WORLD TRADE  
ORGANIZATION  WT/COMTD/LDC/W/37 
28 June 2005 
 (05-2756) 
Sub-Committee on Least-Developed Countries  
  
 
 
OPTIONS FOR LEAST-DEVELOPED COUNTRIES TO IMPROVE THEIR 
COMPETITIVENESS IN THE TEXTILES AND CLOTHING BUSINESS 
 
Note by the Secretariat
1 
 
Table of Contents 
 
I. INTRODUCTION ................................................................................................................... .3 
A. BACKGROUND .............................................................................................................................3  
B. MAIN CONCLUSIONS ...................................................................................................................7  
II. COHERENCE PROGRAMMES OF THE IMF AND THE WORLD BANK 
GROUP .......................................................................................................................... ..........13  
A. PROGRAMMES AND PROJECTS ..................................................................................................13  
B. CONCLUSION .............................................................................................................................19  
III. TRADE-RELATED TECHNICAL ASSISTANCE AND CAPACITY 
BUILDING ....................................................................................................................... .......20  
A. TRTA/CB:  CONCEPT AND FORMS ............................................................................................20  
B. TRTA/CB  PROJECTS .................................................................................................................22  
C. THE INTEGRATED FRAMEWORK ...............................................................................................33  
D. FINDINGS ............................................................................................................................... ....39  
IV. NON-RECIPROCAL PREFERENCE SCHEMES.............................................................41  
A. COVERAGE ............................................................................................................................... .41 
B. PREFERENCE MARGINS .............................................................................................................45  
C. UTILIZATION OF PREFERENCES .................................................................................................49  
D. FLEXIBILITY OF RULES OF ORIGIN ............................................................................................55  
E. PREFERENCES AS AN EXPORT PROMOTION AND DIVERSIFICATION TOOL:  THE CASE 
OF CANADA ............................................................................................................................... 67 
F. OPTIONS FOR IMPROVING THE EFFECTIVENESS OF NON-RECIPROCAL PREFERENCE 
SCHEMES ............................................................................................................................... ....69  
V. OTHER MEANS TO TACKLE CONSTRAINTS AFFECTING LDC 
EXPORTS........................................................................................................................ ........71  
A. ACCESS TO DEVELOPING COUNTRY MARKETS ........................................................................71  
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. WT/COMTD/LDC/W/37 
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 B.
 SUPPLY CONSTRAINTS ..............................................................................................................75  
VI. BIBLIOGRAPHY.................................................................................................................10 3 
ANNEXES ........................................................................................................................ ..................108  
STATISTICAL APPENDIX ........................................................................................................... ..151  
  WT/COMTD/LDC/W/37 
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I. INTRODUCTION 
1. At the 39th Session of the Sub-Committee on LDCs , held on 20 January 2005, Members 
mandated the Secretariat to prepare a paper th at would look into options for improving LDCs' 
competitiveness in the textiles and clothing (T&C) business in light of the termination of the WTO 
Agreement on Textiles and Clothing (ATC).  The te rms of reference for the paper are as follows: 
"Fully respecting the basic principles and rules of the WTO and 
rights and obligations of the Members, the WTO Secretariat will prepare a paper that will look into options for LDCs to improve their 
competitiveness in the textiles and clothing business, namely 
coherence programmes of IMF and Wo rld Bank, more flexible rules 
of origin, technical assistance and capacity building, bilateral 
cooperation programmes and other means to tackle constraints 
affecting LDCs' exports
." 
2. This paper is prepared in line with the above terms of reference.  Section I provides a short 
description of the background of the study and su mmarizes the main findings.  Section II discusses 
World Bank, International Financial Corporati on (IFC) and International Monetary Fund (IMF) 
programmes aimed at enhancing the competitiveness of the T&C sector in LDCs and promoting their 
integration in the world trading system.  Section III considers other technical assistance and capacity 
building programmes with the same purpose.  The analysis covers bilateral programmes of WTO, 
UNCTAD, ITC and OECD, as well as the multi-agency  Integrated Framework (IF).  Section IV 
examines in detail the non-reciprocal preference schemes offered to LDCs by six developed 
economies (Australia, Canada, EU, Ja pan, Switzerland, and the United States).  The analysis focuses 
on the link between rules of origin and utilization of preferences.  Section V first studies LDCs' 
exports of T&C to developing countri es and tariffs imposed by devel oping countries on those imports.  
It then turns to supply constraints in LDCs and explores domestic policy measures that could support 
the T&C sector. 
 
A. BACKGROUND  
3. At different periods in time and in different regions, the T& C sector has offered important 
opportunities for countries to start industrializing and diversifying their economies.  It notably played a key role in the development of East Asian na tions such as:  Hong Kong, China;  Singapore;  
Separate Customs Territory of Taiwan, Penghu, Kinm an and Matsu (Chinese Taipei);  the Republic of 
Korea;  Malaysia; and more recently China;  Indonesi a;  Thailand and Viet Nam.  In many countries, 
the T&C sector has made a major contribution in  alleviating poverty an d enhancing livelihood 
prospects of millions of people.   
4. In the last two decades, the T&C sector and in  particular the clothing industry, has also 
become one of the main sources of growth in ma nufacturing output, exports, employment and income 
for several LDCs.  Between 1995 and 2003, LDC clot hing exports grew at an impressive annual 
average rate of 15.7 per cent.  During this same peri od, the share of LDCs in world exports of clothing 
increased from 2 per cent to 5 per cent.
2  Six LDCs among the 22 for which reliable data is available 
are heavily dependent on their exports of clothing.  The most prominent examples are Bangladesh, Cambodia and Lesotho, where T&C account for 83 , 77, and 72 per cent of merchandise exports, 
respectively.  Nepal, Madagascar and the Maldives a ll depend on T&C for more than 30 per cent of 
their exports.  In Bangladesh, the clothing sector employs about 1.8 million people (40 per cent of 
                                                     
 
2 Source : WTO Secretariat estimates WT/COMTD/LDC/W/37 
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 employment in the manufacturing sector) and indirectly supports about 10 to 15 million people.
3  In 
Cambodia, around 240,000 workers are employed in the clothing sector and provide family income for up to a million people.  Contribution to GDP is as high as 12 per cent in Cambodia and 5 per cent in Bangladesh.  The economic performance of the T& C sector also has socio-economic implications 
related to employment opportunities for women, th e development of medium-s ize firms and spillovers 
into the informal sector.
4 
5. The remarkable growth of clothing exports from LDCs can, to a large extent, be attributed to 
the external environment, in particular to th e quota arrangements under the Multifibre Arrangement 
(MFA) and the subsequent ATC5, non-reciprocal preferential schemes and other preferential access 
schemes granted to LDCs.  Preferential market access  measures played a catalytic role in generating 
FDI in the T&C sector of a number of LDCs.   
6. The MFA, which was negotiated in 1974, exem pted trade in T&C from the principles of 
GATT, allowing developed countries to a complex set  of bilateral quantitative restrictions.  The 
quotas artificially inflated the number of producer s by limiting the production of the most competitive 
producers.  Since quotas were imposed on exports from the most competitive developing countries, 
the entrepreneurs of those countries sought to take advantage of the unused MFA quotas in 
neighbouring countries and elsewhere.  For instance in  the early 1980s, both in Bangladesh and Nepal 
foreign investors exploited unutilized quotas, althoug h later local entrepreneurs seized the opportunity 
in both these countries.  The share of clothing pro ducts of total exports in Bangladesh rose from 
0.2 per cent in 1980 to 75 per cent in 2002.  Sim ilarly, unused MFA quotas, coupled with facilitating 
policies by the government on FDI, permitted Lesotho to attract considerable export-oriented FDI in 
the clothing sector in the 1990s.  The AGOA6 scheme further enhanced Lesotho's clothing exports.  
Lao PDR7 also witnessed a spectacular growth in its clothing exports due to a special textiles 
arrangement with the EU and preferences from c ountries like Australia, Canada and Japan.  In 
Cambodia, the growth of clothing exports was a di rect result of the granting of the NTR (Normalized 
Trade Relations) status by the US.  Cambodia beca me an exporter of clothing only in the late 90s, 
which was a total reversal from the period before 1995.  US imports from Cambodia increased from 
$1 million in 1996 to $1.1 billion in 2003.8 
7. The end of the quota regime is now a source of  considerable anxiety not only in the large 
import markets that were protected but also in those LDCs which benef ited from the constraints 
imposed on the most competitive producers.  While drawn up to phase out the quotas over a ten-year period, the ATC allowed significant backloading so that the most important categories of products 
                                                     
 
3 See Mlachila and Yang (2004). 
4 See UNCTAD (2004a).   
5 The Agreement on Textiles and Clothing (ATC) e xpired on 1 January 2005, and the textiles and 
clothing sector became fully integrat ed into GATT 1994.  It was an agre ement for a transition period of ten 
years which entered into force on 1 January 1995. Th e Agreement was the first WTO multilateral agreement to 
be fully implemented as scheduled. This has put an end to a special and discriminatory regime that has been in application for more than four decades. 
6 The Africa Growth and Opportunity Act (AGOA) was signed into law on 18 May 2000 as Title 1 of 
the US Trade and Development Act of 2000.  It, inter alia , provides duty-free and quota-free treatment for 
eligible apparel articles made in qualifying Sub-Saha ran African countries.  Th e AGOA Acceleration Act of 
2004 extends preferential access for imports from bene ficiary Sub-Saharan countri es until 30 September 2015 
and also extends third country fabric provision for three years from September 2004 until September 2007. 
7 Laos is an acceding country in WTO.  It completed a bilateral trade agreement with the US, although 
a separate textiles agreement is yet to be negotiated.   Its access to the markets of the US and other WTO 
Members will also depend on the result of accession negotiations. 
8 Cambodia became a Member of the WTO in 2004.  Most of its trade with the US since 1999 took 
place under a bilateral textiles agr eement, which was in operation until 31 December 2004.  Expansion in 
Cambodia's clothing exports is largely due to favourable quota allocations under this agreement.   WT/COMTD/LDC/W/37 
 Page 5 
 
 
  were not liberalized prior to 1 January 2005.  Th is in turn allowed necessary adjustments to be 
postponed.   
8. Another reason why the phase out is causing anxiet y is that the elimination of the remaining 
quotas took place in an international environment that is significantly different from the one that prevailed ten years ago.  As a result of technologi cal progress and changes in market structure, the 
T&C sector has undergone significant changes such as:   
 Increasing international fragmentation of production .  As a result of technological 
progress in telecommunications and transport networks, the supply chain from sourcing of 
raw materials via design and production to dist ribution and marketing is being organized as 
an integrated production network where the produc tion is sliced into sp ecialized activities and 
each activity is located where it can be performed at the lowest cost.  In this international 
supply chain, LDCs appear as an actor at the assembly stage;  
  Increasing importance of the time factor.   With the trend towards "lean retailing" producers 
that can provide quick turn-around time enjoy an important competitive advantage.  Quick 
turn-around times tend to be more important for certain groups of products than for others.  
Women's fashion styles typically change more rapidly than men's fashion styles.  Quick 
turn-round times can be achieved either thr ough proximity to large markets (e.g. Mexico, 
Central America and the Caribbean countries to the US, Turkey and CEE to the EU), or because suppliers can efficiently organize the supply chain; 
 
 Increasing role of developing countries in T&C production .  Production of T&C is 
increasingly dominated by developing countries.  Since 1980, textiles exports from developing countries have increased by a factor of 5 and clothing exports by a factor of 7.  
Developed countries only experienced a twofold and threefold increase, respectively.
9  Today, 
developing countries account for half of world te xtile exports and about two thirds of world 
clothing exports.  In 2003, China alone accounted  for 20 per cent of total world exports of 
textiles and 28 per cent of world exports of clothing.10  Trans National Corporations from 
developing countries, notably East Asia, ha ve emerged as major players, controlling 
production plants in several countries; 
 
 Growing economic power of large retail groups .  The economic power of larger retailers, 
predominantly located in developed countries, has increased substantially over the last years.  
As a consequence retailers are able to exert more and more pressure on prices as well as on location choices.
11  Related to this trend, there has be en a move towards "lean retailing" since 
the mid-1980s.  Led by large American retail groups and enabled by technological changes, 
retailers have increasingly brought their suppliers under more direct control;12  and   
 
 Growing importance of markets in emerging economies .  The Quad countries remain by 
far the world’s largest importers of T&C.  Ho wever, the fastest growing markets for T&C are 
in emerging economies. 
 
9. In this global system, shaped as much by the MFA restrictions, and the preferences as by 
market forces, technological progress and compara tive advantage, LDCs typically specialized in 
producing clothing products from im ported textiles.  Beyond unutili zed quotas and preferential access 
to large markets, LDCs' main competitive advantage is their large pool of low-skilled labour 
combined with a low wage level.  All these fact ors contributed to the attractiveness of LDCs to 
                                                      
9 UNCTAD (2004a) 
10 Excluding intra-EU exports. 
11 See OECD (2004a) and UNCTAD (2005a). 
12 See Nordas (2004). WT/COMTD/LDC/W/37 
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 clothing firms.  Operators in LDCs are all integrated into global chains.  Producers in major countries 
own the operations, and they carry out the more impo rtant and higher value adde d functions in parent 
companies.  In many countries, including a major pr oducer such as Lesotho, expatriates make up the 
bulk of the technical and supervisory staff.
13  
10. Most LDCs have failed to develop an integrated  T&C sector.  The textiles industry is usually 
more capital and skilled labour inte nsive than the clothing industry.  Clothing producers in LDCs have 
typically had difficulties creating backward linkages.  On the other hand, cotton producers among LDCs such as Benin, Burkina Faso, Chad and Mali have not managed to build up a viable T&C  
sector.  In Benin, in which cotton accounts for 10-15 per cent of GDP and 50-80 per cent of merchandise exports, production and exports of yarn and fabric are insignificant and there is no 
formal production of apparel.  In Malawi , there is only one textile manufacturer
14 and ten garment 
manufacturers operating below capacity.  Senegal, one  of the medium sized producers of high-quality 
cotton has not emerged as a producer of garments.  The textile industry in most of the LDCs is not 
able to meet the input needs of the local clothi ng industry, because of its inability to meet quality 
requirements or make timely supplies.  In Madagas car, for example, local sourcing of fabric requires 
six to seven weeks of lead time, as much as it takes to obtain the inputs from South Asia.   
11. In recent years, there has b een an increase in the number of studies analysing the likely 
impacts of the elimination of ATC quotas.15  These studies, which use various methodologies, 
assumptions and data, come to diverse conclusions.  R esults suggest that at an aggregate level, large 
welfare gains for both developed and developing nations will emerge from the elimination of the 
MFA/ATC distortions.  There will be efficiency ga ins from the elimination of highly distorting quotas 
that have led to an inefficient allocation of T&C  production.  Although the size of their benefits is not 
clear, consumers stand to gain.  The most competi tive Asian countries, led by China and India, are 
likely to gain, while countries that have increased their market shares through the quota system are likely to be adversely affected.   
12. Focusing on adjustments in the international production structure, the widespread concern 
among LDCs and other beneficiaries of the quotas is th at less efficient supplie rs that were able to 
export only because of the quotas will not resist competition.  The pressure takes two forms.  First, competition among developing countries for FDI is increasing.  Firms seek to reduce costs by consolidating supply chains.   The incentive for producers to set up production plants in countries, 
including LDCs, which benefitted from the quota syst em, is eliminated.  Large manufacturers try to 
concentrate production in fewer locations in order to reduce the costs related to a fragmented supply 
chain.  Note, however, that there should be limits  to this consolidation as firms will continue to 
diversify in order to minimize the risk of supply disruptions.  Second, competition between LDCs and 
other developing countries on export markets is increasing.   Competition will be fiercest in those 
quota categories that were the most constraining.  In several LDCs these categories covered more than 
three-quarters of all apparel exports.   
13. While all studies agree that LDCs, which have lo st one source of their competitive advantage, 
will face fierce competition and that adjustments will take place, views differ on the scale of those adjustments.  One reason behind the different vi ews are diverging assumptions regarding two major 
sources of uncertainty.  The first relates to the reac tions of governments of both the large importers 
and the most competitive exporters.  The second rela tes to the reactions of firms and the relative 
importance of the various factors affecti ng competitiveness in their location decisions. 
                                                     
 
13 World Bank (2004a) 
14 David White head and Sons, Malawi, Ltd (DWM) 
15 See the overviews in UNDP (2005), UNCTAD (2004a and 2004b), Nathan Associates (2002), 
EU (2003).   WT/COMTD/LDC/W/37 
 Page 7 
 
 
  14. WTO Members may apply safeguard measures to temporarily protect products and sectors 
that are seriously threatened by injury from im port competition.  The WTO Protocol on the Accession 
of China contains a transitional product specific safeguard mechanism (Art. 16) that allows WTO 
Members to restrict imports originating in China in case such imports would cause or threaten to 
cause market disruption to domestic producers of T&C.   This safeguard provision remains valid until 
December 2013.  The WTO Report of the Working Pa rty on the Accession of China also contains a 
textiles safeguard provision that enables WTO Memb ers to restrict imports from China when such 
imports threaten to impede the orderly development of trade in these products.  This provision is valid 
until December 2008.  Lobby groups in the large importing countries may also push governments to 
take anti-dumping measures in order to protect domestic industries from competition of low-cost 
countries.  On the other hand, China may decide to voluntarily restrict its exports. 
15. Competitiveness and thus attractiveness to investor s are a function of a variety of factors.  
With the elimination of the quotas, LDCs have lo st one important source of competitive advantage, 
but they have others.  First, LDCs still benef it from preferential access to major markets.  As 
discussed in Section IV of this paper, not all LDCs  are in a position to fully benefit from all schemes 
but the schemes granted to LDCs are typically more generous than those granted to other developing 
countries.  Second, unskilled labour is abundant and wages are low in LDCs.  As discussed in Section 
V below, this advantage may be partly offset by th e lower level of productivity in LDCs than in other 
developing countries, but labour costs remain among the lowest.   
16. While there is no doubt that political stability and the quality of infrastructure are important 
determinants of competitiveness and attractiveness, the role of a number of other factors is subject to 
speculation.  Several studies insist on the importan ce of proximity.  Countries closer to the major 
markets may benefit from the development of "lean  retailing", which makes proximity an advantage 
for reasons of time as well as transport costs.  Other studies emphasize the ability of a country's 
producers to engage in full-package production – th at is to go beyond simple assembly and offer 
clients a full package including design, sourcing of inputs, cutting, sewing, assembling, labelling, 
packaging and shipping.  Most LDCs have not developed such capacities at this stage and will 
continue to offer cut make and trim operations .  Along the same lines, some authors underline the 
importance of backward- and forward-linkages.  As  already mentioned, most LDCs do not seem to 
have a comparative advantage in textiles.  
17. In this context, the challenge for LDCs in th e short run is to enhance the competitiveness of 
existing activities and remain an attractive location for international suppliers.  In the longer run, 
LDCs may develop new activities and shift to higher-value products.  How the international 
community and LDC governments could help improve the competitiveness of the T&C  sector in 
LDCs is explored in the following chapters.  The main results of the report are summarized in the 
second part of this introduction. 
 
B. MAIN CONCLUSIONS  
Section II:  Coherence Programmes of the IMF and the World Bank 
 
18. The emphasis placed by the World Bank, IFC and the IMF on private sector development and 
trade in achieving growth and poverty reducti on in developing countries provides the broad 
framework under which the projects and programmes of  those organizations directly or indirectly 
contribute to enhancing competitiveness.  Under th is framework, countries ar e helped to integrate 
effectively into the global trading system, and to  create conditions that facilitate private sector 
development in the country, includ ing the conditions necessary to attract foreign direct investments.  
Most projects and programmes are not exclusively designed to address the concerns of T&C sectors. WT/COMTD/LDC/W/37 
Page 8  
 
 19. Through analytical work, the World Bank and the IMF help the countries understand the 
implications of quota withdrawal on their economy and develop strategies to strengthen their private 
sector and make it more competitive.  Analytical wo rk has focused on unders tanding the limitations 
faced by the private sector in these countries through surveys and benchmarking.  Studies highlight the limitations imposed by infrastructure, policies,  human capital, regulations and corruption.  They 
recommend measures that reduce the costs of inputs and more generally the costs of doing business, 
and facilitate the development of export activities th at rely on global sourcing of inputs including 
skilled manpower.   
20. The number of projects aimed at implementing the strategies, however, are limited and are at 
an early stage of development.  Projects to implement private sector development strategies that could 
help the T&C sector are under preparation in only  three LDCs and the IFC has supported private 
projects in only two countries.  For the T&C sect ors in which the advantages of low wages are eroded 
by low productivity and high transaction cost s, the reforms could significantly enhance 
competitiveness. 
21. The analysis of World Bank and IFC project s and programmes (see Annex II) suggests that 
these institutions have not devel oped a global strategy to address post-ATC adjustment problems in 
LDCs.  Projects and programmes ar e elaborated on a country-by-country basis and they are typically 
not sector-specific.  On the other hand, all the elem ents that are necessary to address those adjustment 
difficulties are in place.  All the countries with a significant T&C sector have benefited from trade related analytical work (except Haiti) and private sector development projects are planned, active or 
have been completed in recent years (except Lao PDR and Nepal).  In cases where this has not been 
done, measures of particular importance to  the T&C sector could be prioritized. 
22. Innovative projects, such as the one supported by Foreign Investment Advisory Service 
(FIAS), a joint facility of the World Bank and the IFC, in Cambodia, could serve as examples for other LDCs.  Thanks to an un orthodox labour programme intende d to improve working conditions, 
much of Cambodia's garment industry has managed to stay in business after the end of quotas.  In 
addition, 16 plants are scheduled to begin pr oduction in 2005, replacing about a dozen failed 
factories.
16 
23. So far, Bangladesh is the only LDC that has made use of financial support under the IMF’s 
Trade Integration Mechanism (TIM), a policy design ed to make resources more predictably available 
under existing IMF facilities.  In July 2004, the IM F Board approved the country’s request for an 
augmentation of its Poverty Re duction and Growth Facility (PRGF) under the TIM of about 
$78 million, increasing the PRGF amount to about $583 million.  To the extent that it faced a shortfall 
compared to the baseline, Bangladesh would have a ccess to the deviation feature which is capped at 
10 percent of quota.  If the shortfall could not be accommodated by a 10 per cent of quota augmentation, the entire programme supported by the underlying arrangement would need to be 
re-evaluated. 
24. Several LDCs, that are highly dependent on T& C (Cambodia, Haïti, Lesotho, Madagascar), 
do not have immediate access to the TIM as they are not currently engaged in  an IMF programme.  If they were to face balance-of-payments problems related to the phasing out of ATC quotas, they would need to consider the possibility of negotiating a progr amme with the IMF with reference to the TIM.   
Section III: Trade-Related Technical Assistance and Capacity Building 
 25. Trade-related technical assistance and capacity  building (TRTA/CB) covers various forms of 
assistance that directly address some of the most pressing needs in the T&C sector.  In the present 
                                                     
 
16 See "Treating Workers Well Pays Off in Cambodia" New York Times, 28 April 2005.  WT/COMTD/LDC/W/37 
 Page 9 
 
 
  context of rapid changes in the T&C business, TRTA /CB seeks to produce quick results at relatively 
low cost.    
26. The review shows that a significant portion of TRTA/CB related to T&C is analytical work.  
Such work is indispensable for developing coherent  strategies for the T&C sec tor, in line with more 
global poverty reduction plans.  This report suggests that there is no dearth of analytical work on 
post-ATC adjustments in the T&C sector.  The major ity of LDCs with an important T&C sector have 
developed a sector strategy with the assistance of TRTA/CB providers.  Those LDCs, however, that have not yet identified their most binding constrai nts and developed their own strategy for the T&C 
sector will presumably need to conduct such studies and seek support in doing so.  For others there 
might be a need to update existing sectoral studies to  reflect recent developments brought about by the 
abolition of quotas. 
27. Other types of TRTA/CB likely to enhance th e competitiveness in th e T&C sector include 
specific training of labour force and officials, enhancing access to information, and promoting 
exports.  LDCs may seek assistance in these areas. 
28. A few LDCs have chosen to address some of  their needs in the T&C sector through the 
Integrated Framework (IF), a country driven pro cess based on partnership of six core international 
agencies established to support LDCs in coordina ting TRTA/CB and integrating trade issues into 
overall national development strate gies.  Several LDCs, however, did not seek priority assistance in 
the T&C sector.  
29. The success of IF lies largely in realizing suppor t through a systematic identification of needs 
and priorities.  Effective follow-up to the diagnostic  trade integration studies (DTIS) is critical as it 
involves translating the findings of the DTIS into conc rete actions.  By its nature, an IF Action Matrix 
only provides a broad action plan and is devoid of sp ecific project proposals.  Therefore, each need 
identified in the Matrix must be developed into a project proposal.  It is up to the LDCs to engage 
their development partners to jointly develop c oncrete projects relating to the T&C sector.   
30. Finally, in order to further improve coherence and efficiency of TRTA/CB activities, 
providers must better report on their activities, a dopt appropriate monitoring and evaluation methods 
and promote ownership.  Communication and info rmation from and among donors allow stakeholders 
to learn about, draw lessons from, and build on, p ast and on-going projects.  However, despite the 
great benefits arising from openly communicating about their TRTA/CB activities, donors are still 
reluctant or slow to provide deta iled information.  In this respec t, the Doha Development Agenda 
Trade Capacity Building Database (DDA TCBD) represents significant progress towards more 
accountability and transparency in the area of tec hnical assistance.  It was impossible to obtain 
assessments for the vast majority of the TRTA/CB projects under review and, thus, to identify the 
projects that proved particularly successful.  Thus , a desirable approach would be to include 
monitoring and evaluation in every TRTA/CB programme.   
Section IV:  Non-Reciprocal Preference Schemes 
 
