Textile trade proposal under attack

Date: 31/07/1997

By Mark Turner

AN EU scheme to boost trade in the world's poorest countries has come under fire from EU wholesalers and importers.

While welcoming the principle of easing restrictions on textile imports from Asia, the trading lobby EuroCommerce has described the details of a deal struck last month as a “foul compromise”.

In an agreement reached by trade experts meeting in Bratislava, Union governments accepted a European Commission proposal to ease EU import rules for textiles from Laos, Nepal and Cambodia.

But the relaxation was subject to a number of limiting conditions, and was denied altogether to Bangladesh and the Maldives.

Under current rules, produce from poor countries can only benefit from the Union's generalised system of preferences (GSP) - usually tariff reductions - if it undergoes a minimum amount of 'transformation' in the country to which the GSP applies.

This means that cloth from India would need, for example, to be weaved, dyed or otherwise altered in Nepal for it to count as Nepalese.

The new rules are considerably less stringent, accepting that even where the entry conditions are not strictly met, in effect most of the value of the textile is added in the countries concerned and should thus benefit its producers.

The move reflects growing recognition that some countries have been left behind by the global market and need support. But in a bid to allay concerns amongst EU textile-producing countries, this derogation from normal procedures will only apply to a limited quantity of imports and only when the raw material comes from certain designated third countries.

As the quantitative limits are roughly equivalent to current trade flows, they should not matter in the short term. But EU importers warn that they will cause difficulties as soon as the Asians find more European outlets, thus undermining the scheme's aim of boosting commerce.

And while raw materials from India and Pakistan will be acceptable for use by producers in the three countries concerned, Chinese, Korean and Taiwanese cloth will not.

“Although such a derogation recognises the limited possibility of the least developed countries to comply with current origin rules, the details of the derogation will seriously undermine its effectiveness,” warned EuroCommerce.

Finally, both Bangladesh and the Maldives have been denied derogations until they go some way towards meeting EU concerns over fraudulent certificates.

The Commission is now placing strong pressure on Bangladesh to invalidate all 'form A' certificates (proof of Bangladeshi origin) for knitwear from 1994-1996, after it found a number had been issued incorrectly where yarns were imported from third countries.

EuroCommerce warns that this would “unleash a huge wave of customs claims” for duties which were wrongly avoided, affecting in particular small European importers who believed at the time that the certificates were valid. It says those importers would also find it next to impossible to get compensation from Bangladesh.

EU diplomats from free trading countries have also attacked the decision.