Germany, Fed.Rep. 3.5 Germany,Fed. Rep. 3.3 Taiwan 4.3 Canada 1.3 Singapore 2.5 Taiwan 3.3 Germany,Fed. Rep. 3.3 Switzerland 1.2 Canada 2.0 Malayasia 3.2 canada 3.1 China 1.2 Italy 1.6 Singapore 2.2 India 3.1 Taiwan 1.5 Canada 1.9 Italy 2.8 Korea,Rep.of 1,2 Italy 1.4 Malaysia 2.5 Malaysia 1. I Bangladesh 1.2 Brazil 1.8 Netherlands 1. l Netherlands 1.1 Belgium-Luxembourg 1.3 France 1.2 Bangladesh 1.2 Netherlands . 5 suppliers 7.9 9 suppliers 19.4 9 suppliers 21.6 12 suppliers 30.5 Suppliers each with lessthan 1%of total imports 43 suppliers 5.8 47 suppliers 7.4 53 suppliers 6.7 51 suppliers 6.6 Source: UNSO Contrade Data Bank. APPENDIX TABLE A.16. - SHAREOFINDIVIDUAL SUPPLIERSINTHE IMPORT MARKETFORCLOTHING IN NEW ZEALAND,1964-1982 1964 1973 1978 1982 Volums index of totalworld trade in clothing:1973-100 29 100 172 195 Total number of suppliers 39 43 52 59 Supplierseach with5% or more of total importsr. ited Kingdom 61.3 United Kingdom 26.6 AustraliaA 20.6 Hong Kong 23.1 ng Kong 13.3 Hong KongM 22.7 UnitedKingdomlm 19.0 iwan 16.6 stralia 6.2 AustraliaA 13.9 ong Kong 13.2 hinafa 11.9 ited Statese 6.2 Taiwan 9.6 apani 11.0 Australiaa 6.5 pan 6.8 Taiwani 8.6 C ooek Islasde 6.1 pan 5.6 `~~~~~~~~~~~~~md4l#5.3 ierslim suppliers 5 affpuae suppliers 5 up1lier 72.4 . 7 aupliru 75.1 çlfum wi, idcb 14.92 0< toutl tgru C.ChinaFed.Rep. 3.5 nited States 4.5 n UatesStAc" 4.4 Ulited Stcate. 4.8 clUnited States 2.2 China nited S1ktei Satu 4.0 Kingdom 3.8 Uhùted King& 4.1 -_ JeIfl 1.7 Korea, Rep. 2.3 orea, PFi£p of 2.8 Korea, Rep. of 2.9 CrAur S(aro U:WN C4mru Dota M*. APPENDIX TABLE A. 17. SHARE INDIVIDUAL. SUPPLIERS IN THE IMPORT MARKET FOR TEXTIELS IN MONDAY, 1963-1982 1963 1913 19)8 1982 volume index of total world trulein textiles: 1973-100 43 100 114 129 Total number of suppliers (.0 il 74 18 Suppliers eachwith 5%or more of total imports Germany Food. Rep. 1.5 United Kingdom 16.9 Germany, Fed. Rep. 15.9 Germany, Fed. Rep. 16.5 United Kingdom 11.2 Germay, Fed. Rep. 14.4 United Kingdome 14.2Denmark Vesaàtm 11.8 S9A«de 10.3 Seden 9-dn13.9 Sweden &.#.de: 13.5 wedenm Sxti117 snacuwr1uix 10.1 nmark De11iLr 10.6 nmark Desmauk 11.United ingdomte KInwkg 10.0 IUSwu1c 6.4 Austria kwaîria 5.9Austria èIgutrl 5.0 elgium-LugenbourgMug6.1 cu~~~~~~e ~~5.6 Switzerlanddîrle5.6 AustrLj 5.1 ~5.4~~iS 1 awpàluîCu uppliers 72.5 6 taijiplie 61.3 5 applilerr 60.0 6 sippliers 61.8 !~Wfzr ea iWith1-.9Xof total1Sqrr gitzerlavl Portugal 3.9 1>ortifg 4.9 OIhaacdrj4.4 11ertffl 4.5 ItaIy Netherlands 3.6 meUlw-r1màt 4.4 Wtlu.IMr1ai 4.2 tietl&er1nk 4.3 Jiuxo F 3.5 Frawie 3.3 Portugal 4.1 Irance 4.3 AaiuLri Finland 3.4 &±18Iuw-axoe~iJJx1 3.2 bymwe 4.0 Fiaai" 3.0 tl~Irit State witzerland 2.9 Fliu1wv 2.6 LJ1tzer1ait 3.3 Sitzer1îuid 2.8 Pori-..4 ~~2.0 Icaly 2.6 tlited stâcea 2.6 ltaly 2.8 ûctwdialovak ited S ss4 Jalmil 1.8 Icaly 2.6 Un~ite state. 2.7 1rnlh 1.46 Czechoeloyacl 1.6 Fini"n 2.5 China 1.8 lkiued Stateu 1.4 Japai 1.5 Czedwmlov"it 1.2 .zedmtiovakla 1.4 l-dia 1.2 Spain 1.1 .jaff 1.0 6 suppliera 11 suppliers2.1 9 mmppiers 25.8 Il supfilier 31.7 Il afpliera 29.6 45 muppliera suppliers5.4 56 awpliere 6.9 58 suppliera 8.3 61 aijiplier 8.6 Source: LM~S Cqnua 1963 1973 1978 1982 Volumeindex of total world trade ln clothingsg: 1973.100 29 100 172 195 Total number of supplier 44 66 78 79 Supplier each with 5% or more of total Imports Denmark 22.8 Denmark 24.6 Denmark 18.1 Denmark 18.1 Sweden 18.9 Sweden 18.0 United Kingdom 17.5 Finland 16.7 Germay, Fed. Rep. 9.8 United Kingdom 12.7 Finland 14.8 United Kingdom 11.8 HongKong 9.0 Finland 11.6 Sweden 12.6 Sweden 8.8 United Kingdom 8.8 Hong Kong 8.1 HongKong 8.0 Hong Kong 7.0 Italy 8.2 Fortugal 5.1 Italy 6.4 Portugal 5.8 Germany,Fed. Rep. 5.0 6 suppliers 77.5 6 suppliers 80.1 5 suppliers 71.0 8 suppliers 79.6 Suppliers each with 1-4.9% of total imports -18- Netherlands 4.0 Austria 3.7 Portugal 4.6 Austria 4.0 o France 3.0 Germany, Fed. Rep. 2.4 Italy 3.6 France 3.S United States 2.3 Italy 1.8 Austria 3.4 China 1.2 Czechoslavakia 1.9 Switzerland 1.5 Germany, Fed. Rep. 3.0 Ireland 1.1 Austria 1.9 Czechsolavakia 1.3 France 1.9 United States 1.0 Hungary 1.7 India 1.2 United States 1.3 Germany, Fed.Rep. 1.3 Korea, Rep. of 1.2 Switzerland 1.1 Switzerland 1.0 Belgium=Luxembourg 1.1 9 suppliers 18.3 6 suppliers 11.9 8 suppliers 20.0 5 suppliers 10.9 Suppliers each with less than 1% of total imports 29 suppliers 4.2 54 suppliers 8.0 65 suppliers 9.0 66 suppliers 9.5 Source: UNSO Contrade Data Bank. APPENDIX TABLE A. 19 -TRADE BALANCES OFMAJORAREASSELECTEDINCOMPANY COMMIDITYGROUPS, 1963-1981 (Billion dollars) Textiles Clothing Textile Fibres Textile Machinery Manufactures AllCommodities 1963 1973 1981 1963 1973 1981 1963 1973 1981 1963 1973 1981 1963 1973 1981 1963 1973 1981 Developed countries 0.73 0.68 3.24 -0.07 -4.06 -16.80 -140b -0.52b 2.64 0.52 2.25 2.90 19.51 51.75 193.87 -2.71 -5.73 -77.93 of which: United States -0.19 -0.36 0.54 -0.30 -1.88 -6.86 0.28 1.07 3.01 0.09 -0.25 -0.30 7.12 1.14 8.92 5.91 0.77 -45.43 -0.24 -0.63 -1.08 -0.05 -0.21 -0.61 -0.11 -0.lS -0.19 -0.04 -0.10 -0.16 -1.95 -6.22 -12.60 0.39 1.89 3.38 Japan 0.88 1.32 4.22 0.20 -0.21 -1.22 -0.76 -1.73 -1.64 0.06 0.49 1.27 3.39 24.70 118.27 -1.29 -1.38 11.08 Western Europe 0.69 1.39 1.28 0.10 -1.60 -7.59 -1.96 -2.22 -1.46 0.44 2.25 2.44 13.40 39.93 105.85 -7.66 -8.35 -34.77 EC (9) 0.99 1.98 1.81 0.23 -0.89 -5.37 -1.78 -2.03 -1.34 0.33 1.69 1.43 14.36 41.46 103.38 -5.46 -3.85 -27.38 Developingcountries -0.84 -0.75 -3.12 -0.04 3.24 12.13 1.32 0.94 -0.35 -0.47 -1.98 -3.51 -18.69 -52.02 -207.13 -3.57 -6.93 6.41 of which: Soution Europe 0.01 0.24 1.36 0.03 0.51 2.19 -0.12 -0.32 -0.73 -0.11 -0.44 -0.50 -2.13 -6.96 -5.61 -2.64 -10.25 -31.49 Middle Eaat -0.20 -0.75 -4.11 -0.04 -0.02 -1.49 o 0.08 -0.04 -0.03 -0.16 -0.28 -1.90 -9.30 -71.07 1.85 10.90 87.40 East & South East Asia 0.13 0.71 3.00 0.23 3.05 13.74 0.01 -0.69 -1.66 -0.15 -0.73 -0.94 -4.49 -5.51 -9.54 -3.10 -3.26 -10.77 Latin America -0.27 -0.13 -0.63 -0.08 -0.07 -1.04 0.78 0.91 1.40 -0.13 -0.45 -1.12 -5.90 -15.89 -60.39 1.12 -2.39 -16.02 1o- Africa -0.50 -0.78 -2.69 -0.18 -0.21 -1.22 0.65 0.97 0.68 -0.06 -0.20 -0.67 -4.12 -13.87 -59.83 -0.57 0.27 -16.59 Eastern trading area 0.08 0. 0.26 -0.24 0.26 1.81 -0.65 -0.72 -1.99 0.02 -0.07 -0.29 0.49 -4.65 -8.95 0.70 -2.00 2.20 -0.22 -0.50 -1.85 -0.51 -1.04 -2.61 0.04 0.10 0.73 -0.03 -0.14 -0.54 -1.58 -6.95 -27.70 0.21 0.35 6.15 Eastern Europe 0.05 0.01 0.53 0.25 0.96 2.09 -0.59 -0.78 -1.23 0.06 0.10 0.48 1.78 3.45 21.60 0.19 -0.90 -2.95 China 0.25 0.59 1.57 0.03 0.34 2.34 -0.11 -0.05 -1.49 o -0.03 -0.23 0.29 -1.15 -2.85 0.30 -1.45 -1.00 aF.o.b.-c.i.f. for developed countries (except Canada)andSouthern Europe; f.o.b.-f.o.b. for Canada and the other areas as wellas for the UnitedStates in 1963 and 1973. bIncludinga surplus for Australia,New Zealand andsouth Africa of $1 billion, $2½ billion and $3 billion in1963, 1973 and 1981 respectivly. cImportscrts of opinglnpuntriesmtrim are derivom frcu trading eastncra' retums.ther die USSR, deingopkung iemtrlas are ompletelyetely broownn dam stinationatThere11erefore. pan of thR'sSSiports trta tolopingcduntriesisyincluded in the total fordevelopingl ountriesonlfor doplJig ccutrles mly. dIJrAluln nned economies in Asia.Iwd econcmtea ln Asa. Scirces: IM,onalrrbook of Isnics,tenaomtoiial Tade Statits ic Cmdttonthlye Steatits and Mistics;UN/UNCTAD,tHandbookltin of StatNo D. Umaaïc of Internatisnal Trade and ntinueData Bank; OCED Trade byCommodities series , Trade by Cou diltea saerles B and s; FAs, Trade Yearbook; national atatiatica. - 20 - APPENDIX TABLE A.20a. - TRADE OF THE EASTERN TRADING AREA IN TEXTILES, 1968-1981 (Billion dollars) 1968 1973 1981 Exp. Imp. Exp. Imp. Exp. Imp. USSR 0.09 0.30 0.14 0.64 0.13 1.98 Eastern Europe 0.37 0.38 0.86 0.85 1.99 1.46 Chinaa 0.27 0.01 0.78 0.19 3.22 1.66 Eastern trading area 0.73 0.69 1.78 1.68 5.36 5.10 of which: With third countries 0.47 0.43 1.22 1.17 4.25 4.00 World trade 9.90 23.35 55.10 aIncluding the other centrally planned economies in Asia. Sources: UN, Yearbooks of International Trade Statistics, Commodity Trade Statistics and Monthly Bulletins of Statistics; national trade returns. APPENDIX TABLE A.20b. - TRADE OF TRE EASTERN TRADING AREA IN CLOTHING, 1968-1981 (Billion dollars) 1968 1973 1981 Exp. Imp. Exp. Imp. Exp. Imp. USSR 0.01 0.70 0.03 1.07 0.03 2.64 Eastern Europe 0.68 0.17 1.38 0.43 2.78 0.70 Chinaa 0.08 0.01 0.37 0.03 2.42 0.08 Eastern trading area 0.77 0.88 1.78 1.53 5.23 3.42 of which: With third countries 0.20 0.31 0.64 0.39 3.25 1.50 World trade 4.40 12.60 41.30 aIncluding the other centrally planned economies in Asia. Source: See Table A.20. - 21 - APPENDIX TABLE A.21a - EXPORTS OFALL COMMODITIES, MANUFACTURES, TEXTILESAND CLOTHING FROM THE EASTERN TRADINGAREA, 1968-1981 (Billion dollars) 1968 1973 1976 1977 1978 1979 1980 1981 10.65 20.80 37.35 45.10 52.40 64.55 76.60 79.10 ManufacturesTextilesc=res 4.25 8.35 13.00 14.95 18.30 19.85 21.75 19.60 0.09 0.14 0.16 0.18 0.18 0.17 0.19 0.13 ing^e~1 0.01 0.03 0.03 0.02 0.02 0.03 0.03 0.03 Ern Europevve 14.25 30.80 49.10 55.15 63.45 73.30 82.75 82.45 .4taManufac O.-70 23.75 37.15 42.05 49.40 56.35 63.05 62.30 0.37 0.86 1.25 1.35 1.55 1.72 1.79 1.99 clothing 0.68 1.38 1.98 2.18 2.46 2.82 3.09 2.78 wh Czeslachoslov 3.00 6.04 9.06 10.30 11.75 13.20 14.90 14.95 2.53 5.24 7.81 8.93 10.15 11.27 12.55 13.10 Textiles 0.10 0.22 0.28 0.31 0.33 0.39 0.39 0.41 Clodhlngt 0.08 0.18 0.27 0.31 0.32 0.36 0.39 0.43 1.79 4.48 6.17 7.19 8.50 10.10 11.70 11.65 -'EManufac 1.25 3.03 4.28 5.05 5.70 6.96 7.45 7.40 0.08 0.15 0.20 0.21 0.24 0.25 0.29 0.28 Clodhingt 0.09 0.20 0.26 0.31 0.36 0.43 0.43 0.40 ?O1and AUl clmwdommod 2.86 6.32 11.05 12.27 14.11 16.25 17.10 13.40 facttMa 10.40 8.90 Tectimls 0.16 0.28 0.31 0.38 0.37 0.34 0.34 Clôding 0.28 C.47 0.53 0.66 0.69 0.69 0.55 AUl c=cd±tiell 2.10 5.05 8.00 8.60 12.00 '5.20 19.90 23.50 ,%1ufact=esM 0.95 2.35 3.45 4.05 5.80 7.20 9.30 11.70 Textcies 0.27 0.78 1.03 1.12 1.69 2.34 2.57 3.22 ClodiiÉ 0.08 0.37 0.58 0.78 1.06 1.43 1.91 2.42 EAL RADU AU cd,.es 27.00 56.70 94.50 108.90 127.90 153.10 179.30 185.10 ARPA V çfac=mes 15.90 34.50 53.60 61.10 73.50 83.40 94.10 93.60 TF 7les 0.73 1.80 2.45 2.65 3.40 4.25 4.55 5.35 CLod 0.77 1.80 2.60 2.95 3.55 4.25 5.05 5.25 amcluting the other cetally Including the othercentral Notes: - With the exmeptis of the USSR, Czechos1oceptionsoftheUSSR, Czechoslovak data are largey based on retns of tadirg parmers. - Figues may rnt add to totals because of notd-Ing Sources: UN, Yearbook of Iziternbadtlkade Statisties nternationalTrade Statistics, and vcnthlv Bulletir. of S casi;to tal atistics; - 22 - APPENDIX TABLE A.21b. - IMPORTS OF ALL COMMODTTIES, MANUFACTURES, TEXTILESANDCLOTHING INTO THE EASTERNTRADING AREA, 1968--1981 (Billiondollars) 1968 1973 1976 1977 1978 1979 1980 1981 USSR All commodities -ditie 9.40 20.45 38.70 41.70 51.10 57.60 68.60 72.95 ures es 7.35 15.30 28.30 30.30 35.90 40.75 45.95 47.30 Textiles 0.30 0.64 1.08 1.25 1.29 1.38 2.00 1.98 Clothing 0.70 1.07 1.54 1.69 1.90 1.92 2.52 2.64 Eastern Europe Aommoditiestie 14.50 31.70 55.30 61.40 69.90 78.70 88.90 85.40 acturesures 8.85 20.30 33.50 36.75 41.20 44.10 47.35 40.70 Tilesilff 0.38 0.85 1.14 1.25 1.37 1.52 1.66 1.46 Clothing 0.17 0.43 0.56 0.63 0.74 0.84 0.95 0.70 of whïch: Czechoslovakia commoditieses 3.08 6.21 9.71 11.19 