31. In the last few years, most developed countri es have extended their preferences in favour of 
LDCs, offering duty- and quota-free access to all LDC exports.  However, while considerable 
progress has already been achieved and more seems to be planned, results suggest that there is scope 
for further improvements.  So far, the impact of trade preferences on the majority of LDC clothing 
exporters has been rather weak.  In most cases, utilization rates remained very low.  Our results 
suggest that appropriate reforms can significantly and rapidly improve the effectiveness with which 
the schemes promote LDC exports and diversification.   
32. Measures could be taken in three different areas:  coverage, predictability, and rules of origin.  
With regard to coverage, the main problem is discr imination between LDCs.  It could be eliminated WT/COMTD/LDC/W/37 
Page 10  
 
 by granting the most generous treatment unconditionally  to all LDCs.  With regard to predictability, 
schemes could be granted on a permanent basis and c onditionality eliminated where possible.  As for 
rules of origin, they could be simplified, harmoni zed and relaxed.  Such measures would allow LDCs 
to derive the full benefit of non-reciprocal trade pr eferences, which when available are often truncated 
by high compliance costs.  
33. With regard to geographical c overage, the main issue is that Asian LDCs are currently 
"underpreferred".  They do not have access to AGOA or to Cotonou.  Extending the benefits of 
AGOA to non-African LDCs could have a significant effect.
17  An obvious alternative would be to 
extend the product coverage of the US  LDC GSP, while at the same time relaxing its rules of origin so 
as to offer benefits equivalent to those granted under AGOA to all LDCs.  As argued below, Europe, 
rather than extending the coverage of Cotonou to  Asian countries, may consider relaxing EBA rules 
of origin. 
34. With regard to product coverage, the main issue is the limited coverage of US schemes.  Both 
the LDC GSP and AGOA offer only li mited product coverage.  In the case of AGOA, most of textiles 
are not covered.  The US could consider exte nding the coverage of its schemes to textiles. 
35. Uncertainty regarding the conditions of access to major markets could represent a serious 
obstacle to potential investors in the T&C sector  of LDCs.  All measures that preference giving 
countries could take to increase the predictability of those conditions would be very useful.  
Graduation clauses, such as ceilings and caps, fin ite duration and other conditionalities contribute to 
unpredictability and should be eliminated if possible.  The European Union has shown the way by making its EBA permanent.   
36. The analysis shows that simple, homogeneous, unr estrictive rules of origin translate into 
higher rates of utilization.  The generalization of AGOA-type rules of origin to all LDC GSP schemes 
could substantially increase the utiliz ation of those schemes.  The European Union, in particular, 
would significantly enhance the benefits that Asian LDCs derive from its EB A scheme by relaxing its 
rules of origin.   
37. Generous reforms of preferential schemes represent a serious option for improving the 
competitiveness of LDCs in the T&C sector and ther eby helping them in their post-ATC adjustment.  
Clearly, preferences which are likely to be eroded in the coming years should not be seen as a long term measure.  But they can play a role in the shor t run.  The successful reform of the Canadian GSP 
for LDC programme shows that positive resu lts of reforms can be immediate.   
Section V:  Other Means to Tackle Constraints Affecting LDC Exports 
 
38. Developing countries import less than 4 per cent of total LDC clothing exports.  This 
relatively low developing country share can be prim arily explained by two factors.  First, many 
developing countries still apply high average tari ffs on clothing products .  Second, LDCs do not 
necessarily have a comparative advantage in clot hing over all developing countries.  Several 
developing countries have a highly competitive clot hing sector and export more clothing to LDCs 
than they import from LDCs.   
39. Some among the emerging economies which co rrespond to potential markets for LDC 
clothing exporters have relatively high tariffs on T& C.  Mexico, Argentina, Brazil and Thailand, for 
example all have average tariffs that exceed 20 per ce nt.  China’s average tariff on clothing products 
                                                     
 
17 One proposal to do this is the bipartisan Tariff Relief Assistance for Developing Economies 
(TRADE) Act, which was introduced in the US Senate an d House of Representatives early in 2005.  If passed, 
the TRADE Act would authorize the pr esident to grant limited duty-free access to 14 LDCs, plus Sri Lanka, all 
countries hit by the D ecember 2004 tsunami.  WT/COMTD/LDC/W/37 
 Page 11 
 
 
  is 19.6 per cent while Malaysia's tariff is sligh tly above 15 per cent.  The Republic of Korea and 
Chinese Taipei have set their average tariff leve l on clothing products at around 12 per cent.   
40. In this context, a reduction of import tariffs in some developing countries, especially those 
where LDCs could have a comparative advantage in clothing could be considered.  The reduction 
could take the form of non-reciprocal preferences granted to LDCs along the lines of paragraph 10 of 
Annex B of the July Package.  A reduction of ta riffs for all non-agricultural products would be less 
distortive than preferences on clothing only.   
41. In some cases, reciprocal liberalization as part of a regional trade agreement could be 
envisaged.  Given the high level of protection on textile products in some LDCs, there could be 
reciprocal benefits if the LDC specializes in cl othing while the developing country specializes in 
textiles. 
42. Most of the measures that LDC governments c ould take to enhance the competitiveness of 
their T&C sector have already been identifie d by LDC governments and implemented in some 
countries with the assistance of international and nati onal agencies, as set forth in other sections of 
this report.  In the last Section, a whole range of  options to tackle supply constraints is addressed, but 
special emphasis is placed on trade and trade-related policy measures.  
43. Lowering tariffs on inputs may have a substantia l positive impact in the short run.  Lower and 
more uniform tariffs on inputs translate immediately into lower and less distorted input prices for producers.  In order to thrive in an increasingly co mpetitive environment, the clothing industry must 
be able to source its inputs at world prices, and duty drawback schemes are only an imperfect 
substitute for low tariffs.  Where textiles are prot ected for industrial policy purposes, the costs to the 
garment industry should be weighed against the bene fits to the textiles industry and the impact of a 
liberalization reassessed.  Approach es to compensate for foregone tariff revenue would also need to 
be explored with the help of international organizations.   
44. The effects of most measures aimed at enhancing human capital, at facilitating access to 
credits or at improving business environment may take more time to unfold.  Labour markets in LDCs 
provide the necessary cheap labour input for clothing firms.  However, low levels of general and 
professional education result in low productivity whic h offsets the cost advantage of low wages.  
Efforts aimed at enhancing the overall level of educa tion of the work force will need several years to 
produce results.  Specific training courses however  may be effective in the short run.   
45. Another problem to tackle is access to cap ital which is difficult for clothing firms and 
constitutes a major entry barrier for new entrepreneur s.  Liberalization of the financial market in 
LDCs combined with sound macroeconomic polic y could bring in new foreign capital and help 
overcome this bottleneck, but only in the longer run.  In the short run, the introduction of micro-credit 
schemes or special credit facilities for SMEs may s how some very positive effects, as the case of 
Bangladesh illustrates.   
46. Finally, the inadequate business environment in  LDCs considerably raises production costs.  
International agencies in collaboration with nationa l governments have engaged in various projects to 
improve the transport system, utilities, the rule of law, etc.  However, the business climate in LDCs 
has improved slowly and much remains to be done if measures such as the streamlining of customs 
procedures is to bear fruit in the short run.   
47. Another option to enhance the business environm ent in the short run is to establish Export 
Processing Zones (EPZs).  EPZs raise several economic  and legal issues.  However, they may allow 
LDCs to react quickly to the loss of attractiv eness resulting from the elimination of ATC quotas.  
EPZs make it possible for governments, which are not in a position to improve the business 
environment in the whole country, to offer attrac tive physical and services infrastructure as well as a WT/COMTD/LDC/W/37 
Page 12  
 
 favourable business environment to both domestic and foreign investors in a geographically delimited 
area.  Attracting or retaining FDI is crucial fo r LDCs since capital constraints and technological 
backwardness severely hamper the development of  the T&C sector.  EPZs may attract footloose 
investment with limited spillovers but they may as well attract investors with a longer-term perspective which may facilitate technological  and skills transfer and thereby boost the 
competitiveness of LDCs.   
48. In summary, LDC governments have a crucial ro le to play in leading and coordinating a 
coherent strategy for the T&C sector, with the help  of donors and international organizations.  The 
short-term measures suggested in this Sub-section, su ch as trade liberalization, technical training, and 
streamlining of customs procedures, are relativel y easy to implement and have the potential to 
substantially improve the competitive position of firms within a short period of time.  Other short-run 
options, particularly the establishment of EPZs, that  imply stronger government intervention and that 
may lead to considerable market distortions, are mo re controversial.  Despite their advantages, they 
are second-best policy measures and it remains uncl ear whether they are indispensable for the 
development of the T&C sector.  More generally, th e debate on industrial po licy and the appropriate 
role of governments is more open than ever.
18  Each LDC has its own characteristics and therefore 
needs to define its own specific policy.  
                                                      
18 See Rodrik (2005).  WT/COMTD/LDC/W/37 
 Page 13 
 
 
  II. COHERENCE PROGRAMMES OF THE IMF AND THE WORLD BANK GROUP 
49. This Section provides an overview of project s and programmes of the World Bank, the IFC 
and the IMF that directly or indirectly contribute to improving competitiveness of T&C sector in LDCs.  Details on the sectors and projects and pr ogrammes implemented in different countries are 
provided in the form of country profiles in the Annex II. 
50. This Section focuses on 14 LDCs in which the T&C sector plays an important economic role.  
They include some countries in which the sector does not yet make significant contributions to value added or employment, but where the government pla ces significant emphasis on its development with 
a view to taking advantage of special trade prefer ences that the country may enjoy.  The 14 LDCs 
include two in East Asia (Cambodia and Lao PDR), two in South Asia (Bangladesh and Nepal), one 
in the Caribbean (Haiti) and nine in Africa (Cap e Verde, Ethiopia, Lesotho, Madagascar, Malawi, 
Mozambique, Tanzania, Uganda and Zambia).    
 
A. P
ROGRAMMES AND PROJECTS  
51. The emphasis placed by the World Bank, IFC and the IMF on private sector development and 
trade in achieving growth and poverty reducti on in developing countries provides the broad 
framework under which the projects and programmes of the organizations directly or indirectly 
contribute to enhancing competitiveness.  Under th is framework, countries ar e helped to integrate 
effectively into the global trading system, and to  create conditions that facilitate private sector 
development in the country, including the conditions necessary to attract FDI.  They are also assisted 
in coping with temporary balance-of-payment difficulties.  
52. The instruments that the organizations use to achieve the objectives are the following:  
1) Analytical and advisory work designed to iden tify constraints to growth and competitiveness 
and to suggest strategies to overcome them; and in the case of IMF, to develop suitable 
programmes to aid countries with balance-of-payment problems and monitor the situation; 
 
2) Projects that help countries implement the st rategies, including assistance to individual 
private enterprises;  and 
 3) Programmes to help countries cope with short-run impacts of trade integration.  
 
1. Analytical and Advisory Work 
53. Trade and competitiveness related analytical wo rk typically takes the form of Diagnostic 
Trade Integration Studies (DTIS) under the IF, a mu lti-organizational effort that includes the World 
Bank, but is also carried out by Foreign Investment  Advisory Service (FIAS), a joint facility of the 
World Bank and the IFC, various units in the Worl d Bank, particularly private sector development 
and the IMF.  All the selected countries have benef ited from trade-related analytical work except Haiti 
(Table 1).
19  Besides the DTIS, the World Bank Group and the IMF conduct vari ous other relevant 
analytical work that is listed below. 
(a) World Bank  
54. The analytical work done by various divisions at the World Bank includes reports in which 
private sector development is one of the aspects cove red and those that are specific to private sector 
development.  Country strategies fall into the first category.  They usually address issues of various 
sectors in the broader context of achieving growth an d poverty reduction in the countries.  For five of 
                                                      
19 For more information on DTIS and the IF, see Section III. WT/COMTD/LDC/W/37 
Page 14  
 
 the countries (Bangladesh, Ethiopia, Lao PDR, Lesot ho and Nepal), such anal ytical work discusses, 
amongst others, issues related to the T&C sectors.  Also included in such work are studies of other 
sectors, which draw lessons of some relevance for th e T&C sectors.  An example is the study of the 
Rural Non-Farm (RNF) sector in Bangladesh.  
55. Analytical work that falls into the second cate gory and that is specific to private sector 
development (PSD) is also not exclusively designed to address the concerns of T&C sectors.  The 
studies are designed to develop strategies to incre ase trade and enhance competitiveness.  But when 
done in countries with a significant T&C sector, th e studies necessarily address the concerns of the 
sector.  Such work has taken place in recent years in three LDCs in which the T&C sector makes a 
significant contribution to employment and exports.  Those three LDCs are Bangladesh, Cambodia 
and Lesotho.  Case studies of important sectors in cluding T&C, which usually take the form of value 
chain analyses, are important inputs into these studies.  They include recommendations that seek to bring about across-the-board changes that would benefit the T&C sector as well.  
56. The thrust of the recommendations of the th ree studies is on reducing transaction costs and 
creating conditions favourable to domestic and fore ign investments.  They focus on policies that 
facilitate global sourcing of inputs, removal of pr otection to domestic firm s, reduction of tariffs, 
improving infrastructure and streamlining of regulat ory policies.  Specific recommendations of the 
Bangladesh strategy, for example, include: easing of  protection of domestic firms that result in 
anti-export bias; greater openness to foreign direct investments; opening up the borders for import of inputs; reduction in tariffs; and a more strategic approach of ‘behind the border’ measures that 
includes investing in infrastructure, skills and tec hnology, streamlining of trade, tax, and regulatory 
policies, and improving quality and safety standards.
20 
57. One of the three pillars of the Lesotho pr ivate sector development strategy aimed at 
developing a diversified export-orie nted economy is to retain and e xpand the existing FDI base in the 
garment industry.21  The priority actions recommended incl ude diversification of input sourcing 
opportunities to reduce dependence on imported inputs,  improvements in the business environment by 
simplifying visa issues, customs clearance, and VAT  rebate repayment, upgrading of infrastructure 
and utility services through private sector management and upgrading of the level and range of skills 
to increase labour productivity.  The Cambodia strategy  is typical of the emphasis placed in all the 
strategies on addressing supply-side constraints (see Box II.1).  
 
Box II.1:  Reform Strategy for Cambodia 
 
The report finds that the three major challenges of  private sector development in Cambodia are:  
 
1) closing the productivity gap; 
 
2) diversifying the production base;  and 
 
3) improving access to affordable water, electricity, transport and telecommunications.  
 
Weak rule of law, bureaucratic costs and corruptio n are identified as the major constraints.  Trade 
facilitation practices were found to have high official and unofficial costs due to a combination of 
administrative overlap, inefficient processes, a lack  of automation and high unofficial and official 
costs.  
 
                                                      
20Opening statement of the Workshop on Trade, Growth and Export Competitiveness in Bangladesh, 
organized by the World Bank in March 2005. 
21 See World Bank (2004a).  WT/COMTD/LDC/W/37 
 Page 15 
 
 
  Reform initiatives suggested to restore confidence and raise productivity are: streamlining of trade 
and trade-related policies, removal of  impediments to diversification, strengthening of the rule of law, 
supplier development to create linkages, improv ing the efficiency of regulatory functions, 
strengthening governance to increase private sector participation in infrastructure, strengthening 
learning through business associations and accelerated leasing as a viable form of finance to ease the 
constraint of limited access to capital.  
 
Source : World Bank (2004b). 
 (b) Foreign Investment Advisory Service (FIAS)  
58. Analytical work done by FIAS is usually not speci fic to any sector and is also more limited in 
scope compared to World Bank work.  It is genera lly intended to help countries create the conditions 
favourable to foreign direct investment.  The work  includes assessment of situations, particularly 
identification of constraints, and assistance in implementing certain solutions.  The most common 
type of analytical work are assessments of investme nt climate which identify barriers to investments.  
Those assessments include assistance to governme nts with the design of measures to attract 
investments and with improving the capacity of gove rnment organizations that are responsible for 
promoting and attracting foreign direct investments.   The following list indicates broad categories of 
issues on which FIAS has provided assistance to sel ected LDCs (indicated in parenthesis):   
1. Institutional :  assisting government organizations, us ually those that deal with foreign 
investments, through design of promotion st rategies, plans to improve organizational 
effectiveness or development of management  tools such as investor tracking guides 
(Bangladesh, Cape Verde, Ethiopia, Madagascar, Malawi, Tanzania); 
 
2. Diagnostic :  examining investment climate and identifying obstacles to flow of FDI 
(Bangladesh, Ethiopia, Madagascar, Malawi);  
 
3. Investment laws and policies :  assisting with drafting laws and regulations, examining the 
feasibility of an export processing zone, institutional framework for investments in infrastructure (Cambodia, Lao PDR, Madagascar, Malawi);  
 
4. Incentives :  assisting with the design of incentive schemes and monitoring, and review of tax 
and fiscal incentives offered to investors (C ambodia, Cape Verde, Nepal, Uganda);   
 
5. Administrative barriers :  assisting with examination of regul atory costs, or modernization of 
company registry (Cape Verde, Lesotho, Madagascar).  
 
59. As noted, FIAS analytical work is typically not specific to any sector.  One example however 
of analytical work that is specifi c to the T&C sector in an LDC is the support provided by FIAS to the 
Cambodian T&C sector to redesign the labour certification and monitoring system that is part of its corporate social responsibility (CSR) strategy in the more competitive post-MFA world.  
 WT/COMTD/LDC/W/37 
Page 16  
 
 Box II.2:  Helping the Cambodian T&C Industry Pursue Corporate Social Responsibility 
Strategy22 
 
In 1999, the US Government imposed quotas on 12 items exported by Cambodia, but committed to 
increase the size of the quota by 6 per cent if the country improved labour standards.  The Cambodian 
Government, the Garment Manufacturers Association of Cambodia, the US Government and the ILO 
initiated an innovative project designed to improve  labour standards, monitor improvements and 
report to meet the US requirements.  The project was highly successful in raising labour standards, 
increasing quota allocations for the country and bui lding Cambodia’s reputation as a “sweatshop-free” 
country. 
 
FIAS conducted an advisory project to assist the Ministry of Commerce and the industry in 
transitioning from the quota-based strategy to a market  led strategy in the post-MFA world.  The 
project tested the assumption that corporate social responsibility strategy offers a market niche.  A 
survey of key buyers revealed that compliance with labour standards is an aspect that influences their 
buying decisions, and that labour standards advant age may be the only issue on which Cambodia may 
outperform its regional competitors.  The project staff worked with all the stak eholders to redesign the 
monitoring and reporting system, using some of the b est practices, to meet the information needs of 
international buyers.  
 
(c) IMF   
60. Analytical work by the IMF h as been geared towards assessing the likely impact of the ATC 
termination on balance of payments, designing a suita ble programme to assist  the countries affected 
and monitoring the situation.  The work includes an assessment of vulnera bility of countries to 
balance-of-payment problems and identification of countries that are most vulnerable23, country 
specific assessment of the prospects for exports pos t-ATC and impact on the balance of payment for 
Bangladesh and Cambodia.24  The recent outlook for Africa25 notes that the factors that make the 
African T&C sector particularly vulnerable to quota removal are (i) that most exports are shipped to the US and EU, where competition is likely to be mo st intense after quota withdrawal; and, (ii) that 
African exports are concentrated in formerly quota-restrained products. 
61. IMF experts also provide significant technical assistance for data improvements, customs 
reform, tax and tariff reform.  As part of the pro cess of Article IV surveilla nce, the IMF works with 
country authorities to identify areas of risk and o pportunity and to devise appropriate policy responses 
to the challenges of international integration.   
2. Projects 
62. The thrust of the projects is to facilitate priv ate sector development, primarily through foreign 
direct investment, by improving investment climate.  All the countries except Lao PDR and Nepal 
have PSD projects that are planned, active or completed in recent years (See Annex II, Table 1).  In 
five countries, Bangladesh, Cambodia, Lesoth o, Madagascar and Tanzania, private sector 
development projects will be initiated soon, followin g the development of private sector development 
strategies in three of the countries.  The Banglad esh, Cambodia and Tanzania projects are at very 
early stages of conceptualization.  The PSD strate gy for Lesotho has been discussed in the country, 
but the project is yet to be designed.  Because th ey are in such early stages of development, it is 
difficult to anticipate the form they are likely to take.  However, there are some indications of the key 
objectives these projects will pursue, and the components they are likely to have.  
                                                     
 
 22 Source : FIAS (2005) 
23 See IMF (2004a). 
24 See Mlachila and Yang (2004); IMF (2004b). 
25 See http://www.imf.org/external/pubs/f t/afr/reo/2005/eng/01/pdf/ssareo.pdf.  WT/COMTD/LDC/W/37 
 Page 17 
 
 
  63. The projects are designed to help countries implem ent the strategies and their contents closely 
follow those of the strategies.  Key components of PSD projects or those laying the foundation for PSD in the selected countries are summarized in  Annex II, Table1.  A roughly hierarchical 
organization of the components in terms of their ap propriateness for different stages of private sector 
development reveals a pattern.  The early stages are characterized by divestiture of public enterprises 
to create room for private sector growth, privati zation and reforms to improve provision of utilities, 
improved efficiency in the use of public funds throug h a greater transparency a nd public investments.  
These are some of the components of the project s in Ethiopia, Haiti, Malawi, Madagascar and 
Zambia.  In contrast, the projects in countries that  already have significant merchandise exports focus 
more on improving competitiveness.  They typically  concentrate on the streamlining of regulatory 
policies; infrastructure provision; development of capac ity in governments to work with private sector 
and develop policies suitable for trade and priv ate sector development; and some aspects of 
entrepreneurial development or technical and mana gerial assistance to private organizations.  A 
typical project has at least three of these elements (See Box II. 3).   
Box II.3:  Second Private Sector Competitiveness Project, Uganda26 
 
The objective of this project is to eliminate the key constraints to Uganda’s international 
competitiveness.  The project has 3 components: 
 
Component 1 : developing infrastructure and financial services 
 
The objective is to provide priority infrastruct ure and related facilities in modern well-planned 
industrial parks.  The project will support provision of  infrastructure in the form of serviced land at a 
new industrial park and support fina ncial institutions with institution building grants to develop and 
introduce products suitable for Micro, Small and Medium Enterprises (MSME). 
 
Component 2 : enhancing enterprise competitiveness 
 
The objective is to improve enterprise creation and growth through MSMEs.  It will be achieved 
through matching grant schemes and new schemes to improve technology, skills and support creation 
of innovative products and new lines of business. 
 
Component 3: improving business environment 
 
This component will address critical issues relating to business environment such as improving 
business registry and survey training schools, improving business registration services and supporting 
the Uganda Law Reform Commission and revisi on of key legislation relating to exports. 
 
64. In addition to the emphasis on trade facilitati on and reducing transaction costs in all the 
projects, many of the projects have components for efficient provision of infrastructure and support to firms, mostly domestic, to improve their capabilities.  The projects seek to provide infrastructure for 
both foreign and domestic firms largely through the creation of export processing zones, economic 
zones and industrial parks, or, on a larger scale through “growth poles” where physical, legal and 
business environments in which industries can thrive  are provided.  The measures aimed at helping 
domestic firms improve their capabilities include matc hing grants for firms to obtain training and/or 
technical assistance, development of export services and linkages, provision of market information and support to local management schools, as in the Ethiopia private sector development capacity building project.
27  
                                                      
26 Source : Project Appraisal Document, Second Private Sector and Competitiveness project, Report 
No. 29639-UG 
27 World Bank (2004c) WT/COMTD/LDC/W/37 
Page 18  
 
 65. The IFC is supporting the establishment of an export zone in Haiti a nd a garment firm in 
Madagascar.  The Haiti Project is a loan to fi nance an export zone focusing on garment production 
promoted by Grupo M, a vertically integrated a pparel manufacturer in the Dominican Republic.  The 
project is a phased development of a 500,000 m
2 site on the border of Haiti and the 
Dominican Republic.  Upon completion, the total s ite area would allow up to 40 factory units 
providing as many as 20,000 direct jobs and 40,000 indirect jobs at full capacity.  The IFC has also 
helped the company improve its labour practices in its facilities in both the Dominican Republic and 
Haiti by providing support for labour mediation. 
66. The Madagascar project consists of setting-up  a 600 sewing machine, apparel manufacturing 
factory specializing in knit and woven casual wear  for the US and European markets.  IFC’s 
investment will be used for financing the capital i nvestment needed to complete the project and for 
funding a part of the working capital requirement of the project.  At full capacity, the company will be capable of producing 12 million garments per y ear and employ 1,750 people.  The plant will use 
modern manufacturing equipment that conforms to EU requirements for operator and product safety.  
3. Balance of Payments Support
28 
67. The IMF introduced the TIM in April 2004 to assi st member countries in meeting balance of 
payments shortfalls that might result from multilateral trade liberalization.  The TIM is not a special lending facility, but a policy designed to make r esources more predictably available under existing 
IMF facilities.  TIM was initiated to help stabilize temporary balance-of-payment problems that arise 
from erosion of tariff preferences in export markets, increases in the price of food imports relative to 
food exports that might result from cuts in agri cultural subsidies in OECD countries and higher 
imports and/or lower exports from intense compet ition in textiles and clothing markets with the 
expiration of the ATC quotas.
29  The Fund’s research suggests that although balance-of-payment 
shortfalls are unlikely to be large for most coun ties and would eventually be dominated by positive 
impact of more open trade, some countries could face  significant shortfalls in the short run.  The TIM 
does not cover the implications of "own liberalizati on" measures such as deterioration in balance of 
payments that might result from the reduction of a country’s own import tariffs.  
68. A member country, whether or not a Member of the WTO, can request support under the TIM 
if it expects a net balance-of-trade shortfall as a resu lt of measures introduced by other countries that 
result in more open and non-discriminatory market access for goods and services.  The Fund will discuss with countries facing such balance-of-payment  shortfalls new arrangements with its existing 
lending facilities, which include upper credit tranches,  the Extended Fund Facility (EFF) or the PRGF.  
The appropriate size of access under both new and exis ting arrangements is determined on the basis of 
anticipated impact of the trade adjustment on the me mber’s balance of payments.  The TIM also has a 
“deviation feature” to augment access if the actual ba lance-of-payment effect turns out to be larger 
than anticipated.  
69. Bangladesh was the first country to make u se of financial support under TIM through an 
augmentation under its PRGF arrangement.  The IM F’s Executive Board had approved Bangladesh’s 
three year PRGF arrangement in June 2003 for an amount equivalent to about $505 million.  In 
July 2004, the IMF Board approved the country’s re quest for an augmentation of its PRGF under the 
TIM of about $78 million, increasing the PRGF amount to about $583 million.
30   
 
                                                      
28 Extracted from IMF (2005a). 
29 See IMF (2004a). 
30 See http://www.imf.org/externa l/np/sec/pr/2004/pr04161.htm  WT/COMTD/LDC/W/37 
 Page 19 
 
 
  B. CONCLUSION  
70. Through analytical work, projects and programmes, the three organizations have helped 
countries understand the implications of quota withdr awal for their economies and develop strategies 
to strengthen their private sectors and make them more competitive.  Three countries in which the 
T&C sectors make significant contribution to empl oyment and exports, private sector development 
strategies developed recently on the basis of the study of important sectors in the economies have 
direct relevance for increasing competitiveness of te xtiles and clothing sectors.  Projects are under 
preparation to implement the strategies.  IFC has supported private firms in two countries to develop 
an export zone and factory.  The IMF has ex tended support to one country under its TIM in 
anticipation of short-term difficulties with balance of payments.  
71. The emphasis that the three organizations place on private sector development and trade in 
achieving growth and poverty reduction provid es the framework under which the projects and 
programmes contribute to increasing competitiveness.   The analytical work has focused on 
understanding the limitations faced by private se ctors in these countries through surveys and 
benchmarking.  These studies highlight the limitations imposed by infrastructure, policies, human 
capital, regulations and corruption.  They recomme nd measures that reduce the costs of inputs and 
doing business and facilitate the development of export businesses that rely on global sourcing of 
inputs including skilled manpower.  For the T&C sector where the advantages of low wages are eroded by low productivity and uncompetitive costs of non-labour inputs that dominate the total costs, 
the reforms significantly enhance competitiveness.  
72. T&C sectors in LDCs are characterized by low value operations that are at the bottom of the 
value chain.  Participation in the sector is of ten limited to low skilled labour; the technical and 
supervisory positions are filled by expatriates.  LD Cs also compete in markets for standard products 
in which competition is likely to be most severe.  The industry is changing in ways that makes it 
increasingly difficult for new entrants to learn a nd gradually move on to performing higher valued 
functions.  While attracting FDI is very useful to  bring in technologies that make use of existing 
capabilities, it is not enough for building capabiliti es.  How to help these countries develop their 
capabilities so that they can build a stronger base for industrialization is a challenge that has not been 
adequately addressed.   
73. The most important contribution of the World Bank projects to improving competitiveness of 
T&C sectors in LDCs is in reducing costs and improving trade facilitation.  The projects typically seek to provide better infrastructure, improve supply of utilities, streamline regulatory processes, 
reduce trade barriers – which enable firms to effi ciently source inputs and the necessary skills – and 
build capacity in governments to effectively respond to the needs of private sector.  Streamlined 
processes and lowered transaction costs enable firm s not only to improve productivity, but also to 
develop the capacity to more effectively respond to market demands.  The provision of appropriate 
physical and institutional infrastructure in export pr omotion zones and in growth poles, as some of the 
projects are proposing to do, could be expected to contribute significantly to improve competitiveness 
of T&C sectors. 
 WT/COMTD/LDC/W/37 
Page 20  
 
