On January 1st 2005, world trade in textiles and clothing became free of the quotas that had bound it for 30 years. The dismantling of quantitative restrictions under the World Trade Organisation (WTO) Agreement on Tex-tiles and Clothing will create winners and losers in both North and South, offering new challenges and opportunities for all involved in the supply chain.
These developments are analysed in "A New World Map in Tex-tiles and Clothing - Adjusting to Change," a publication of the Organisation for Economic Co-operation and Development (OECD).
According to the report, Europe and North America will remain the most important garment markets in the short to medium-term, attracting two-thirds of all world-clothing imports. In these countries, the textile industry will face intensified competition in both their export and domestic markets.
More than four mil-lion people in developed countries have already lost their jobs in the industry as producers have responded to competitive pressures by modernising their working methods and shifting production toward faster growing products.
The more competitive developing countries that have both textile and clothing capacity, together with reliable and modern support infrastructure, will prosper in the new environment. Producers in these countries, which include China and India, will be in a position to develop stronger clusters of textile expertise, move up the higher value-added service segments of the supply chain and eventually handle all stages of production, from growing natural fibres to producing finished clothing.
However, in small developing and least developed countries (LDCs), where producers are hampered by a lack of skilled human resources, distorting domestic measures and weak infrastructure, the industry will struggle to survive.
Reliable and up-to-date communications and electricity infrastructure give textile and clothing manufacturers a competitive edge. In contrast, outdated regulatory frameworks for these services act as taxes on textile and clothing suppliers, undermining their capacity to focus production on the higher value-added segments of the supply chain that depend on reliable infrastructure to ensure quick market responses.
Poor infrastructure re-mains a major obstacle to strengthening productive capabilities and reducing poverty, particularly in the 50 LDCs, 34 of which are in sub--Saharan Africa. While low wages can still give these countries a competitive edge in the manufacture of clothing products from imported textiles this does not translate into a comparative advantage in the management of the entire supply chain.
The elimination of export quotas will have a profound effect on employment levels in these countries, particularly among low-skilled women and minorities, who constitute the majority of workers in the industry.
Small developing countries and LDCs are increasingly vocal about their growing vulnerability and are demanding access to developed country markets on a preferential basis within the context of the Doha Development Agenda.
The challenge for policy makers in developed countries is to provide such preferential arrangements as part of the ongoing multilateral trade negotiations in order to minimise hardship for LDCs and small developing countries that are most vulnerable to competition from large, integrated suppliers.
Another major challenge for the international community is to help LDCs meet their enormous social, physical and commercial infrastructure needs. Inadequate telecommunications coverage and service reliability, chronic power shortages and poor transportation systems impose a burden on textiles and clothing industries in LDCs and hinder their access to inputs and technologies, their inter-national competitiveness and ability to reach new markets.
Conscious of the importance of infrastructure development for enabling poor countries to make progress on development, the OPEC Fund has sup-ported infrastructure and infrastructure service projects for almost three decades. As of December 31, 2004, close to 60% of the institution's cumulative public sector lending had been dedicated to building new, and maintaining existing, infrastructure, including transportation (26.4%), energy (18.3%) and water supply and sewerage (7.9%), in addition to projects with multi-sectoral outcomes.
The bulk of this financing has been provided to the world's poorest countries - the traditional focus of the OPEC Fund - in partnership with all relevant stakeholders, so as to enhance aid effectiveness and ensure the necessary national ownership of, and commitment to, the project.-Courtesy: OPEC Fund Newsletter