12.60 14.36 15.15 14.63 nufactures 1.60 3.58 5.60 6.42 7.39 7.94 8.32 7.74 Textiles 0.03 0.10 0.11 0.13 0.13 0.14 0.12 0.12 Clothing 0.05 0.10 0.11 0.12 0.15 0.16 0.15 0.12 ymmary 1.80 3.97 6.83 7.91 9.93 11.12 12.58 Manufactures 1.06 2.50 4.40 5.17 6.55 6.90 7.23 Textiles 0.04 0.12 0.18 0.22 0.26 0.24 0.30 Clothing 0.01 0.03 0.06 0.08 0.11 0.10 0.12 Po1n All commodities 2.85 7.81 13.85 14.62 16.09 17.58 19.09 15.52 Manufactures 10.80 8.04 Textiles 0.15 0.22 0.23 0.2Z 0.28 0.30 0.18 Clothing 0.05 0.07 0.08 0.09 0.11 0.15 0.11 All commodities 2.40 6.50 7.80 8.90 13.00 17.65 22.80 24.50 Manufactures 1.35 3.50 5.30 5.35 8.35 11.65 14.15 14.55 Textiles 0.01 0.19 0.22 0.35 0.36 0.43 0.97 1.66 Clothing 0.01 0.03 0.04 0.02 0.02 0.03 0.05 0.08 EASTERN TRADING All commodities 26.30 58.70 101.80 112.00 134.00 154.00 180.30 182.90 AREA Manufactures 17.60 39.10 67.10 72.40 85.50 96.50 107.50 102.60 Textiles 0.69 *.70 2.45 2.85 3.00 3.35 4.65 5.10 0.88 1.55 2.15 2.35 2.65 2.80 3.50 3.45 alncluding the other centrally planned economies in Asia. Notes: With the exceptionsof the USSR, Czechoslavakia, HungaryandPoland, the data are lagely based on returnss of radingpartntparbers. ures mres may not add to totals becauseounding.of rrding. Sources. UN, Yearbook ofn InternatioaliTrade Statlodtics, Commdity Trade Statistics anBulletingofd Monthly States nadoal traderns.retuis. - 23 - APPENDIXTABLEA.22. - SHARE OFTEXTILES AND CLOTHING IN MANUFACTURINGFIXEDINVESTEMENT INSELECTEDCOUNTRIES, 1963-1981 (Percentages) 963 L964 L9 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 United States Textiles 3.7 3.8 3.7 4.7 3.3 3.7 4.2 4.2 4.8 5.1 4.7 3.7 3.0 3.0 3.0 2.8 2.4 2.4 Clothing 1.0 0.7 0.7 0.8 0.7 1.0 1.0 0.9 1.2 1.1 1.0 8 0.8 0.8 0.8 0.7 0.6 0.7 Canada 4.2 5.8 5.3 4.2 3.2 3.1 3.6 3.0 3.3 4.2 4.1 3.6 3.5 2.4 1.6 1.9 1.9 2.1 1.7 0.6 0.6 0.5 0.4 0.3 0.4 0.5 0.3 0.5 0.7 0.8 0.5 0.5 0.4 0.4 0.5 0.4 0.4 0.4 6.3 6.7 5.3 4.6 5.0 4.5 4.1 4.7 4.8 4.9 5.2 3.9 2.7 2.7 2.5 2.0 2.6 2.4 2.1 0.5 0.5 0.4 0.5 0.5 0.4 0.4 0.4 0.4 0.5 0.8 C.5 0.4 0.6 0.5 0.5 0.5 0.4 Clothing 8.7 7.7 6.9 6.8 6.1 7.3 7.8 6.8 5.2 6.0 7.0 5.9 5.2 4.6 5.3 4.9 3.6 2.1 2.6 1.7 l.5 1.7 1.5 2.3 L21 1.7 1.8 1.1 0.8 0.9 1.1 1.2 1.3 1.0 *.0 4.3 6.2 3.6 3.8 3.2 4.0 3.9 5.8 4.2 4.8 5.4 4.7 2.5 4.6 3.2 2.0 2.3 2.5 .. 2.4 2.4 1.8 2.2 1.0 1.3 1.3 1.7 0.8 1.3 0.8 0.7 0.7 1.7 1.2 0.9 0.7 0.3 0.8 4.6 4.8 4.5 4.1 5.1 4.8 3.9 3.8 3.7 3.6 3.0 2.9 3.3 3.0 2.8 3.0 2.5 Fed. Rep. 1.3 1.3 1.1 0.9 L1 1.1 0.9 0.8 0.9 0.8 0.6 0.7 0.9 0.8 0.8 0.7 0.6 3.9 3.6 3.8 3.2 2.8 2.9 2.8 2.2 2.1 2.2 2.4 1.7 1.6 1.6 1.4 1.2 1.2 1.2 0.9 0.9 0.9 1.0 8.9 9.4 8.9 6.3 12. 12.0 13.3 14.0 14.0 8.6 6.9 5.5 5.6 9.6 13.1 6.7 1.3 1.2 1.1 1.8 7.9 3.0 2.2 2.1 1.1 0.7 1.1 0.7 0.8 0.5 1.2 1.4 7.3 7.5 6.4 6.6 5.6 4.3 5.9 6.6 6.8 6.2 6.7 5.6 6.2 6.9 7.0 1.0 1.3 L.5 1.3 1.3 1.2 1.0 1.1 1.2 1.4 1.1 1.1 1.2 1.2 1.3 1.5 ntcIau 5.2 4.4 3.3 2.8 3.7 3.9 3.2 2.5 2.4 3.5 2.9 2.4 2.7 2.0 1.6 2.0 1.8 1.5 ngochin 1.9 1L3 L2 1.0 0.9 1.0 0.6 0.8 0.7 0.5 0.3 0.5 0.5 0.6 0.5 0.6 0.3 0.3 6.0 7.9 8.5 7.7 6.4 6.8 .. 5.0 4.3 4.8 6.9 6.4 5.1 3.8 3.6 3.7 3.3 2.3 0.8 2.0 1.6 1.6 1.4 0.9 .. 0.8 0.6 1.1 1.1 L.1 3.8 0.8 0.3 0.9 1.0 0.8 6.8 8.5 6.5 6.7 6.5 8.6 10.6 7.6 6.4 5.6 6.1 6.0 5.0 5.5 4.0 3.8 4.4 4.3 1oe 2.4 2.4 2.6 2.3 1.8 2.5 1.9 2.2 1.8 1.7 1.8 1.3 1.7 1.6 1.5 1.5 1.4 1.0 c*n 3.0 3.2 3.1 L2 3.S 3.9 4.8 3.0 2.9 2.2 3.9 3.3 2.0 1.6 1.4 3.4 2.9 2.7 NW- ii . 1.3 1.2 1.0 1.4 0.9 1.0 I.5 2.0 1.1 1.0 1.7 1.7 1.2 1.0 1.2 2.1 2.0 1.5 âtux 3.0 2.6 2.9 2.4 2.6 2.3 3.6 '.8 2.0 1.9 1.7 1.8 1.2 1.3 1.4 2.1 2.2 L.1 0.7 T~a 1.3 0.9 0.8 0.9 0.5 0.6 1.0 0.5 0.4 0.4 0.2 0.3 0.3 0.5 0.5 0.6 0.5 0.3 2.6 2.6 2.8 1.6 2.4 2.4 2.1 2.2 1.5 1.7 2.0 1.8 1.7 1.3 1.1 1.9 1.9 1.7 . 1.. 2.1 1.6 1.7 0.8 0.8 0.8 0.9 0.5 0.6 0.6 0.4 0.4 0.4 0.4 0.3 0.4 0.3 0.3 3wd TCCLI 4.4 3.0 3.3 3.5 2.6 3.4 4.2 4.8 2.9 2,5 4.3 2.8 2.4 1.9 1.8 1.7 2.3 1.6 Clci 2.4 0.9 0.6 0.5 0.4 0.7 0.9 0.9 0.6 0.8 1.0 0.5 0.5 0.5 0.6 0.7 0.8 0.6 7.5 5.8 S.5 5.3 5.6 6.0 6.8 8.0 4.1 3.8 3.4 3.9 5.2 2.9 73 5.7 6.0 3.8 2.0 1.9 1.2 1.1 1.2 1.3 1.2 2.3 1.2 1.3 1.5 1.5 1.5 1.2 0.8 0.8 0.7 MCI 7.0 6.7 6.5 7.1 8.6 9.4 8.5 8.9 8.6 8.4 7.8 .. 5.0 3.7 3.7 CdLc 1.5 2.2 1.6 1.: 1.6 1.7 2.7 1.5 1.4 2.4 1.9 .. 0 1.6 2.1 _42 20.3 10.9 28.9 22.5 16.7 11.7 10.8 12.7 5.1 3.1 2.3 3.1 0.5 2.0 L5.2 12 .15. . 0.5 1.4 1.1 1.2 1.7 0.7 1.9 0.5 0.4 0.4 0.2 1.6 0.6 2.5 3.0 2.1 1.1 - .. 37.4 .. .. 33.0 16.8 17.4 16.6 16.6 Ceu 9.5 .. .. 17.0 14.8 19.1 12.3 14.5 SLdr 13.2 9.2 TâCL 0.3 02 . cL-d .. 27.3 15.1 26.7 21.7 .. 27.4 21.9 20.0 58.7 57.3 23.7 - .. 0.4 - 0.9 - 0.1 0.8 rmu 28P. of 19.7 31.4 M.7 15.2 23.1 25.2 0.5 10.2 t9.1 27.0 20.9 19.6 20.3 L5.9 11.6 9.2 0.8 0.9 0.8 1.4 1.9 1.4 1.3 13 2.1 2.3 2.0 3.4 2.2 1.6 1.4 1.2 rbLuwim- 21.8 1.9 ..7 8.7 12.6 9.7 7.0 7.4 7.4 13.1 15.9 23.8 22.0 1' 2 .. 20.6 1.5 1.2 1.4 0.9 0.2 0.6 0.4 0.9 0.6 0.7 0.4 1.3 1.1 1.5 .. 1.7 CL« 6.7 6.2 5.5 0.5 3.0 10.0 5.8 6.2 4.4 5.9 2.8 7.8 6.0 3.7 1.7 1.3 1.7 2.9 1.4 mCS4l 1.3 2.0 3.1 2.1 1.5 2.2 3.6 1.3 4.9 1.4 2.0 2.3 2.9 1.9 1.8 1.8 4.3 .. 39.0 51.5 5.6 4.2 15.4 12.0 8.9 11.9 5.8 7.3 9.9 5.3 63 3.6 2.2 3.0 1.2 .. 2.3 3.0 1.2 1.3 2.3 2.2 0.8 2.8 6.7 4.2 7.8 4.5 4.6 6.3 3.3 3.6 5.5 .. 4.2 2.3 1.1 2.8 0.8 .. 0.7 0.6 0-' 0.6 owth of world industry and Yearbook of IndustrialuStatistics; national statisti - 24 - APPENDIXTABLE A. 23. - SHARE OF MACHINERYAND EQUIPMENT IN TOTAL INVESTEMENT INTEXTILES AND CLOTHING, 1972-1980 (Percentages) 1972-1974 1975-1977 1978-1980 Textiles United States 79.4 81.6 83.1 Canada 77.0 81.1 85.1 Japan 67.5 79.7 82.4 Germany, Fed. Rep. 77.2 82.6 81.8a Italy 79.1 81.4 82.4 Netherlands 83.3 84.6 81.8 United Kingdom 83.7 86.2 83.6 Austria 66.7 68.1 70.5 Finland 63.4 71.7 70.6 Norway 84.1 80.2 78.9 Sweden 74.4 81.1 73.7 Australia 87.5 91.4 87.8 Clothing United States 67.9 72.7 73.2 Canaa 68.2 72.7 78.6 Japan 41.2 53.6 51.9 Germany, Fed. Rep. 62.4 66.9 70.7a Italy 62.3 69.6 66.1 Netherlands 82.1 67.6 72.2 United Kingdom 73.1 84.8 76.7 Austria 50.0 51.3 55.0 Finland 54.8 59.7 60.7 Norway 86.7 84.6 75.0 Sweden 75.6 69.4 73.1 Australia 70.0 85.7 73.3 a1979 oly. Source: UN, Yearbooks of Industrial Statistics. APPENDIX TABLE A.24. - TOTAL EXPORTS OF TEXTILE MACHINERY (SITC 7171) FROM SEVEN MAHIR PRODUCING COUNTRIES, 1962-1982 (Million dollarss) United States Japan France Germany, United Swit- Total of Idem at Stipm.a Japan. Rep. Italy Kingdom zerland seven 1982 Prices Idem IGo2 158 (417) 74 49 257 67 180 132 917 585 (5 213) 1963 145 (529) 56 52 278 66 186 145 928 620 (5 683) i 964 180 (425) 83 68 327 75 188 157 I 078 036 (5 627) 1965 168 (540) 82 65 350 84 199 175 1 123 042 (5 984) 1966 188 (632) 100 69 401 109 230 191 I 288 052 (6 710) 1967 168 (544) 106 82 454 127 220 204 I 361 699 (6 579) 1968 167 (553) 119 133 499 167 243 234 1 562 481 (7 423) 1969 190 (623) 148 154 605 168 267 282 814 838 (7 844) 1970 227 (580) 196 145 723 200 296 298 2 085 829 (7 453) '> 1971 208 (560) 248 188 890 205 344 358 2 441 047 (7 434) u1 1972 211 (612) 233 191 109 225 367 411 760 962 (7 293) i973 299 (522) 429 276 476 269 407 604 3 760 578 (7 491) 1974 4,38 (549) 630 306 662 355 492 707 4 590 196 (8 057) 1975 398 (463) 535 334 452 419 530 822 4 490 187 (5 999) 1976 350 (568) 461 282 462 381 454 822 4 212 638 (6 399) 1977 315 (54 21 502 294 1 4145 381 369 782 4 087 809 (5 448) 1978 382 (567) 651 396 641 401 447 977 4 895 871 (5 435) 1979 501 (556) 719 420 2 030 559 542 1 053 s 824 089 (5 574) 1980 545 (578) 874 456 2 196 673 648 1 350 6 742 797 (6 081) 1981 540 886 351 819 622 507 1 191 5 916 839 1982 431 672 278 652 534 422 065 5 054 054 aUnited States' domestic shipments in current dollars. bThe figures in current dollars, taken from official statistics, have been deflated by the Federal Republic of Germany's export price index for textile machainery (after adjustment for exchange rate changes). cIncluding United States' domestic shipments in constant prices. Sources; UNSO Comtrade Data Bank; US, Department of Commerce, Bureau of Census, Annual Survey of Manufactures, Value of Product Shipments. - 26 - APPENDLX TABLE A. 25. - GEOGRAPHICAL DISTRIBUTION OF WORLD SPINNING AN WEAVING CAPACITIES, 1963-1981 (Percentages) Spinninga WeavingC 1963 1973 1981 1963 1973 1981d Developed countries 46.8 34.2 23.7 44.6 33.1 24.4 United States 1;.1. 13.2 10.4 10.9 11.4 8.7 Japan 10.4 8.3 5.4 14.0 11.5 9.5 EC(9) L8.3 10.6 6. a 1J7.4 8.7 5.0 Developing countries 29.6 36.5 42.6 28.4 34.2 41.2 Southern Europe 4i .5 4.8 5.9 4.9 4.9 4.5 Asia . 16.8 21.6 25.0 13.8 16.9 22.3 Latin America 6.i 7.5 7.9 8.3 9.5 10.3 Africa . 1.5 2.6 3.8 '.4 2.9 4.0 Eastern trading area 23.7 29.3 33.6 27.0 32.7 34.3 aShort-staple , ring spindles. As for 1981, open-end rotors are first converted into ring spindle equivalent (1 rotor = 3 ring spindles), and then added to the total ring spindles installed. CCotton-type looms. dShuttleless looms are included without any adjustment for productivity difference. Source: IFCATT/ITMF. - 27 - APPENDIX TABLE A. 26. - CANADA: QUOTAS AND SIMPLEAVERAGE QUOTA UTILIZATION RATES BY SUPPLYING COUNTRIES, 1979-1982 (Number and percentages) Number Simple average Total Over 90% quota utilization rate (%) Hong Konga 1979 31 12 76.9 1980 31 8 66.4 1981 31 7 67.7 1982 12 4 75.8 Korea, Rep. ofa 1979 29 8 62.2 1980 29 42.9 1981 29 7 !7.6 1982 17 8 71.2 Macao 1979 7 2 73.3 1980 10 2 58.1 1981 10 3 56.8 1982 7 2 53.1 Singapore 1979 7 O 35.3 1980 7 o 39.9 1981 7 1 33.7 1982 9 3 43.8 Thailand 1979 4 2 127.8 1980 6 2 65.3 1981 6 o 48.0 1982 4 o 33.3 Malaysia 1979 1980 3 o 43.0 1981 3 i 50.7 1982 2 I 82.0 India 1979 1980 8 I 61.6 1981 8 3 65.5 198a 8 Q 45.0 Pakistan 1979 1 1 105.3 1980 1 1 102.7 1981 1 1 97.5 1982 1 I 106.0 Philippinesa 1979 il 5 69.3 1980 3 50.6 1981 il i 47.5 .982 10 i 47.1 (continued on next page) - 28 - APPENDIX TABLE A. 26. - CANADA: QUOTAS AND SIMPLE AVERAGE QUOTA UTILIZATION RATES BY SUPPLYING COUNTRIES, 1979-1982 (cont'd) (Number and percentages) Number Simple average Total Over 90% quota utilization rate (Z) Bulgaria 1979 8 2 46.1 1980 8 o 23.8 1981 8 O 11.4 1982 4 1 33.0 Czechoslovakia 1979 2 2 10 ' O 1980 2 O 70.5 1981 2 o 60.5 1982 4 1 69.5 Hungary 1979 1 1 168.8 1980 I o 57 .0 1981 1 o 5.0 1982 I o 75.0 Poland 1979 14 7 78.4 1980 14 2 52.6 1981 14 3 51.2 1982 Il 2 54.3 Romania 1979 Il 4 89.6 1980 12 2 134.6 1981 12 2 37.9 1982 7 o 33.0 Chinaa 1979 28 19 169.8 1980 28 10 99.1 1981 28 8 115.1 1982 16 3 64.2 a1982 data not comparable to earlier years due to a change in category classifications. Note; Quotas are unadjusted for flexibility provisions. Quota utili- zation rates calculated by dividing quotas by the corresponding import permits. Source: Data supplied by the Canadian delegation. - 29 - APPENDIX TABLE A.27. - FINILAND:QUOTAS AND SIMPLE AVERAGE QUOTA UTILIZATION RATES BY SUPPLYING COUNTRIES, 1979-1982 (Number and percentages) Number Simple average Total Over 90% quota utilization rate (Z) Hong Kong 19i79 3 93.4 1980 O J8.0 1981 2 78.0 1982 1 73.2 Korea. Rep. of 1979 1980 1 38.7 1981 i 45.0 1982 S4. 6 Macao 1979 i LS. i 980 i '3. i 1981 3 80.3 1982 63. S Singapore 1979 3 i 980 o ia981 1982 Sri Lan.ka 1t79 i980 1981 1982 o 69.7 Thailand 1979 o z9.9 1980 I 95.4 1981 1 1982 O 55.0 Malaysia 1979 O 70.2 1980 1 O 56.9 198 . 