 III. TRADE-RELATED TECHNICAL ASSISTANCE AND CAPACITY BUILDING 
74. This section examines how trade-related technical assistance and capacity building 
(TRTA/CB) could improve the competitiveness of the textiles and clothing (T&C) sector in LDCs.  
Sub-section III.A defines the concept of TRTA/C B, presents its various forms and proposes an 
assessment of its importance with respect to de velopment aid.  Sub-section III.B describes TRTA/CB 
projects that can help improve competitiveness in the T&C sector and provides several case studies.  
Sub-section III.C is devoted to the Integrated Fram ework, an integrated programme of technical 
assistance in LDCs while Sub-section III.D pr esents the main findings and concludes. 
A. TRTA/CB:
 CONCEPT AND FORMS  
1. Concept 
75. The aim of TRTA/CB is to promote greater pa rticipation of developing countries in the 
multilateral trading system (MTS) and the world economy.  The OECD and the WTO define TRTA/CB as "all activities that intend to enhance the ability of the recipient country to (1) formulate 
and implement a trade development strategy and create an enabling environment for increasing the volume and value-added of exports , diversifying export products and markets and increasing foreign 
investment to generate jobs and trade; or (2) stimulate trade by domestic firms and encourage 
investment in trade-oriented industries; or (3) participate in and be nefit from the institutions, 
negotiations and processes that shape national trade policy and the rules and practices of international 
commerce".
31 
76. TRTA/CB is a special type of technical assist ance and capacity building (TA/CB), which in 
turn is one of the many forms of development ai d.  Development aid is an essential mechanism to 
address the wide gap between the developed and de veloping world.  Its overall objectives are poverty 
reduction, dependency reduction a nd promotion of sustainable development.  TRTA/CB and TA/CB 
more generally, are seen as ways to contribute to  these goals while promoting national ownership of 
assistance and better sustainability, and progressive ly reducing reliance on external assistance.  
TRTA/CB is frequently mentioned as a priority and the final Declaration of the WTO Doha 
Ministerial meeting in paragraph 41 reiterates its importance, reaffi rming "the important role of 
sustainably financed technical assist ance and capacity-building programmes".32 
77. In this section, the emphasis is put on TRTA/CB projects clearly related to the T&C sector in 
LDCs.  But some other TRTA/CB programmes that contribute to enhance the institutional, social 
and/or economic environment, and thereby benefit the T&C sector are also examined, though in less 
detail.  The focus on TRTA/CB, instead of TA/CB in general, is not restrictive.  Every TA/CB 
programme affecting the T&C sector in LDCs necessarily possesses a trade dimension, as the 
development of this sector is essentially driven by  its export potential, not by local demand.  Thus, 
any TA/CB project in this area is usually considered as trade-related .  
78. The competitiveness of the T&C sector depends on various factors that are not 
sector-specific.  Assistance deliver ed to the T&C sector alone can only address a subset of all supply 
constraints.  Efforts undertaken by LDC government s with the support of providers of development 
assistance to define appropriate macro-economic and tr ade policies, to build or reform institutions, to 
develop infrastructure, and to address education and h ealth problems, play a crucial role.  Assistance 
delivered in those areas will contribute to build  a favourable institutional, economic and, social 
environment, thereby significantly benefiting the T&C sector in countries where it is prominent and 
presents a strong potential.  
                                                      
31 See WTO and OECD (2004). 
32 For general considerations on TRTA/CB, see for example OECD (2001) and OECD (2004b).  WT/COMTD/LDC/W/37 
 Page 21 
 
 
  79. In 2003 (latest year available), total Official  Development Assistance (ODA) from the OECD 
Development Assistance Committee countries amounted to $69 billion, of which $18.4 billion (26 per cent) went to LDCs.
33  This sum is split between bilateral grants and grant-like flows 
($51 billion), bilateral loans (- $1.2billion in 2003,  due to reimbursements)  and contributions to 
multilateral institutions such as UN, EC, IDA, a nd regional development ba nks ($19.2 billion).  
Bilateral grants and grant-like flows comprise, among others, development food aid ($1.2 billion), 
emergency and distress relief ($5.9 billion), debt fo rgiveness ($8.3 billion) and technical co-operation, 
which represents a total of $18.4 billion, of whic h $3.7 billion went to LDCs.  In comparison, the 
Doha Development Agenda Trade Capacity Building Database lists 1,953 TRTA/CB projects 
delivered to LDCs in 2003 for a total of $613 million.  
2. Forms of TRTA/CB 
80. Table III.1 presents a classification of TRTA /CB projects such as defined by the Doha 
Development Agenda Trade Capacity Building Da tabase (DDA TCBD), a joint initiative by the WTO 
and the OECD (see Sub-section III.B).  Sub-cate gories are grouped under two main headings "Trade 
policy and regulations" and "Trade development".  The first one covers support to aid recipients’ 
effective participation in the MTS, analysis a nd implementation of multilateral trade agreements, 
trade policy mainstreaming and technical standards,  trade facilitation including tariff structures and 
customs regimes, support to regional trade arrangeme nts and human resources development in trade.  
The second encompasses business development a nd activities aimed at improving the business 
climate, access to trade finance, and trade prom otion in the productive sectors, including at the 
institutional and enterprise level.  T hose categories, which correspond to areas in which TRTA/CB 
activities can take place do not tell much about the forms of TRTA/CB. 
Table III.1 
DDA TCB Classification of TRTA/CB projects 
  
I. TRADE POLICY AND REGULATIONS (20) II. TRADE DEVELOPMENT (6) 
  
Dispute Settlement Trade Promotion St rategy Design and Implementation   
Customs Valuation Market Analysis and Development   Technical Barriers to Trade Business S upport Services and Institutions   
Sanitary and Phytosanitary Measures  Public-Private Sector Networking   
Trade Mainstreaming in PRSPs /dev. Plans E-commerce   
Trade-Related Intellectual Property Rights Trade Finance   
Agriculture  
Services  
Tariff Negotiations - Non-Agricultural Market Access  Rules  Trade and Environment  Trade and Investment  Trade and Competition  
Trade Facilitation  
Transparency and Government Procurement  
Accession  
Tariff Reforms  
Trade-Related Training Education  Negotiation Training  Regional Trade Agreements (RTAs)   
Source: DDA TCBD.  For category descriptions , see http://tcbdb.wto.org/trta.asp. 
                                                      
33 Source: Final ODA Data for 2003, OECD.  DAC is the principal body through which the OECD 
deals with issues related to cooperation with develo ping countries (www.oecd.org/ dac).  DAC aid recipient 
countries are split between "Developing countries and te rritories" (Part I) which includes the 50 LDCs and 
"Countries and territories in transitio n" (Part II).  ODA is destined to th e first group while Official Aid (OA) 
goes to the second group.  See Annex III fo r a list of the 23 DAC member countries. WT/COMTD/LDC/W/37 
Page 22  
 
  
81. Training (or capacity building) is the core component of most TRTA/CB projects and 
integrates the main features of TRTA/CB: owners hip, sustainability, a nd dependency reduction.  
Training represents a transfer of knowledge, which will eventually enhance the capacity  of the 
recipients to do certain things.  For instance, when the WTO Secretariat organizes training sessions 
where delegates and officials from developing countr ies are given the possibility to learn about the 
MTS, trade agreements (e.g.: ATC, PSP, TBT), or trade disputes, the objective is to enhance 
capacities and participation of developing countries.  But TRTA/CB in the context of the WTO is only 
one among many examples.  Also considered as traini ng is a situation where an expert visits a country 
to advise the director of a factory on how to improve input sourcing, a government official on how to 
develop custom capacity, or the members of a textiles manufacturers association on foreign 
competition.  In these three examples, technical assi stance will help, among other things, the director 
to reduce its production costs, the government to reduce smuggling, and the business association to 
improve competitiveness.  In support of training activities, donors may also provide equipment or machines or finance the setting- up of training institutes.  Similarly, in the area of information 
technologies (IT), light infrastructure (e.g.: comp uters, software packag es, internet connexions, 
communication means) can be provided in the contex t of a TRTA/CB project, in addition to training. 
82. TRTA/CB also comprises activities such as assi stance to producers to promote and market 
their products (e.g.: promotion, quality enhan cement), or develop new products (e.g.: product 
diversification, fair trade initiatives).  Always underlying is the objective to produce lasting, positive 
effects once TRTA/CB has been delivered.  Even  though those latter programmes imply more than 
just training, their budgets usually remain relatively small.   
83. Finally, analytical and advisory  work constitutes another, common form of TRTA/CB.  
Sectoral studies serve to lay down the grounds for deve lopment strategies of a particular sector and, as 
for textiles and clothing in LDCs, represent a signi ficant fraction of TRTA/CB activities.  A sectoral 
study can be a project on its own or be part of a bigger analysis aiming at reviewing and developing, 
for example, the manufacturing sector, the private sect or, or the whole economy.  Analytical work can 
also be one of the components of a more comprehensive action plan that includes conduction, coordination, supervision, a nd/or financing of projects.
34  
B. TRTA/CB  PROJECTS  
84. This Sub-section presents different types of TR TA/CB projects, illustrated by several related 
case studies, and draws some lessons.  The project s presented below were selected because of their 
relatively short implementation period, rela tively low costs, and their sustainability. 
Box III.1:  The Doha Development Age nda Trade Capacity Building Database 
 
The analysis of TRTA/CB projects related to textile s and clothing in this report relied on the Doha 
Development Agenda Trade Capacity Building Da tabase (DDA TCBD).  The DDA TCBD has been 
established jointly by the WTO and the OECD to provide information on tr ade-related technical 
assistance and capacity-building projects.  This on -going project already provides information on 
more than 10,000 national and regi onal TRTA/CB projects.  The period covered is 2001 to 2003.  As 
of April 2005, data is still partial for 2004.  Wh ile many donors maintain their own databases, often 
accessible on the Internet, the DDA TCBD is unique in  that it lists bilateral and multilateral initiatives 
carried out by 27 countries (including the European Commission) and 26 agencies.35 Note that given 
the time period and the number of reporters, it h as only limited coverage and is by no means 
exhaustive.  
 
                                                      
34 See the Integrated Framew ork in Sub-section III.C. 
35 See Annex III for a complete list of  donors reporting to the DDA TCBD.  WT/COMTD/LDC/W/37 
 Page 23 
 
 
  Among the 76 projects related to textiles and clothing  identified in the database, 41 took or take place 
in LDCs, for a total of $30 million: Bangladesh (13 projects, representing $16 million), Cambodia (4, 
$3 million), Eritrea (3, $150,000), Ethiopia (1, $702, 000), Ghana (1, 77,000), Lao PDR (2, 49,000), 
Madagascar (2, $80,000), Malawi (1, $20,000), Mali (1, $1.2 million), Nepal (1, $20,000), and 
Uganda (6, $4.2 million).36  Of interest is that among the LDCs  for which the T&C sector represents a 
significant part of total exports and GDP, onl y Bangladesh, Cambodia, Lao PDR, Madagascar and 
Nepal have received TRTA/CB, while Cape  Verde, Haiti and Lesotho have not.  
 
Results suggest that, in terms of budget, more than half of the total TRTA/ CB in relation to Textiles 
and Clothing goes to Bangladesh, where it represents a bout 35 per cent of all activities reported to the 
DDA TCBD for this country.  In Uganda and Camb odia, they represent 25 and 11.6 per cent of total 
TRTA/CB, respectively.  For all other co untries, percentages do not exceed 5 per cent.37 
 
As for developing countries, it appears that they  continue to receive aid for improving their T&C 
sector.  For example, the European Commission is carrying out a $100 million project in Egypt to 
support the Government in modernizing the country's spinning and weaving industry.  Four 
TRTA/CB programmes were or are conducted in  Sri Lanka for a total of $2 million.  
 
The total sum of TRTA/CB programme budgets is $144 million.  When excluding the 'outlying' EC 
project in Egypt, the average budget for the 76 projects is $580,000 (TRTA/CB) and the median is 
$191,000.  Fifty-one projects exclusively target th e T&C sector, while 25 explicitly affect the sector 
but have a broader scope. 
 
The percentage of projects affecting the textiles (excluding cotton) sector in developing countries is 
41 per cent while it is only 19 per cent in LDCs, wh ich is consistent with the present situation in 
LDCs, where the priority is given to developing the garment industry because textiles production is 
much more intensive in capital (machines), skilled labour (to operate them) and resources (especially 
water and electricity). 
 
Regarding the purpose of the projects carried out in LDCs, 16 projects (representing $4.6 million) fall 
into the sub-category "Trade Promotion Strate gy Design and Implementation" which regroups 
initiatives that contribute to the development of a national sector-level trade strategy; workforce 
development in export industries;  and/or the impl ementation of sector-specific, including 'fair trade 
programmes'.  Nine projects (representing $4.8 milli on) belong to the sub-category "Market Analysis 
and Development", which comprises projects aiming at enhancing access to market information and 
providing advice on standards, packaging, quality control, marketing and distribution channels. 
 
Finally, Table III.2 presents the figures on TR TA/CB activities as reported to the DDA TCBD over 
the period 2001-2003.  Note that the number of proj ects identified as related to T&C in LDCs in this 
table, does not fully reflect the actual efforts bei ng made in this sector, as it accounts only for projects 
of "Market Analysis and Development" and "T rade promotion strategy and implementation". 
 
                                                      
36 Capacity-building projects by WTO are excluded. 
37 Absolute terms must be interpreted with caution as, for example, the popu lation of Bangladesh is 
144 million, while it is 13.6 million in Cambodia, and only 1.9 million in Lesotho ( source : The CIA World 
Factbook).  It is therefore no t a surprise to see much more aid flows going into Bangladesh. WT/COMTD/LDC/W/37 
Page 24  
 
  
Table III.2 
Trends in TRTA/CB activities 
 
 2001  2002  2003 
Heading: TPRa TDb Total  TPRa TDb Total  TPRa TDb Total 
            
Total number of projects 2269 1959 4228  4443 2731 7174  5197 2686 7883 
Total amount (US$ '000) 658595 1352975 2011570  665530 1319447 1984977  983442 1761910 2745352 
            
Number of projects in 
LDCs 451 379 830  1144 557 1701  1137 518 1655 
Total amount (US$ '000) 113135 367741 480876  71184 225599 296783  284477 328256 612733 
            
Number of projects  
related to T&C in LDCsc N/A 3   N/A 3   N/A 5  
Total amount (US$ '000)  782    186    2253  
            
a Trade Policy and Regulations. 
b Trade Development.  
c Number of reported projects belonging (1) to either category "Marke t Analysis and Development" or category "Trade promotion str ategy 
and implementation" and (2) to industry B32163 "Textiles, leather and substitutes". 
Source : Development Gateway and DDA TCBD.  Type of flow: grants and loans.  
 
1. Developing Sectoral Strategies 
85. A great deal of TRTA/CB related to textiles and clothing is analytical work.  In particular, 
sectoral studies constitute a valuable and necessa ry step towards a sound, coherent sectoral 
development strategy and, ultimately, towards enha ncement of competitiveness.  They are particularly 
relevant in the post-ATC context.   As conditions have been cha nging drastically over the past few 
years, it may be necessary for LDCs to assess or re -assess the situation in the light of these new 
developments.  The first step of a typical sectoral  study, the diagnosis phase, serves to establish the 
profile of the garment industry or the whole T&C sector.  During this phase, the weaknesses and 
threats are identified, as well as the strengt hs and opportunities.  In the second phase, 
recommendations are formulated on how to address pr oblems and further explo it opportunities.  Also 
possibly included are advice on implementation, suggest ed timeframes and priorities, list of potential 
donors, etc.  Implementation of recommendations is traditionally not part of the study and is the 
subject of subsequent projects. 
86. One of the goals of the Integrated Framewor k (IF) through the Diagnostic Trade Integration 
Study (DTIS) and the resulting Action Matrix is to  develop strategies for prominent export-oriented 
sectors and industries.  The various recommendations based on the findings of the DTIS are gathered 
into the Action Matrix, which contains empty cells next to the recommendations.  These cells are then 
to be filled with the names of donors that w ill finance or/and implement these recommendations.  
Excerpts of DTIS and Action Matrices can be found in Annex III.38 
87. While a sectoral study constitutes a form of TRTA/CB per se , it is important that every other 
TRTA/CB project either contains its own diagnosis phase or draws on that of a previous study.  In this 
regard, donors and beneficiaries shoul d exploit existing studies and research to a greater extent.  Lack 
of cooperation, information, transparency and acc ountability may result in a wasteful duplication of 
effort.  In this respect, the great benefit of th e IF is to conduct the diagnosis phase once for many 
subsequent TRTA/CB projects.  In addition, it is important that sectoral studies achieve a proper balance between micro and macro levels of action.  On the one hand, studies focusing exclusively on 
textiles and clothing without reference to the br oader context may be too narrow and miss important 
considerations such as institutions or infrastructur e issues.  On the other hand, macro studies covering 
the whole private sector may be too ge neral and vague in their objectives. 
                                                     
 
38 See Sub-section III.C below for more information on the IF.  WT/COMTD/LDC/W/37 
 Page 25 
 
 
  Box III.2:  ITC's Sectoral Study in Cambodia 
 
ITC's study "Building blocks for a country action pl an for textiles and clothing" provides an example 
of a sectoral study.39 Carried out in 2002 with a budget of about $20,000, this study establishes a 
diagnosis of the T&C sector and  proposes a number of  "building blocks", that is, the elements of a 
development strategy: 
 
- private-public partnership for dialogue between Cambodian Government and industry represented 
by the Garment Manufacturers' Association in Cambodia;  
- monitoring system on the MTS; 
- capacity building at the institutional level: mon itoring business environment, market analysis, 
information, promotion activities based on the positive image that Cambodia carries among 
buyers and consumers; 
- benchmarking, notably using the FIT applicati on developed by ITC (see Improving Access to 
Information and Information Technologies below); 
- reducing dependence on imports for accessories th rough the development of an industry of 
accessories which are relatively easy to produce.  Such factories could be located in existing 
EPZs; 
- improving sourcing of fabrics: need to reinforce buyer power by providing better information on 
cheaper alternatives for sourcing.  Dependence on China and India is dangerous because of the 
risk that Cambodian orders be honoured only once domestic demand for fabric has been satisfied 
there.  Therefore, a solution would be to deve lop sourcing relationships with Thai manufacturers 
to reduce lead times; 
- improving productivity and quality through the development of the Cambodia Garment Training 
Centre set up by Japan; 
- encouraging product innovation and design development; 
- EPZs: four EPZs are located near the border with  Thailand, a country with a strong textiles 
industry.  Increased cooperation would allow to e xploit respective comparative advantages of the 
two countries and would result in synergies; 
- improving forward integration and marketing by exploiting the positive image of Cambodian 
products, developing marketing skills in Cambodia,  creating direct links between Cambodia and 
buyers.  
 
88. Besides sectoral studies, organizations (e.g. UNIDO, ITC, OECD) and agencies devote 
significant efforts to analysis and research on textiles and clothing, in particular in LDCs.  This kind 
of analytical work is not properly considered as  technical assistance, because it does not follow a 
specific request from a country.  The geographical cove rage is often broader than that of a typical 
sectoral study.  There exists a number of recen t, detailed – and sometimes voluminous – studies 
addressing the question of textiles and clothing.  One can mention US ITC (2004) and OECD (2004a) both presented in Box III.3, UNDP (2005) which l ooks at development polic y options in the T&C 
sector of Asian countries, IFM and partners (2004)  which examines the situation of European 
countries as compared to their competitors in th e context of the quota abolition, and Nordas (2004) 
who assesses the likely impact of the ATC termina tion, taking into account recent technological and 
managerial developments in th e sector, and focusing on recent developments in supply chain 
management.  All these studies conduct insight ful analysis and their conclusions and 
                                                     
 
39This study is part of a project (ref. INT/W4/13) during which sectoral studies were also realized for 
Malawi and Nepal.  A similar study exists for Madagas car ("Capacity Building for Garment Exporters to Meet 
2005 Challenges", ref. INT/W4/58, ITC). WT/COMTD/LDC/W/37 
Page 26  
 
 recommendations can provide very useful directions  for developing sectoral strategies and also for 
future technical assistance activities.
40  
Box III.3:  Examples of Analytical Work 
 
The OECD global study 
 
The OECD (2004) study entitled "A New World Map in Textiles and Clothing" focuses on the 
adjustment challenges facing the T&C sector in the po st-ATC era.  It reviews the most recent market 
developments throughout the entire supply chain, from natural fibres to retail distribution.  It 
examines the policy challenges in the fields of tr ade, labour adjustment, technology and innovation, 
and other regulatory dimensions that are important  determinants of a country’s drive towards global 
integration.  It covers adjustment in both de veloped and developing countries and underscores the 
vulnerability of suppliers located in small developi ng countries and LDCs that have specialized in the 
final assembly of clothing produc ts using imported textiles.  The main recommendations as outlined 
in the study's executive summary are to: 
 
- shift the industrial cluster of expertise from ma nufacturing to the higher value-added segments of 
the supply chain by placing greater emphasis on e ducation and training of services-related skills, 
such as design, material sourcing, quality control, logistics and retail distribution; 
- support the emergence of qualified pools of expe rtise and the adaptability of the workforce; 
- improve the regulatory environment for essential business services; 
- stimulate collaborative innovation processes in the fields of dissemination and technology 
transfer; 
- negotiate improved market access for textiles a nd clothing products, especially for highquality 
textiles; 
- remove remaining obstacles that prevent reta il distribution systems and remove production 
measures that distort markets. 
 
The US ITC Report 
 
US ITC released a report in 2004 wh ich assesses the situation of certa in foreign suppliers of textiles 
and clothing to the US market, with respect to th eir competitiveness and other factors in relation with 
their adjustment to the final completion of the phase- out of quotas.  It also addresses factors such as 
textiles and apparel consumption, production, empl oyment, and prices in major exporting countries, 
as well as their textiles and apparel trade, particularly with industrial country markets.  It identifies the 
key changes that likely will occur following quota el imination.  The selection of countries is based on 
the importance of their textiles and apparel industri es as a source of employment and export earnings.  
Among others, it includes four LDCs (Ba ngladesh, Haiti, Lesotho and Madagascar). 
 89. As useful as analytical work can be, it shoul d not be considered as "timeless".  The past 
decade has witnessed profound chang es in the world of T&C and the latest developments must be 
taken into account when conducting this work. 
2. Training of the Labour Force 
90. Most of the sectoral studies point out the seri ous shortages of skilled labour in LDCs.  This 
lack of local trained staff represents a ma jor obstacle to productivity and competitiveness 
                                                     
 
40 For this to work, these studies need to be made widely available to donors, governments, 
organizations, and to all relevant stakeholders.  WT/COMTD/LDC/W/37 
 Page 27 
 
 
  enhancement in LDCs.  While the T&C sector re lies heavily on unskilled labour to perform basic 
operations (RMG), improving its sk ills would allow it to produce more complicated high value-added 
products, thereby contributing to di versification efforts within the sector and also to develop niche 
markets.  Trained manpower is also needed in the areas of management, information technologies, 
marketing and fashion design.  Often, the main tasks in garment factories are in the hands of 
expatriates from the country where the owners are located.  This favours th e phenomenon of footloose 
companies.  To address this issue, TRTA/CB providers can carry out a wide set of activities which may consist in organizing expert visits and workshops, helping to set up vocational training centres, 
professional schools, and fashion and design institutes.   They also include the introduction of courses 
and programmes in universities.  
3. Promoting Exports 
91. Bringing producers and buyers together is th e central theme of several surveyed TRTA/CB 
projects.  Such projects can consist of organizing and financing trips for producers and/or business 
associations' representatives to major export markets, with a view to informing them about buyers' 
needs and establishing lasting business relations hips.  Producers and/or business associations 
participate in promotion events and meetings (trade  fairs) where they are given the opportunity to 
present and promote their activities.  Alternatively, such  events can be organized in the South.  In this 
case, technical assistance providers help manufacturers pay registration fees, create promotion material and/or facilitate contact with buyers.  Also, technical assistance can be delivered to 
employees of local export promotion bureaus or business associations in order for them to coordinate promotion efforts at a higher level. 
Box III.4:  Sida's Textilica Initiative 
 
Launched by Sweden’s development agency  Sida, "Textilica" is a good example of a 
promotion-enhancing programme.  With a budget of  about $425,000 in 2004, Textilica is an annual 
event aimed at improving the producer-buyer matching process by inviting a dozen business 
associations representing southern countries to Sweden.41  According to Sida, participants must have 
reached a certain level to attract main buyers in Europe.  Also, they must be from a Sida partner 
country.  Activities include field training and pr e-selection of participants in each country, 
information on the Textilica concept and on activitie s taking place in Sweden, one week of special 
seminars and meetings in Sweden with the main  buyers in Europe.  A SIDA representative reports 
that participants find Textilica a unique project th at combines training and business meetings with the 
European market, but also stimulates South-South cooperation.  
 92. While extremely valuable, promotion initia tives do not compensate for the lack of 
productivity and other competitiveness issues.  Promotion can only intervene at a stage of 
development, when conditions and production capacities are such that exporting is possible and 
demand from buyers can be satisfied.  In this case, promotion will help to make up for the lack of 
visibility of manufacturers with idle capacity or  strong development potential.  In delivering 
assistance, initiators must therefore caref ully choose the time and the recipients. 
4. Promoting Quality, Compliance with Standards, and Fair Trade Initiatives 
93. An increasing number of TRTA/CB projects aim at improving the quality and/or production 
processes of export products, including cotton, and other textiles and clothing, as more and more 
importing countries now require that products achieve certain levels of quality and/or performance or 
comply with certain standards.
42 
                                                      
41 Ref. SIDA 71001536 
42 On standard-related tech nical assistance, see WTO World Trade Report 2005. WT/COMTD/LDC/W/37 
Page 28  
 
 94. Fair trade, which is seen as a promising area for sustainable development and sustained 
competitiveness in textiles and clothing, receive s increasing support from TRTA/CB providers.  
FINE
43 defines fair trade as "a trading partnership, based on dialogue, transparency and respect that 
seeks greater equity in international trade.  It c ontributes to sustainable development by offering better 
trading conditions to, and securing the rights of, ma rginalised producers and workers – especially in 
the South".  Its proponents argue that socially and environmentally sustainable production can 
contribute to a better management of resources and en hanced work conditions.  It may also create new 
opportunities for manufacturers and producers of  LDCs as a result of a growing demand from 
consumers for "fair trade" (or "labelled") products , often higher value-adde d products which sell at 
higher prices. 
95. Fair trade initiatives build on the growing awaren ess of consumers, rela yed by retailers, about 
conditions in which the products they buy are manu factured.  For clothing, the main concern is 
working conditions, in particular child labour, and the existence of sweatshops. 
Box III.5:  JICA's Quality Improve ment Programme in Sri Lanka 
and Other Quality-Related Initiatives 
 
Between 1996 and 2001, the Japanese Internationa l Cooperation Agency (JICA) assisted the 
Government of Sri Lanka – not an LDC – in impr oving the quality of Sri Lanka n fabrics and garments 
to meet buyers' requirements.44  The purpose of this project was to upgrade testing facilities, 
certification procedures and training capacities at the Textile Training & Services Centre and the 
Clothing Industry Training Institute (CITI), two government-owned institutions providing 
certification and consulting services, as well as tr aining to employees and managers of the T&C 
industry who then introduce quality testing procedur es in factories.  JICA provided equipment and 
training to employees of both institut ions.  In 2004, a team ran a project assessment.  The results of 
this evaluation were qualified.  Testing capacities of the Centre were significantly improved and the 
Centre obtained several ISO certifications.  Pa rticipants to the workshops organized by both 
institutions were extremely satisfied.  Subsequently , several employees left and the level of activity 
significantly decreased, as a result of more and mo re factories in Sri Lanka being equipped with 
in-house testing facilities.  The evaluation team ma de several recommendations to reverse this trend 
such as privatizing both institutions, upgrading the c ontent of training courses, inviting international 
experts and consultants a nd launching an advertising campaign.  It  remains that the quality of fabrics 
and garments was improved as a result of the project. 
 
