Textile Wars
...Agreement on Tariffs and Trade (GATT) was first signed, developed countries such as Europe and the United States (U.S.) feared a significant rise in unemployment if protective measures were not implemented to protect local producers. An international quota system was created through the Multifibre Arrangement (MFA) regulating world trade in textiles and clothing arena. However, employment in these industries continued to decline in the developed world as manufacturers relocated production in lower-cost countries. After the terrorist attacks on September 11, 2001, textile quotas were imposed on Pakistan by the U.S. and the European Union. The MFA was later replaced by the World Trade Organization (WTO) Agreement on Textiles and clothing, requiring quotas to be removed by January 1, 2005 however the tariffs remained. The end of quotas was expected to create big winners and losers. India’s and China’s share of imports would rise. China was also expected to see a large increase in its position in the European Union. This growth threatened strong regional producers such as Turkey.
1.1 CHINA
Advantages of China’s textile and apparel industries:
1. Chinese labor was often cheaper and more productive.
2. China provided a good transportation infrastructure.
3. Locally produced inputs helped keep costs low.
In addition, China gained unfair advantages by unfairly subsidizing government owned manufacturers, pegging its currency too low, and pirating massive amounts software. However, others were unsure about China’s ability to attain and sustain its projected gains in market share for the following reasons. First, the Chinese economy showed signs of overheating. Second, since the amount of foreign manufacturers moving to China was rising, prices for materials and labor could increase. China could also have difficulty in recruiting new labor....
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