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Developing countries with both textile and clothing capacity may be able to prosper in the new competitive environment when the textile quota regime of quantitative import restrictions under the multi-fibre arrangement (MFA) comes to an end two days from now – with effect from 1st January, 2005 under the World Trade Organisation (WTO) Agreement on Textiles and Clothing, putting an end to a complex trade regime built up over decades, according to an OECD (Organisation for Economic Cooperation and Development) policy paper titled "A New World Map in Textiles and Clothing: Adjusting to Change". As a result, the textile industry in developed countries will face intensified competition in both their export and domestic markets. The migration of textile capacity will nevertheless be influenced by objective competitive factors and will be hampered by the presence of distorting domestic measures and weak domestic infrastructure in several developing and least developed countries.
The elimination of quota restriction will open the way for the most competitive developing countries to develop stronger clusters of textile expertise, enabling them to handle all stages of the production chain from growing natural fibres to producing finished clothing, the paper says, adding that the recent surge in China’s imports of up-to-date textile and clothing machinery bears witness to this trend and points to the future sources of textile and clothing production and exports.
Emphasising the need for shifting industrial expertise in textile sector towards service related skills, the OECD paper says that while low wages can still give developing countries a competitive edge in world markets, time factors now play a far more crucial role in determining international competitiveness. Developing countries that can offer low-wage workers for sewing garments or seat covers together may have a comparative advantage over developed countries for that one stage of the assembly process, but that does not necessarily translate into a comparative advantage in the management of the entire supply chain when no export restrictions apply. Countries that aspire to maintain an export-led strategy in textiles and clothing need to complement their cluster of expertise in manufacturing by developing their expertise in the higher value-added service segments of the supply chain such as design, sourcing or retail distribution. To pursue these avenues, national suppliers need to place greater emphasis on education and training of services-related skills and to encourage the establishment of joint structures where domestic suppliers can share market knowledge and offer more integrated solutions to prospective buyers.
Further, the textile industry is undergoing a major reorientation towards non-clothing applications of textiles, known as technical textiles, which are growing roughly at twice rate of textiles for clothing applications and now account for more than half of total textile production. The processes involved in producing technical textiles require expensive equipments and skilled workers and are, for the moment, concentrated in developed countries. Technical textiles have many applications including bed sheets; filtration and abrasive materials; furniture and healthcare upholstery; thermal protection and blood-absorbing materials; seatbelts; adhesive tape, and multiple other specialized products and applications.
The textile and clothing industries provide employment for tens of million of people, primarily in developing countries, and accounted for US $ 350 billion in merchandise exports in 2002, or 5.6% of the world total, the paper adds.
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