98.5 1982 3 I 72. India 1979 3 o 9 1980 3 o 56.1 1981 3 38.6 1982 1 49.7 Note: Data by agreements years which do not necessarily correspond to calendar years. Quotas are unadjusted for flexibility provisions. Source: Data supplied by Finnish delegation. - 30 - APPENDIX TABLE A.28. - SWEDEN: QUOTAS AND SIMPLE AVERAGE QUOTA UTILIZATION RATES BY SUPPLYING COUNTRIES, 1979-1982 (Number and percentages) Number Simple average Total Over 90% quota utilization rate (%) Hong Kong 1979 1980 17 il 85.8 - 1981 17 2 69.4 1982 15 12 94.8 Korea, Rep. of 1979 1980 13 8 84.5 1981 13 10 85.0 1982 17 5 71.6 Macao 1979 il 6 89.6 1980 11 8 93.0 1981 12 9 89.2 1982 12 8 87.0 Singapore 1979 1980 8 8 101.8 1981 8 5 92.3 1982 10 6 83. 6 Sri Lanka 1979 1980 4 2 89.5 1981 4 2 89.8 1982 4 2 85.8 Thailand 1979 1980 8 6 107.4 1981 8 7 98.4 1982 9 7 89.6 Malaysia 1979 1980 6 2 83.5 1981 6 4 93.7 1982 6 2 79.8 India 1979 9 7 97.0 1980 9 6 91.9 1981 10 8 93.3 1982 10 6 85.8 (continued on next page) - 31 - APPENDIX TABLE A. 28. - SWEDEN: QUOTAS AND SIMPLE AVERAGE QUOTA UTILIZATION RATES BY SUPPLYING COUNTRIES, 1979-1982 (cont'd) (Number and percentages) Number Simple average Total Over 90% quota utilization rate (%) Pakistan 1979 1980 5 1 51.8 1981 5 2 70.8 1982 5 3 79.0 Philippines 1979 1980 .7 3 91.1 1981 7 0 59.4 1982 7 2 79.3 Brazil 1979 1980 1981 8 3 54.1 1982 8 2 49.1 Yugoslavia 1979 10 3 82.8 1980 10 3 68.7 1981 10 5 75.8 1982 10 5 73.5 Note: Data by agreement years which do not necessarily correspond to calendar years. Quotas include adjustments for flexibility. Source: Data supplied by the Swedish delegation. - 32 - APPENDIX CHART A.1. EMPLOYMENT IN INDUSTRYIN SELETED COUNTRIES(POST 1960) (as a percentage of civilian employment) 1960 65 70 75 80 1960 65 70 75 80 V 1 1 1 ,1 1 Il Tt 1 i 1 1 iI IAml[1 1 1-1 1 1 Ilj 36.0 fi.- s United States ' 30.2 W% de- 33.6 " ?urkey / 2 29.0 . New Zealand. 3L4 10.2 - - - O-- 4%_ 30.1 37.5 -- - - France Greece ' - - - i --M. .-_ 37.8 ,' 32.6 -0 36.-. W - Spaia 33.1 -- -- 44-N 35.3 -. 4 17.7 , 4% -e 35.2 dl - - 'w"" l6.1 ^a.e.qAustria . 41.i I- 28.3 - 32.0 - - - - Finland - - - 140.3 _-- - - 40.0 f.. lde -- - - - 34.8 .. 42.8 -. 'fi 42.6 ------31.9'1 4% % Sweden - -i Ireland - 40.3- - 4%- 4% % ei- 36.1 4%.* Netherlands -0- 4% 'de-. 4% - - 4% 23.7e Portugal' do 31.3 do 4% dl .P 4%.%%% 35.3 48.8_ --- " 29.5 - b17.2 9% Japan - 30.2 --- ' % 46.8 ILI % 4% 7 dl ital /64 -%N* Bei4 .9-. 4%= 43.5 j- _ 3-.5 28.5' / 48.k {f "%4 36.9, _' 4% Switzerland4% 4% 5 6-- 04 h8.8 "% 33.4 Denmark -. 29.8 39.3 36.9 .w -_- - 4 \ 4% United 30.3 % .Kingdom 29.3 35.7 11 1 111 1 11.11 111.1 1*11t 1.1 1-1.l 1 1 1 IL il Il il 1-1-11 1-U1111-1 1960 65 70 5 80 1960 65 70 75 80 Note: Figures underlined represent peak for period covered in the chart. o - Pl V t S* F ' t*, various issues - 33 - APPEDIX CHART A.2 AVERAGESHARE OF TEXTILES ANDCLOTHING PRODUCTION IN GNP AND TOTAL EMPLOYMENT, , RELATED TO PER CAPITA GNP. IN SELECTEDCOUNTRIES 1938 AND 1975 (Percentages and SUS at 1975 prices) Per cent 8-, Hong Kong (17.5) 7 - 6. *France 1938 Japan 1938 1 UK 1938 Italy 1938* *Portugal1938 * Egypt -s5 * Italy . Korea *Argentina .4 - .4 US 1938 *.Germany 1938 3 - * Philippines 23 *Morocco *Sri Lanka * Thailand UK*UIC.e*JapanJapan ' France * Germany 2 *US . * Ivory Coast Swedene 1 *Indonesia .1 * Haiti n i v an-U 200- 300 4dO S00 600 8 Ov 10O0 1S500 Z000 3000 4000 ' 6000 8000 b10oO N.B. Unless otherwise noted after country names, the figures refer to 1975. Sources: UN, Yearbook of Industrial Statistics; OECD, National Accounts, and Labour Force Statistics; ,i- - Y b-_. P.w. - 34 - APPENDIX CHART A.3. GROSS FIXED INVESTMENT AND PRODUCTION IN TEXTILES AND CLOTHING, IN DEVELOPED AREAS, 1964-1980 Investment in Mill. US$ at 1975 prices and exchange rate (left scale); production indices, 1975.100 (right scale) 120 USA no 110 1 l10 93 70 ta IHYESTWENT 2Dm 1 Sm 1 = l ITIIT Sm 110 1diifl - 110 100 sa 20 3 cm z O 1.ESa aUn7aa7 sn nu77 7n Imm lm& Es;1 a sa s nl1 n JS 7 7 71 7S IP Source: OECD, Textile and Clothing Industries: Structural Problers and Policies in DECO countries, Paris, 1983, and Secretariat estimates. APPENDIX CHART A.4. - CHANGES IN WORLD SHORT-STAPLE SPINNING AND WEAVING CAPACITIES, 1930-1981 ~~~~~~~~~~~~~~M.1oa n1al Installed Spindles: Mlillions sNote., Bote-n19 0 _ _ _ _ . . wQue. data wers not collected ~~~~~~~~~~~1m MUnMRMu InstallsdLooms: Millions 2.7 ...... _ _ __ I I! 1, 1 1 '32 *34 '35 0135 039 '50 '52 '54 '60 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '7r Source: 1THf, International Cotton Industry Statistics and Secrotarlat estimates. - 36 - APPENDIX III: PRINCIPAL TECHNOLOGICAL DEVELOPMENTS IN TEXTILES AND CLOTHING 1. The purpose of this Appendix is to give an overview of post-war technological developments and prospects for technological innovations 'on the horizon' in the textile and clothing sectors. In addition to the general developments in transportation and communications described briefly in Chapter 2, post-war technological developments affecting the textiles and clothing industries have taken two main forms: - material-innovations: fibre developments stemming from remarkable advances in synthetic fibre technology, and - process-innovations: improvements in traditional production technology and the development of alternative manufacturing methods. A. MATERIAL DEVELOPMENTS AND INTER-FIBRE COMPETITION 2. The advent of synthetic (non-cellulosic) fibre, which resulted from the development of high polymer chemistry in the pre-World War II years, paved the way for the diversification of fibre material in the post-war period. The commercialization of a variety of synthetic fibres, which featured high strength, durability, thermoplastic, 'wash and wear', and so on, contributed to the remarkable buoyancy of textile demand during the period. 3. Once polyester, nylon and acrylic had formed the 'Big Three' in the synthetic fibre market, interest focused on seeking reductions in production costs through the development of chemical technology and the pursuit of scale economies. Combined with the low-priced supply of petro-chemical feedstock, these efforts led to a steady decline in the relative prices of synthetic fibres during the 1960s and early 1970s. Consumption boomed, thanks in part to success in blending of natural and synthetic yarns, and the share of synthetic fibre in world fibre prodution increased sharply from 5 per cent in 1960 to 30 per cent in 1973. After 1973, however, fibre substitution slowed down markedly, and from the end of the 1970s to early 1980s inter-fibre competition appears to have turned in favour of cotton (see Table 1). 4. Tremendous progress was also made in the technology for processing synthetic fibre. Taking advantage of such functional properties as thermoplastic, the yarn texturing system (in which continuous filament synthetic yarn was treated to impart 'hand and appearance') was introduced in the 1950s. Since such textured yarn was particularly vell-suited to knitting, advances in the texturing of synthetic filament yarn in turn stimulated the growth of the knitting industry in the 1960s. Advances in both synthetic fibre and chemical technologies also animated the existing production methods of 'non-woven' fabrics. Last, but not least, much effort was devoted to overcoming some qualitative disadvantages inherent in synthetic fibre with respect to dyeability, electrical conductivity and piling, in order to provide fibre material suitable for each end-use. This in turn stimulated developments of process technologies such as dyeing, printing and finishing. - 37 - TABLE 1. - INTER-FIBRE COMPETITION: COTTON VS. POLYESTER Prices Relative % Share of cotton Year Cottona Polyesterb price in world fibre US current $ US current $ (A) demand Cent/KG Cent/KG (B) (based on weight) (A) (B) (C) (D) 1960 65.0 278 0.23 68 1963 64.1 218 0.29 65 1966 61.7 141 0.44 60 1969 62.3 99 0.63 55 1972 82.1 77 1.07 54 1975 122.4 106 1.15 49* 1978 159.6 119 1.34 46 1981 187.1 187 1.00 49 aCotton - Mexican Middling 1-3/32", c.i.f. Northern Europe. bPolyester - 1.5 Denier Polyester Staple for Cotton Blending f.o.b. United States Producing Plants. Sources: World Bank, Price Prospects for Major Primary Commodities; Vol. 3 Agricultural Materials July 1982; C.I.R.F.S. 1982. 5. The sharp increase in petroleum prices in 1974 and again in 1979-80 led to a considerable price rise of naphtha, which is a major feedstock of synthetic fibre. The steep rise in the costs of energy and feedstock, however, seem to have exerted rather limited effects on prices of synthetic fibre. On the other hand, cotton prices showed rather wide fluctuation after the 1973 commodity boom. 6. Table 2 shows the current state of fibre substitution in the EC and the United States in terms of fibre consumption in the main end-uses. Although synthetic fibre has gained ground in the fields of home furnishing (for example, carpets) and industrial uses (for example, tyres), substitution of synthetic for natural fibres has stabilized, or even declined, in clothing consumption, reflecting not only changes in relative prices, but also changes in consumers' tastes. TABLE2. - FlBRE CONSUMPTION INTHEMAINEND-USES (Based on weight - %) Man-madeflbrec of which: Synthetic fibre Cotton Wool Main and-uses 1971 1973 1979 1980 1981 1971 1973 1979 1980 1981 1971 l973 1979 1980 1981 1971 1973 1979 1980 '-981 Clothing 58 62 59 55 57 42 48 50 44 47 24 22 25 27 25 18 16 16 18 18 Home fumishing Carpets 71 79 ai 80 81 56 69 78 78 79 5 3 1 2 2 21 19 18 18 17 Others 43 52 Y, 53 53 23 28 36 36 36 51 44 41 41 41 6 4 5 6 6 Industrial uses Tyres 95 94 98 98 98 19 21 27 31 30 5 6 2 2 2 - - - - - Others b 50 55 65 67 71 21 34 40 42 44 47 42 32 31 27 3 2 3 2 2 B. UNITED STATES MAN-made fibrec of which: Synthetic fibred Cotton Wool ao Main end-uses 1971 1973 1979 1960 1981 1971 1973 1979 1960 1981 1971 1973 1979 1980 1981 1971 1973 1979 1980 1981 00 Clothing 56 64 63 62 62 43 53 55 56 55 41 33 34 35 35 3 3 3 3 3 Home furnishing Carpets 90 95 99 99 99 '85 94 99 99 99 5 3 1 1 1 5 2 0 0 0 Others 37 44 53 53 54 19 28 42 43 45 63 55 46 46 45 O 1 1 1 1 Industrial. uses Tyres b 100 100 99 99 99 80 87 94 93 94 0 0 1 1 1 - - - - - Others 55 63 77 77 80 22 36 65 64 69 44 37 23 23 20 1 0 0 0 0 Excluding Denmark, Ireland and Greece. bIncluding acetate tow used in cigarette filters, except for United States From 1977. Consists of synthetic (non-cellulosic)fibre and cellulosic fibre. dIncludes film and spunbondedpolypropylene from 1978. Sources: CIRMS and Textile Organon - 39 - 7. Developing countries started to produce synthetic fibre in the 1970s, and their share of world production has increased dramatically over the last decade. As shown in Table 3, this major shift in world production of synthetic fibre is attributable to rapid expansion of production capacity in a handful of developing countries, notably, the Republic of Korea, Taiwan, Mexico and Brazil. Meanwhile, industrial countries have made further progress. in synthetic fibre technology in two areas: (1) the development of energy-saving technology, and (2) improvements in quality and diversification of synthetic fibre. TABLE 3. - SHARE OF WORLD PRODUCTION OF MAN-MADE FIBRE BY REGION AND BY COUNTRY, 1971-1981 (Based on weight - %) 1971 1981 Region and country MMF SF MMFb SF World total 100 100 100 100 Developed countries 75 84 58 62 North America 28 34 27 31 Japan 17 20 12 12 Western Europe 29 30 18 18 EC(9) 26 28 16 17 Developing countries 10 8 23 24 Southern Europe 2 2 4 4 Asiaa 4 3 14 15 Korea, Rep. of 1 1 5 6 Taiwan 1 2 5 5 Latin America 4 3 5 5 Mexico 1 1 2 2 Brazil 1 1 2 2 Eastern trading area 15 8 19 14 MMF = Man-made fibre. SF = Synthetic fibre only. aIncluding East Asia, Southeast Asia, South Asia and West Asia. bExcept Olefin. Source: Textile Organon. B. MAJOR TECHNOLOGICAL DEVELOPMENTS IN PRODUCTION PROCESSES 8. The conventional classification of the textile production system consists of three major parts: (1) the manufacture of yarn from either staple fibre or filament, (2) fabric formation and finishing, and (3) assembly of finished products for end-uses. Each part of the production system can be further divided into several discrete processes. (See Chart 1.) - 40 - Chart I THE MANUFACTURING PROCESS OF TEXTILE PRODUCTS SEGMENTS PRODUCTION FINISHING ACTIVITIES 1. PRIMARY PROOUCTS TEXTURING DYEING 2. ROVING AND SPINNING 3. WEAVING DYEING PRINTING SANFORIZING - PERMA PRESS etc . 