KARACHI, Sept 8: Three special provisions in the Chinese Protocol of Accession to the World Trade Organization (WTO) provide enough safeguards for Pakistan’s textiles exports in the EU, the US and Canada from where textile export quotas will be dismantled by December 2004.

With a production capacity of 20 per cent of world textile garment export, China now competes head to head with virtually every textile producing and exporting country that included India, Vietnam, Mexico, Bangladesh, Indonesia and Pakistan.

An analysis of growth of Chinese garments in all 29 categories of apparels in the US market after removal of quota control on January 1, 2001, revealed that the average export unit price came down to $3.24 per square meter from $5.79 dollars per square meter when it was exported under the quota control. The average export unit price of Chinese apparel was found to be lower than average unit price of the rest of the world garment export in the US market — $3.47 dollars a square meter. Total export from China jumped to 554 million square meters in 2002 after removal of the quotas from 142 million square meters in 2001 when it was subjected under the quota control. Its export value increased to $1.79 billion in 2002 as against $824 million in 2001. Chinese export growth leaves export from the rest of the world into the US far behind both in terms of quantity and value.

The Chinese advantageous position in a quota free regime to take over the EU and US markets is a definite possibility due to low costs and better quality products. But Pakistan needs not to scare.

Textile exporters and market analysts in Pakistan seem not to be scared of the situation that could put them in a tough competition. They speak of three specific provisions in the Chinese Protocol of Accession to the WTO.

First such condition is that Chinese textile exports to the US and the EU will remain under quota control till the year 2008, while Pakistan and other countries will enjoy unlimited access. China joined the WTO in 2001 unlike Pakistan and many other countries who signed WTO accession in 1995. This gives Pakistan and other countries some edge over China.

The quantitative restrictions on Chinese textile exports to the EU and the US will be determined on the average flow of first 12 months of the last 14 months that precede December 2004. The restrictions will be on all categories. The implications of this textile specific facility conceded by China in its accession to the WTO is that growth in every quota category is capped at 7.5 per cent above the pre-2005 quota period level. “This would indirectly facilitate Pakistan viz-a-viz the US and the EU by allowing it to maintain the same level of textile exports in the quota free post-2005 period.

Chinese economy is being classified as “non market economy” and it will remain so till 2016 when China is expected to take up political and economic reforms to bring it at the level when it would be considered market economy. Under para 15-D of the Protocol of Accession, China can be asked to establish that market conditions prevail in any particular sector. By virtue of this provision, countries facing a barrage of low-priced Chinese goods can initiate anti-dumping investigation against the import in question taking the Chinese economy as a non-market economy. A procedure has been specified to establish dumping margins and it will be for Chinese supplier to establish that market conditions exist in that particular sector.

The paragraph 16 of the Chinese Protocol of Accession lays down the criteria for invoking of transitional product specific safeguard mechanism in case of imports of a product of Chinese origin. If these products are being imported into any country in such increased quantities that cause a threat or injury to domestic industry or disturbs local market conditions it can lead to corrective steps.

Top textile exporters and market analysts are convinced that entry of Chinese goods in textile markets of the four quota regions will stay limited as these countries will be providing protection to their domestic producers and indirectly it would help maintain the share in the textile market the same level as prior to January 2005.

The Chinese have been provided facility of consultations prior to imposition of safeguard measures plus the right to suspend equivalent concessions in case of imposition of safeguard duty of the WTO member applying the concession if the safeguard measures are taken as a result of relative increase in the level of imports for a period of two years. “This China specific can also be explored by Pakistan is the claims of local producers of a deluge of Chinese exports injuring their industry is proved satisfactorily according to Pakistani law and the transitional safeguard criteria as laid down in the Chinese Protocol of Accession to the WTO.

An analysis of the EU market shows that Pakistan’s core textile export items are bedsheets, towels and trousers. Pakistan’s performance in these export categories have exceeded their quotas. China has not been able to perform impressively in these three categories and leaves enough room in the post-2005 period.

A World Bank-IMF study places China as top textile exporter with $52.2 billion share in a world textile export market of $356.4 billion during 2001. Hong Kong’s share is $37.65 billion, Korea $25.1 billion, Taiwan $15.99 billion and Indonesia $8.2 billion. Pakistan’s textile exports stood at $6.6 billion. Pakistan faces competition from all the six countries and not China alone.

While a lot has been done to improve textile production, much is to be desired in blended sector. Blended products made from a combination of natural and man made fibres are preferred in clothing the world over. The All Pakistan Textile Mills Association wants removal of 20 per cent protective duty on polyester fibre import. According to Aptma, the ratio of man made fibre in textile was the lowest in Pakistan. Pakistani blended clothing has a ratio of 27:75 as against an international ratio of 52 per cent synthetic yarn in blended textile. In India, Indonesia and China, the standard man made fibre content is 35 per cent in blended textiles.