The decades old global textile quota regime is set to become history from January 1, 2005. But it is not time yet to begin celebrating. Reason: many of the poor and least developed countries, fearful of competition from major players like China and India, have prevailed upon the Council for Trade in Goods (CTG) of the World Trade Organisation (WTO) to review the present deadline at its emergency meeting scheduled for October 1 and 2. They want the quota system to continue for three more years. What makes this move worth watching is the fact that these countries (Mauritius, Bangladesh, and Nepal among them) are probably acting as fronts for developed nations, notably the US, who would like to protect their domestic industry for as long as possible. This impression is borne out by the fact that the poor countries' demands sound quite similar to the "Istanbul declaration" of March last, in which the industry associations of the US, Turkey, Mexico, and a dozen sub-Saharan African nations had called for a three-year extension of the quota regime.However, regardless of this new-found convergence of interests between rich and poor, it will not be easy for the CTG to concede the demand for an extension of the deadline. For one thing, the governments of the developed countries represented at the WTO cannot openly vote for this move because they are signatories to the 1994 Uruguay Round of the world trade agreement, which commits them to phasing out the quotas by December 31, 2004. Besides, a strong bloc, spearheaded by countries like China, India, Pakistan, and Brazil, is bound to oppose this proposal with all their might. The WTO's textile unit has, on several occasions in the past, also categorically ruled out any rollback of the quota decision.Whatever be the outcome of the CTG's emergency meeting, it needs to be realised that India, China, and other major textile exporters will not get the new markets on a platter even after the removal of quotas. Fierce competition among them is one reason, but not the only one. They will have to come to terms with the rich nations' arsenal of WTO-compatible defence mechanisms, including safeguards against imports, anti-dumping duties and the like. On this count, the risks confronting China are much greater because it has already conceded several textile safeguards to the US in its WTO accession package. This apart, textile exporters, including Indian ones, will have to tackle importers' demand for price cuts in the post-quota period. In fact, this trend has already set in over the past few months, resulting in declining returns from textile exports.What is also obvious, from the Indian point of view, is that the post-quota regime will suit only the large exporters. The smaller ones, who were so far receiving favourable treatment in export quota allotments, may have to opt out of this business. The bottom line really is that even if export volumes go up, the gains may not swell in tandem. The industry will, therefore, have to be prepared to pay the adjustment costs.
