China and India are expected to dominate world trade in textiles and clothing starting next year when the United States and other industrial countries have to remove restrictions on imports, according to a World Trade Organization report released Thursday.
The WTO predicted that China alone will account for more than half of the global textile market following the end to the quota system that has governed international trade in textiles since the 1960s, reports the World Bank press review Thursday.
The WTO-negotiated agreement will allow producers to export as much as they can sell – and the report contends that will be a lot more than many developing countries are selling now. Indian and Chinese industries will become significantly more competitive, as the United States, the European Union and Canada – by the far the worlds biggest importers of textiles – open their markets, the WTO said.
China had 30 percent of 2002 global market share in clothing and a 22 percent share in textiles. Other major exporters include Germany, South Korea and Turkey. But the expected surge in Chinese and Indian competitiveness might be limited by the time it takes for its products to reach consumer markets.
Increasing competition from other countries is also another threat to Chinas dominance. – Other developing countries are catching up with China in terms of unit labor costs in the textile and clothing sector and China has not yet shown competitive strength in the design and fashion segments of the markets, the report added.
The study concluded that smaller exporters which are geographically close to the big consumer markets may not be as sharply affected by the more vigorous and unbridled competition from China and India as previously estimated.
Mexico, and economies in the Caribbean, eastern Europe and North Africa, which offer low labor costs but are near to the EU and United States, are likely to be helped by structural shifts in the fashion industry, the study said.
The study confirmed the likelihood of big gains China and India, primarily at the expense of local producers in North America and the EU, and more remote locations. The huge gains for the Asian giants in the US would largely come at the expense of smaller exporters like Bangladesh, Indonesia, the Philippines, Latin America and the European Union, which currently have market shares in the single digits or low teens.
Meanwhile, former WTO head Mike Moore said a strong China is an asset, not a threat, to the global economy but the rising giant is unlikely to overtake the US as the worlds biggest economy in the next 100 years.
Moore has “never feared a strong China but I fear a weak China” because this could lead to more poverty and economic uncertainties in the world. – A strong China and India are healthy and will strengthen the world economy and security order, he said at an Asian economic conference.
Moore said a “bipolar regional world has emerged, with a successful China and growing competitors like India and this is good for all of us.” Moore also hit out at some rich nations protesting the move to outsource operations to the developing world, calling it “nonsense” adding that outsourcing reflects the success of globalization and will enrich poor nations.
Kimberly Elliott, research fellow, and Ethan B. Kapstein, a visiting fellow at the Center for Global Development, Washington, D.C., write in an opinion piece in The Wall Street Journal Europe that the recently announced “July Package” of multilateral trade commitments suggests that the Doha Development Round will reach a successful, if modest, conclusion.
But before opening the champagne, we need to recognize that the gains from freer trade will not be achieved automatically. In order to profit from a new world trade agreement, developing nations will need to make huge investments in their economic policies, institutions, and infrastructure.
A recent study by the World Bank, for example, has detailed the time it takes in developing countries to establish new businesses. It found that entrepreneurs must wait for months rather than days in order to obtain a license to operate. Nobody should be fooled into believing it will make a tremendous difference to growth without significant additional investments throughout the developing world.
The gains from trade are only enjoyed when states take the necessary steps to improve their economic and business climate at home, the authors write.
Kilde: www.worldbank.org