Another project intended to increase the quality, br anding, compliance and competitiveness of export 
oriented products is the $12 milli on programme funded by the European Union in Bangladesh.  This 
project focuses on quality management system an d conformity assessment, support to the T&C 
industry, fisheries inspections, and awaren ess of private sector on quality and SPS/TBT. 
 
Two projects funded by US Department of Labour in Cambodia aim to improve working conditions 
by establishing an independent monitoring system and improving the capacity of employers, workers 
and labour ministry officials to ensure complian ce with Cambodian labour law and internationally-
recognized labour standards.45  
 
                                                      
43 FINE is a network formed by four organizations, namely FLO, IFAT, NEWS! and EFTA, in order to 
share information and to coordinate lobbying and awareness-raising efforts in the area of fair trade. 
44 Ref. JICA 0661103E0/2 
45 Ref. US DoL 016-0476-03-A and 016-0491-02-A. No further detail about the two projects could be 
obtained.  WT/COMTD/LDC/W/37 
 Page 29 
 
 
  5. Improving Access to Informatio n and Information Technologies 
96. Enhancing access to information technologi es (IT) can contribute to strengthening the 
competitiveness of the T&C sector by improving information and communication and optimizing production processes.  There is considerable room for improvement and for technical assistance in this 
area.  Information technologies are crucial in the T&C sector where timing and up-to-date information 
are important determinants of competitiveness.  
97. First of all, it is crucial that manufacturer s be equipped with computers and Internet 
connections.  This calls for technical assistance that  fits within a strategy for reducing the so-called 
"technology gap".  Once a manufacturer is "computeri zed", he can have access to a wide range of 
tools, as well as valuable information and data.  Internet is an immense source of information and 
knowledge for market analysis.  Among its many applications and benefits, Internet allows 
manufacturers to learn about current trends a nd consumer preferences in export markets, access 
conditions and procedures and natio nal regulations.  Internet is also useful to learn about other 
potential buyers and export markets.  Finally, a presence on the Internet can significantly add to a 
manufacturer's visibility and constitute a cheap way to  advertise its activities, and thus possibly attract 
new buyers.  
98. IT can also greatly enhance communication.  E-mail for example is a cheap, rapid and 
convenient way for a manufacturer to communicate w ith buyers and suppliers.  Much more elaborate 
IT solutions are in use to facilitate trade, shorten lead-times, and reduce inventory costs.  
99. In this respect, ITC is preparing a Business Guide on Electronic Applications in Textiles & 
Clothing Trade, underlining the importance of e-commerce and describing how to respond to new 
“e-requirements” of buyers.
46 In parallel, ITC organizes Works hops on how to develop tailor-made 
solutions following buyer requirements. 
100. Getting to know its competitors and its position compared to them is vital for any business, 
even more so in a context of the extremely fierce competition which characterizes T&C industry.  To conduct this analysis known as benchmarking, a ma nufacturer needs good data and information on its 
own business unit as well as those of its compe titors.  ITC has developed a software-based 
methodological tool called FiT.  Available on CD-R om and online, the tool compares and positions 
the enterprise performance of one firm with respect to a group of  other national and international 
firms on a confidential basis.  The questions are or ganized into four main sections, ‘management and 
organization’, ‘financial planning’, ‘marketing and sal es’ and ‘production, opera tions and sourcing’.  
101. Computer technology can also help improve the production process.  It is possible to reduce 
waste of fabric during the cutting phase by maximizi ng the number of shapes to be made from a piece 
of fabric as a result of computer-assisted design.   
102. As a complement to these activities, it is necessar y for beneficiaries to receive proper training. 
                                                     
 
46 As of May 2005 and according to ITC, the book was in the final editing process and the final version 
should be available in the course of July 2005.  WT/COMTD/LDC/W/37 
Page 30  
 
  
Box III.6:  Example of IT Projects by UNIDO and USAID 
 
In the field of e-commerce, UNIDO is  conducting a $728,000-project in Uganda.47 Initiated in 2003, it 
aims at providing small and medium enterprises (SMEs) with information and support about, and 
access to, information and communication technologi es (ICTs) by establishing a network of regional 
centres, called District Business Resources Centers.   These DBRCs allow SMEs to access business 
information regarding their sector of activity or to have a presence on the Internet.  The main targets 
are SMEs active in sectors with high e xport potential, including textiles.  
 
In Bangladesh in 2002, USAID initiated a proj ect called Job Opportunities and Business Support 
(JOBS).  The overall objective of this project is to provide technical assistance and training to private 
enterprises in several sectors, such as footwear and leather goods, handicrafts, and specialized textiles.  
One of its components, with a budget of $400,000, targ ets governments’ and private sectors’ needs for 
training and policy formulation in information technologies. 
 
6. Labour Force Redeployment and Product Diversification 
103. Most of the projects under review aim to im prove competitiveness through various channels, 
while very few programmes are meant to mitigate th e adverse effects of the quota phase-out in LDCs, 
in particular the risk of unemployment.  In a concept note for a project of human development in 
Bangladesh, UNDP (2005) concludes that most trad e-related activities have been directed "to 
cushioning the impact of the MFA expiration by fo rmulating mechanisms for increasing the efficiency 
of the firms in the sector".  Some other activ ities focus on supporting advocacy for possible activities 
by developed countries to mitigate the impact on less competitive countries.  But, according to 
UNDP, "There is also an urgent need to directly address the issue of massive loss of employment and 
put in place mechanisms to mitigate the negative impact on vulnerable groups, mainly workers and 
small entrepreneurs, since it is expected that the negative human development will be very much real 
and operate through massive job displacement both in and out of the Ready Made Garment [sector]". 
Box III.7:  Asian Development Bank (ADB) Programmes for Social Protection  
of Female Workers in the Clothing Industry 
 
The ADB is carrying out two projects in Cambodia (launched in 2003, of a total budget of $590,000, 
$500,000 financed by ADB) and in Bangladesh (started in 2004, budget $525,000, $420,000 by 
ADB).48 The overall objective of both projects is to "help the country reduce poverty of [Ready Made 
Garment] sector employees in a sustainable manner" .  The purpose is to reduce unemployment risks 
associated with the end of the ATC and to improve  job opportunities for female garment workers.  
 
In Cambodia, the expected outputs are: 
 
1. a comprehensive situation analysis of the garmen t industry and workers in the sector, identifying 
likely scenarios and recommendations for options;  
2. following the recommendations, introduction of small pilot schemes to (i) build formal and 
informal safety nets e ffectively establish links with altern ative employment opportunities for the 
workers, and (ii) develop and test effectives short-term social protection measures for those 
retrenched; 
                                                      
47 Ref. UNIDO 2213-00/03 
48 Ref. ADB, BAN 37735 and CAM 37100  WT/COMTD/LDC/W/37 
 Page 31 
 
 
  3. strengthened capacity of concerned government, priv ate sector, and civil society organizations to 
address the downside risks cause by ATC phase out. 
A very similar project carried out by UNDP and entitled "Human development implications of MFA 
phase out and sustainable policy options." t ook place in Bangladesh between 2003 and 2004.49 
 
104. Countries affected by the ATC termination will presumably need to identify opportunities to 
diversify within and outside the T&C sector.  For instance, in sectoral studies conducted in 
Madagascar and Cambodia, ITC suggests, to develop an industry for garment accessories.  
7. Exploiting the Opportunities Offered by the MTS 
105. In these challenging times, it is important that officials of LDCs acquire the knowledge and 
skills necessary to participate activ ely in the MTS and to defend their interests.  Most importantly, 
they must be aware of every opportunity offered by  the MTS, in particular preferential access granted 
to LDCs by importing countries, so they can exploit them.  Importing countries with GSP schemes need to promote and inform on their respective schemes, through conferences, training sessions and 
the Internet.  In addition, these countries should en sure that exporters of eligible countries know the 
rules and provisions, such as the rules of origin, asso ciated with preferential access so that exporters 
can comply with them.
50  
Box III.8:  The WTO Secretariat's Technical Assistance Related to Textiles and Clothing 
 
It is with the view of facilitating trade that th e WTO Secretariat carries out many capacity-building 
activities for its Members.  As stated in the 2005 T echnical Assistance and Training Plan of the WTO, 
the mandate given by Members to the WTO Secretar iat regarding technical assistance is to "enhance 
institutional and human capacity in beneficiary c ountries to address trade policy issues and concerns, 
'mainstreaming' trade into national development and poverty reduction polici es and facilitating a fuller 
participation of beneficiaries in the [MTS] and effective participation in the negotiations".  
 
Between 1998 and March 2005, the WTO Secretaria t carried out (or contributed to) 46 projects 
specifically addressing issues in relation to textiles and clothing (including cotton).51 These projects 
essentially consisted of conferences, workshops and me etings at the regional (a majority) or national 
level.  The objective of these events was mainly to  inform participants of the implementation of ATC 
and the consequences of its termination.  They also constituted a platform of discussion and an 
occasion to exchange views.  It is also the occasion for the WTO Secretariat and co-organizing 
agencies and organizations (e.g.: ITC, IMF, Worl d Bank) to present their different programmes of 
assistance  (e.g.: TIM, PSP, JITAP, IF) available to  LDCs and developing countries so that the latter 
can knowledgeably formulate request s for assistance.  In addition, representatives of major importing 
countries are generally invited to present the prin ciples, conditions and benefits of bilateral and 
multilateral trade agreements and GSPs.  
 
As of 2005, technical assistance can only be delivered  as a result of an explicit request by a Member 
country. Countries affected and concerned by ATC termination are still entitled to formulate a 
national request for technical assistance in T&C.  The WTO Secretariat will then be able to set up 
national workshops for requesting Members. 
 
In its efforts the WTO Secretariat is supported by ot her agencies.  As an example, USAID carried out 
in 2003 a TRTA/CB project in Eritrea which part ly consisted in sending representatives of key 
                                                      
49 Ref. UNDP, BGD/03/006 
50 See Section IV below. 
51 Information was obtained through the WTO In stitute for Training a nd Technical Cooperation 
database which keeps track of activities undertaken by the ITTC and other WTO divisions in the fields of 
technical assistance (TA) and training. WT/COMTD/LDC/W/37 
Page 32  
 
 sectors, in particular leather and textiles, and offi cials from Ministry of Trade and Industry, Ministry 
of Agriculture to WTO and COMESA events, and to  sectoral trade events in Europe, North Africa, 
and South Africa, and the US.52 According to USAID, this has helped to create a group of Eritreans 
knowledgeable on trade-related i ssues and also allowed business representatives make contacts, 
including in certain instances formal linkages with c ounterparts, thereby promoting trade in Eritrea.  
 
In another TA project, USAID worked with South African universities to set up special MA 
programmes in trade economics to train historically disadvantaged economists. 
 
8. Customs Capacity Building 
106. An efficient and effective customs administra tion facilitates trade and benefits the national 
economy by collecting revenue.53 It helps to combat fraud and illegal trafficking and provides 
statistical information on foreign trade transactions that is essential for econom ic planning.  However, 
customs in LDCs remain mostly ineffective and inefficient because of  corruption, excessive 
paperwork and cumbersome procedures.  For the T&C sector, ineffective and inefficient customs 
result in longer lead times and costly shipments,  that penalize exporters.  As suggested by UNDP 
(2005), "faster customs clearance, computerized documentation; streamlining of bureaucratic procedures; reduction of opportunities for rent seeki ng; rationalization of fees, taxes, and inspection 
requirements; and enhancement of delivery logistics would all contri bute to enhancing lead times and 
'virtual' proximity to key markets". 
107. Automated SYstem for CUstoms DAta (ASYCUDA) is an integrated programme of technical 
assistance launched in the 1980s by UNCTAD as a response to customs administration problems 
faced by most developing countries.  ASYCUDA is directed at reforming the customs clearance process.  It aims at speeding up customs clearan ce through the introduction of computerization and 
simplification of procedures and thus at minimizing administrative costs.  It also aims at increasing customs revenue by ensuring that all goods are declar ed, that duty/tax calculations are correct and that 
duty/exemptions, preference regimes, etc. are correc tly applied and managed.  Finally, it aims at 
producing reliable and timely trade and fiscal statistic s to assist in the economic planning process.  An 
important objective of ASYCUDA projects is to implement the systems as efficiently as possible with a full transfer of know-how to national customs ad ministrations at the lowest possible cost for 
countries and donors.  The key element of th is programme is the ASYCUDA software, a 
computerized customs management system which covers most foreign trade procedures.  The system 
handles manifests and customs declarations, account ing procedures, and warehousing manifest and 
suspense procedures. 
108. According to UNCTAD, the system has been installed or is being implemented in over 
80 countries and regions.  Among th e 13 LDCs which have not yet entered the process are Cambodia, 
Eritrea, and Lesotho.  Box III.9 describes the implementation process of ASYCUDA.  
Box III.9:  Implementation of ASYCUDA Programme54 
 
The ASYCUDA implementation strategy comprises three phases:  
 
1. The preparation phase proceeds with an assessment of the actual situation.  The national team, 
together with the international advisers, iden tify areas requiring reform.  While some of these 
reforms can be achieved and introduced early in th e project, others need to be established through 
legislation and may therefore take much more time to implement.  During this phase, technical 
and functional ASYCUDA implementation courses are delivered to build up the national 
                                                      
52 Ref. TDA 036-0151-03-A 
53 Improving customs procedures is also crucia l for access to inputs (see Sub-section V.B.1). 
54 Adapted from UNCTAD's ASYCUDA website ( www.asycuda.org).   WT/COMTD/LDC/W/37 
 Page 33 
 
 
  implementation team and to prepare the psycholog ical foundation for them to develop a sense of 
ownership of the system (minimum  duration:  eighteen months); 
2. The pilot implementation phase includes the preparation of the national ASYCUDA configuration 
and the preparation of valuation and selectivity  systems.  Computers for the pilot offices 
(normally headquarters, an airport, a seaport, a land boundary and an inland clearance office) are 
installed and tested to confirm that the configura tion of the system fully meets the requirements of 
the national regulations.  The reform activities in itiated in phase one are continued as necessary.  
A work plan for the implementation of the system throughout the country (phase 3) is elaborated, 
together with an estimate of the resources requi red.  A large ASYCUDA familiarization training 
programme for customs staff and trade users is delivered during this phase (minimum duration:  
eighteen months); 
3. The roll-out phase can potentially be implemented by  the national team with little or no assistance 
from international experts if the transfer of skills and know-how was successfully completed 
during the first two phases.  This phase is much more  of a logistic challenge than an intellectual 
problem: it requires the physical preparation of all sites to be computerized, a large amount of 
training based on the model training course of  phase two, and the technical installation and 
support of computer systems in the identified sit es.  The configuration of the customs software 
will simply be copied from the appropriate pilot sites. 
The impact of ASYCUDA projects can easily be assessed through the increase in customs revenues, 
the availability of reliable trade statistics and th e reduction in average cl earance time.  In some 
countries the results are less impressive, mainly becau se of resistance to the in-depth reforms of the 
customs system that the implementation of the programme requires. 
 C. T
HE INTEGRATED FRAMEWORK  
109. The Integrated Framework (IF) is a process established to support LDC governments in trade 
capacity building and integrating trade issues into ov erall national development strategies.  It has two 
major objectives:  (1) to mainstream trade into LD Cs national development plans such as the Poverty 
Reduction Strategy Papers (PRSPs);  and (2) to assist in the coor dinated delivery of trade-related 
technical assistance in response to needs identified by LDCs.  The IF is a country-driven process 
based on the partnership of six core internationa l agencies:  IMF, ITC, UNCTAD, UNDP, the World 
Bank and WTO.  These core agencies combine thei r efforts with those of LDC partners, other 
development partners and bilatera l donors to respond to the trade development needs of LDCs.  The 
WTO Doha Ministerial Declaration endorsed the IF as a viable model for LDC trade development. 
110. The implementation of the IF generally involves three broad steps for each IF country: 
1) The preparation of a Diagnostic Trade Integration Study (DTIS), which assesses the 
competitiveness of the economy, identifies sector s of export potential, human and institutional 
constraints, and other constraints affecting trade; 
2) Based on the findings of the study, an Action Matrix is developed in consultation with 
stakeholders and outlines a set of policy recomme ndations and priority technical assistance 
needs to overcome the constrai nts identified in the study; 
3) Trade policy priorities are incorporated into th e country's national development plans such as 
PRSP, and priority TA needs are considered fo r financing at donors' financing fora, such as 
the Consultative Groups (CG) or Round Tables or in specific IF donor implementation 
meetings.   
111. The IF has its own Trust Fund with two f unding instruments, Window I and Window II.  
Window I finances the preparation of the DTIS while Window II funds technical assistance/capacity-building activities identified by  the LDCs in the DTIS Action Matrices.  WT/COMTD/LDC/W/37 
Page 34  
 
 Window II can finance priority projects up to a limit of $1 million in eligible countries.  A large 
number of LDCs have been utilizing Window II f unding for project development, institutional 
strengthening, enhancing supply-side capacity in spec ific sectors, etc.  Financial support to implement 
the Action Matrix is also expected  to come through bilateral and mu ltilateral financial channels, other 
than the IF's own Trust Fund.  A few LDCs have been able to secure funding under the IF process 
from such traditional channels. 
112. It is in the above context, that the role of th e IF in responding to the needs of the LDCs in the 
T&C sector has to be seen.  It is  emphasised that the IF's princi pal aim is to assist countries to 
integrate their trade policy into their nati onal development plans such as the PRSPs.   
113. Out of 50 LDCs, 35 are at different stages of the IF process.  Fourteen countries have 
completed and validated
55 their DTIS.  These are Burundi, Cambodia, Djibouti, Ethiopia, Guinea, 
Lesotho, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nepal, Senegal and Yemen.  The 
contribution/effectiveness of the IF in addressing issues in the T&C sector of LDCs can be best 
documented in these 14 countries.  It is also to be  noted that these 14 LDCs are at different stages of 
implementation, a factor which qualifies the progress made in the IF process.  
1. DTIS 
114. As outlined above, a major step in the IF process  is the formulation of the DTIS.  Through the 
integration of the DTIS into a country's overall deve lopment strategy, it contributes to the integration 
of issues of trade policy into the national de velopment plan such as the PRSPs.  The DTIS 
furthermore provides the analytical foundation fo r policy recommendations, makes a diagnostic of 
capacity gaps for trade and related sectors and institu tions.  Together with DTIS, an Action Matrix is 
developed for trade-related technical assistance and ca pacity building for the country's integration into 
the multilateral trading system.  
115. The DTIS is country-specific.  It starts with a preliminary Mission in the beneficiary country 
normally by the World Bank56, which is the principal agency to carry out the DTIS.  During that 
mission, in which other IF agencies also participate,  a concept paper for the DTIS is agreed upon by 
the IF agencies and the beneficiary government.  This  concept paper defines the scope of the study.  
Depending on the concept paper, the sectoral  review differs in depth and size from 
country-to-country.  Generally, a DTIS contains macro-economic developments, trade policy issues, 
linkages among trade, growth and poverty, enabling environment, especially the investment climate, 
transport and trade facilitation issues, trade-relate d institutional issues.  Apart from cross-sectoral 
issues, a DTIS dedicates special chap ters to selected sectors.  In mo st cases, countries chose to make 
an appraisal of the sectors where they have revealed  comparative advantage.  Rarely in DTIS, detailed 
analysis is made on sectors that are not e xport-oriented or have little export potential.57   
116. Out of the 14 countries that validated DTIS, the DTISs of five countries namely Cambodia, 
Lesotho, Malawi, Nepal and Senegal cont ain dedicated chapters on the T&C sector58, because these 
countries have chosen to include this sector.  This is as a reflection of the priority attached to this 
sector by these countries.  This Section, therefore, focuses on these five countries and provides a brief 
account of how T&C sector features in their DTIS.  
                                                      
55 Approval by the government of the DTIS and its Action Matrix, once finalized, is known as 
validation.  
56 UNDP has taken this responsibility in Djibouti and Maldives. 
57 There are few exceptions like Madagascar where clothing, despite being a major export item, does 
not appear in the DTIS. 
58 The sector-specific analysis of textiles and clothi ng sector in Lesotho as well as in Malawi is 
accompanied by separate Annex/Action plan apart from its reflection in their Action Matrices.  WT/COMTD/LDC/W/37 
 Page 35 
 
 
  117. The timing of the preparation of the DTIS has been found to be a factor in the review of 
sectors that form part of the DTIS.  For instance,  in Cambodia the DTIS was prepared in 2001 when 
the country had been witnessing rapid growth in cl othing exports due to preferential arrangements by 
the US and EC.  The phasing out of quota was not i mminent and therefore the analysis focused more 
on sources of growth in the T&C sector and did not adequately deal with adjustment challenges of 
post-ATC period.  Similarly, in the case of Lesotho,  which had been experiencing phenomenal growth 
of clothing exports to the US under the African Gr owth and Opportunity Act (AGOA), a considerable 
attention was given to AGOA-related issues.  
118. The DTIS of Cambodia analyzes the sources of gr owth of the garment sector, especially the 
role of preferences.  The remarkable growth of garments exports from Cambodia has been attributed 
to its agreements with the US and EC.  The core  questions that emerged from the study include how 
to lower transaction costs, enhance capacity of Cambodian producers to compete post 2004, prospects 
for productivity gains, impacts of existing preferen tial arrangements on its cost structures, distribution 
of benefits/rents arising from the system, how the quota rents be more efficiently and fairly shared, 
etc.  
119. The DTIS of Lesotho features prominently the T&C sector.  It points out that almost all of US 
imports from Lesotho are clothing and apparel,  the volume of which has increased with the 
introduction of AGOA.  The DTIS has pointed out that most of the imports entering under AGOA programme is within established product lines that we re already traded.  Thus, the central challenge 
posed in the DTIS is how to use AGOA to expand e xports into new products.  With regard to major 
constraints, the DTIS listed the following factors: inadequate and unreliable supply of water to the 
industrial estates, lack of additional factory shells  and serviced industrial land, poor handling capacity 
of its railways and lack of targeted training to workers, etc.  
120. The DTIS of Malawi describes the existing st ructure of the sector (cotton growing and 
ginning sub-sector, textiles and garment industry),  gives an account of demand and supply-side 
factors in the development of the sector and contai ns a specific Annex to the garments' chapter on 
suggestions for better performance of the T&C sector.  Major factor s identified for the downsizing of 
garment factories since the early 1990s include massive imports, part of which are second-hand clothes.  The DTIS strongly recommends the promotion of the Cotton Council, improving efficiency of its textiles manufacturing including through more a ttention to fabric variety and delivery deadlines.  
The specific Annex outlines the po ssible areas for donor funding and technical assistance.  For 
instance, it emphasized on the need for training related to cotton growing and ginning, garment 
production, increased fund for cotton research, im proved facilities to take advantage of global 
marketing opportunities, strong recommendation to hi re an international marketing consultant in 
woven, dyed and printed cotton fabr ics, consultants for garment design and for quality control, etc.  
121. Both the DTISs of Nepal and Senegal have devoted sections on T&C sector but not to the 
extent of Cambodia, Lesotho and Malawi.  The DTIS of Nepal in a nutshell summarized the key 
features of the industry such as high concentration of its clothing exports in the US market, poor 
marketing, high transportation costs and delivery times (being a landlocked country) and challenges 
of intense competition with the abolition of quota in the post-ATC period.  The DTIS of Senegal 
highlights its weaknesses in the sector such as low le vel of efficiency of textile firms, lack of 
information on outsourcing and partnership possib ilities, absence of formal training for garment 
industry workers, and poor infrastructure such as e rratic electricity supply, which forces firms to 
purchase their own generators adding subs tantially to the cost of production. 
122. In these above-mentioned five countries, DTISs have made critical analysis of their T&C 
sector, highlighted major weaknesses and challenges facing the sector and identified areas where action or support is required.  In common, th e major problems facing these LDCs include their 
concentration of export markets, heavy reliance on imported fabrics, high transportation costs, long 
delivery times, lack of ability to penetrate new mark ets, lack of capacity to expand exports to new WT/COMTD/LDC/W/37 
Page 36  
 
 products even with preferential access, etc.  More  or less all DTISs underline the importance of access 
to cutting-edge technology, improved management  and marketing acumen, improved investment 
climate to attract new investment, targeted trai ning to workers, improved capacity for design and 
innovation, etc.  
2. DTIS Action Matrices 
123. The Action Matrices are an integral part of DTIS s.  Based on the analysis and findings in the 
DTIS, these Action Matrices consolidate in tabular  form technical assistance needs ranging from 
trade-related institutional capacity to physical infrastructure.  They also summarize the policy 
measures needed.  Actions identified in the Action Ma trices are implemented according to the priority 
of the governments.  These priorities are set duri ng the DTIS Workshop when the draft DTIS and its 
Action Matrix is considered by all IF stakeholders .  Once the DTIS and its Action Matrix is validated 
by the government, the Action Matrix serves as the ma in tool to conduct follow-up consultations with 
development partners including support for identified needs. 
124. In the Action Matrices, the identified needs are presented in several broad headings such as 
administrative and regulatory reforms, Trade Facilita tion, Customs and Transport, quality/standards, 
creating enabling environment, enhancing capacity of specific sectors, etc.  Some Action Matrices 
present priority actions on a short, medium and long-term basis.   
125. In the Action Matrices of all five countries unde r consideration, support required in the T&C 
sector have been outlined.  The recommendations a nd technical assistance needs identified in these 
Action Matrices are provided in the Annex.  It is to be noted that the degree of challenges and level of 
concern facing these LDCs are not similar and ther efore actions proposed in their Action Matrices 
vary.  In the Action Matrices of Cambodia and Nepal emphasis was placed on rationalization of the 
quota allocation system to achieve a more efficient and equitable distribution of quota rents, an issue 
less relevant in post-quota environment.  Ca mbodia placed emphasis on increased understanding of 
the competitive advantage of its garments; while fo r Malawi the critical question is of unrealized 
opportunity even with the presence of AGOA.  In th e cases of Malawi and Senegal, strengthening of 
marketing networks and design capacity was id entified as an area requiring support.  In both 
countries, the Action Matrices proposed to accel erate the privatization of its textiles and 
cotton-ginning factory respectively.  The foremost pr iority identified by the Action Matrix of Nepal is 
reduction of its transaction costs in clothing exports.  
3. Preliminary Observations on the Use of IF Process in Addressing Needs in the T&C 
Sector 
126. This Section attempts to provide some prelimin ary observations on the extent the IF process 
was used in addressing needs in the T&C sector of the IF countries.  It is recalled that it is the 
beneficiary country itself which defines and elaborat es the role of IF in its country-specific process 
and what it intends to achieve through the IF exer cise.  LDCs generally receive support in areas to 
which they attach priority in the IF process.   
127. A few LDCs have chosen to utilize IF process in  addressing some of their needs in the textiles 
and clothing sector.  For instance, in Cambodia, the DTIS has acted as a catalyst for carrying out many strategic development plans and sectoral sub- strategies initiatives in the country such as the 
World Bank's value chain analysis and the private sector development strategy, including the garments competitiveness study.  The Asian Deve lopment Bank (ADB) has supported a project on 
preventing poverty and empowering female garment workers affected by the changing international 
trade environment, in anticipation of the termina tion of the ATC.  In Nepal, following the DTIS, a 
project has been prepared on the garments devel opment action plan (the only area in the T&C sector 
where support has been sought in the Action Matrix).    WT/COMTD/LDC/W/37 
 Page 37 
 
