‘Made in China’ spells big trouble for Europe’s textiles

By David Cronin

Date: 14/04/05

The mushrooming of 'Made in China' labels on the clothes racks of Europe's chainstores is leaving the textiles industry on this continent jittery.

China now accounts for 20% of the world's €311 billion annual textiles trade. Peter Mandelson, the European commissioner for trade, predicted last week that its share could rise to 50% in the next five years if current trends persist.

Nobody appears sure, however, just how sharp an increase there has been since import quotas were lifted by Europe, the US and Canada on New Year's Day. Beijing states that its worldwide textiles exports were 29% higher in January 2005, compared to the same month last year. The European Apparel and Textile Organisation (Euratex) has calculated a 46% rise of Chinese exports to the EU for the same period.

The aggregate figures conceal the surge in the exports of certain goods. Men's trousers are supposed to have risen by 900%, according to some estimates, while bras and women's shirts and blouses rose by 493% and 244%. "The time has now come to limit the seemingly voracious appetite of Chinese exporters for the European market," says Euratex's Bill Lakin.

Mandelson has so far resisted calls to impose immediate restrictions on Chinese imports. Data concerning Chinese exports to several EU countries is too imprecise at the moment to justify such an action, he has said.

Yet Mandelson has also stressed a willingness to take action to protect both Europe's textiles industry and what he described as "vulnerable developing countries".

Bangladesh, Sri Lanka, Mauritius, Vietnam, Laos, Tunisia and Cambodia are among the countries fearing greater hardship as Chinese exports expand further.

All are beset by the loss of preferences bestowed on them by the so-called Multi-Fibre Agreement covering the clothing trade between industrialised and developing countries. Although the end of this 1974 accord was negotiated in 1994, it did not fully expire until January this year.

The Bangladeshi authorities indicate the effects of the expiry are already severe. The level of textiles exports in January 2005 was 28% below those of January 2004. Textiles are the main source of export revenue in Bangladesh, with more than 55% of its garments trade going to the EU. The clothing industry provides two million jobs in a country of 13.7m people. Some 87% of those jobs are held by women. "Even a 10% fall in exports would see 200,000 women on the street overnight," says a Bangladeshi diplomat.

He welcomes signals by the Commission that it will apply a sort of positive discrimination in favour of the world's poorest countries and against countries with more robust growth like China, India and Brazil.

Earlier this year Mandelson proposed that plans to revamp the EU's Generalised System of Preferences (GSP) should be accelerated. The GSP grants a range of duty-free access to the EU's markets and reduced tariff rates to developing countries.

Following the Asian tsunami, Mandelson had urged that tariff cuts for four of the affected countries - Sri Lanka, Indonesia, Thailand and India - should come into effect earlier than the originally envisaged date of July. Because of disagreements among EU member states, this now appears unlikely.

One sticking point covers clothing exports from India. The Commission has proposed that countries should no longer qualify for preferential tariffs on clothing if they account for more than 12.5% of total exports to the Union. France and Italy, both of which are large textiles manufacturers, are pressing for a lower threshold of 10%. That would exclude Indian clothes - which account for 11% of the Union's imports - from the GSP scheme.

India has been trying to allay European fears that it threatens Europe's clothing manufacturers. One Indian diplomat claims "there is not much clash" between its exports and goods produced here.

Nevertheless, the EU has been involved in a protracted dispute with India over bed linen. Amid allegations that Indian bed linen was being 'dumped' on the EU's market, the Union imposed duties in 1997. The case was finally closed with a 2001 World Trade Organisation ruling in India's favour, yet by then steep job losses had been reported in southern India, where the goods had been made.

Sheila Page from the Overseas Development Institute in London says the worst advice that Mandelson could give to 'vulnerable' countries is to compete directly with China. "Textiles is the last of the mass-producing industries, where being large and low-cost are really the only things that matter," she adds.

The EU could play a role by aiding smaller textiles producers to concentrate on niche goods, rather than mass-market ones. Page cites the example of Mauritius, which has made a concerted effort to move from inexpensive garments to ones more typically modelled on the catwalks of fashion shows.

Mandelson's announcement that he may curb China's exports has been denounced by anti-poverty advocates. Oxfam pointed out that Europe has had more than a decade to phase out quotas gradually and that China - a country where the average income per person is 4% of France's - should not be penalised because the Union dithered until the last minute on scrapping most of them.

Matt Griffith from the Catholic Agency for Overseas Development (CAFOD) says the "problem with the textiles trade is that is now a free-for-all, where there is a general atmosphere of frenzy".

While 'graduating' countries from the GSP may be useful to prevent big players from monopolising trade, there would be adverse social consequences if those with high levels of poverty, such as India, had to leave it too quickly.

"Playing one set of poor people off another set of poor people is not an easy choice," adds Griffith.

Catholic Agency for Overseas Development (CAFOD) says the "problem with the textiles trade is that is now a free-for-all, where there is a general atmosphere of frenzy".

While 'graduating' countries from the GSP may be useful to prevent big players from monopolising trade, there would be adverse social consequences if those with high levels of poverty, such as India, had to leave it too quickly.

"Playing one set of poor people off another set of poor people is not an easy choice," adds Griffith.

Analysis of trends in European textile imports from China since quotas were lifted on 1 January 2005. Article examines the effects on the EU's textile sector as well as those of developing countries and discusses EU moves to counteract possible damage.