3. FINAL PRODUCTS Source: C.E.P.I.I. Taken front OECD (1983) Textiles and Clothing Industries: Structural Problems and Policies in OECD Countries, Paris, p. 19. - 41 - 9. Post-war technological developments in the textile production system have centred on four aspects: - Improvements in machine speed, leading to more output per unit of time; - Enlargement of machine capacity, as characterized, for example, by larger cheese on the winder and longer reed on the loom; - Advances in automation in production lines as well as among individual processes; and - pure innovations, for example, rotor spinning and shuttleless looms. 10. Developments in process technology in the textile and clothing production were less revolutionary than those in synthetic fibre technology, however. Most technological developments in the textile and clothing industries in the 1950s and 1960s involved improvements in conventional production methods and rationalization of production processes through the introduction of automation. In the 1970s textile machinery manufacturers began developing electronics-related application technologies in their search for increased automation. (1) Manufacture of yarn 11. Improvements in technology rather than "pure" innovations have dominated the pre-spinning processes of manufacturing spun yarn during the post-war period, though remarkable advances have been made in machine speeds in each of the production processes. A notable exception is the introduction of a continuous automatic spinning system to replace manual handling of fibre materials. This system is applicable only to mass production of highly specific products, however, and improvement in product quality under this system has fallen short of spinners' expectations. Furthermore, converting a conventional system into the fully automatic system is rather expensive, a fact that.has limited the popularity of the continuous automatic spinning system. 12. Major technological developments have centered on the spinning process (including winding). Automatic equipment has been developed, and improvements in the ring spinning system have been made as well. With respect to the former, automatic doffers and fully automatic winders have been introduced on a large scale in countries where labour costs are high, while automatic piecers have been under development, since yarn piecing on the ring frame is a complicated operation. In the latter case, attention has been paid to process control, such as computerized management of ring spinning, energy saving, noise reduction and dust control. - 42 - 13. Perhaps the most striking technological development in spinning was the introduction of open-end (rotor) spinning in the late 1960s. The main advantages of open-end spinning are as follows: it dispenses with both roving and winding processes; it: has increased the spinning speed substantially - the rotor can now operate about 3½ times faster than the ring spindle; and it saves floor space, while at the same time reducing labour costs to roughly one-third of those of ring spinning. As against these merits, open-end spinning requires higher capital costs and greater power consumption. Obviously, the labour-saving characteristic of open-end spinning is the main concern for high-wage countries. Although the cost comparison between two different systems involves many difficulties in measurement, it is now clear that the cost advantage of open-end spinning is confined to yarn of coarser count up to 20s-30s. 14. Versatility is the great advantage of ring spinning. With open-end spinning it is not possible to freely change the direction of twisting, and open-end spinning is possible only with cotton and man-made staple fibre. Woollen and worsted spinning, as well as dry flax spinning is possible with ring frames. Recent developments in automatic equipment and various attachments have made the adoption of ring spinning economically more attractive under certain circumstances (especially in low-wage countries). 15. Table 4 shows the world spinning capacity4 of short-staple spindles in 1963-1981 and of open-end rotors in 1981. It reveals that the geographical shift of spinning capacity from industrial countries to the developing countries and China has occurred on a large scale over the last two decades, and that a greater proportionof spinning frames are still of the conventional type (ring spinning). During the period of 1974-1982 the cumulative shipments of ring spindles and open-end rotors to the world market amounted to 23.5 million and 4.2 million respectively. (See Table 5.) About 80 per cent of ring spindles shipped during the above period went to developing countries, while more than 60 per cent of rotors were shipped to the USSR. Since its initial introduction in the late 1960s, open-end spinning has not been widely accepted by spinners outside the Eastern trading area, partly due to the fact that open-end spinning is less suitable for the finer yarns which industrial country consumers prefer. 16. As mentioned earlier in this section, it is also true that modernization of ring spinning system has proceeded at the same time through application of automatic or semi-automatic attachments and introduction of new machines which can operate much faster than old models. For instance, Table 6 gives a rough idea of the major trend of modernization in Japanese cotton spinning industry during the last decade. It shows that in spinning processes diffusion of technology has occurred unevenly. 17. Recently spinners' attention has been paid to the automation of open-end spinning and the air-jet spinning, first introduced in 1980 by a Japanese textile-machinery firm. - 43 - TABLE 4. - INSTALLED SPINNING CAPACITY OF SHORE-STAPLE SPINDLES AND OPEN-END ROTORS IN 1963, 1973 AND 1981 (Hundred thousands and percentages) 1963b 1973b 1981b Region and country SpindlesC SpindlesC SpindlesC Rotors World trade 1 282.1 100.0 1 435.4 100.0 1 559.0 100.0 40.1 100.0 Developed countries 599.8 46.8 490.9 34.2 374.0 24.0 8.2 20.4 North America 201.3 15.7 195.7 13.6 175.3 11.2 2.7 6.7 United States 193.6 15.1 188.9 13.2 167.4 10.7 2.6 6.5 Japan 133.5 10.4 118.9 8.3 85.1 5.5 1.7 4.2 Western Europe 259.1 20.2 168.4 11.7 105.3 6.8 3.6 9.0 EC(9) 235.0 18.3 151.8 10.6 92.2 5.9 3.4 8.5 Developing countries 378.9 29.6 524.2 36.5 697.6 44.7 6.1 15.2 Southern Europe 57.4 4.5 69.0 4.8 95.7 6.1 1.3 3.2 Asiaa 215.8 16.8 309.9 21.6 412.4 26.5 2.6 6.5 Korea, Rep. of 5.9 0.5 13.1 0.9 31.7 2.0 0.2 0.5 Hong Kong 6.3 0.5 8.9 0.6 5.3 0.3 0.6 1.5 Taiwan 4.5 0.4 22.0 1.5 34.5 2.2 0.7 1.7 India 146.7 '1.4 184.9 12.9 217.8 14.0 Pakistan 24.2 1.9 32.9 2.3 40.8 2.6 0.3 0.7 Latin America 86.0 6.7 107.7 7.5 127.9 8.2 1.4 3.5 Mexico 16.5 1.3 28.2 2.0 30.0 1.9 0.4 1.0 Brazil 39.4 3.1 40.4 2.8 49.0 3.1 0.5 1.2 Africa 19.7 1.5 37.6 2.6 61.6 4.0 0.8 2.0 Eastern trading area 303.4 23.7 420.3 29.3 487.4 31.3 25.8 64.3 USSR 123.0 9.6 157.4 11.0 153.0 9.8 21.0 52.4 China 105.0 8.2 180.0 12.5 255.9 16.4 - - aIncluding East Asia, Southeast Asia, South Asia and West Asia. bAs of the end of each year. CRing spindles, except for 1963 when mule is also included. Source: IFCATI/ITMF. - 44 - TABLE 5. - CUMULATIVE SHIPMENT OF SHORT-STAPLE SPINDLES AND OPEN-END ROTORS, 1974-1982 (Hundred thousands and percentages) Destination: Region and country Spindles Rotors World trade 235.3 100.0 41.9 100.0 Developed countries 44.8 19.0 6.9 16.5 North America 7.9 3.3 2.4 5.7 United States 7.4 3.1 2.3 5.5 Japan 9.7 4.1 0.8 1.9 Western Europe 25.4 10.8 3.6 8.6 EC(9) 21.6 9.2 3.3 7.9 Developing countries 187.1 79.5 6.3 15.0 Southern Europe 19.9 8.5 0.9 2.1 Asiaa 113.2 48.1 3.1 7.4 Korea, Rep. of 20.4 8.7 0.2 0.5 Hong Kong 0.8 0.3 0.8 1.9 Taiwan 7.3 3.1 0.9 2.1 India 43.7 18.6 0e1 0.2 Pakistan 6.7 2.8 0.3 0.7 Latin America 31.1 13.2 1.5 3.6 Mexico 6.7 2.8 0.4 1.0 Brazil 16.6 7.1 0.5 1.2 Africa 22.9 9.7 0.8 1.9 Eastern trading area 3.4 1.5 28.7 68.5 USSR - - 26.0 62.1 China 1.6 0.7 0.2 0.5 aSee Table 2. bRing spindles only. Source: ITMF. - 45 - TABLE 6. - EQUIPMENT MODERNIZATION RATEa IN JAPANESE COTTON SPINNING INDUSTRY (Percentages) Process/Item 1970 1975 1980 1. Chute feeding n.a. 17.9 32.4 2. High-speed card (Doffer: more than 15 r.p.m.) 6.0 20.8 32.7 3. High-speed comber (more than 150 nip p.m.) 18.6 41.6 48.6 4.High-speed drawing frame (more than 160 m.p.m.) 11.0 29.6 52.5 5. High-speed roving frame (more than 800 r.p.m.) 12.2 25.9 44.4 6. Automatic stop-motion on roving frame 67.1 88.2 96.9 7. Automatic doffer on spinning frame 34.3 42.1 51.2 8. Travelling cleaner on spinning frame 63.3 67.6 77.7 9. Automatic stop-motion on spinning frame 74.9 74.7 85.8 10. Continuous automatic spinning system (from mixing, scutching to carding) 7.3 19.6 39.3 11. Continuous automatic spinning system (from mixing, scutching to drawing) 2.9 2.2 3.3 12. Automatic winder 32.7 51.9 54.7 13. Electronic yarn cleaner on winder 13.9 32.2 46.2 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ aPercentage share of the number of machine/equipment incorporating the new technology concerned to total installed capacity. Source: Japan Spinners' Association, Statistics on Japanese Spinning Industry. Various issues. (2) Fabric formation and finishing 18. Among major techniques for transforming yarn into fabrics are weaving, knitting, tufting (for carpet making), and non-wovens. For example, in 1980 these processes, taken together, accounted for 87 per cent of total mill consumption of textile fibres in the EC. Weaving 19. Cloth is woven by interlacing a series of yarns running lengthwise, known as 'warp', with those running across, called 'weft' or 'filling'. There are various kinds of looms in operation today, from traditional hand looms to modern automatic looms. What is crucial in the weaving process from the standpoint of loom design is the weft insertion mechanism. The traditional way of carrying out this operation by projecting a shuttle to one side of the loom to the other, is by modern standards, both energy and noise-intensive. 