WORLD TRADE
ORGANIZATIONG/TMB/N/407
8 August 2001
(01-3933)
Textiles Monitoring Body Original:  English
AGREEMENT ON TEXTILES AND CLOTHING
Communication from the European Community
The Textiles Monitoring Body has received a communication from the European Community
in reply to its request for additional information in the context of the preparation of the Body's
Comprehensive Report on the implementation of the ATC during its second stage, in accordance with
Article 8.11.
The TMB is circulating this communication to WTO Members for their information.G/TMB/N/407
Page 2
European Commission
Permanent Delegation
to the International Organizations in Geneva
Geneva, 7 May 2001
Subject: Request for information in the context of the TMB's comprehensive report on the
implementation of Stage 2
Dear Chairman,
With reference to note G/TMB/24 of 16 February 2001, requesting information in the context of the
TMB's comprehensive report on the implementation of  Stage 2, I am pleased to provide the attached
communication.
Yours sincerely,
(Signed for)
C. Trojan
Ambassador
Mr. András Szepesi
Chairman of the TMB
WTO – Centre William RappardRue de Lausanne 154
1211 Geneva 21G/TMB/N/407
Page 3
Communication from the European Community
in the context of the preparation by the TMB of the Report
foreseen by Article 8.11 of the ATC on the
Second Stage of Integration
Introduction
The EU is the world's largest trader in textiles and clothing products, which was reflected by total
trade amounting to €110 billion in the year 2000.  Since the entry into force of the WTO Agreementon Textiles and Clothing (ATC) in 1995 EU imports have increased at a steady pace, despite the
existence of quantitative restrictions (quotas). In the year 2000, the value of imports amounted to
€69.5 billion, an increase of 16.6 per cent over the €59.3 billion imported in 1999 and of 54 per cent
over 1995. Imports now represent almost a third of  total EU textiles and clothing consumption.
Exports rose 16.6 per cent from €34.7 billion in 1999 to €40.5 billion in 2000.
The European Community considers that the progressiv e character of the process of integration (as set
out in the recitals to the ATC) should cover not just  the integration programmes of Members but also the
application of strengthened GATT 1994 rules and disc iplines covering, in particular, access to markets.
Small suppliers and least-developed country Members
The European Community has applied the provisions  of Article 2.18 concerning small suppliers by
increasing the growth rates during the first stage of integration first by 16 per cent secondly by an
additional 25 per cent. These rates were increased by an additional 27 per cent in Stage 2.
In so far as least-developed country Members are concerned the European Community does not
maintain any restrictions on products covered by the ATC.  In addition, whether as a result of the Lomé
Convention or the General System of Preferences (GSP), most imports to the Community from LLDCs
benefit from zero duty provisions concerning tariffs. This includes large garment suppliers such as
Bangladesh, who become in 2000 the EU's sevent h supplier of textiles and clothing products.
Industrial adjustment
The textiles and clothing sector continues to occupy a central position in the economy of the
European Community with around 2.100.000 employees.
Over recent years the sector has made efforts to increase competitiveness against a backdrop of
continuous market opening. It has not been possible, however, to re verse the general downward trend in
production and employment.
In 1999 production in the EU clothing  sector went down 10.1 per cent, while the textile sector witnessed
a 4.1 per cent reduction as compared to 1998. This re duction was the continuation of a steady downward
trend in both sectors between 1995 and 1999, that was in terrupted by a brief production increase in the
textile sector in 1997, only to be followed by a renewed slump in 1998.G/TMB/N/407
Page 4
Of the 2.1 Million people employed in textiles and clothing in 1999, about 1,159,300 worked in the
textile sector and 923.500 in the clothing sector. In 1999 altogether some 92.000 jobs were lost in the
Community's textiles and clothing industry, which amounted to a reduction of 4.2  per cent of the work
force as compared to the previous year. This fall  in employment was greater than the one witnessed in
1998 (46,000 jobs) and 1997 (27,000 jobs). Employment in  the textile sector went down 3.3 per cent in
1999, while employment in the clothing  sector decreased by 5.3 per cent.
The level of investment in the clothing sector fe ll by 13.4  per cent in 1999, as compared to 1998. In the
textile sector the reduction was 3.2 per cent. Capacity utilisation was at 80 per cent in the clothing sector
and at 82 per cent in textiles.
Against this background the textiles and clothing sect or has, nonetheless, improved its competitivity at
an international level in particular as a result of its specialisation in the high added value end of the
sector and an active exporting strategy.
A series of Community programmes assist structural adjustment.  Thus, the textiles and clothing sector
is in a position to take an advantage of a series of Community programmes destined to favourautonomous adjustment such as reconversion a nd modernisation by way of assistance from the
structural funds in regions most affected by perm anent adaptation in the sector.  The European social
fund provides an important instrument to assist the requalification or conversion of workers in all sectors
affected by restructuring including textiles and clot hing.  The textiles and clothing sector can also take
advantage of programmes concerni ng technological research and development and small and medium
enterprises.
Integration
In the context of the first, second and third stage of  integration, the aim of the European Community has
been to adopt a balanced approach. The programme submitted for the third stage of integration thus
contains a large number of restricted and pr oducts, including importa nt clothing products.
The restrictive effect of trade under quota should be put into perspective. In 1999 the value of imports
WTO Members under quota from represented a bit less than a quarter of total imports of textiles and
clothing by the EU. Many of the quotas have low levels of utilisation: only a tenth of EU quotas
applied to imports from WTO countries were highly utilised (95 per cent or more), and less than onein twenty of such quotas will have grow between 1994 and 2002 by less than 50 per cent.
Transitional safeguard
The European Community has not had recourse to the provisions of Article 6 of the ATC.
Market access
During the second stage the Community has rema ined preoccupied that certain Members do not
consider the obligation to achieve improved access to markets for textile and clothing products as animportant part of the integration process, as set out in  Article 7 of the ATC.  Thus, there is a concern that
while the stages of integration up to 1 January 2005 will ensure the removal of quotas by the restraining
Members, certain Members will have done little or no thing to improve conditions for access to their own
markets for imports.
EU tariffs for textile and clothing imports ar e low and will go down further due to the EU's
commitments in the WTO. Present rates are on average 0.7 per cent for raw materials, 5.3 per cent for
yarns and fibres, 6.3 per cent for fabrics and 11.9 per cent for clothing - an overall average of
9 per cent. However, these rates are applied only to a small share of the EU's textile and clothingG/TMB/N/407
Page 5
imports, because of EU commitments under the Generalised System of Preferences (GSP) and other
arrangements. Roughly 44 per cent is imported free of tariffs and 46 per cent enjoys a GSP reduction
of 15 per cent of the MFN tariff rate, thus leaving only about 10 per cent of imports for which the full
MFN rate is levied.
The EU's low tariffs and the absence of non-tariff barriers compare with average tariffs for the whole
sector ranging between 14 per cent in Indonesia and 25 per cent in Thailand and 39 per cent in India.
Tariff peaks, for example, abound in the sector.  In addition, high tariffs are often combined with
additional taxes and frequently changing non-tariff barriers.
Creating an environment, in which traders worldwide will face substantially the same market access
conditions after 2005 is thus the EU's main objectiv e. The Community thus thinks that in the process
of integration under the ATC Members, who have so far done little to open their markets, should
implement less prohibitive tariff levels, as well as remove non-tariff barriers to trade.
Functioning of the TMB
The European Community considers that the TMB has exercised its role in a more transparent manner
over time and fully supports the TMB in continuing this approach.
__________