FOR IMMEDIATE RELEASE: September 29, 2005
CONTACT: Jennifer Linker, 202/939-2372, jlinker@carnegieendowment.org
    
Carnegie associate Viji Rangaswami has developed a comprehensive policy response that rich countries can use to help smaller developing countries retain competitiveness and to address those dislocations that cannot be avoided as a result of this year’s elimination of textiles and apparel quotas. A Stitch in Time, Helping Vulnerable Countries Meet the Challenges of Apparel Quota Elimination is essential reading for trade policymakers. Access it here.

On January 1, 2005, the United States and other members of the WTO eliminated all quotas limiting the amount of textiles and apparel developing countries can send abroad. Analysts predict that China and a handful of other efficient, low-cost producers will dominate the global market within a few years, shutting smaller, less industrialized countries out of an industry that created millions of jobs and often was the first step in the process of industrialization.

The contraction of the apparel sector in these countries should ring alarm bells in the United States and elsewhere. At the household level, loss of the sector will exacerbate already severe poverty. At the national level, it jeopardizes the industrial development path these countries hoped to pursue. A downturn also may have security consequences at the international level if instability results from economic turmoil in countries such as Bangladesh, Haiti, and Sri Lanka.

U.S. and EU policymakers have imposed trade restraints on China in defense of their own domestic industries and these measures are currently stemming the exodus of investment from smaller countries. However, permanent solutions are essential. “These less industrialized countries can rise to the post-quota challenge, but they need the active assistance of the United States and the EU,” says Rangaswami, “The window for action is limited; responses should occur during the three-year period of transition under the China safeguard.”

A Stitch in Time gives detailed prescriptions in four areas: 1) enhanced trade preferences for vulnerable countries; 2) targeted technical assistance to help affected countries improve competitiveness (for example, through infrastructure improvement and customs facilitation); 3) assistance to help countries differentiate their exports in the global marketplace; and 4) assistance to help affected countries manage inevitable dislocations.

Viji Rangaswami is an associate in Carnegie’s Trade, Equity and Development project.
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