20. During the post-war period, advances in loom technology have involved the development of shuttleless looms, as well as improvements in the speed of conventional looms. With the exception of Japan, automatic looms have replaced non-automatic looms almost completely in the industrial countries. Even in developing countries, with the notable exception of India, automatic looms have already become dominant in weaving. (See Table 7.) - 46 - TABLE 7. - SHARE OF AUTOMATIC LOOMSa IN TOTAL WEAVING CAPACITIES OF COTTON-TYPE LOOMS IN 1963, 1973 and 1979 (Percentages) Region and country 1963 1973 1979 World total 48.6 65.7 68.9 Developed count: 56.7 74.2 73.2 North America 100.0 100.0 100.0 United States 100.0 100.0 100.0 Japan 13.8 37.2 39.4 Western Europe 61.7 85.9 92.5 EC(9) 60.3 85.0 92.1 Developing countries 41.8 59.3 68.6 Southern Europe 42.8 54.4 77.3 Asiab 33.6 53.9 64.2 Korea, Rep. of 26.8 95.0 100.0 Hong Kong 79.9 100.0 100.0 Taiwan 46.7 86.8 82.3 India 10.0 18.6 21.9 Pakistan 63.2 74.3 82.3 Latin America 50.8 63.7 68.1 Mexico 68.2 75.6 83.7 Brazil 27.3 45.4 49.4 Africa 63.8 85.3 84.8 Eastern trading area 42.6 63.9 65.9 USSR 57.6 82.3 76.7 China 33.3 56.7 59.2 Including looms with automatic attachments. bSee Table 3. Source: IFCATI/ITMF. 21. The geographical shift of the world weaving capacity of cotton-type looms has shown a pattern similar to that of spinning capacity since the early 1960s, and the majority of looms installed are also accounted for by the traditional (that is, shuttle-type) models. (See Table 8.) What is different from the case of spinning, however, is that shuttleless looms have gained interest among weavers since the mid-1960s and began making inroads into the market, especially of industrial countries in the 1970s, as seen in Table 9. - 47 - TABLE 8. - INSTALLED WEAVING CAPACITY OF COTTON-TYPE LOOMS IN 1963, 1973 and 1981 (Thousands and percentages) 1963b 1973b 1981b Of which c c d Region and country Total looms Total looms Total looms shuttleless looms World total 2 697.6 100.0 2 820.6 100.0 2 874.0 100.0 259.8 100.0 Developed countries 1 201.9 44.6 934.8 33.1 702.0 24.4 99.2 38.2 North America 306.9 11.4 333.9 11.8 261.4 9.1 46.0 17.7 United States 294.8 10.9 322.3 11.4 248.9 8.7 44.8 17.2 Japan 376.8 14.0 323.2 11.5 272.6 9.5 15.3 5.9 Western Europe 508.1 18.8 266.2 9.4 155.9 5.4 35.2 13.5 EC(9) 469.5 17.4 244.1 8.7 142.7 5.0 32.2 12.4 Developing countries 767.0 28.4 964.1 34.2 1 184.9 41.2 65.3 25.1 Southern Europe 133.5 4.9 139.0 4.9 130.7 4.5 10.9 4.2 Asiaa 371.3 13.8 477.9 16.9 642.3 22.3 23.8 9.2 Korea, Rep. of 16.8 0.6 14.1 0.5 91.5 3.2 1.5 0.6 Hong Kong 19.9 0.7 27.8 1.0 23.1 0.8 4.0 1.5 Taiwan 15.2 0.6 45.5 1.6 56.7 2.0 9.2 3.5 India 208.1 7.7 205.8 7.3 209.2 7.3 0.6 0.2 Pakistan 34.0 1.3 29.6 1.0 25.8 0.9 0.5 0.2 Latin America 223.2 8.3 266.8 9.5 296.6 10.3 24.6 9.5 Mexico 45.0 1.7 49.2 1.7 52.5 1.8 12.4 4.8 Brazil 110.0 4.1 140.6 5.0 151.6 5.3 5.4 2.1 Africa 39.0 1.4 80.4 2.9 115.3 4.0 6.0 2.3 Eastern trading area 728.7 27.0 921.7 32.7 987.1 34.3 95.3 36.7 USSR 269.0 10.0 282.5 10.0 320.0 11.1 79.0 30.4 China 300.0 11.1 485.0 17.2 500.0 17.4 - - aSee Table 2. At the end of each year. Consists of non-automatic looms, automatic looms and looms with automatic attachment, 18 inches or wider. Looms using cellulosic and non-cellulosic yarn which are installed in cotton mills are also included. dCons-sts of automatic and non-automatic looms, 75 cm or wider. Source: IFCATI/ITMF. - 48 TABLE 9. - CUMULATIVE SHIPMENT OF SHUTTLE AND SHUTTLELESS LOOMS, 1974-1982 (Thousands and percentages) Shuttle looms Shuttleless looms Destination: Of which Of which Region and country Total cotton type Total cotton type World total 244.3 100.0 212.0 223.9 100.0 176.9 Developed countries 67.1 27.5 52.8 118.6 53.0 91.4 North America 10.3 4.2 10.0 36.4 16.3 30.1 United States 10.0 4.1 9.7 35.2 15.7 29.1 Japan 39.8 16.3 28.2 23.5 10.5 11.4 Western Europe 15.9 6.5 13.7 56.5 25.2 47.8 EC(9) 1.4.8 6.1 12.7 51.6 23.0 43.5 Developing countries 173.3 70.9 156.3 70.9 31.6 54.1 Southern Europe 1.0.2 4.2 9.1 17.1 7.6 15.0 Asiaa 114.9 47.0 100.5 29.3 13.1 17.7 Korea, Rep. of 29.9 12.2 24.0 6.8 3.0 2.3 Hong Kong 1.5 0.6 1.5 3.1 1.4 2.9 Taiwan 14.3 5.9 13.7 8.6 3.8 4.2 India 19.8 8,1 17.3 3.3 1.5 2.2 Pakistan 2.7 1.1. 2.7 0.5 0.2 0.5 Latin America 16.6 6.8 15.9 16.4 7.3 14.5 Mexico 2.7 1.1 2.4 6.8 3.0 6.0 Brazil 8.7 3.6 8.6 2.7 1.2 2.6 Africa 31.6 12.9 30.8 8.1 3.6 6.9 Eastern trading area 3.9 1.6 2.9 34.4 15.4 31.4 USSR 0.8 0.3 0.1 23.3 10.4 21.9 China 0.7 0.3 0.3 0.6 0.3 0.1 aSee Table 2. Source: ITMF. 22. Depending on the weft insertion mechanism, shuttleless looms may be divided into four categories, rapier, gripper (projectile), water-jet, and air-jet looms. Rapier looms have won popularity because of their versatility, and are widely used in the United States and Western Europe, together with gripper looms. Water-jet (hydraulic) shuttleless looms, which are applicable only to 'hydrophobic' filament yarns such as nylon, acrylic and polyester, have been adopted mainly in Japan and the - 49 - Eastern trading area. The commercialization of air-jet (pneumatic) looms started in the mid-1970s, though the air-jet weft insertion system was invented in Czechoslovakia in 1945. In recent years, there has been increasing interest directed to the development of multi-phase weaving, that is, the simultaneous multiple weft insertion system. Knitting 23. Behind the successful inroad of knitted goods into the clothing market lie a number of technological factors. First, knitting is one of the textile branches which has been most favoured by developments in synthetic fibre technology. In 1980 wool's share of total fibre consumption by knitting mills in the EC was only 12 per cent, while synthetic fibre such as acrylic, nylon and polyester accounted for about 65 per cent. Second, since knitting machines can operate much faster than weaving machines, knitting enjoys higher productivity and lower labour costs than weaving. Third, the introduction of electronics and microprocessors into knitting machines have brought about substantial simplification of pattern changes and increased versatility in terms of design scope. Finally, much effort has been directed into making garments more complete on the knitting machine. Socks, for example, are now completely machine-made. Carpets 24. The tufting method has become dominant in the machine-made carpet industry over the last two decades, thanks to the superior productivity of tufting machines over the conventional looms used to manufacture woven carpets. This basically stems from the simple production process of tufted carpets. The introduction of mechanical and electronic controls has contributed to increasing versatility in tufting machines in terms of carpet styles and texture design. 25. The carpet industry is a good example of a branch of the textile industry in which rapid advances in production technology have gone hand-in-hand with synthetic-fibre developments. By the mid-1960s the share of tufted carpets in total shipments of carpets and rugs passed 80 per cent in the United States, and by 1981 it reached 96 per cent. In the EC tufting carpets accounted for two-thirds of total fibre consumption for textile floor coverings in 1980, followed by oven carpets (20 per cent) and needle-punched carpets (14 per cent). The synthetic fibre industry has supplied a wide range of synthetic fibres particularly suitable for carpet making, taking advantage of the fact that the world supply of 'carpet wool' is very limited. Non-wovens 26. Non-wovens are an "umbrella" category which includes a wide range of fabrics that are neither made by weaving nor by knitting. The term 'non-wovens' may be defined as "planar assemblies of textile fibres held together either by mechanical interlocking in a random web or mat, by fusing (in the case of thermoplastic fibres), or by bonding with a cementing medium such as starch, glue, casein,rubber latex or one of the cellulose derivatives or synthetic resins." Expectations are that - 50 - the use of non-wovens will not only continue to expand in traditional end-uses such as floor coverings, disposable cloths, towels, sanitary protectives and industrial fabrics and filters, but that they will enter new market areas - civil-engineering fabric uses (geotextiles), environmental filtration, agricultural uses, and so forth. The advent of the non-woven technology also made it possible to reduce production costs substantially in fabric making by bypassing spinning, weaving or knitting processes. Although some non-woven technologies have been around for a long time, it was rapid advances in synthetic adhesives in the post-war years that allowed non-wovens to make great strides. 27. Rayon is still regarded as the "bread-and-butter" fibre in the non-wovens industry. In recent years, however, polyester and polypropylene have come to the fore as the main competitors for rayon in the United States and the EC, respectively. In the-EC, where polyester is relatively expensive, polypropylene has become more important than polyester in manufacturing non-woven fabrics; the share of polypropylene in total fibre consumption of non-woven fabrics jumped from less than 10 per cent in 1972 to nearly 25 per cent in 1980, while that of polyester remained unchanged at 22 per cent. Meanwhile, the share of rayon declined from 44 to 30 per cent. Finishing 28. The remarkable improvements in quality, functional property and dyeability of fabrics owe much to post-war developments in finishing and dyeing technologies. Besides regular finishes, special treatments are applied to fabrics to impart various desired effects. In the early 1950s, sanforizing finish for shrinkage-resistanca. and application of synthetic resin for shrinkage and absorbancy control and crease-resistance were introduced to cotton fabrics. In the mid-1960s major developments occurred in synthetic-fibre fabrics, in particular, 'permanent press' finish for synthetic-fibre blended fabrics, and polyester special finishes to give certain properties such as soil- and spill-resistance and static-electricity control. In addition, water-proofing, fire or flame retarding and sanitized finishes are also applied to specific end-uses. Recently, much attention has been paid to the development of energy-saving measures in finishing processes, including dyeing. 29. The increasing use of synthetic fibres with new properties in fabric making has stimulated the development of new dyes, new dyeing assistants and new dyeing processes. New dyeing machines for polyester or polyester and cotton blended products were introduced in the early 1960s, while the boom in knitted goods in the mid-1960s made a great contribution to the development of new dyeing processes suitable for them. Jet-dyeing machines and computerization of dye cycles have made spectacular progress, and computerized colour matching, electronic monitoring of moisture and temperature and process control by microprocessor systems have been introduced in modern dye mills. 