 
  128. It is to be noted that several IF beneficiaries di d not seek priority assistance in the T&C sector 
in their Action Matrices, and therefore visible proj ects in this sector under the IF in these countries are 
scant.  The DTISs of Malawi and Senegal include a good analysis of the T&C sector along with recommendations on how to tackle pr oblems faced by the sector.  Howe ver, neither of these countries 
seek to develop concrete sectoral projects on tex tiles and clothing through the IF process.  For 
instance, Senegal has chosen to utilize IF Trus t Fund resources for projects on fisheries and the 
handicraft sector.  
129. Many of the IF beneficiaries are engaged in b ilateral discussions, often outside the IF process, 
with development partners in mee ting the challenges of their critical sectors like textiles and clothing; 
and stand-alone actions taken in this sector may have matched the needs expressed in the DTIS.
59  For 
instance, in Lesotho, a number of actions have be en taken in the T&C sector in parallel to the IF 
process, which are not part of its Action Matrix.  A value chain analysis of four sectors including the 
textiles and garment sector has been completed by the World Bank as a part of the IF exercise.  An 
inter-Ministerial Task Force has been looking at all options to attract and maintain FDI in the clothing 
sector.  A draft Action Plan for improving the competitiveness of Lesotho's garment industry is also 
envisaged.  
130. Many IF beneficiaries may not have received direct support in the textiles and clothing sector, 
but assistance received in other areas may have c ontributed to an improved environment, benefiting 
trade including the textiles and clothing sector.  For instance, Cambodia, Nepal, Madagascar and 
Mauritania have received support in customs moderni zation.  Senegal, Madagascar and Djibouti have 
received support in the area of transport infrastructur e.  As constraints in the area of customs and 
transport are often listed as caus ing general impediments to trade,  assistance in these areas will likely 
have a positive impact on overall exports in these coun tries including textiles and clothing exports.   
131. It is to be noted that a large number of LDCs put a special emphasis on trade-related 
institutional capacity, human capacity building or le gislative and regulatory reform as an immediate 
priority.  In fact, most of the activities which are i mmediately generated as a result of the DTIS relate 
to institutional and human capacity building in the ar eas of trade policy.  This type of action may not 
be at an enterprise level but contributes to improved capacity to engage in multilateral trading system, 
which should contribute to an improve trading climat e.  For instance, in Malawi, high importance has 
been attached for a clear understanding of trade policy issues.  IF Trust Fund Window II resources are being used to fund a senior trade policy advisor to  support and strengthen the capacities of the Malawi 
Government in trade policy formulation so as to ef fectively represent Malawi's interests in domestic, 
regional and multilateral trade negotiations.  On the other hand, the IF process has consolidated the 
support for the construction of a port with a new contai ner terminal, a free zone, and an oil terminal in 
Djibouti.  This is a reflection of the usefulness of the IF process in addressing broad infrastructure 
requirements of a country. 
132. Overall, the IF process is helping governments to consider trade as an effective tool for 
development strategy and a vehicle to address broader trade policy issues.  Trade issues are 
increasingly  receiving prominence in the PRSP process and in the formulation of national development plans.  
4. Options Generated Through the IF Process  
133. This Section seeks to provide some options to derive better results from the IF process.  The 
implementation of the IF with regard to the T&C se ctor is still nascent and will only work if the LDCs 
identify textiles and clothing as a priority.  The IF per se  is not a trade-related technical assistance 
programme to address needs in the textiles and clot hing sector.  Through the DTIS and its associated 
                                                     
 
59 Many of the IF beneficiaries are also currently engaged with development partners in the context of 
IF and outcome of their discussions are not known yet. WT/COMTD/LDC/W/37 
Page 38  
 
 process, it tries to address broader trade policy issu es and to create a better policy environment for the 
growth of critical sectors, including textiles and cl othing.  In order to benefit from the IF process, 
LDCs that are in the process of preparing their DTIS can examine recent developments in the T&C 
sector and outline their needs through an appropriately  prioritized Action Matrix.  On the other hand, 
LDCs that have completed and validated their DTIS  and have reflected needs for external support in 
the textiles and clothing sector, can develop full-fledged projects aimed at improving the 
competitiveness of the textiles and clothing sector.  
134. There are a number of ways through which assistance from the IF process can be improved. 
(a) Mainstreaming of trade priorities into nati onal development plans and improving coherence 
and coordination 
135. Gains from trade (and the IF) will not be maxi mized unless trade is mainstreamed into a 
country's national development strategy.  The IF pr ocess is a vehicle to assist LDCs in repositioning 
trade into their overall development strategy.  If need s for external support in trade, including trade in 
textiles and clothing, are reflected as a priority in  the overall development plans or PRSPs, there is 
greater likelihood of receiving support from donors in this sector.  It is to be noted that PRSPs or other 
development plans are the instruments on which LD Cs' development partners base their decision on 
funding.  Here a related but vital issue is that of domestic coordination.  The IF process involves a large number of ministries of the government.  There is a need for them to act in unison to derive 
concrete results from the IF.   
(b) Ensuring effective follow-up to DTIS 
136. Effective follow-up to the DTIS is critical as it involves translating the findings of the DTIS 
into concrete actions.  By its nature, an IF Ac tion Matrix only provides a broad Action Plan and is 
devoid of specific project proposals.  Therefore, ea ch need identified in th e Matrix needs to be 
developed into a project proposal.  It is up to the LD Cs to engage their devel opment partners to jointly 
develop concrete projects relating to the T&C sector  (provided that the proposal stems from validated 
DTIS and Action Matrix).  Between the validation of  the DTIS by the LDCs and the translation of 
needs expressed in that Action Matrix into concre te project proposals, a mechanism has been designed 
to act as a bridging fund until bila teral and multilateral donors implement projects with larger funding.  
This facility, the Window II of the IF Trust Fund, can fund small-scale technical assistance projects, 
excluding projects on phsyical infrastructure.
  It can be used as a seed money or be used as 
preparatory phases of large projects.  It is to be noted that any activ ity aimed at enhancing 
competitiveness or supply-capacity of a particular sector, in most of the cases involves resources 
beyond the scope of Window II.  Therefore, LDCs should intensify their efforts to seek support for 
their needs identified under the IF from their traditional donors including through the CG or Round Table or IF implementation meetings.  The success of  IF largely lies in realizing support through this 
process.   
(c) Building long-term relationships with donors 
137. The IF should be considered a mechanism to fo ster long-term relationship with donors.  The 
pre-DTIS phase, and the DTIS process, are meant to  generate greater involvement of donors in the 
IF's implementation phase, where concrete interventi ons take place.  Also past experiences have 
shown that an early identification of a lead donor/f acilitator contributes to an expedient running of the 
IF process as well as in creases the chances of receiving support in  prioritized areas in the post-DTIS 
phase.  Therefore, LDC governments would need to engage further their deve lopment partners present  WT/COMTD/LDC/W/37 
 Page 39 
 
 
  in their countries.  At the same time, donors will ne ed to focus more on the DTIS findings in planning 
their aid strategy in a particular country.60 
D. FINDINGS  
138. This Section considered how technical assistan ce could help enhance LDC competitiveness in 
the textiles and clothing sector post-ATC.  To answer this question, technical assistance programmes 
to LDCs on textiles and clothing delivered over the last few years were examined.  This conclusion 
seeks to draw the lessons from this overview. 
139. The focus in this Section is on Trade-Relate d Technical Assistance and Capacity Building 
(TRTA/CB).  TRTA/CB is a special type of technical assistance, which in turn is one of the many forms of development aid.  Clearly, other form s of development aid, such as the funding of 
infrastructure projects for roads, power stations and other physical infrastructure can significantly 
contribute to improve the competitiveness of the T& C sector.  However, considering all forms of 
development aid that can potentially have an im pact on the T&C sector would have been largely 
beyond the scope of this study.  TRTA/CB covers va rious forms of assistance that directly address 
some of the most pressing needs in the T&C sector.  In the present context of rapid changes in the 
T&C business, TRTA/CB seeks to produce qui ck results at relatively low cost.   
140. Our overview shows that a significant portion of TRTA/CB related to textiles and clothing is 
analytical work.  Such work is indispensable for developing cohere nt strategies for the T&C sector, in 
line with more global poverty reduction plans.  Analy tical work is necessary to identify problems that 
can be addressed through further TRTA/CB activiti es.  However it also pinpoints other important 
problems that require other forms of assistan ce – not only TRTA/CB – and actions from the 
government.  This report suggests that there is no de arth of analytical work on post ATC adjustments 
in the textiles and clothing sector.  A majority of LD Cs with an important T&C sector have developed 
a sector strategy with the assistance of TRTA/CB pr oviders.  Those LDCs, however, that have not yet 
identified their most binding constraints and develope d their own strategy for the textiles and clothing 
sector will presumably need to conduct such studies and seek support in doing so.  For the others, 
there might be a need to update existing sectoral studies to reflect recent developments brought about 
by the abolition of quota. 
141. But for all this work to be of use, strate gies, priorities and recommendations contained in 
those studies must be implemented.  The problem is  that when the list of recommendations is long – 
and it is typically the case with LDCs – their impl ementation is clearly beyond the capacities of one 
single agency.  In such cases, ma ny agencies may get involved and there is a need for coordination, 
supervision and follow up of the various recommended activities.  
142. As for the other types of TRTA/CB, this Sec tion has not presented them all.  Rather, it 
focused on those likely to quickly enhance the competitiveness in the T&C sector:  providing specific 
training of labour force and officials, enhanci ng access to information, and promoting exports.  
143. This Section also presented the IF, a process established to support LDCs in coordinating 
TRTA/CB and integrating trade issues into overall national development stra tegies.  Assessing the 
role played by the IF in the textiles sector is not an easy task.  A few LDCs have chosen to utilize the 
IF process to address some of their needs in the textiles and clothing sector.  Several others, however, 
did not seek priority assistance in the T&C sector in their Action Matrices, and therefore visible 
projects in this sector under the IF in these countries are scant.  Also, many of the IF beneficiaries are 
engaged in bilateral discu ssions, often outside the IF process, w ith development partners in meeting 
the challenges in their critical sectors like textiles and clothing.  Finally, ma ny IF beneficiaries may 
                                                     
 
60 In some countries such as Cambodia and Senegal identified needs in the Action Matrices have been 
taken on board in donor assistance programmes. WT/COMTD/LDC/W/37 
Page 40  
 
 not have received direct support in the textiles and clothing sector, but assistance received in other 
areas may have contributed to an improved environmen t, benefiting trade including in the textiles and 
clothing sector.   
144. To the extent that the IF succeeds, its success lie s largely in realizing support through a 
systematic identification of needs and priorities.  Effective follow-up to the DTIS is critical as it 
involves translating the findings of the DTIS into conc rete actions.  By its nature, an IF Action Matrix 
only provides a broad Action Plan and is devoid of specific project proposals.  Therefore, each need identified in the Matrix must be developed into a project proposal.  It is up to the LDCs to engage 
their development partners to jointly develop conc rete projects relating to the T&C sector (provided 
that the proposal stems from validated DTIS and Action Matrix).   
145. Finally, in order to further improve coherence and efficiency of TRTA/CB activities, 
providers must better report on their activities, a dopt appropriate monitoring and evaluation methods 
and promote ownership.  Communication and info rmation from and among donors allow stakeholders 
to learn about, draw lessons from, and build on, p ast and on-going projects.  However, despite the 
great benefits arising from openly communicating about their TRTA/CB activities, donors are still 
reluctant or slow to provide deta iled information.  In this resp ect, the DDA TCBD initiative represents 
a significant progress towards more accountability and transparency in the area of technical 
assistance.  It was impossible to obtain assessments for the vast majority of the TRTA/CB projects 
under review and, thus, to identify the projects that  proved particularly successful.  Thus, a desirable 
approach would be to include monitoring a nd evaluation in every TRTA/CB programme.    WT/COMTD/LDC/W/37 
 Page 41 
 
 
  IV. NON-RECIPROCAL PREFERENCE SCHEMES 
146. In recent years, developed countries have expende d considerable efforts to improve the scope 
and efficacy of their non-reciprocal tariff prefer ence schemes in favour of LDCs.  Despite these 
efforts, the share of products or countries covere d with preferences varies across programmes, and the 
permanence of preferences over time remains uncertain .  Moreover, most LDCs so far have not been 
able to fully exploit the preferential access.   Preferences continue to be underutilized. 
147. This Section considers options to further improve the efficacy of preference schemes, 
focusing on the role of rules of origin.  The anal ysis covers the preferences granted by six WTO 
Members, namely Australia, Canada, the European Union, Japan, Switzerland and the US, to imports 
of T&C originating from LDCs.  A total of 13 progr ammes are compared: the Generalized System of 
Preferences (GSP) for LDCs schemes of the afore-mentioned countries61, their general GSP schemes 
(except for Switzerland and the European Union), th e European Cotonou Partnership Agreement, the 
US African Growth and Opportunity Act (AGOA) a nd the US Caribbean Basin Trade Partnership Act 
(CBTPA).  
148. These schemes differ not only in terms of products  and countries covered, or with respect to 
their predictability, but also with regard to the preference margins, their actual utilization and their 
rules of origin.  Together, these characteristics of  the schemes determine the value of the preferences 
for the beneficiary countries.  Our analysis exam ines how the schemes could be modified to increase 
the value of preferences granted to LDCs.  It fi rst compares geographic and product coverage, and the 
predictability of the schemes.  Sub-section IV.B th en compares the margin of  preferences granted.  
Sub-section IV.C compares utilization rates while Sub-section IV.D examines the link between rules 
of origin and utilization.  The next Sub-section di scusses the effects of the reform of the Canadian 
GSP for LDC scheme.  The last Sub-section consider s various options to modify the schemes in order 
to promote LDC exports of T&C more effectively. 
A. COVERAGE  
1. Concepts and Definitions 
149. The definition of T&C products in  this study follows that of the now expired ATC.  All tariff 
items belonging to chapters 61 and 62 of the Harmon ized System (HS) are denominated as clothing, 
or equivalently, as garment or a pparel, while textiles include a s ubset of tariff lines under various 
HS chapters.62  The detailed definition is  provided in the Appendix. 
150. Both the product and the geographical covera ge of preferential schemes need to be 
considered.  The product coverage of a given programme is calculated as the share of tariff lines or 
imports for which preferences are granted.  Products with a zero MFN duty are not included in the 
calculation.  The coverage ratios computed for T&C are shown in Table IV.1.  As mentioned before, 
this report focuses on non-reciprocal schemes gran ted to LDCs.  A majority of the schemes are 
extended to all WTO LDCs but some, such as  the European Cotonou Partnership Agreement 
(hereafter simply Cotonou), the American AGOA and CBTPA, are only available to a subset of LDCs 
and the list of beneficiaries may change over time.63 It is therefore important to consider its 
geographical coverage and evolution over time.  Changes in geogr aphical coverage affect the stability 
of preferences which in turn affects the value of the schemes for beneficiaries. 
 
                                                      
61 The European GSP for LDCs is also known as the “Everything But Arms” (EBA) initiative. 
62 The tariff lines are drawn from the following HS chapters: 30, 39, 42, 50, 51, 52, 53, 54, 55, 56, 57, 
58, 59, 60, 63, 64, 65, 66, 70, 87, 88, 91, 94, 95 and 96. 
63 See the list of beneficiaries for both th e Cotonou Agreement and AGOA in Annex 4. WT/COMTD/LDC/W/37 
Page 42  
 
 Table IV.1 
Preferences coverage 
 
 TEXTILES  CLOTHING 
 Non-reciprocal pref. scheme, 2004  Non-reciprocal pref. scheme, 2004 
 Australia Canada  Australia Canada 
 GSP GSP LDC GSP GSP LDC  GSP  GSP LDC GSP GSP LDC 
          
Total number of tariff lines reported 649 1,097  278 272 
Percent of total lines under MFN duty-free treatment 15.9 34.3  11.2 5.1 
Percent of MFN dutiable lines covered with preferences 1.5 100 39.8 100  0 100 12.2 100 
          
Total imports from preference-eligible LDCs (US$ 
millions) 5.0 37.5  3.4 486.7 
Percent of total imports under MFN duty-free treatment 84.7 7.6  6.7 0.3 
Percent of MFN dutiable imports covered with preferences 0 100 22.9 100  0 100 0.3 100 
                  
 EU (2003)  EU (2003) 
 EBA Cotonou  EBA Cotonou 
          
Total number of tariff lines reported 893  375 
Percent of total lines under MFN duty-free treatment 1.2  0 
Percent of MFN dutiable lines covered with preferences 100 100  100 100 
         
Total imports from preference-eligible LDCs (US$ 
millions) 244.2 60.0  4,118.20 221.2 
Percent of total imports under MFN duty-free treatment 17.3 0.05  0 0 
Percent of MFN dutiable imports covered with preferences 100 100  100 100 
                  
 Japan Switzerland  Japan Switzerland 
 GSP GSP LDC GSP LDC  GSP GSP LDC GSP LDC 
          
Total number of tariff lines reported 1,459 749  562 323 
Percent of total lines under MFN duty-free treatment 3.5 0.5  0 0 
Percent of MFN dutiable lines c overed with preferences 86 99.4a 99.9  8.5 100 100 
         
Total imports from preference-eligible LDCs (US$ 
millions) 14.4 4.7  83.3 73.5 
Percent of total imports under MFN duty-free treatment 47.4 0  0 0 
Percent of MFN dutiable imports covered with preferences 99.4 100 100  1.7 100 100 
                   
 United States  United States 
 GSP GSP LDC AGOA CBTPA  GSP GSP LDC AGOA CBTPA 
          
Total numbers of tariff lines reported 1,005  568 
Percent of total lines under MFN duty-free treatment 15.7  5.1 
Percent of MFN dutiable lines covered with prefer ences 8.3 9.1 n.a. n.a.  3.1 3.1 n.a. n.a. 
           
Total imports from preference-eligible LDCs (US$ 
millions) 285.8 1.6 2.2  4,620.60 822.8 328.3 
Percent of total imports under MFN duty-free treatment 19.1 11.2 15.4  0 0.05 0.6 
Percent of MFN dutiable imports covered with preferences 1.6 1.6 12.9 18.8  0.02 0.02 99.99 99.6 
a Products 640610110, 640610190, 640610200, 640699100, 640699200, 911390110 and 911390190 not covered by preferences. 
Note: all countries reporting at HS 8 digits, except Japan at HS 9 digits.      Source:  WTO (IDB), countries notifications and Secretariat’s calculations  
   WT/COMTD/LDC/W/37 
 Page 43 
 
 
  2. Overall Results 
151. T&C products, which have traditionally been  excluded from non-reciprocal preferential 
schemes, have been progressively included in th e schemes available to LDCs only.  With one 
exception, all GSP for LDCs schemes in our sa mple had a product covera ge of 100 or almost 
100 per cent in 2004.  Only the US GSP for LDCs  scheme as well as the AGOA and CBTPA schemes 
for textiles goods have a significantly lower product coverage.  Under the US GSP for LDCs scheme, 
9.1 per cent of MFN dutiable textiles lines and 3.1 per cent of MFN dutiable garment lines were covered in 2004.  As for the AGOA and CBTPA progr ammes, they offered full coverage for clothing 
but covered only 12.9 and 18.8 per cent resp ectively of MFN dutiable lines in textiles. 
152. Product coverage is generally much lower under the GSP schemes for developing countries 
than under the special GSP for LDC schemes, the AGOA or the CBTPA.  LDCs thus have a clear 
preference margin over other developing countries in  all markets except the U. S. where the situation 
is more complex.  In the US market, non-African LDCs which benefit only from the LDC GSP are at a disadvantage compared to non-LDC African or  Caribbean countries with access to AGOA or the 
CBTPA and only have a very modest advantage compared to the other developing countries. 
153. The LDCs' advantage over other developing countri es in terms of coverage is generally more 
important in clothing given that the product coverage  of "standard" GSP is typically higher for textiles 
than for clothing.  This is further accentuated by the fact that duty-free treatment under the MFN 
regime is systematically more extende d for textiles items than for clothing. 
154. As already mentioned, while all six GSP for LDC schemes considered here are available to all 
LDCs, the geographical coverage is limited under the European Cotonou, the US AGOA and CBTPA.  
Under AGOA, only African LDCs and non-LDCs, whic h satisfy certain requirements with regard to 
customs cooperation and a VISA scheme, can benefi t from preferential access to the US market for 
their exports of T&C products.  As for the CBT PA, Haiti was the only LDC beneficiary in 2004.  
Consequently, for the year 2004, only $1.2 billion out  of a total value of US imports of textiles and 
apparel from LDCs of $4.9 billion - a proportion as low as 23.5 per cent - were eligible for 
preferences.  As for the Europ ean Cotonou scheme, only African and Caribbean countries belonging 
to the former Lomé Convention, i.e. ACP countri es, who represent a relatively small share of the 
European total imports of T&C from LDCs (5.1 per cent), were granted a preferential access.  
Non-ACP LDC countries, accounting for most of the European imports of T&C from LDCs (94.9 per cent), nevertheless could take advantage of a potential preferential access thanks to the EBA 
Initiative. 
155. Finally, as far as the predictability of preferenc es is concerned, it is important to remember 
that preferences are granted unilaterally and, therefor e, can be suspended at any time.  In fact, except 
for the European EBA initiative, all the remaining schemes are temporary.  Most schemes are rolled 
over more or less automatically.  In some cases, however, such as the AGOA, renewal is subject to 
uncertainty.  In this perspective, the renewal of AGOA in 2004, and particular ly of its global sourcing 
provision, was a relief for exporters in beneficiary countries.
64 
156. Moreover, some countries also include conditi onalities and graduation clauses in their criteria 
for preference eligibility.  Some schemes include ce ilings or caps above which imports are not eligible 
for preferences.  In the case of AGOA, the cap whic h is expressed as a percentage of the volume of 
total US apparel imports in the preceding 12 months, has not been binding so far.  
                                                      
64 See also the discussion of this issue in Su b-section on utilization of preferences below. WT/COMTD/LDC/W/37 
Page 44  
 
 3. Specific Examples 
157. The product coverage of Canada's GSP for LDCs was substantially extended between 2002 
and 2003.
65 As of 1 January 2003, Canada proposed a new non-reciprocal preferential scheme for 
LDCs under its GSP.66 It has since been extended for a ten-year period as of 10 May 10 2004.67  The 
new programme added 903 tariff lines to the list of duty-free tariff items, including T&C products, 
which were previously excluded from any access to prefer ences.  Chart IV.1 plots the number of 2002 
and 2003 tariffs lines for T&C chapte rs which have lines included in the ATC.  The number of tariffs 
lines benefiting from GSP for LDCs preferences has literally exploded be tween 2002 and 2003 as 
shown by the light shade bars, and now covers  all tariff items defined as T&C in the ATC. 
Chart IV.1 
Extension of the coverage of Cana dian preferences to LDCs in 2003 
 
0 50 100 150number of tariffs lines
clothing textile61 62 30 39 42 50 51 52 53 54 55 56 57 58 59 60 63 64 65 66 70 87 88 91 94 95 96
lines with pref. in 2002-03 new lines with pref. in 2003
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
                                                      
65 Canada and Customs Revenue Agency (2003); UNCTAD (2002a) 
66 WTO: WT/COMTD/N/15/Add.1, 13 February 2003  
67 WTO: WT/COMTD/N/15/Add.2,  11 May 2004  WT/COMTD/LDC/W/37 
 Page 45 
 
 
   
B. PREFERENCE MARGINS  
1. Concepts and Definitions 
158. The preference margin on a specific tariff item is defined as the difference in percentage 
points between the MFN and preferential scheme duties.   In this report, three different (simple) 
average preference margins are computed:  
1. the average across all textiles and clothing tariff lines; 
2. the average over traded tariff lines only; and  
3. the average over traded products covered with preferences.  
 
159. The first figure indicates the extension of prefer ences irrespective of the trade pattern of the 
sector.  The second excludes goods not imported wh ile the third excludes both non-imported goods 
and non-covered, essentially duty-free lines.  All othe r things being equal, a product benefiting from a 
higher preference margin is also more likely to trigger trading, which in turn should lead to a higher means of granted preference margins on traded and covered goods.  In other words, if preferences 
effectively engender trade, averages two and thr ee should exceed average one, and the wider the gap 
between any of the two trade-dependent measures and the first simple average of preferences over all 
tariff items, the more likely it is that preferences aff ect the pattern of trade.  Table IV.2 provides the 
reader with these indicators, the averag e MFN duties and the MFN peak rates. 
160. In addition to this information, standard devi ations measure the degree of variation around the 
computed averages.  The dispersion of preference ma rgins across products is one of the factors that 
explain the dispersion of import levels across products.  
  