30. The most common technique of printing is roller printing using a variety of dyes and copper rollers on which design patterns -are engraved. Development of synthetic-fibre fabrics and blends which are not easily dyed has paved the way for pigment printing in which pigment - 51 - colours mixed with synthetic-resin solvents are printed on fabrics by roller printing. Since the mid-1960s flat screen printing and rotary screen printing have made considerable advances. Over the last decade transfer printing in which design patterns printed on paper are transferred to fabrics has been increasingly introduced. This technique armed with a computerized process control, has played a major rôle in economizing labour and improving clearness of design and colour depth. (3) Clothing 31. The manufacture of clothing consists of three basic processes; (1) preparation, involving pattern grading, fabric spreading, marking and cutting, (2) sewing, and (3) finishing process, including inspection, pressing and packing. In essence, the clothing industry is an assembly production, dominated by the sewing operation. It has remained highly labour intensive, labour's share generally accounting for 90 per cent or more of total value added; sewing alone is responsible for about 90 per cent of the labour costs. 32. Until the late 1960s technological developments in the clothing industry had been less marked than those in the textile sector. Since then the larger clothing manufacturers have been introducing computers, and automatic and semi-automatic machines to aid production management and the "handling" processes. Computerized grading systems which automatically cut various grades of pattern, based on the 'master' pattern that is constructed according to the original design, are a leading example of the new labour-saving hardware. Other examples are automatic fabric spreaders, computerized automatic cutting machines and computerized marking systems. The application of computers to preparation process seems to have made most progress in the mass production of ready-made clothing and some casual-wear industries. 33. It must be stressed, however, that the pre-sewing stage accounts for less than 5 per cent of total labour costs in the manufacture of clothing. The major obstacles to modernization and rationalization of the clothing industry lie in the sewing process. Technological advances in sewing since the late 1960s have been of two main types. The first is the development of automatic sewing machines of various types designed to (1) rationalize the sewing process substantially, (2) reduce the skill requirements of the operators, (3) increase the sewing speed, and (4) enhance the uniformity of the sewing operation, thereby improving the product quality. The actual operating hours of the conventional sewing machines usually correspond to 20 to 30 per cent of total working hours, the remaining hours being taken up with preparatory and supplementary operations. In recent years, the advent of numerically controlled sewing machines has served to increase the machine flexibility, since the remarkable developments of electronics have made it possible for sewing machines to cope with frequent changes in design and pattern grading of clothes. 34. The second stream of technological advances in the sewing process is based on a more radical point of view, namely the complete transformation of production processes so as to do without the sewing operation. A good example is the manufacture of seamless hosiery directly from synthetic filament yarn. There are other attempts to - 52 - replace the sewing operation to some extent by much simpler, 'non-seaming' methods; the use of fusible interlinings in outwear and the application of the welding technique to seams. 35. Current efforts to re-vitalize the clothing industry in industrial countries centre on incorporating the "fruits" of the remarkable progress in electronics and robotics in the 1970s. One challenge stems from the upgrading and diversification of consumers' preferences in clothing, and the increasing importance of high value-added and 'high-fashion' items with short cycles in the demand for clothing in industrial countries. In such a setting there is a premium on multi-item, small-lot production systems, and on close and rapid communication between manufacturer and retailer. Other challenges include the handling of soft materials. The development of a 'Flexible Manufacturing System' (FMS) applicabl to the clothing industry is a key technological challenge in the 1980s.14 C. ON DIFFUSION OF PROCESS TECHNOLOGY IN THE TEXTILE AND CLOTHING INDUSTRIES 36. Why is it that the diffusion of technology, described earlier in this Appendix, has been relatively 'uneven' in the textile and clothing areas? What are the factors that determine the extent to which new technologies are diffused among textile and clothing manufacturers? Some indication of the answers to these questions can be found in the relatively extensive literature on the rates and patterns of diffusion of various technological innovations in different countries.15 37. The measure of diffusion is commonly defined as the ratio-of the number of actual adopters of the technology concerned to the population of potential adopters. The validity of the 'rate of diffusion' as defined above is based on the implicit assumption that the selection of dates when technological innovations occurred and of the eventual population of potential adopters is plausible. In practice, however, this assumption is far from convincing; improvements in new technologies after their first introduction are of great significance in terms of enhancing reliability, efficiency and applicability. As Gold concisely states: "Taken together, recognition of the dynamics of technological improvements in an innovation and of changes in a firm's evaluation of the available forms of any innovation, reveal a fundamental weakness in 'saturation models' of technological diffusion in industry".16 38. Despite the shortcomings of the studies mentioned above, "the general slowness as well as wide variations in the rate of diffusion" can be observed. Generally speaking, several factors are responsible for this. First, the superiority of new technologies over the old ones cannot be established immediately, because most innovations are far from perfect when they are first introduced. In addition, old technologies continue to be improved even after the advent of new ones. Second, accumulation of human skills and know-how on the part of users is prerequisite to exploit effectively the advantages of new technologies over the existing ones. It is unlikely that this can be done in a short period of time. It also takes time, often decades, for machine-makers to produce the specialized machinery that meets the needs of users. - 53 - 39. Other factors should also be taken into account when trying to understand the diffusion of technology in the textile and clothing industries. It is often argued that ownership characteristics of textile and clothing firms influence the rate at which new technologies are introduced. In many countries the textile and clothing sector is less concentrated than other industries and has traditionally included a large number of small - and medium - scale family enterprises; 18 it is alleged that such firms are often relatively "conservative" and "risk averse" so that many firms are reluctant to invest in new production methods which entail heavy financial burdens and major changes in organization, possibly including the acceptance of new shareholders, a closer control by banks and stronger reliance on professional management.19 40. There are other factors to consider, however. Textile and clothing manufacturers are producing today various kinds of goods in highly fragmented markets under different economic and other conditions, some amenable to mass-production methods, others not. Technological requirements which textile and clothing manufacturers demand, therefore, vary according to what and how they produce. From the standpoint of textile-machine manufacturers, it becomes increasingly important to reconcile the pursuit of higher machine-speed with that of greater machine-flexibility. It is not surprising then that conventional machines with automatic attachments of ten turn out to be more attractive, at least to small f irms which usually face relatively short production runs. In other words, the advent of new machines embodying the latest technology does not necessarily make conventional machines obsolete from the standpoint of unit cost calculations. 41. A second point concerns the investment behaviour of textile and clothing manufacturers in industrial countries. Since the recession of 1974-75, they have shown a more cautious approach to investment in machinery and equipment, although this tendency has been less marked in the clothing industry than in textiles. Under less favourable prospects of demand, this has acted to slow down the adoption of new techniques. Finally, since new technologies are nearly always "embedded" in new capital equipment, the rate at which they are adopted will be sensitive to the availability and cost of capital. - 54 - FOOTNOTES 1C.I.R.F.S., 1982. 2See World Bank (1982, p. 11). 3In Japan, for example, less than 4 per cent of total cotton spinning capacity has adopted the fully automatic system from mixing and scutching to drawing by 1980, though a part of such system up to carding has been increasingly used over the last decade. (See Table 6). 4ITMF spinning capacity and shipment data include estimated figures in many cases. There are also some cases (e.g. China) in which cumulative shipment figures are inconsistent with capacity data. The same caveat applies to weaving capacity and shipment data provided by ITMF. 5On the assumption that three spindles are equivalent to one rotor, total spinning capacity in the world reached about 168 million spindle equivalents in 1981, of which open-end spinning accounted for about 7 per cent. 6The Japanese machine-maker claims that the air-jet spinning, which creates an open-end state by using two air-nozzles rather than a rotor, is suitable for the finer yarn ranging between 20s and 60s, and that the spinning speed is about ten times that of ring spinning. Similarly, among the present yarn texturing technologies much interest has been directed to the air-jet texturing system in which filament yarn can be processed by means of compressed air. (See Japan Textile News, june 1983, pp. 64-65 and July 1983, pp. 109-110.) Quite recently it is also reported that the Japanese cotton spinning industry will start a new technological development project in April 1984, in which main concern is turned to developing a new method of spinning that incorporates the advantages of both ring spinning and open-end spinning. The spinning speed is expected to reach about seventeen times that of ring spinning,, while the yarn quality can be maintained even at such a high-speed spinning. The project period covers four to five years from 1984. (Nihon Keisai Shinbun, 9 January 1984.). 7.If.account is taken of the fact that shuttleless looms can attain much higher productivity than shuttle ones, actual impacts of shuttleless looms on world production of woven fabrics would be much greater than what the shipment figures show. 8Textile Hi-Lights, December 1982. 9C.I.R.F.S., ibid. 10Tufted carpets are excluded from non-wovens, while needle-punched carpets are usually included. Ward, D. (1981), "Nonwoven Event", Textile Asia, .July, pp.44. 11Fairchild's Dictionary of Textiles, edited by I.B. Wingate, 1975, p.398. - 55 - ¹²However, non-woven fabrics have encountered the problem of rising material costs since two oil crises. The development of energy-saving technology is, therefore, vital to exploitation of market opportunities for non-wovens. 13C.I.R.F.S., ibid. 14Since 1982 Japan's Agency of Industrial Science and Technology has launched the so-called "Automated Sewing System" project, a wholly government-financed technological development project. This project aims at developing necessary technologies for multi-item, small-lot production systems. It extends for eight years and total R&D expenses are estimated to reach 13 billion yen ($50-60 million). The first five years (1982-86) are devoted to developing the total system and four areas of component technologies, i.e. preparation, sewing and assembling, fabric handling and system control. For the remaining years, the experimental plant is to be designed, built and operated for the overall evaluation of the new system, but its commercialization will be left to private firms. 15See, for example, a series of studies done by the National Institute of Economic and Social Research; Ray, G.F. (1969), "The Diffusion of New Technology - A Study of Ten Processes in Nine Industries", National Institute Economic Review No. 48, May, pp: 40-83, Nabseth, L. & G.F. Ray (eds.) (1974) The Diffusion of New Industrial Processes - An International Study. Cambridge University Press, and Ray, G.F. (1983), "The Diffusion of Mature Technologies", National Institute Economic Review, No. 16, November, pp. 56-62. A sigmoid (e.g. logistic) curve has been widely used, implicitly or explicitly, as the standard diffusion model to measure the extent of inter-firm. diffusion of a given technology in industry. However, the statistical analyses of technological diffusion have involved some conceptual problems, as cogently argued by N. Rosenberg and others. For a detailed discussion of the standard diffusion model, see Davies, S. (1979), The Diffusion of Process Innovations, Cambridge University Press, Metcalfe, J.S. (1981), "Impulse and Diffusion in the Study of Technical Change", Futures, Vol. 13, No. 5, October, pp. 347-359, and so on. See Rosenberg, N. (1972), "Factors Affecting the Diffusion of Technology", in Exploration in Economic History, Academic Press, New York, reprinted in Rosenberg, N. (1976), Perspectives on Technology, Cambridge University Press, pp. 189-210, and Gold, B. (1981), "Technological Diffusion in Industry: Research Needs and Shortcomings", Journal of Industrial Economics, Vol. 29, No. 3, March, pp. 247-269. 16Gold, B. (1981), p. 250. Rosenberg, N. (1972), op. cit., p. 191. 18See OECD (1983), pp.25-28. 19See Hoffman, K. and H. Rush (1983), chapter 6. 20OECD (1983), pp.62-65. - 56 - APPENDIX IV: RELATING TRADE TO DOMESTIC PRODUCTION AND CONSUMPTION 1. Empirical work on trade issues sometimes includes figures which relate imports and/or exports of particular products to domestic production or consumption of those products. Many researchers seem to accept uncritically the view that such ratios provide useful information in addition to that available from separate figures on production, employment trade and so forth. In certain circumstances, that may be the case. However, in many instances these ratios enter the analysis in ways that range from useless to harmful. There is a danger, in particular, of such ratios being used in ways that - wittingly or unwittingly - reinforce the mercantilist view that imports are bad and exports good. 2. The purpose of this Appendix is threefold: to provide a brief overview of the main conceptual problems involved in the use of ratios of trade in particular products to production or consumption, to note some of the more important statistical limitations of such ratios, and to present data illustrating the values of the ratios for textiles and clothing under different definitions. Because they are the most widely used, the focus is on import penetration ratios. (1) Conceptual issues 3. There are two main approaches to measuring import penetration: (A) M/ (P+M-X), and (B) M/P or M/(P+M) where P stands for the value of domestic production, M the value of imports and X the value of exports. The first measure is the ratio of the value of imports to the value of "apparent consumption", while the latter is the ratio of the value of imports to the value of domestic production, or the value of total supply (i.e. domestic production plus imports). 4. One way of approaching the question of the usefulness of such ratios is to ask whether there are certain questions or issues for which they provide useful additional information/insights over and above those available from statistics of the kind provided in Chapter 2 and Appendices I and II of this background study. Actual use of the ratios points to three main possibilities. (a) The first concerns the use of such ratios as one possible indicator of the relative extent of international specialization in a particular product. For example, in many countries the ratio of imports to consumption for icecream or cement will be smaller than the corresponding ratio for machine tools or clothing; thus we could conclude that international specialization has been carried farther in the latter two products than in the first two. - 57 - (b) A second possible use arises in situations involving national security considerations. Armaments, food and certain critical raw materials are examples of areas where countries may believe that a certain level of self-sufficiency is necessary, despite the added costs which this entails during peacetime. Leaving aside the question of the extent to which import penetration ratios are relevant to this issue, it is not clear that many countries would base their concern with import penetration in textiles and clothing on national security arguments. (c) Import penetration ratios are often used in ways that imply a positive correlation between the values of the ratios and some notion of "pressure" on the domestic industry. In this instance the most important practical shortcoming is that the trend in the value of the ratio teils us nothing about the trend in either imports or production; a rising ratio of imports to production is consistent with expanding domestic production as long as imports are increasing faster than production, and a declining ratio is consistent with declining domestic output provided imports are falling faster than production. Furthermore, if the ratio is based on formula (A) above, it is possible for domestic production to be growing faster than imports at the same time as the penetration ratio is increasing (for example, if as a result of an intensification of intra-industry trade, most of the increment to production is exported). In other words, by itself the fact that domestic production is supplying a smaller share of domestic consumption will say little about the state of the domestic industry if exports are expanding at the same time. These considerations suggest that the separate figures on production, employment and trade are more use-ful in gauging the output/employment/profit situation of the domestic industry, and the extent of any adjustment problems confronting the industry. This conclusion is reinforced by the fact that, in some circumstances, ratios based on formula (A) move in an opposite direction from those based on (B), plus the fact that there is no a priori basis for judging one formula as superior to the other. 5. Some additional conceptual problems may be mentioned. One involves the absence of objective criteria for selecting the appropriate level of product disaggregation to use wher. relating trade to production or consumption. For example, should we choose total clothing, ladies' mittens containing at least 51 per cent wool, or something in between? A second problem involves the lack of an objective criter-on for choosing among the various definitions of import and export ratios. Finally, whe., import penetration ratios are used to examine the impact of trade on the size of the domestic industry, allowance must be made for the fact that such ratios yield biased estimates of the impact on domestic value addd in the industry in question (see Keesing and Wolf, 1980, pp.205-211). 6. The use of import penetration ratios may also involve a fundamental misunderstanding of the nature of the gains from international specialization. For example, it is sometimes argued that because the ratio of imports from developing countries to production and/or consumption in the developed countries is quite small for nearly all - 58 - manufactured goods, it follows that imports of those products from developing countries are not an important source of "disruption" in developed country markets. Although this argument has a practical appeal in certain circumstances, it implicitly endorses the mercantilist view that imports are harmful. This opens the door to debate over what constitutes a "small" import penetration ratio; it encourages the use of highly disaggregated product categories (the narrower the product classification, the more likely it is that some "high" ratios will turn up); and it encourages the argument that once the ratio passes a certain level, constant or even increasing trade restrictions are warranted (or at least are less objectional). 7. Proposals to "stabilize import penetration ratios" (by relating future import growth to the growth of consumption) can thus rest both on arbitrary definitions of product. categories and arbitrary assumptions regarding the desirable level of international specialization in various product sectors. (2) Statistical problems 8. Whenever possible, production statistics are expressed in value added terms to eliminate double counting (for example, counting the value of fabric twice, once at the fabric level and once at the clothing level). Statistics based on value added are not available, however, for imports and exports. As a result, data on a country's imports is virtually certain to include some of its own value added (e.g. if imported fabric is made from previously exported domestic fibres); similarly, its export data is very likely to include foreign value added (e.g. if any of its export products uses foreign inputs); trade figures may also include double counting, as when a country exports fibres, imports cloth made from those fibres, and then exports shirts made from that fabric (in this case, the fibres appear twice in the exports statistics). 9. Calculating import-to-production ratios using grass trade data and value added production data is not satisfactory because it exaggerates the values of the ratios. The usual way of trying to deal with this problem is to use production figures based on gross output rather than value added. In effect, this amounts to compensating for less-than-perfect trade data by introducing questionable production data. Since there is no reason to assume that the degree of distortion in these data is (i) the same for trade and production, (ii) constant over time, or (iii) similar across industries or countries, it is not easy to interpret import penetration ratios at a point in time, let alone their behaviour through time. 10. Other difficulties involved in relating trade to production or consumption include statistical problems with the production data (such as infrequent censuses, and poor coverage of smaller establishments - a particularly important point with respect to clothing), differences in the valuation of goods from different sources (for example, c.i.f.