 WT/COMTD/LDC/W/37 
Page 46  
Table IV.2  
Preference margins 
 
 TEXTILES   CLOTHING 
 Non-reciprocal pref. scheme, 2004  Non-reciprocal pref. scheme, 2004 
 Australia Canada  Australia Canada 
 GSP  GSP LDC GSP GSP LDC  GSP  GSP LDC GSP GSP LDC 
Duty rates and preferences at the tariff line          
Average MFN rate [std. dev.] 9.2 [6.2] 7.8 [6.4]  20.5 [8.8] 16.8 [4.5] 
Tariff peak: maximum duty 25 18.5  25 19 
Average pref. margin over all lines [std. dev.] 0.05 [0.5] 9.2 [6.2] 1.1 [2.3] 7.8 [6.4]  0 [0] 20.5 [8.8] 0.4 [1.3] 16.8 [4.5]  
Average pref. margin over traded lines [std. dev.] 0.03 [0.1] 5.7 [5.1] 1.6 [2.7] 11.2 [6.0]  0 [0] 20.0 [9.2] 0.4 [1.4] 17.2 [ 3.9] 
Average pref. margin over traded and covered lines [std. dev.] 0.5 [0] 7.5 [2.5] 4.5 [2.8] 13.4 [3.8]  - 23.6 [4.1] 3.6 [2.3] 1 7.9 [1.9] 
                  
 EU (2003)  EU (2003) 
 EBA Cotonou  EBA Cotonou 
Duty rates and preferences at the tariff line          
Average MFN rate [std. dev.] 6.9 [2.5]  11.8 [1.3] 
Tariff peak: maximum duty 12.2  12.2 
Average pref. margin over all lines [std. dev.] 6.9 [2.5] 6.9 [2.5]  11.8 [1.3] 11.8 [1.3] 
Average pref. margin over traded lines [std. dev.] 8.0 [2.3] 7.5 [2.5]  11.6 [1.4] 11.6 [1.4] 
Average pref. margin over traded and covered lines [std. dev.] 8.0 [2.3] 7.5 [2.5]  11.6 [1.4] 11.6 [1.4] 
                  
 Japan Switzerland  Japan Switzerland 
 GSP GSP LDC GSP LDC  GSP GSP LDC GSP LDC 
          
Duty rates and preferences at the tariff line          
Average MFN rate [std. dev.] 6.0 [2.5] 3.6 [3.2]  9.3 [1.8] 2.9 [2.0] 
Tariff peak: maximum duty 25a 39.8b  13.4 21.8 
Average pref. margin over all lines [std. dev.] 2.4 [2.2] 5.9 [2.3] 3.6 [3.2]  0.5 [1.9] 9.3 [1.8] 2.9 [2.0] 
Average pref. margin over traded lines [std. dev.] 2.9 [3.1] 4.9 [3.5] 3.8 [2.7]  0.5 [2.0] 9.6 [1.5] 2.8 [1.7] 
Average pref. margin over traded and covered lines [std. dev.] 4.0 [3.0] 6.3 [2.5] 3.8 [2.7]  7.2 [3.1] 9.6 [1.5] 2.8 [1.7] 
                   
 United States  United States 
 GSP GSP LDC AGOA CBTPA  GSP GSP LDC AGOA CBTPA 
Duty rates and preferences at the tariff line          
Average MFN rate [std. dev.] 7.9 [5.6]  11.5 [8.1] 
Tariff peak: maximum duty 40.4c  32.0 
Average pref. margin over all lines [std. dev.] 0.3 [1.4] 0.4 [1.5] n.a. n.a.  0.1 [1.0] 0.1 [1.0] n.a. n.a. 
Average pref. margin over traded lines [std. dev.] 0.4 [1.7] 0.4 [1.8] 0.6 [0.9] 0.6 [1.0]  0.1 [1.1] 0.1 [1.1] 16.1 [10.0] 17. 5 [10.6] 
Average pref. margin over traded and covered lines [std. dev.] 5.6 [4.5] 5.6 [4.5] 8.0 [0.9] 8.3 [0.0]  5.7 [5.8] 5.7 [5.8] 16. 4 [8.0] 18.2 [7.3] 
          
a HS 640699100, b HS 54072000, c HS 64061030.         
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.         WT/COMTD/LDC/W/37 
 Page 47 
 
 
  2. Overall Results 
161. Since most of the preferential rates for LDCs  are now zero, preferential margins for those 
countries depend only on the level of the corresponding MFN duties in the preference-giving countries.  Because MFN rates on apparel are hi gher on average than those on textile products, 
margins are generally higher on apparel than on tex tiles.  For apparel, the preference margins of the 
Australian and Canadian GSPs for LDCs progra mmes, as well as of the US AGOA and CBTPA 
schemes range between 15 and 20 per cent.  Japa n's margins as well as Europe’s are around 
10 per cent while Switzerland's are less than 3 per cent due to very low MFN duties.  The corresponding figures for textiles range between 5 a nd 10 per cent for most of the preference-giving 
countries, except Canada with an average margin as high as 13.4 per cent  over traded and preference-
covered tariff lines.  It is interesting to note th at the higher MFN rates on clothing than on textile 
products, which reflect the presence of tariff escal ation, offer a stronger preference to clothing 
exporters than to textiles exporters .  Although peak rates appear to be higher for textiles, looking at 
the tariff line with the maximum duty reveals that the product is rather close to apparel in spite of the 
ATC definition.   
162. Because the preferential rates in the "normal"  GSP schemes are often relatively close to the 
MFN tariffs, preference margins are typically hi gher for LDCs than for most non-LDC developing 
countries, which reinforces the co mpetitive edge provided to LDCs over other developing countries 
by the better coverage of LDC schemes.  As with  the coverage, the exceptions here result from the 
fact that the AGOA and CBTPA schemes are not accessible only to LDCs and that some LDCs do not 
have access to either of those two schemes.  
163. Results also confirm that the pattern of trade is, among other factors, likely to be determined 
by preference margins.  Simple averages over all ta riff lines are generally lower than simple averages 
over traded tariff lines, which themselves are lowe r than the simple aver ages over both traded and 
preference-covered tariff lines.  And the standard  deviations are decreasing when the average 
increases.  This suggests that most of the trade in  T&C is taking place in tariff lines with rather high 
and uniform margins of preferences in 2004, w ith the sole exception of the US AGOA and CBTPA 
programmes where the variation around the average marg in reached the relatively high levels of 8 and 
7.3 percentage points respectively for traded apparel.   More flexible rules of  origin for the AGOA and 
CBTPA relative to other non-reciprocal preference  schemes may partly explain that interesting US 
exception, as will be shown below. 
3. Specific Examples 
164. The new Canadian GSP for LDCs  scheme again provides an interesting illustration of the 
various points made so far.  Before 2003, tex tiles and apparel items were given much lower 
preferences through the GSP programme as shown by the lightly shaded bars in Chart IV.2.  While 
developing countries are only eligible for those G SP preferences, LDCs now have access to an 
average margin of preference which simply matc hes the average MFN duty, as shown by the dark 
bars in Chart IV.2.   
165. Only three chapters have average preference  margins that exceed 15 per cent, namely 
chapters 61 and 62 (clothing), and chapter 63 (textil es) (see Chart IV.2).  Those also are the most 
traded chapters as reflected in Ch art IV.3 for Canada in 2003.  Interestingly enough, this trade pattern 
is observed for the other preference-giving countri es as well.  Chart IV.4, which focuses on the tariff 
headings (four digits level) of the three main chap ters in the T&C sector, i.e. chapters 61, 62 and 63, 
shows the rather homogenous pattern of preference margins in the Canadian case: 28 out of 41 tariff headings have average preference margins above 17 per cent.  As will be shown below, this pattern is 
even more homogeneous when only the tariff lines  whose preferences are utilized are taken into 
account. WT/COMTD/LDC/W/37 
Page 48 
 
 
 Chart IV.2 
Average preference margins over all tariff lines by chapter under the GSP for LDC and the GSP programmes (Canada, 2003) 
 
0 5 10 15 20average preference margin (percentage points)
clothing textile61 62 30 39 42 50 51 52 53 54 55 56 57 58 59 60 63 64 65 66 70 87 88 91 94 95 96
pref. margin under GSP LDC pref. margin under GSP
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
Chart IV.3 
Trading in textiles and clothing for Canada in 2003 
 
142.7
177.2
0.0
0.5
0.00.0
0.2
1.7
0.00.0
0.7
1.7
0.2
0.00.0
22.4
0.0
4.2
0.00.00.0
0.70 50 100 150 200total value of imports (millions of U.S. dollars)
clothing textile61 62 30 42 50 51 52 53 54 55 56 57 58 59 60 63 64 65 66 87 91 94
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
  WT/COMTD/LDC/W/37 
 Page 49 
 
 
   
Chart IV.4 
Average preference margin s by selected tariff headings (Canada, 2003) 
 
18.5
18.518.518.518.518.5
15.1
17.0
18.518.518.518.5
9.5
18.5
8.9
18.5
12.0
18.0
17.8
18.0
18.0
18.3
17.6
17.7
17.4
18.3
11.6
13.8
18.5
10.5
10.4
17.7
18.5
10.3
17.5
16.7
18.4
17.1
13.8
16.6
13.70 5 10 15 20average preference margin (percentage points)
61 62 636101
61026103610461056106
6107
61086109611061116112611361146115
6116
6117
6201
62026203620462056206
6207
6208620962106211621262136214621562166217
6301
6302630363046305
6306
6307  
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
 C. U
TILIZATION OF PREFERENCES  
1. Definitions 
166. Given that, as already mentioned, effective u tilization of non-reciprocal preference requires 
the fulfillment of certain conditions, assessing the exte nt to which eligible exports actually obtain 
preferential treatment is of paramount interest.  No te that the focus here is on the extent to which 
preferences are utilized for any eligible good which is  exported by an eligible country rather than on 
the broader issue of the supply response to preferences,  i.e. the fact that countries do or do not fully 
exploit available preferences by exporting more. 
167. The preference utilization rate measures what has be en saved in terms of tariffs due to the use 
of the preferential regime instead of the MFN relative  to what could have been saved if all eligible 
imports had been charged the preferential rates.  
168. Five different measures of preference utilization are presented in this report for both T&C and 
for each scheme.68  The main measure is the simple average of preference utilization rates across all 
tariff lines .  All lines enter the simple average calculus in  the same way, regardless of the volume of 
trade and extent of the preferences provided.  The second and third measures are respectively the 
percentage of tariff lines with a zero rate of u tilization and the percentage of tariff lines which are 
fully utilized .  The fourth measure of preference utilization is the preference and trade-weighted 
average utilization rate over all tariff lines, sometimes called the overall utilization rate (UR) .  This 
rate, is the ratio of two sums: the first adds up the value of preferences actually utilized for each tariff 
                                                      
68 For details on the calculation of thos e measures, see the Technical Appendix. WT/COMTD/LDC/W/37 
Page 50 
 
 
 line; and the second adds up the total amount of give n preferences over all items.  This measure thus 
allocates a higher weight to tariff lines which are rela tively more traded and the margin of preference 
of which is relatively larger.  The fifth and last measure is the value of preferences utilized as a 
percentage of total imports .  It measures the actual benefits that LDCs are able to extract from a 
non-reciprocal preference programme. 
169. As in the case of the preference margins a bove, a measure of dispersion around the simple 
average (i.e. the standard deviation) is also calcula ted.  This measure indicates whether the pattern of 
utilization of preferences is homogeneous across tariff lines or not.   
  
   WT/COMTD/LDC/W/37
 Page 51Table IV.3  
Utilization of preferences 
 
 TEXTILES  CLOTHING 
 Non-reciprocal pref. scheme, 2004  Non-reciprocal pref. scheme, 2004 
 Australia Canada  Australia Canada 
 GSP  GSP LDC GSP GSP LDC  GSP  GSP LDC GSP GSP LDC 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 12.5 [0] 46.0 [48.8] 20.1 [32.1] 40.5 [44.1]  - 37.8 [45.4] 12.3 [20.0] 71.6 [37.3] 
Percent of preference-covered traded lines with ur = 0 0 33.3 49.3 39.9  - 57.7 50.0 13.9 
Percent of preference-covered traded lines with ur = 1 0 33.3 4.5 17.1  - 11.5 0 8.0 
Preference and trade-weighted average of tariff lines 12.5  32.2 30.3 69.1  - 68.2 11.7 93.5 
Value of preferences u tilized as a percentage of total im ports 0 0.4 0.3 10. 3  - 15.5 0.0 16.8 
              
 EUa (2003)  EU (2003) 
 EBA Cotonou  EBA Cotonou 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 54.7 [41.3] 62.4 [41.4]  37.8 [28.4] 76.0 [30.1] 
Percent of preference-covered traded lines with ur = 0 27.4 22.1  4.3 5.2 
Percent of preference-covered traded lines with ur = 1 14.8 29.2  0 22.5 
Preference and trade-weighted average of tariff lines 83.1 83.9  50.2 88.7 
Value of preferences utilized  as a percentage of tota l imports 7.2 5.2  6.0 10.4 
                  
 Japana Switzerlanda  Japan Switzerland 
 GSP GSP LDC GSP LDC  GSP GSP LDC GSP LDC 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 0 [0] 68.9 [42.3] 60.1 [47.6]  0 [0] 40.3 [43.3] 43.8 [42.4] 
Percent of preference-covered traded lines with ur = 0 100 21.7 37.3  100 37.9 31.8 
Percent of preference-covered traded lines with ur = 1 0 50.0 37.3  0 19.8 16.6 
Preference and trade-weighted average of tariff lines 0 88.0 95.6  0 66.6 47.6 
Value of preferences utilized as a percentage of tota l imports 0 3.1 1.0  0 5.9 2.5 
                   
 United States  United States 
 GSP GSP LDC AGOA CBTPA  GSP GSP LDC AGOA CBTPA 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 73.7 [37.8] 0 [0] 33.3 [57.8] 0 [0]  58.5 [31.9] 0 [0] 79.8 [34.8] 71.3 [37.9] 
Percent of preference-covered traded lines with ur = 0 10.5 100 66.6 100  12.5 100 9.2 13.2 
Percent of preference-covered traded lines with ur = 1 47.4 0 33.3 0  12.5 0 34.5 32.9 
Preference and trade-weighted average of tariff lines 76.8 0 37.5 0  67.3 0 97.9 67.7 
Value of preferences utili zed as a percentage of total imports  0.0 0.0 0.0 0.0  0.0 0.0 17.7 12.8 
          
a Country did not provide HS 30, 39,  42, 70, 87, 88, 91, 94,  95, 96 information on utilization for textiles. 
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.  
 WT/COMTD/LDC/W/37 
Page 52  
 
 2. Results 
170. Figures in Table IV.3 point at an overall under-utilization of non-reciprocal preferences by 
LDCs in 2004.  Average utilization rates for th e LDC GSPs are as low as 37.8 per cent for the 
European Union
69 and Australia in apparel, and 40.3 per cent for Japan in clothing.  A low of 
33.3 per cent is reached for the US AGOA progra mme in textiles, a sector with only limited - 
$1.6 million (see Table IV.1) - US imports from LDCs.  The main exception is AGOA for clothing 
with a simple average utilization rate of nearly 80 per cent for the $822.8 millions of clothing imports 
from African LDCs (see Table IV.1).  Other programmes such as the Canadian GSP for LDCs and the US CBTPA also achieved relatively high rates of ut ilization for clothing, with means of preferences 
utilization slightly above 70 per cent.   
171. Besides the overall disappointing performance of non-reciprocal schemes in terms of 
utilization, results also show substantial variati on of utilization rates across tariff lines.  Indeed, 
standard deviations from the means attain values as  high as 45.4 for Australia in the clothing sector, 
and 57.8 for the US AGOA in textiles.  Except fo r the European Union which provided consolidated 
utilization data, no single programme presents a vari ation around the simple average below 37, which 
is about half of the highest simple  average utilization rate.  Heteroge neity in utilization of preferences 
is thus clearly an important issue.  Different lin es do not present uniform utilization rates but quite the 
opposite instead. 
172. Another observation is that there is relatively mo re trade in lines with higher utilization rates.  
The preference and trade-weighted average of utiliza tion rates in Table IV.3 are typically higher than 
the simple averages.  Under-utilization of preference s seems more limited for lines with higher trade 
levels, and the US AGOA for clothing even achiev es the impressive figure of 97.9 per cent for its 
trade-weighted average of utilization rates.  Note , however, that higher utilization rates can simply 
trigger more trade, and this higher level of trade in turn gives a higher weight  to those lines with high 
utilization rates.  This is the reason why simple av erages along with their standard deviations are often 
seen as better indicators of the utilization of preferences.  
173. The value of preferences utilized as a percenta ge of total imports, another trade-intensity 
dependent measure, is highest under the Australian  GSP for LDCs programme (15.5 per cent), the 
Canadian GSP for LDCs (16.8 per cent) as well as with AGOA (with a high of 17.7 per cent) and 
CBTPA (12.8 per cent).  The European Union, Jap an and Switzerland all show lower values due to 
relatively low preference margins and utilizati on.  Though Australia’s utilization rates are not 
extremely high, the high value of preference utilized  as a percentage of total apparel imports reflects 
the very high preference margins available under its non-reciprocal preference programme (see 
Table IV.2). 
174. A disaggregated analysis of utilization rates for clothing imports of the Quad countries by 
beneficiary country confirms the conclusions from the comparison between the different schemes at 
the aggregate (all LDCs) level.  As shown in Ta ble IV.4 when comparing any beneficiary country 
across programmes, the Canadian GSP for LDCs scheme, the US AGOA and CBTPA as well as the 
European Cotonou present a higher utilization of pref erences than the Japanes e GSP for LDCs or the 
European “Everything but Arms” Initiative. 
175. Nevertheless, it is important to note that the ex tent of the utilization of preferences may vary a 
lot across countries within a non-reciprocal scheme.   In the Canadian case (see Table IV.4 and 
Annex IV Table 1 for further details), utilization ra tes are considerably higher for Asian countries 
                                                     
 
69 This figure is computed for LDCs which are only eligible for preferences under the “Everything but 
Arms Initiative” (EBA), that is excluding all ACP LDC countries which have an incentive to use the Cotonou 
regime instead.  WT/COMTD/LDC/W/37 
 Page 53 
 
 
 than for African countries or Haiti.  Islands like Ha iti, Madagascar or the Maldives also seem to face 
difficulties utilizing preferences. 
176. In the case of Japan (see Table IV.4), only Myanmar a nd Nepal among our selected LDCs 
reach satisfactory utilization rates while African  and island economies are very much underutilizing 
the preferences granted. 
177. As shown in Table IV.4, the European “E verything but Arms” Initiative does not seem 
particularly favorable to Bangladesh or Cambodia, which are among the LDCs that do not have access 
to the Cotonou preferences.  Only the US non-reci procal schemes (further information in Annex IV 
Table 1) and the European Cotonou Partnership Ag reement reach sufficiently high overall utilization 
rates across African countries and Haiti. 
Table IV.4  
Country-specific utilization rates for cl othing by preferential scheme, 2004: si mple averages and standard deviation 
 
 Canada  Europe  Japan  United States United States 
 GSP LDC  EBA 
(2003) Cotonou 
(2003)  GSP LDC  AGOA CBTPA 
          
Bangladesh 77.1 [38.0]  33.8 [29.8]   16.8 [30.2]    
Cambodia 61.8 [44.2]  30.9 [31.4]   14.9 [34.8]    
Cape Verde 0.0 [0.0]   83.0 [36.1]      
Haiti 6.7 [23.2]   38.5 [49.2]  0.0 [0.0]   71.3 [37.9] 
Lesotho 41.8 [47.9]   63.3 [41.5]  1.7 [5.4]  95.4 [17.2]  
Madagascar 38.8 [45.4]   84.9 [24.8]  2.2 [11.4]  81.9 [34.0]  
Malawi        96.5 [12.5]  
Maldives 19.3 [38.1]  1.0 [8.0]   0.0 [0.0]    
Mozambique        89.5 [15.2]  
Myanmar      52.0 [49.0]    
Nepal 67.3 [38.9]  65.8 [32.2]   71.3 [38.5]    
Tanzania        99.4 [1.2]  
Uganda        100.0 [0.0]  
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.  
 
178. After having compared utilization across countries and programmes, it is also interesting to 
assess its evolution over time, and particularly the extent to which preferences are utilized in the 
periods preceding and following a programme’s reform. 
179. Indeed, the reform of non-reciprocal preferen ce schemes can very quickly translate into 
positive results provided that the changes undertaken take the right path.  Canada provides a clear 
example of the effects of a successful reform on utilization rates.  It is also the only case in our sample 
with tariff line information for both the periods befo re and after the introduction of the GSP for LDCs 
reform, which in this particular case took place in 2003.70 
180. A comparison between Charts IV.5 and IV.6 shows that the results of the reform of Canada's 
GSP for LDCs on the utilization of preferences by Bangladesh were significant and immediate.  
Charts IV.5 and IV.6 show the average utilization rate of Canada's GSP for LDCs by Bangladesh for 
the three main trading chapters at the 4 digit tari ff heading level respectively in 2002 and 2003.  While 
utilization rates were either null or extremely low be fore the introduction of the reform, after one year 
in the new regime only six tariff headings out of forty had average utilization rates below 40 per cent. 
                                                      
70 Australia reformed its GSP in 2003, but data was made avalaible only at the HS 6-digit level, not at 
the tariff line.  WT/COMTD/LDC/W/37 
Page 54  
 
 Chart IV.5:  
Pre-reform utilization of preferences for the Canadian impo rts from Bangladesh in HS chapters 61, 62 and 63 (2002) 
 
19.3
0.0
0.0
0.0
0.00.00.00.0
0.0
0.00.0
0.0
29.8
45.10 10 20 30 40 50average utilization rate (percent)
61 62 636110
6116
6117
6202
6204620562076208
6211
62136216
6301
6305
6307
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
Chart IV.6 
Post-reform utilization of preferences for the Canadian impo rts from Bangladesh in HS chapters 61, 62 and 63 (2003) 63.3
49.8
81.2
52.3
93.1
57.9
85.4
83.9
96.3
82.7
81.7
55.1
52.3
48.0
24.9
53.1
24.9
44.6
66.8
79.3
68.1
67.0
54.0
83.2
75.1
54.0
59.7
70.4
99.0
0.0
100.0
0.0
37.4
14.2
58.2
64.7
44.2
50.0
44.9
51.10 20 40 60 80 100average utilization rate (percent)
61 62 636101
61026103
6104
61056106
6107
61086109
6110
61116112611361146115
6116
6117
6201
6202620362046205
6206
62076208620962106211
6212
6214621562166217
6301
6302
6303
63046305
6306
6307
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
  WT/COMTD/LDC/W/37 
 Page 55 
 
 
 181. Yet this does not mean that there is no room for improvement in the Canadian case, as shown 
by the AGOA utilization figures for the US imports fro m Lesotho in 2003 (see Chart IV.7), 11 out of 
23 tariff headings simply had rates of 100 per cent. 
Chart IV.7 
Utilization of preferences for the U.S. imports from Lesotho in HS chapters 61 and 62 (2003)  
100.0
100.0
97.6
98.6
90.8
89.1
100.0
89.9
99.8
97.5
61.7
100.0
100.0
100.0
79.8
99.9
100.0
87.3
100.0
95.0
100.0
100.0
100.00 20 40 60 80 100average ut ilization rate (percent)
61 626101
6102
6103
6104
6105
6106
6107
6108
6109
6110
6111
6112
6114
6202
62036204
6205
6206
6207
6208
6209
6211
6212
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
 D. F
LEXIBILITY OF RULES OF ORIGIN  
1. Would More Flexibility in Rules of Origin Increase the Rate of Utilization of 
Preferences? 
182. The raison d'être  of rules of origin is to ensure that  preferences are granted only to exporters 
from countries that are eligible beneficiaries.  Wh en a product is produced in a single stage or is 
wholly obtained in one country, the origin of the pr oduct is relatively easy to establish.  This applies 
mainly to "natural products" and goods made en tirely from them and hence products which do not 
contain imported parts or material.  For processed ma nufactured products, the rules of origin stipulate 
the amount of processing or the nature of the domes tic processing that must take place to ensure a 
substantial transformation has taken place and to c onfer origin.  Rules of origin may distort the 
choices of producers from beneficiary countries, leading them to use inputs of less efficient producers or constraining their methods of production thro ugh technical requirements, or both.  Beyond 
administrative costs, producers who wi sh to satisfy rules of origin ma y thus encur the cost of using a 
suboptimal mix of inputs.   
183. A producer's decision whether to export under the preferential tariff regime or under the MFN 
regime consists in weighing the margin of pref erence it gets from the preferences providing country WT/COMTD/LDC/W/37 
Page 56  
 
 against the costs that its compliance to rules of origin entails.
71  The margin of preference corresponds 
to the absolute difference between the MFN duty and the preferential duty.72  If the cost of compliance 
to rules of origin does not exceed the benefits as defined by the margin of preference, the producer 
would be expected to export under the preferential re gime.  Otherwise it would continue to access the 
market under the MFN regime. 
184. One has to keep in mind that the cost of complian ce to rules of origin is intrinsically related to 
the choices available to the producers that are elig ible for preferential access.  Restrictive rules of 
origin, distort the choices of producers trying to get access to foreign markets and increase the cost of 
complying with these conditions which enable preferential access.  
185. In the T&C sector, the rules that distort producers' choices are the minimum local content 
requirement (MLCR), the change of HS tariff he ading and other manufacturing requirements, and 
rules regarding cumulation.73  MLCR simply refers to the thres hold value of inputs produced outside 
the beneficiary country above which a good cannot be nefit from the preferential treatment anymore.  
Higher thresholds are usually given to LDCs.  As for the change of heading, it ensures that the 
product exported under the preferential scheme has been sufficiently transformed.  Manufacturing 
requirements may further constrain the producer’s ch oice of inputs by defining exactly what kinds of 
processes are accepted outside the beneficiary coun try, and in which of the other countries such 
processes are accepted.  Finally, cumulation rul es indicate the possible combinations of inputs’ 
originating and processing requirement s which allow the granting of pref erences.  Three types of rules 
are distinguished: bilateral, diagonal and full cumu lation.  In the case of bilateral cumulation, the 
preference-benefiting country can only use its own inpu ts or those from the preference-giving partner.  
More generously, diagonal cumulation allows the u se of any input originating from a defined set of 
third countries, provided that the inputs’ processing requirements have been fulfilled.  This last constraint is eliminated under full cumulation whic h confers the right to use any input originating 
from the defined set of countries, regardless of the processing or transformation undertaken for any material.  Besides the type of cumulation, the natu re and size of the defined set of countries matters.  
The broader the set of countries and processes that are allowed, the more flexible rules of origin are 
and the less distorted the inputs choices of producers are likely to be. 
186. Restrictive rules of origin are seen by a few preference-providing countries as a way to 
promote the creation of a “vertically integrated” sect or in beneficiary countries and thus as a way to 
facilitate diversification of production.  In rea lity, there is no empirical evidence to support this 
argument.
74 On the contrary, more restrictive rules of origin may make trade partners less willing to 
diversify their production. 
                                                      
71 See for instance Anson et al. (2005) or Carrère and de Melo (2004). 
72 The formula for the preference margin is th e following: Preference Margin = (MFN Duty – 
Preferential Regime Duty). 
73 For more detail on rules of origin, see the Technical Appendix. 
74 Brenton and Ikezuki (2004)  WT/COMTD/LDC/W/37 
 Page 57 
 