-f.o.b. differences, and exchange rate related problems), the lack of true price indices for imports (needed to calculate penetration - 59 - ratios in constant prices), problems of establishing an accurate concordance between trade and production data, and difficulties in being precise about the necessary degree of substitutability between imports and domestic production (the latter problem may be illustrated as follows: it would be absurd to calculate the ratio of imported bananas to domestic production of machine tools because they do not compete with one another, but what about the ratio of bananas to domestic apple production?) 11. Although the problems caused by many of the statistical limitations noted above are not confined to calculations of import penetration ratios, they are often more pronounced in this particular case. 12. In many instances, the main interest is the share of domestic demand supplied by imports. Formula (A) approximates this by using "apparent consumption" as a proxy for domestic demand. Two points need to be made in this connection. The first may be illustrated with the example of textiles. As the concept is used in calculating these ratios, "apparent consumption" of textiles does not take into account textiles embodied in imported clothing - that is, indirect trade - which is, of course, part of the domestic demand for textiles (the problem of indirect trade also affects formula B).² Second, it is often very difficult to correct estimates of apparent consumption for changes in inventories (moreover, the relative importance of inventories varies widely among various products). 13. Finally, import penetration ratios are sometimes calculated in physical rather than value terms - as, for example, when imports of textiles and clothing are converted into "tons of fibre equivalent" and related to domestic "mill consumption" of fibre. Such ratios suffer from the same problems as the value-based ratios, including the fact that mill consumption is calculated so as to avoid double counting, whereas the fibre equivalent trade figures are based on statistics for gross trade. An additional problem with the ratios based on physical units is that they ignore differences in value added per unit, that is, differences in quality and/or product mix. Thus when this measure is applied to broad product groups, the ratios will be distorted to the extent that imports are concentrated in higher or lower value added items and/or the product mix changes over time. (3) Examples of ratios of trade to production and consumption 14. Among several attempts³ to estimate import penetration ratios, a recent study by the World Bank is the most comprehensive in terms of both industry and country coverages.4 By way of illustration, Table 1 shows estimates of import penetration ratios as well as export-output ratios from the World Bank study, calculated in value terms, with respect to manufacturing total (ISIC Division 3), textiles (321), clothing (322) and textile & clothing (321 + 322) in the United States, United Kingdom and Japan. Four distinct patterns can be seen from Table 1 in terms of movements in import penetration and export-output ratios: - 60 - (a) Not only import penetration but also export-output ratios showed an upward trend during the 1970s (manufacturing total in the United States, the United Kingdom and Japan; textiles in United Kingdom; clothing in the United States and United Kingdom). (b) Import penetration ratios increased, while export-output ratios decreased during the same period (clothing in Japan). (c) Import penetration ratios were on the increase, while export-output ratios remained almost unchanged or showed a slight fluctuation (textiles in Japan). (d) Import penetration ratios remained almost unchanged or showed a slight fluctuation, while export-output ratios showed an upward trend (textiles in the United States). It seems that except for the clothing industry in Japan, these trends reflect increasing specialization in international trade in manufactured goods, including textiles and clothing. 15. Table 2 presents import penetration and export-output ratios (for the same countries as shown in Table 1), based on data expressed in physical units (tons of fibre equivalent). A comparison of the 'textile & clothing' section of Table 1 with Table 2 shows that not only import penetration, but also export-output ratios calculated in terms of fibre equivalent, are much higher than those measured in value terms. This finding is consistent with the earlier remarks about the shortcomings of ratios based on physical rather than value data, as well as with the hypothesis that imports of textiles and clothing into the developed countries contain, on average, less value added per unit than the corresponding domestic output in the developed countries.5 - 61 - TABLE 1. - ESTIMATES OF IMPORTPENTRATION AND EXPORT OUTPUT RATIOS IN VANJE TERMS: UNITEDSTATES, UNITEDKINGDOM AND JAPAN (Percentages) United States United Kingdome Japane (1) (2) (3) (1) (2) (3) (1) (2) (3) (A) (B) (A) (B) (A) (B) (A) (B) (A) (B) (A) (B) M M M X X M M M X X M M M X X AC P P+M P P+M AC P P+M P P+M AC P P+M P P+M Manufacturinga 1970 5.6 5.5 5.3 5.8 5.5 16.3 16.0 13.8 18.1 15.6 4.7 4.5 4.3 10.0 9.6 72 6.5 6.5 6.1 5.5 5.2 17.3 17.0 14.5 18.5 15.8 4.1 3.8 3.7 10.6 10.2 74 7.9 7.9 7.3 7.7 7.2 23.4 23.6 19.1 22.5 18.2 5.9 5.5 5.2 12.6 12.0 76 7.5 7.5 7.0 7.9 7.4 23.5 23.1 18.8 24.8 20.1 5.1 4.6 4.4 13.7 13.1 78 8.9 9.0 8.3 7.6 7.0 26.3 25.9 20.6 27.2 21.6 4.2 3.9 3.7 12.3 11.8 80 8.7 8.6 7.9 8.9 8.2 28.2 27.8 21.8 29.1 22.7 6.3 5.7 5.4 15.0 14.2 Textilesb 1970 4.5 4.6 4.4 2.6 2.5 14.1 13.2 11.7 19.8 17.5 4.0 3.5 3.4 16.6 16.1 72 4.7 4.8 4.6 2.7 2.6 18.0 17.5 14.9 20.6 17.5 5.3 4.7 4.5 14.9 14.3 74 4.5 4.4 4.2 5.2 5.0 24.0 23.5 19.0 25.6 20.7 7.6 6.9 6.4 16.0 15.0 76 4.1 4.0 3.9 5.0 4.8 24.7 24.3 19.6 25.8 20.7 6.2 5.6 5.3 15.4 14.6 78 4.7 4.7 4.5 4.7 4.4 29.5 30.6 23.4 26.9 20.6 7.3 6.9 6.4 13.1 12.2 80 4.4 4.3 4.1 6.3 6.1 32.9 33.7 25.2 31.2 23.4 7.4 6.7 6.3 15.9 14.9 Clothingc il70 6.4 6.8 6.3 1.2 1.1 13.5 13.6 12.0 12.4 10.9 4.4 3.7 3.6 19.3 18.6 72 7.9 8.5 7.8 1.1 1.0 19.2 20.8 17.2 12.9 10.7 3.9 3.6 3.5 11.2 10.8 74 8.8 9.4 8.6 1.6 1.5 25.4 28.7 22.3 15.5 12.0 13.2 14.3 12.5 5.7 5.0 76 11.9 13.2 11.7 2.0 1.8 32.7 38.0 27.5 22.0 15.9 10.3 10.9 9.8 5.7 5.1 78 16.3 19.1 16.0 2.2 1.9 34.0 37.9 27.5 26.6 19.3 9.4 10.0 9.1 3.9 3.6 80 16.7 19.4 16.2 3.2 2.7 38.6 44.9 31.0 28.5 19.7 10.7 11.5 10.3 3.7 3.3 Textiles & Clothingd 1970 5.3 5.5 5.2 2.0 1.9 13.9 13.3 11.7 17.7 15.6 4.1 3.5 3.4 17.1 16.5 72 6.0 6.3 5.9 2.0 1.9 18.4 18.5 15.6 18.3 15.4 5.0 4.5 4.3 14.2 13.6 74 6.2 6.4 6.0 3.8 3.6 24.5 25.1 20.0 22.6 18.0 9.0 8.5 7.8 13.8 12.7 76 7.3 7.6 7.1 3.8 3.5 27.4 28.4 22.1 24.6 19.2 7.3 6.9 6.5 13.0 12.2 78 9.5 10.2 9.2 3.7 3.4 31.0 32.9 24.8 26.8 20.1 8.0 7.8 7.2 10.5 9.7 80 9.4 9.8 8.9 5.2 4.7 35.1 37.8 27.4 30.3 22.0 8.5 8.1 7.5 12.4 11.5 ISICa Division 3 bISIC 321 cISIC 322 dISIC 321 + 322 eThe simple countries were selected on the basis of the availability of consistent data. The trade data for the United Kingdom include trade with other EC countries. Production data availability is as follows: US=- 1970-76; UK = 1971-80 (The coverage for 1971-72 is incomplete.); Japan = 1970-77. For the remaining years, the figures of production are estimated by the World Bank. Abbreviation: P - Production (total sales) M = Imports X = Exports AC = Apparent Consumption, defined as P+M-J Source: World Bank 'Import Penetration' Tape. - 62 - TABLE 2. - ESTIMATES OF IMPORT PENETRATION EXPORT-OUTPUT RATIOS, FOR TEXTILES AND CLOTHINGCOMBINED, IN TERMS OF FIBRME EQUIVALENTa: UNITEDSTATES, UNITED KINGDOM AND JAPAN UNITEDSTATES UNITED KINGDOM JAPAN 1974 1979 1980 1974 1979 1980 1974 1979 1980 1) Mill Consumption (MC)b 4 511 4 940 4 561 771 710 525 1 869 2 234 2 145 (1,000 tons) 2) Imports (M)c 581 825 840 401 602 550 239 382 301 (1,000 tons) 3) Exports (X)c 398 528 602 310 309 296 516 416 524 (1,000 tons) 4) Apparent Consumption (AC)d 4 694 5 237 4 799 862 1 003 779 1 592 2 200 1 922 (1,000 tons) 5) M/AC (%) 12.4 15.8 17.5 46.5 60.0 70.6 15.0 17.4 15.7 6) W/MC (%) 12.9 16.7 18.4 52.0 84.8 104.8 11.3 17.1 14.0 (%) 11.4 14.3 15.5 34.2 45.9 51.2 7.5 14.6 12.3 8) X/MC (%) 8.8 10.7 13.2 40.2 43.5 56.4 27.6 18.6 24.4 9) X/(MC + M) (%) 7.8 9.2 11.1 26.5 23.6 27.5 24.5 15.9 21.4 aThis table covers cotton, wool, flax, cellulosic and non-cellulosie (synthetic) fibres. bMill Consumption is defined as the volume of raw fibres used at the first stage of processing at home. cProcessed textile products and clothing imported fran or exported to foreign countries are converted to fibre equivalent. For the coverage of textile products and clothing and the conversion factors, see "Explanatory Notes" in FAO (1983). d Apparent Consumption (AC) -Mill Consumption (ME) + Imports (M) - Exports (X). Source: FAO (1983), World Apparel Fibre Consumption Survey. -63- FOOTNOTES ¹This does not exhaust the list of shortcomings. For example, a rise in the import penetration ratio could be a precondition for the survival of certain domestic firms, as when the opportunity to engage in OPT offers the only way of maintaining profits. ²However, it should be noted that if, for example, (i) imports of textiles are constant, and (ii) increased imports of clothing cause domestic textile production to decline, the import penetration ratio will increase. ³For example, see Hughes, J.J. & A.P. Thirwall (1977) 'Trends and Cycles in Import Penetration in the U.K.', Oxford Bulletin of Economics and Statistics, vol. 39, November, and Wells, J.D. & J.C. Imber (1977), 'The Home and Export Performance of United Kingdom Industries', Economic Trends, CSO, August. See also UNCTAD (1983). Handbook of International Trade and Development Statistics. Part Seven, pp. 544 - 551, FAO (1983), World Apparel Fibre Consumption Survey, U.S. Department of Commerce (1981), U.S. Production, Imports and Import/Production Ratios for Cotton, Wool, Man-made Fiber Textiles and Apparel, International Trade Administration, June., and Keesing & Wolf (1980) Table A.I.p.208. 4The World Bank study covers ISIC Division 3 (Manufacturing) that contains 82 4-digit ISIC groups, 23 of which are further disaggregated into 70 5-digit ISIC subgroups. Eleven industrial countries participated in this study; Australia, Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, United Kingdom and the United States. Production data are provided by the above countries. 5Among the alternative approaches that have been developed there is the one put forward by the International Ladies' Garment Workers' Union. The ILGWU's attempt to calculate import penetration in the US apparel industry is based on the view that the value of apparel imports should be expressed in prices charged for equivalent goods produced in the United States. If, for example, a certain amount of T-shirts made in Hong Kong would replace the same amount of higher priced domestically-produced T-shirts in the United States market, the actual impact of increased imports of T-shirts on the United States apparel makers should be evaluated at domestic prices rather than import prices. See ILGWU Research Department (1983), "Estimation of Apparel (Knit and Woven) Imports: Methodological Note", April.