 
  
2. A Comparative Analysis of Rules of Origin Across Non-Reciprocal Preferential Scheme 
 
 
Table IV.5 Main features of rules of origin in  textiles and clothing by programme 
 
 Non-reciprocal pref. scheme, 2004 
RULES OF ORIGIN Australia: GSP LDC  Canada: GSP LDC 
 HS 61,62 HS 63 Other text.   HS 61,62 HS 63 Other text. 
Minimum local content (de minimis)        
Highest required value in per cent 25% for 61, 62,  63 and other text.  25% not mentioned 40% 
Product transformation and processing         
Product-specific rules (e.g. change of tariff heading) no specific rules mentioned  no specific rules mentioned 
Other technical requirements (e.g. triple transformation) no technical requirements me ntioned  different technical requirements  
Cumulation        
Possible cumulation over inputs bilateral cu mulation  bilateral diagonal cumulationa 
Possible cumulation over inputs of inputs no cumu lation rule mentioned  diagonal cumulationb - 
Scope for the geographical sourcing of  inputs limited geographical sourcing  limited large numb. of countries 
Scope for the geographical sourcing of inputs of in puts not mentioned  large number of countries 
           
 EU: EBA  EU: Cotonou 
 HS 61,62 HS 63 Other text.   HS 61,62 HS 63 Other text. 
Minimum local content (de minimis)        
Highest required value in per cent 47.5% 50%  47.5% 50% 
Product transformation and processing        
Product-specific rules (e.g. change of tariff heading) variety of product-specific rulesc  variety of product-specific rulesc 
Other technical requirements (e.g. triple  transformation) different technical requi rements  different technical requirements 
Cumulation        
Possible cumulation over inputs bilateral or diagona l cumulation  full cumulation over ACP countries 
Possible cumulation over inputs of inputs bilateral or diagonal cumulation  full cumulation over ACP countries 
Scope for the geographical sourcing of inputs regional sourcing provision  large number of countries 
Scope for the geographical sourcing of inputs of inputs regional sourcing provision  large number of countries 
               
 WT/COMTD/LDC/W/37 
Page 58  
 
  
 
Table IV.5 (continued) Main features of rules of origin in  textiles and clothing by programme 
 
 Non-reciprocal pref. scheme, 2004 
 Japan: GSP LDC  Switzerland: GSP LDC 
 HS 61,62 HS 63 Other text.   HS 61,62 HS 63 Other 
text. 
Minimum local content (de minimis)        
Highest required value in per cent not mentioned 50%  60% for 
62 60% for 63 and other text. 
Product transformation and processing        
Product-specific rules (e.g. change of tariff heading) variety of product-specific rulesd  variety of product-specific rulese 
Other technical requirements (e.g. triple  transformation) different technical requi rements  different technical requirements 
Cumulation        
Possible cumulation over inputs no cumulation rule mentioned for 
LDCs  diagonal cumulation 
Possible cumulation over inputs of inputs no cumulati on rule mentioned  no cumulation rule mentioned 
Scope for the geographical sourci ng of inputs not mentioned   large number of 
countries  
Scope for the geographical sourcing of inputs of inputs not mentioned  not mentioned 
                
 United States: AGOA   United States: CBTPA 
 HS 61,62 HS 63 Other text.   HS 61,62 HS 63 Other 
text. 
Minimum local content (de minimis)        
Highest required value in per cent 7 % of the weight 35%  7 % of the weight 35% 
Product transformation and processing        
Product-specific rules (e.g. change of tariff heading) no specific rules mentioned  no specific rules mentioned 
Other technical requirements (e.g. triple  transformation) different technical requi rements  different technical requirements 
Cumulation        
Possible cumulation over inputs diagona l cumulation  diagonal cumulation 
Possible cumulation over inputs of inputs diagonal cumulation -  U.S. yarn only  - 
Scope for the geographical sourcing of inputs global sourcing 
provision regional  regi onal sourcing provision 
Scope for the geographical sourcing of inputs of inputs not mentioned -  U.S.A only - 
a Diagonal cumulation over least-de veloped countries and Canada. 
b Diagonal cumulation over least-developed c ountries, developing co untries and Canada. 
c In the case of the EU, product-specific rules are less complex under Cotonou than under EBA. 
d Rules of origin are more restri ctive for chapter 61 than for 62. 
e Rules of origin are more restri ctive for chapter 62 than for 61 which does not include any de minimis. 
Source : WTO75, UNCTAD76, countries’ customs77 and Secretariat’s consultations. 
 
 187. The Canadian case represents a recent successful reform of a GSP for the LDCs programme, 
and thus will serve as a reference in the compar ative analysis between rules of origin across 
preference-giving countries.  Table IV.5 provides a non-exhaustive and stylized description of the 
most relevant rules for each of the schemes in our sample.   
188. With regard to rules of origin requirements under the Canadian GSP for LDCs, five categories 
of T&C products are distinguished: two for fabri cs, two for garments, and one for made-up textiles 
articles.
78  
                                                      
75 WTO: WT/COMTD/N/15/Add.1, 13 February 2003; WTO: WT/COMTD/N/15/Add.2, 11 May 2004 
76 UNCTAD (1999), UNCTAD (2000), UNCTAD (2002a), UNCTAD (2002b), UNCTAD (2003a), 
UNCTAD (2003b), UNCTAD (2004a) 
77 Canada and Customs Revenue Agency (2003);  US Customs (2001);  European Commission,  The 
Countries of Africa, the Cari bbean and the Pacific (ACP), 
http://europa.eu.int/comm/taxation_customs/customs/custo ms_duties/rules_origin/prefe rential/article_785_en.ht
m  WT/COMTD/LDC/W/37 
 Page 59 
 
 
 189. Rules of origin for apparel may sometimes impose a MLCR in terms of value-added of 
25 per cent.  This value is relatively low when comp ared to the 40 per cent content asked for most of 
the other non-T&C items, and a much lower value as compared to the 60 per cent under the normal GSP.  However, some manufacturing requirement s are to be fulfilled, and diagonal cumulation 
through the set of LDCs, developing countries and Ca nada is only available for inputs used to produce 
the inputs that the final apparel producer will use at the last stage of processing.  For instance, 
clothing items are accepted as originating from the LD C if the item is assemb led from fabric cut in 
that country or Canada only, introducing a first c onstraint which excludes textile inputs not cut in the 
LDC or Canada (i.e. only partial cumulation for inputs used in the last processing stage).  Further, the 
fabric used must be produced from yarn originatin g from any LDC, developing country or Canada but 
provided that this yarn does not undergo further pr ocessing outside the LDC or Canada (i.e. diagonal 
cumulation at the first processing stage).  In conclusion,  inputs (e.g. yarn) of i nputs (e.g. fabric) enjoy 
wide cumulation, whereas cumulation rules for inputs (e.g. fabric) are more restrictive.  
190. Rules for made-up textiles articles are even l ess constraining since they do not require any 
minimum value-added content in any case, and limit di stortions to the choice of inputs.  The fabrics 
used must be produced in any LDC or in Canada but not in developing countries. 
191. Finally, rules of origin requirements for fabrics only include the minimum value-added 
content (40 per cent) for a subset of items, and the inputs can originate not only from any LDC or 
Canada, but also from any developing country. 
192. The only rules of origin that are more flex ible than the Canadian ones are the US AGOA 
apparel special provisions, particularly since they were recently extended to  September 2007, and the 
European Cotonou Partnership Agre ement originating requirements.  
193. As for AGOA, the global sourcing of fabric provi sion minimizes the distortive impact of rules 
of origin on producers’ choice of inputs in t hose African LDCs to which it has been extended.
79  The 
global sourcing provision lowers both administrative costs of proving conformity with the rules and non-administrative costs associated with trade distor tions.  As mentioned, however, it is not available 
to developing countries under AGOA and it is not av ailable at all under the GSP for LDC or GSP 
programmes.  This once more illustrates the segme nted nature of preferential access to developed 
country markets, which in its American versi on excludes important Asian apparel producers from 
global sourcing provisions.  Thanks to CBPTA, Haiti benefits from more liberal rules of origin than 
those available under the GSP for LDC and GSP pr ogrammes of other preference-giving countries, 
such as for instance possibilities of cumulation with other beneficiaries from the Caribbean basin.  
However, AGOA’s global sourcing is not yet availabl e in the case of Haiti through its participation to 
CBTPA. 
194. The European Cotonou Partnership Agreement also provides beneficiaries with relatively 
flexible rules of origin as it allows for full cumula tion.  However, most of the LDCs with significant 
T&C exports to the European Union are facing EB A’s more restrictive pr oduct-specific rules, double 
processing and minimum local value content requirements and diagonal cumulation. 
195. As for Japan and Switzerland, their rules of or igin are product-specific for all T&C products, 
as well as for all other items covered under their GSP for LDCs scheme.  Their rules typically require 
either a change of tariff heading or a specific processing or a minimum local value content, or a combination of those.  Moreover, exemptions furthe r increase the stringency of rules of origin.  A 
                                                                                                                                                                    
 
 78 Canada and Customs Revenue Agency (2003).  In this document, developing countries that are not 
LDCs are designated as "beneficiary countries". 
 79 Mauritius was given the same treatment as an LDC for a one-year period as of 1 October 2004 
onwards.  WT/COMTD/LDC/W/37 
Page 60  
 
 common feature of both Swiss and Japanese rules is  their lack of uniformity and simplicity, which 
differs across T&C items.  In the case of clothing,  for instance, Japanese rules of origin are more 
restrictive for chapter 61 than for chapter 62, whereas it is the opposite for Switzerland. 
196. Finally, under the Australian GSP for LDCs, orig in is conferred based on a single local value 
content rule: at least 25 per cent of the value of the imported good must have been generated in the 
preference-receiving LDC.
80 However, cumulation offered by the programme is only bilateral. 
                                                      
80 Before 2003, at least 50 per cen t of local content was required.  WT/COMTD/LDC/W/37 
 Page 61 
 
 
 3. Determination of Utilization Rates:  Ru les of Origin vs. Preference Margins 
  
Table IV.6  
Variation of utilization relative to preferences 
    
 TEXTILES  CLOTHING 
 Non-reciprocal pref. scheme, 2004  Non-reciprocal pref. scheme, 2004 
 Australia Canada  Australia Canada 
 GSP LDC GSP LDC  GSP LDC GSP LDC 
          
Preferences at the tariff line          
Average pref. margin over traded and covered lines [std. dev.] 7.5 [2.5] 13.4 [3.8]  23.6 [4.1] 17.9 [1.9] 
     (1) variation coefficient of  pref. = std. dev / average 0.3 0.3  0.2 0.1 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 46.0 [48.8] 40.5 [44.1]  37.8 [45.4] 71.6 [37.3] 
     (2) variation coefficient of  util. = std. dev / average 1.1 1.1  1.2 0.5 
     (3) relative variation of u tilization to preferences = (2) / (1) 3.7 3.7  6.0 5.0 
          
 EU* (2003)  EU (2003) 
 EBA Cotonou  EBA Cotonou 
          
Preferences at the tariff line          
Average pref. margin over traded and covered lines [std. dev.] 8.0 [2.3] 7.5 [2.5]  11.6 [1.4] 11.6 [1.4] 
     (1) variation coefficient of  pref. = std. dev / average 0.3 0.3  0.1 0.1 
Utilization rate (ur) of preferences value at the tariff line       
Simple average of tariff lines [std. dev.] 54.7 [41.3] 62.4 [41.4]  37.8 [28.4] 76.0 [30.1] 
     (2) variation coefficient of  util. = std. dev / average 0.8 0.7  0.8 0.4 
     (3) relative variation of u tilization to preferences = (2) / (1) 2.7 2.3  8.0 4.0 
                  
 Japana Switzerlanda  Japan Switzerland 
 GSP LDC GSP LDC  GSP LDC GSP LDC 
          
Preferences at the tariff line          
Average pref. margin over traded and covered lines [std. dev.] 6.3 [2.5] 3.8 [2.7]  9.6 [1.5] 2.8 [1.7] 
     (1) variation coefficient of  pref. = std. dev / average 0.4 0.7  0.2 0.6 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 68.9 [42.3] 60.1 [47.6]  40.3 [43.3] 43.8 [42.4] 
     (2) variation coefficient of  util. = std. dev / average 0.6 0.8  1.1 0.97 
     (3) relative variation of u tilization to preferences = (2) / (1) 1.5 1.1  5.5 1.6 
                   
 United States  United States 
 AGOA CBTPA  AGOA CBTPA 
          
Preferences at the tariff line          
Average pref. margin over traded and covered lines [std. dev.] 8.0 [0.9] 8.3 [0.0]  16.4 [8.0] 18.2 [7.3] 
     (1) variation coefficient of pref. = std. dev / average 0.1 0  0.5 0.4 
Utilization rate of preferences value at the tariff line          
Simple average of tariff lines [std. dev.] 33.3 [57.8] 0 [0]  79.8 [34.8] 71.3 [37.9] 
     (2) variation coefficient of util. = std. dev / average 1.7 -  0.4 0.5 
     (3) relative variation of u tilization to preferences = (2) / (1) 17 -  0.8 1.3 
          
a Country did not provide HS 30, 39,  42, 70, 87, 88, 91, 94,  95, 96 information on utilization for textiles. 
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.        
 
 
197. Two main results are worth underlining in Table IV.6: utilization of preferences is higher for 
programmes with relatively flexible rules of orig in in the clothing business, and the variation of 
preference utilization is generally higher than that of preference margins. WT/COMTD/LDC/W/37 
Page 62  
 
 198. The link between flexible rules of origin and high utilization rates is fairly clear for clothing.  
Rules of origin are relatively less stringent for the Canadian GSP for LDCs, the US AGOA and 
CBTPA, and the European Cotonou.  Their respectiv e rates of utilization, which are relatively high, 
reflect the flexibility of their rules of origin in  comparison with those of the Australian, Japanese, 
European EBA, and Swiss non-reciprocal schemes’ ru les, which all exhibit lower average utilization 
of preferences in clothing. 
199. Another important result shown in Table IV.6 is  that for all LDC GSP schemes, the dispersion 
of preference margins around the simple average is  much smaller than the dispersion of utilization 
rates.  This means that LDC exporters of T&C react  differently to similar preference margins.  This 
can either be due to the fact that different rule s of origin are applied to products with similar 
preferences, or that producers of different items  are reacting in a heter ogeneous manner to similar 
rules of origin and preferences. 
200. The only exception to this observation for prefer ence programmes other than normal GSPs is 
the US AGOA for clothing.  Although the dispersion in utilization is also quite high, the variation in 
preferences margins is even higher.  One interpretati on of this result could be that a relatively similar 
set of rules of origin for apparel does not seem to constrain the utilization of a wide range of 
preferences margins values.  In other words, th e compliance costs to rules of origin under AGOA 
seem to be low enough to enable items with relatively low margins of preference to  take advantage of 
the American import preferential regime.  
201. What then explains the heterogeneity in utilizati on rates, in particular where rules of origin 
are identical or relatively uniform across products?  Let us first consider the case where preference 
margins are relatively uniform.  In this case, where, all other things being equal, identical rules and 
preferences translate into different utilization rate s, the differences must relate to idiosyncratic 
characteristics of the exporting in dustry.  Such idiosyncrasies ma y for instance be the costs of 
switching from one input producer to another or the relative efficiency with which a producer deals 
with pure administrative requirements to fulfill rules of origins.  Canada’s clothing imports from 
Bangladesh provides a good illustration as shown in Char t IV.8a.  However, if we compare different 
countries for a same year, rules a nd preferences, as displayed in Charts IV.8b and IV.8c for the 
Canadian clothing imports from Madagascar and Ca mbodia respectively, one can notice overall lower 
levels in utilization than for Banglad esh, since idiosyncrasies are also to be related to the country of 
origin.  Indeed, the local access to inputs may vary  a lot from one exporting country to another. 
202. In the second case, where prefer ence margins vary between products, variation in utilization 
is likely to be due to both differences in those ma rgins across products and producer idiosyncrasies.  
This is well illustrated by US imports of cl othing from Haiti under the CBTPA programme (see 
Chart IV.9).  However, the more flexible the rules of origin, the lower the variation in utilization is 
likely to be.  AGOA’s rules for LDCs are more flexible than CBTPA’s, and though preference 
margins are relatively variable in both progr ammes for relatively homogeneous rules within 
programmes, AGOA’s utilization rates are uniformly high relative to CBTPA’s (compare Chart IV.9 
for Haiti to Chart IV.10 for American imports of clothing from Lesotho under AGOA).
81  To make a 
comparison with Canada, AGOA reduces much more the variation in utilization for Lesotho than the 
Canadian GSP for LDC does (see Charts IV.10 and IV.11). 
203. Let us finally consider the case where rules of origin are specific to products while preference 
margins are relatively uniform.  Th is is for instance the case of Japan and Switzerland as shown in 
Charts IV.12 and IV.13. In addition to producer idio syncrasies, the different levels of restrictiveness 
of rules of origin may help explain the variation in utilization rates.  The comparison between Japan 
                                                      
81 Rules of origin are more binding for chapter 62 (i.e. knitted items) than for chapter 61 (i.e. not 
knitted items).  See Chart IV.9.  WT/COMTD/LDC/W/37 
 Page 63 
 
 
 and Switzerland is interesting since Japan uses more r estrictive rules of origin in chapter 61 compared 
to 62, while Switzerland is doing the opposite.  Unsu rprisingly, Charts IV.12 and IV.13 reflect these 
differences.  Switzerland’s average utilization rate in  chapter 61 also illustrates that when rules of 
origin are flexible, relatively low preference margins may be utilized by preference-receiving 
countries. 
Chart IV.8a 
Variation of utilization relative to preferences – the case of Ca nadian clothing imports from Ba ngladesh under GSP for LDC (HS 
headings, 2003)  
0 20 40 60 80 100percent
61 626101
6102
61036104
6105
6106
61076108
6109
611061116112
6113
61146115
6116
6117
6201
6202
6203
6204
620562066207
6208
620962106211
6212
62146215
6216
6217
average utilization rate average preference margin
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 WT/COMTD/LDC/W/37 
Page 64  
 
 Chart 8b 
Variation of utilization relative to preferen ces – the case of Canadian clothing im ports from Madagascar under GSP for LDC (HS 
headings, 2003) 
0 20 40 60 80 100percent
61 626101
6102
6103
6104
6105
61066107
6108
6109
6110
6111
6112
6114
6116
6117
6201
6203
6204
6205
6206
6207
6208
6209
6211
6214
6215
average utilization rate average preference margin
 
 
 
Chart IV.8c 
Variation of utilization relative to preferences – the case of Ca nadian clothing imports from Cambodia under GSP for LDC (HS 
headings, 2003) 
 
0 20 40 60 80 100percent
61 626101
610261036104
6105
610661076108
6109
611061116112
6113
611461156117
6201
6202
620362046205
6206
620762086209
6210
621162126214
6217
average utilization rate average preference margin
  WT/COMTD/LDC/W/37 
 Page 65 
 
 
 Chart IV.9 
Variation of utilization relative to preferences – the case of American clothing imports from Haiti under CBTPA (HS headings, 
2003) 
0 20 40 60 80 100percent
61 626101
61026103
6104
6105
6106
6107
61086109
6110
61116112
6114
6116
6201
6202
6203
6204
62056206
6207
62086209
6210
62116212
6216
average utilization rate average preference margin
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
Chart IV.10 
Variation of utilization relative to preferences – the case of Am erican clothing imports from Lesotho under AGOA (HS headings, 
2003) 
 
0 20 40 60 80 100percent
61 626101
6102
6103
610461056106610761086109
6110
611161126114
6202
62036204
6205
6206
6207
6208620962116212
average utilization rate average preference margin
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. WT/COMTD/LDC/W/37 
Page 66  
 
  
Chart IV.11 
Variation of utilization relative to preferences – the case of Canadian clothing imports from  Lesotho under GSP for LDC (HS 
headings, 2003) 
 
0 20 40 60 80 100percent
61 626103
6104
6105
6106
61086109
6110
61116114
6201
62036204
6205
6206620862096211
average utilization rate average preference margin
 
 
Chart IV.12 
Variation of utilization relative to preferences – the case of Jap anese clothing imports from Ba ngladesh under GSP for LDC (HS 
headings, 2003)  
0 20 40 60 80 100percent
61 626101
61026105
6106
6108
610961106112
6114
6115
6201
6202
6203
6204
620562066207
6208
62106211
6212
6214
average utilization rate average preference margin
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations.  WT/COMTD/LDC/W/37 
 Page 67 
 
 
  
Chart IV.13 
Variation of utilization relative to preferences – the case of Swiss clothing imports from Bangladesh under GSP for LDC (HS 
headings, 2003) 
 
0 20 40 60 80 100percent
61 626101
61026104
6105
6106
6107
6108
6109
6110
6111
6112
6114
6115
6117
6201
6202
6203
62046205
6206
6209
6210
6211
6212
average utilization rate average preference margin
 
Source : WTO (IDB), countries notifications and Secretariat’s calculations. 
 
E. PREFERENCES AS AN EXPORT PROMOTION AND DIVERSIFICATION TOOL:  THE CASE OF 
CANADA  
204. The Canadian example shows that a generous reform of preference schemes can 
simultaneously increase the number of countries act ually benefiting from the scheme, increase the 
amount of imports from countries that were alre ady using the scheme and increase the range of 
products imported from those countries.  By extend ing the coverage of its preference scheme and 
increasing the margins of preferences while simult aneously relaxing the rules of origin, Canada 
successfully promoted LDC T&C exports and horiz ontal export diversification in beneficiary 
countries.  Export diversification, measured here  as an increase in the range of products exported 
within a same HS chapter enab les LDC producers to exploit economies of scope, and thus increase 
their competitiveness on international markets.  Diversification should also help LDC producers 
penetrate new markets and respond to changes in fashion cycles. 
205. As shown in Table IV.7, following the reform, a number of LDCs which were not previously 
exporting clothing to Canada started supplying the Canadian clothing market.  While the number of 
clothing suppliers from LDCs was stagnating aro und 32 between 2000 and 2002, new LDCs entered 
into the Canadian market as soon as the reform st arted operating in 2003, and the total number of 
exporting countries in clothing first increased to 36 be fore reaching a historical high of 41 suppliers, 
only two years after the introduction of the reform.  
206. Even more strikingly, exports from a selected sample of LDCs have substantially increased 
after the implementation of the Canadian reform.  The exports value index for the trade between 
Canada and Bangladesh (with a base=100 in 1998) ro se from 112.5 in 2002 to 247.5 in 2003, before 
further increasing to 370.8.  Cambodia knows an ev en more spectacular evolution with an index WT/COMTD/LDC/W/37 
Page 68  
 
 moving from 348.7 in 2002 to 1500 in 2003 and 2469.7 in 2004.  Only the Maldives shows a 
disappointing performance in 2004 in this regard. 
207. Last but not least, the Canadian reform has contributed to an increase in the number of 
clothing items imported from Banglad esh.  The new rules of origin allowed an extensive use of the 
preferences granted.  As shown in Table IV .8, when the reform was announced in 2002 for 
1 January 2003, importers’ expecta tions led to a first increase in the number of imported items, from 
137 in 2001 to 158 as of 2002, followed by a jump to 186 and 197, respectively in 2003 and 2004. 
208. The change in rules of origin played a crucia l role in the success of the Canadian reform.  
Only highly flexible and uniform rules of origin seem  to allow LDC producers to reap the benefits of 
economies of scope.  Such rules make sure prefer ences can be easily utili zed for any item produced 
and exported within a group of products.  This poin t is well illustrated by the fact that the only 
programme (US AGOA) which significantly decreases the variation of utilization of preferences (as 
shown by its ratio of relative variation of utilizatio n to preferences of 0.8) is also the scheme which 
provides the beneficiary countries with the most liber al rules of origin in the clothing business.  
Enabling global sourcing of inputs is thus paramount to facilitate export diversification.  Only highly 
unrestrictive rules of the AGOA type in clothing  can reduce the variation which characterizes the 
other schemes designed for LDCs: simple flexible rules like the Canadian may not be sufficient. 
209. Heterogeneous rules, as shown in the case of  Japan and Switzerland, but also for the 
European Cotonou Agreement and EBA Initiative, in crease the variation of utilization rates which 
leads to a higher concentration of beneficiary coun tries' exports to the preference-giving country.  
Australia and Canada, although using relatively uni form rules, fail to reduce the variation in 
utilization rates.  In both cases, rules of origin re main too restrictive for the products of which the 
idiosyncrasies make the compliance costs too high, or the margins of preferences of which are too low.  Homogeneity of the rules is thus not e nough to reduce the variation of utilization in the 
Canadian and Australian case: only highly flexib le and uniform rules of origin can reduce 
dissimilarities in utilization in both countries.  While Canada is closed to having very liberal rules of 
origin, Australia should undertake a greater effort in that regard. 
Table IV.7 
Number of LDCs exporting to Canada and gr owth of exports of selected exporters 
 
 YEARS 
 1998a 1999 2000 2001 2002 2003 2004 
Number of exporting counties 26 29 32 31 33 36 41 
        
Bangladesh 100 103 125 129 113 248 371 
Cambodia 100 191 291 390 349 1,500 2,470 
Haiti 100 156 225 106 151 447 432 
Lao PDR 100 230 166 201 262 486 713 
Lesotho 100 47 116 176 92 158 247 
Madagascar 100 86 110 274 108 274 571 
Maldives 100 137 200 396 64 218 91 
Nepal 100 176 343 284 189 259 503 
        
a Exports value index (base=100 in 1998).        
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.  
 
  WT/COMTD/LDC/W/37 
 Page 69 
 
 
 Table IV.8  
Evolution of the number of clothing item s imported by Canada from Bangladesh 
 
 Number of tariff lines for clothing: 272 (HS 8 digits) 
Year Traded Covered and traded Covered, traded and 
utilized 
1998 134 10 3 
1999 129 8 1 
2000 133 8 0 
2001 137 9 0 
2002 158 14 1 
2003 186 186 140 
2004 197 196 164 
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.  
 
 F. O
PTIONS FOR IMPROVING THE EFFECTIVENESS OF NON-RECIPROCAL PREFERENCE SCHEMES  
210. So far, the impact of trade preferences on th e majority of LDCs has been rather weak.82  In 
most cases, utilization rates remained very low.  Ho wever, our results suggest that appropriate reforms 
can significantly and rapidly improve the effectiveness of a scheme.  In the last few years, most developed countries have extended their preferenc es in favour of LDCs, offering duty- and quota-free 
access to all LDC exports.  However, while cons iderable progress has already been achieved and 
more seems to be planned, results suggest th at there is scope for further improvements.  
211. Measures could be taken in three different areas: coverage, predictability, and rules of origin.  
With regard to coverage, the main problem is discr imination between LDCs.  It could be eliminated 
by granting the most generous treatment unconditionally  to all LDCs.  With regard to predictability, 
schemes could be granted on a permanent basis and c onditionality eliminated where possible.  As for 
rules of origin, they could be simplified, harmoni zed and relaxed.  Such measures would allow LDCs 
to derive the full benefit of non-reciprocal trad e preferences, which when available, are often 
truncated by high compliance costs.  
212. As regards geographical covera ge, the main issue is that Asian LDCs are currently 
"underpreferred".  They do not have access to AGOA or to Cotonou.  Extending the benefits of 
AGOA or benefits equivalent to those grante d under AGOA to non-African LDCs could have a 
significant effect.
83  As argued below, the EU, rather than extending the coverage of Cotonou to Asian 
countries, may consider relaxing rules of origin for LDCs. 
213. With regard to product coverage, the main issue is the limited coverage of US schemes.  Both 
the LDC GSP and AGOA offer only li mited product coverage.  In the case of AGOA, most of textiles 
are not covered.  The US could consider exte nding the coverage of its schemes to textiles. 
214. Uncertainty regarding the conditions of access to major markets could represent a serious 
obstacle to potential investors in the T&C sector  of LDCs.  All measures that preference giving 
countries could take to increase the predictability of those conditions would be very useful.  
Graduation clauses, such as ceilings and caps, fin ite duration and other conditionalities contribute to 
unpredictability and should be eliminated if possible.  The European Union has shown the way by making its EBA permanent.   
                                                     
 
82 See Brenton and Ikezuki (2004). 
83 One proposal to do this is the bipartisan Tariff Relief Assistance for Developing Economies 
(TRADE) Act, which was introduced in the US Senate an d House of Representatives early in 2005.  If passed, 
the TRADE Act would authorize the pr esident to grant limited duty-free access to 14 LDCs, plus Sri Lanka, all 
countries hit by the D ecember 2004 tsunami. WT/COMTD/LDC/W/37 
Page 70  
 
 215. As for rules of origin, discrimination in th e level of restrictiveness faced by different 
beneficiary LDC countries in a given export market could be avoided.  Generous rules combining a 
relatively low minimum local content requirement, unrestrictive cumulation rules and the global sourcing provision, if extended to  all schemes, would certainly boost utilization rates.  The European 
Union could significantly enhance the benefits th at Asian LDCs derive from its EBA scheme by 
liberalizing its rules of origin.   
216. Generous reforms of preferential schemes represent a serious option for improving the 
competitiveness of LDCs in the T&C sector and ther eby helping them in their post-ATC adjustment.  
Clearly preferences, which are likely to be eroded in the coming years, should not be seen as a long-term measure.  But they can play a role in the short run.  The successful reform of the Canadian 
GSP for LDC programme shows that positive r esults of reforms can be immediate.    WT/COMTD/LDC/W/37 
 Page 71 
 
 
 V. OTHER MEANS TO TACKLE CONSTRAINTS AFFECTING LDC EXPORTS 
217. This Section looks into other means to tackle  constraints affecting LDC exports of textiles 
and clothing than the ones considered in other parts of this report.  Sub-section A considers access to 
developing country markets while Sub-section B ex plores measures that LDC governments could take 
to enhance their competitive position in the T&C sector. 
 
A. ACCESS TO DEVELOPING COUNTRY MARKETS  
1. Developing Countries:  Size and Trends in World T&C Imports  
218. Because their growth has been higher than aver age and because they are still protected behind 
relatively high tariffs, developing country markets have considerable potential for LDCs' exporters of 
T&C.  While developing countries still import signi ficantly less clothing products than developed 
countries, their imports of clothing have grown fast er over the last decade than those of developed 
countries (see Table V.1).  At the same time, ta riffs on both textiles and apparel imports are still 
relatively high in developing countries (see Table V.2) and only very few offer preferential access to LDCs. 
219. While developing countries import fourteen ti mes less clothing products than developed 
countries, their textiles imports are comparable to those of developed countri es, reaching $60 billion, 
compared to $78 billions imported by developed count ries.  In line with this pattern, developing 
countries only absorb less than 4 per cent of clothing exports from LDCs (see Table V.3).  In contrast, they absorb about a quarter of LDCs' textile exports. 
220. Developing country imports of textiles and appa rel have grown steadily over the past decade, 
at a rate of 3.3 and 6.5 per cent respectively (see Tabl e V.1).  The trend is even more favourable if the 
role of the three "trading cities" is controlled.
84  The trade pattern of the trading cities sharply 
contrasts with that of other developing countries.   They import products and re-export them to the 
biggest markets (i.e. the developed ones) with or wi thout  only minimal processing.  For this reason, 
they import proportionally much more clothing than  other developing countries, and for the same 
reason their textiles imports are low and decreasi ng.  For developing countries excluding the "trading 
cities", the growth of clothing imports reached an  impressive 9.1 per cent on average over the past 
twelve years, while the growth of their textiles imports was 5.1 per cent. 
Table V.1 
Average Import Growth of Textiles and Clothing Products, 1991-200385 
 
 Textiles Clothing 
World 2.9 % 5.2 % 
Developed Countries 1.5 % 4.7 % 
Developing Countries 3.3 % 6.5 % Free Traders -1.2 % 4.6 % 
Other Developing 5.1 % 9.1 % 
 
 
                                                      
84 Singapore and Hong Ko ng, China and to a lesser extent, Macao, China 
85 Source: Statistics Database – WTO.  Logarithmic trend WT/COMTD/LDC/W/37 
Page 72  
 
 221. As shown in Table V.2, average tariffs are hi gher in developing countries than in developed 
countries.  The simple average tariff for textile pr oducts in developing countries is more than twice 
the average tariff in developed countries, while for clothing products, it is 57 per cent higher and the figures are even higher in LDCs.
86  The higher level of tariffs for apparel than for textiles points at the 
presence of tariff escalation.  Average tariffs on apparel products range from zero per cent for the 
"trading cities" to almost 80 per cent in the case of Mauritius.  A majority of 30 out of the 
52 developing countries for which both trade and tariff in formation is available, have an average tariff 
for clothing that exceeds 20 per cent.  The problem lies in uniform high protection, in most developing countries
87, dispersion around the mean is very low  (see Annex Table V.1).  
Table V.2 
Simple Average of Tariff Rates (last available year)88   
 
 Textiles Clothing 
Developed Countries 6.4 12.9 
Developing Countries 14.0 22.6 
Least Developed Countries 17.4 24.6 Transition Economies 10.5 18.8 
 
 2. Trade and Tariffs Between Developing Countries and Least-Developed Countries  
222. As already mentioned, LDCs export almost ei ght times more clothing than textiles and most 
of LDC exports go to developed countries.  Bearing this  in mind, it is interesting to have a closer look 
at the structure of LDC exports to developing countri es and at the tariffs those exports face.  Again, it 
is useful to make a distinction between the "t rading cities" which do not impose duties on their T&C 
imports and other developi ng countries.  The trading cities absorb  more than half of LDC clothing 
exports to developing countries but only a very sm all fraction of LDC textiles exports to developing 
countries.  The other developing countries, many of which apply high tariffs on textiles and even 
higher tariffs on clothing import about the sa me amount of apparel but more textiles.
89  
223. The concentration of clothing exports on the " free traders" strongly affects the weighted 
average tariff for developing countries, which appear  lower in clothing and higher in textiles, as 
shown in Table V.4. 
                                                      
86 See the discussion in Sub-section B below. 
87 Seventy-three per cent of the countries with info rmation for the year 2001 , year with the most 
complete coverage.  
88 Source: IDB-WTO.  Only ad valorem  tariffs have been taken into account in the calculation.  
89 Note that non a d valorem  tariffs represent a non-negligible portion of those tariffs. 
  WT/COMTD/LDC/W/37 
 Page 73 
 
 
 Table V.3 
Developing Country Imports from LDCs (expanded figures 2000-2003, thousand dollars) 
 
 Clothing Textiles 
 US $  share US $  share Textiles & Clothing 
Developing countries               230,182 100%             270,177 100%               500,360 
   - Free traders                   6,803 3%             142,368 53%               149,171 
   - Other developing               223,379 97%             127,809 47%               351,188 
      -Of which N.A.V.                  10,357 4%               29,417 11%                 39,774       LDC exports to World               900,649            7,037,646              7,938,296 Per cent to developing 25.6%  3.8%  6.3%    - Free traders 0.8%  2.0%  1.9%    - Other developing 24.8%  1.8%  4.4% 
      -Of which N.A.V.  1.1%  0.4%  0.5% 
 
 
224. Excluding the free traders raises the weighted  average protection facing LDC T&C products 
in developing markets.  Tariffs on clothing are onl y moderately higher than tariffs on textiles which 
means that, given the kind of products exporte d by LDCs, they do not face significant tariff 
escalation, but simply high tariffs.90  More generally, LDCs  being concentrated in the final segment of 
this productive chain, it is not easy to find a problem of tariff escalation in the usual sense. 
Table V.4 
Textiles and Clothing Tariffs and Impo rts of Developing Countries (weighte d average and millions of dollars) 
 
 Textiles Clothing 
 Average tariff Imports  Average tariff Imports  
Weighted by world imports of developing countriesa 
All developing 12.3 60'440 10.1 33'047 
   Trading cities 0.0 13'391 0.0 17'708 
   Countries applying ta riffs 15.8 47'049 21.8 15'340 
     
Weighted by developing country imports from LDCsb 
All developing 17.4 159 8.1 226 
   Trading cities 0.0 7 0.0 136    Countries applying tariffs 18.2 152 20.2 89 
a 99 reporting countries included in the calculation. 
b 52 reporting countries included in the calculation. 
 
 
 225. The main bilateral flows are exports from Lesot ho to South Africa, from Nepal to India, from 
Bangladesh to the Islamic Republic of Iran.
91 
226. Bangladesh’s main exports to India, jute ya rn and jute sacks, are linked to the main 
agricultural advantage of Bangladesh.  In Nepal's c ase, the dominant product is man-made fibres.  
                                                      
90 Given the high weight of India in those products, it also reflects the uniformly high protection of 
India's tariff in those sectors. 
91 See Statistical Appendix Table 2. WT/COMTD/LDC/W/37 
Page 74  
 
 Note that under the India-Nepal Trade Agreement, Ne palese exports to India benefit from preferences  
whereas the coverage of preferences fo r India-Bangladesh trade is sparse.  
227. The incomplete information on preferences granted by developing countries to LDCs 
available to the Secretariat suggest s that their role is very limited.
92  Evidence suggests that in Latin 
America the impact of such schemes is almost zero.  CARICOM should give duty-free access to 
Haiti.  There are some regional agreements unde r which developing countries grant duty-free access 
or preferences to LDCs on a reciprocal basis in Africa.  South Africa for instance grants preferences 
to SACU, SADC and COMESA countries, many of them LDCs.  The Republic of Korea informs of 
the application of GSTP that includes LDCs, but is not  specifically directed to them.  In South Asia, 
preferences are given to few LDCs by ASEAN a nd SAARC.  India-Nepal trade is conducted duty 
free.  This incomplete overview of LDC preferen ces from developing countries suggests that where 
such preferences exist, they are random, partial and not well focused on LDCs.  
3. Conclusions 
228. Developing countries import less than 4 per cen t of total LDCs' clothing exports.  This 
relatively low developing country share can be ch iefly explained by two factors.  First, many 
developing countries still apply high average tari ffs on clothing products .  Second, LDCs do not 
necessarily have a comparative advantage in clot hing over all developing countries.  Several 
developing countries have a highly competitive clot hing sector and export more clothing to LDCs 
than they import from LDCs.   
229. Some among the emerging economies which co rrespond to potential markets for LDC 
clothing exporters have relatively high tariffs on tex tiles and clothing.  Mexico, Argentina, Brazil, and 
Thailand, for example, all have average tariffs that exceed 20 per cent.  China’s average tariff on 
clothing products is 19.6 per cent, while Malaysia's tariff is slightly above 15 per cent.  The Republic 
of Korea and Chinese Taipei have set their aver age tariff level on clothing products at around 
12 per cent.  Raising labour costs over recent year s and a shift in production towards more capital 
intensive and high-skilled labour inte nsive manufacturing, makes it mo re and more difficult for some 
emerging economies to compete with low-labour cost developing countries, including LDCs.  
Mauritius and Thailand may serve as an example for th is group of countries.  Both countries have set 
their average tariffs for clothing at nearly 80 per cent.   
230. In this context, a reduction of import tariffs in some developing countries, especially those 
where LDCs could have a comparative advantage in clothing could be considered.  The reduction 
could very much take the form of non-reciprocal  preferences granted to LDCs along the lines of 
paragraph 10 of Annex B of the July Package.  In paragraph 10, Members call upon 
developed-country participants and other participants who so decide, to grant on an autonomous basis 
duty-free and quota-free market access for non-agricu ltural products originating from least-developed 
countries.  In the short run, developing countries may not be ready to reduce their protection on a 
non-discriminatory basis and LDCs may not be able to compete with the most competitive developing 
countries.  A reduction of tariffs for all non-agricu ltural products would be less distortive than 
preferences on clothing only.   
231. In some cases, reciprocal liberalization as part of a regional trade agreement could be 
envisaged.  Given the high level of protection on textile products in some LDCs, there could be 
reciprocal benefits if the LDC specializes in cl othing while the developing country specializes in 
textiles. 
                                                      
92Document WT/COMTD/LDC/W/35 provides an overview of all recent initiatives to improve market 
access by country and customs territory.   WT/COMTD/LDC/W/37 
 Page 75 
 
 
 B. SUPPLY CONSTRAINTS  
232. A country's competitive position in the T&C sector depends on many factors.  Moreover, 
T&C industries have different factor requirements and one country rarely has a competitive advantage 
in both industries.  The textiles industry is typically capital and skilled-labour intensive while the clothing industry is more uns killed-labour intensive.  
233. Large manufacturers have started fragmenting the production of T&C products and to 
relocate production stages according to countries’ specific advantages.  Today, they manage an 
international supply chain with production stages locate d in several countries.  In this international 
supply chain, LDCs appear as an actor in the assembl y stage.  The assembly stage consists mainly in 
sewing, a highly labour intensive production stage.  Whereas the location decision of companies was 
motivated by the abundance of cheap labour in LDCs, unfilled quotas and preferential market access 
also attracted investors.  With the quota phase- out and progressive erosion of preference, the 
competitive position of LDCs is becoming weaker.  If  LDCs want to remain an important player in 
the assembly stage of the clothing sector, or if they  wish to expand their range of activities in this 
sector, they need to consolidate their competitive position.  
234. This Sub-section studies supply constraints specifi c to the T&C sector that LDCs face when 
competing on international markets.  The report defi nes supply constraints as encompassing all factors 
that may limit or restrain the adequate supply of T&C products from LDCs.  The Section focuses in particular on inputs used in the T&C sector.  Results  suggest that in the short run LDCs should try to 
enhance their competitiveness in the labour-intensive  production stages of clothing production.  In the 
longer run, LDCs should try to diversify vertically  and become competitive in other production stages 
of the T&C production.  Several options to improve competitiveness in the short and long run are 
envisaged.  
235. The Sub-section starts with a short overview of the inputs required in the T&C sector 
respectively.  It then studies the tariff profile that  LDCs apply for these inputs.  It further examines the 
labour and capital markets and the business environment before turning to FDI policies and the role of 
Export Processing Zones.  
1. Access to Inputs 
236. T&C production encompasses several processing stages and requires a panoply of inputs.  
The production process can be divided into four stages: (1) preparing the fibres (natural or man-made) for spinning, (2) spinning the fibres into yarn, (3) producing fabrics out of yarn, and (4) cutting and sewing the fabrics.  In this report stages (1) to (3) correspond to the textiles industry while stage (4) 
corresponds to the clothing industry.  Another ke y activity that may add substantial value and 
determine the final quality of the goods is dyeing and fi nishing.  Products are finished in order to give 
them certain qualities, such as preventing shrinkage, providing strength, or resisting stains.  Even though products can be dyed and finished at all four stages, both processes are especially important 
for the textiles industry.    
237. The production of T&C requires a range of inputs.  We define inputs in this report in a broad 
sense including labour, capital, business environment as well as physical inputs.  Whereas for both 
industries the business environment is importa nt, the capital and labour requirements differ 
substantially.  The textiles industry is markedly more capital intensive than the clothing industry.  The 
machinery used in the textiles industry can be  highly complex and is increasingly controlled 
electronically.  As a consequence, high-skilled labour  combined with extensive on-the-job training is 
needed.  WT/COMTD/LDC/W/37 
Page 76  
 
 238. For the clothing sector low-skill labour plays a very prominent role.  Producing clothing starts 
with a fashion designer's creation of sample produc ts.  Once the design has been approved, the mass-
production begins.  The fabric used is spread on cu tting tables in many layers and cut by an electric 
knife or other cutting tools according to the specific design.  In the next step, the resulting pieces of 
fabrics are sewed into three-dimensional products .  Sewing is typically done by low-skilled labour 
using sewing machines.  The basic requirements for sewing machine operators is a good hand-eye 
coordination to manipulate the soft and limp materials and the capability to carry out repetitive works over many hours.  After sewing, the garments undergo a final inspection and are pressed.  Depending 
on the automatization of the factory, both processes can require substantial labour input.  Again, the 
workers employed for these purposes do not need to be highly skilled.  
239. In addition to labour and capital, the production of T&C requires a range of physical inputs, 
such as raw materials, machines, intermediate goods, chemicals, etc.  Since only few LDCs have 
developed a full-fledged T&C sector, many LDCs rely heavily on imports of these inputs for their 
T&C sector.  As the example of other developing countries such as for instance Hong Kong, China; 
the Republic of Korea; or Chinese Taipei, shows, the lack of domestic inputs does not necessarily 
translate into a competitive disadvantage.  In the early stage of the sector’s development these 
countries relied heavily on imports of raw materials a nd textiles.  An open trade regime helped ensure 
access to these inputs, and over time, the developmen t of the T&C sector reduced the dependency on 
foreign imports.  The next Sub-section studies the trad e regime that LDCs apply for inputs in the T&C 
sector.  
(a) Tariff profile for inputs in the textiles and clothing sector 
240. As stated above, the textiles industry is a cap ital-intensive industry that transforms raw 
materials and/or prefabricated products into fabr ics.  Even though several LDCs are producing raw 
materials used in the textiles production, such as cott on or jute, most of the equipment to process these 
inputs needs to be imported.  Out of the many different inputs used in the production process, the analysis is limited to the inputs listed in Annex V Table1, namely, chemical products for tanning and 
dyeing, raw materials and prefabricated textile products, and textile machines.  
241. An important part of the output of the textiles industry is used as input in the clothing 
industry.  However, the production of garments requires further inputs, such as machines for extruding, drawing, texturing, cutting and sewing.  A nnex V Table 2 lists all products that are used to 
study the tariff profile of the clothing sector.  Again,  this list is not comprehensive, but it allows an 
insight in the tariff structure for the most important inputs in the clothing industry. 
242. In the following Section, the tariff structure a pplied by LDCs to inputs of the T&C sector is 
studied.  Since tariff profiles vary substantially fro m one country to another, the report examines the 
profiles of several LDCs individually.  Annex V Tables 5 and 6  present the tariff profile of the LDCs 
studied.  In order to facilitate the analysis, the countries are allocated within three groups:  
(i) countries that apply low tariffs for T&C inputs, (ii) countries with low import tariffs on textile 
inputs and high tariffs on clothing inputs, and (iii) c ountries that set high tariffs for the inputs of both 
industries.  
(i) LDCs with an overall low tariff level  
243. Some LDCs have set their import tariffs for T&C inputs at low levels.  However, in most of 
these countries high tariffs still apply for several product groups.  Cambodia and Madagascar, in which the T&C sector plays a prominent economic role, are examples of this type of tariff structure.  
244. In the case of Cambodia, the applied tariff rate  for products used as inputs in the textiles 
industry is 7 per cent except for paints (3208, 3209,  and 3210) with an applied tariff of 35 per cent  WT/COMTD/LDC/W/37 
 Page 77 
 
 
 and textile machines (8445 to 8451) with an applied tariff of 15 per cent.  For inputs of the clothing 
industry the tariffs are all fixed at 7 per cent with some exceptions.  The tariff for the product group 6001 (pile fabrics) is set at 35 per cent, and for machines used in the clothing industry (8444, 
8452) at 15 per cent.   
245. In Madagascar the overall tariff level for te xtile inputs is low, reaching a maximum of 
5 per cent.  All tariffs applied for clothing input s are below 10 per cent, except for pile (6001) and 
knitted fabrics (6002) where they reach a level of 20  per cent.  Firms located in EPZs are exempted 
from customs duties, except for 5 per cent of production that EPZ firms can sell domestically. 
246.  The overall low import tariffs in both countries help foster the development of a competitive 
T&C sector.  Reducing the remaining tariff peak s could provide T&C producers with a further 
competitive advantage.  Governments would forego a source of income.  However, the adjustment 
cost should be limited since for the majority of  products there is no directly competing domestic 
production.   
(ii) LDCs with low import tariffs on textile inputs and high tariffs on clothing inputs    
247. The majority of LDCs are characterized by low import tariffs on textile inputs and high tariffs 
on clothing inputs.  The tariffs on imported inputs for the textiles industry are often not uniformly 
low, but show several peaks.  Prominent examples of  this tariff regime are: Lesotho, Malawi, Nepal, 
Senegal, and Tanzania.  As men tioned above, LDCs enjoy a competitive advantage in the clothing 
industry mainly due to the abundance of cheap labour.  Inputs for the clothing industry should therefore be available at world market prices and wi th short lead times.  Several LDCs offer drawback 
schemes for inputs used in export-oriented industri es.  Dwelling on the exampl es of Lesotho, Malawi 
and Senegal the report illustrates the benef its and problems of this strategy.  
248. Lesotho is a member of the Southern African Customs Union (SACU).  Under the most 
recent SACU agreement tariff rates are determined  by the so-called Tariff Setting Board and applied 
to all goods imported from outside by one of the me mber countries.  The tariffs on inputs for the 
textiles industry are low under SACU; some of them are even set at a zero tariff level.  However, as 
Chart V.1 indicates,
 the tariffs on imported inputs for the clothing industry are set at a level averaging 
around 20 per cent (for the year 2001).  This high tariff level creates an anti-export bias for Lesotho since the country only has a small textiles industry and therefore needs to import most of its inputs.
93 
In order to sidestep this high tariff level, th e Government applies duty drawback schemes for 
export-oriented firms.  Duty drawback schemes seem  indeed to be a good strategy for Lesotho.  
Benefiting from AGOA, Lesotho has become the la rgest US supplier of garments in Sub-Saharan 
Africa in 2002.  The most recent figures for 2005 i ndicate that the exports to the US have been 
growing substantially compared to last year.94 However, some problems related to drawback schemes 
remain.  Salm et al.  (2002) point out that the a pplication of drawback schemes might be too strict.  
Currently, wasted fabrics are destroyed instead of  being used for domestic small-scale production.  
249. Malawi's tariff structure is characterized by  duty rates that increase with the degree of 
processing.  For the clothing sector the average tariffs are around 25 per cent.95 This high tariff level is 
softened by the drawback schemes and excise duties.  For the clothing industry textile fabrics and lace 
are entitled to drawback schemes provided that the final goods are exported within two years from the 
date of payment of the duty.  Enterprises with EPZ st atus can also ask for tariff exemptions.  The main 
setback of drawback schemes is that the completi on of claims for drawbacks can take several weeks 
                                                      
93 More than half of Lesotho’s textile imports originate from China;  Hong Kong, China;  and Chinese 
Taipei.  See Statistical appendix for details. 
94 Office of Textiles and Apparel (OTEXA): http://otexa.ita.doc.gov, consulted in May 2005. 
95 WTO (2002) WT/COMTD/LDC/W/37 
Page 78  
 
 or months.  In addition, the management of draw back schemes can become a source of administrative 
discretion.  
Chart V.1 
Tariff Structure of Inputs used in the Clothing Industry in the case of Lesotho, 2001 (applied im port tariffs and volume in dol lars) 
 
0510152025
5204
5208
52095210
5211
5212
5401
5407
55085513
5514
55155516
6001
6002
7319
8452HS Product GroupTariff Level
05000100001500020000250003000035000400004500050000
Import ValueSimple Av erage Import Volume
 
250. Tanzania has a similar tariff profile for input s used in the T&C production.  The applied 
average tariffs for textile inputs are around 10 per cent, whereas the average a pplied tariff for clothing 
inputs exceeds 20 per cent.  The applied tariffs vary from product-to-product within both groups.  
Many processed products face a much higher effectiv e rate of protection along the processing chain 
providing substantial protection for higher-level processing activities.  A system of duty drawbacks is in place for export-oriented enterprises.  However, it is reported that the system does not work very 
well.  The Tanzania Revenue Authority, which is  responsible for administering the drawback 
programme, has requested technical assistance in order to implement a drawback system effectively.
96  
251. In summary, the analysis of the tariff stru cture of this group of countries identifies three 
issues.  First, one observes a great disparity in ta riff levels for inputs in the T&C industry.  A high 
dispersion raises the level of distortion for both cons umption and production, in particular if goods are 
close substitutes.97 A low uniform tariff prevents these misallocations and has the advantage to be 
simpler to manage and more transparent.  It may be argued that a low uniform tariff reduces 
government revenue.  However, imports may incr ease sufficiently to counterbalance the loss in 
government revenue.  Second, there seems to be co ntinual pressure to maintain high tariff rates for 
clothing inputs.  On the one hand, the possible loss in  tariff revenue through lo wer tariffs and, on the 
other hand, protective measures for the domestic te xtiles industry are possible explanations for the 
high level of tariffs.  However, a reduction in th e tariff level of clothing inputs would be clearly 
beneficial for the competitive position of the domestic clothing industry.  Third, many countries apply 
duty drawback schemes in order to promote export-oriented enterprises.  However, the existing duty 
drawback systems do not seem to be effective.  Th e delays for reimbursement can be considerable and 
the process subject to red tape.  One possibility w ould be to change to a system of registering 
                                                      
96WTO (2000a) 
97WTO (2002)  WT/COMTD/LDC/W/37 
 Page 79 
 
 
 exporters, where registered exporters are permitted  to import raw materials and semi-finished goods 
free of duty.98  
(iii) LDCs with a high tariff level in the textiles and clothing industries  
252. The remaining LDCs apply high average tariffs on inputs of the textiles industry as well as of 
the clothing industry.  Bangladesh as the largest garment producer and exporter of all LDCs is the 
most prominent example of countries in this group.  Maldives is another example of an LDC with a 
relatively important T&C sector that applies hi gh tariffs on inputs needed by this sector.  
253. Chart V.2 shows the tariff structure and level of  imports of inputs for the textiles industry.  
The left vertical axis measures the value of the applied import tariff while the right vertical axis 
depicts the volume of trade.  At first sight, one notices that for many products the applied import tariff is still high.  Tariff for products of colouring (3208-3215), silk pro ducts (5002-5006), yarn of animal 
hair (5110), and other fibres (5301-5405) are nearly  all above 20 per cent.  The high tariff level 
artificially increases the input prices for textile mills .  In an extremely competitive environment high 
input prices can be highly detrimental to the comp etitiveness of the domestic textiles industry.   
254. The reasons for the inadequate size of the count ry's textiles industry are manifold.  We focus 
here on the question whether high tari ffs on inputs result in high prices.  
 
Chart V.2 
Tariff Structure of Inputs used in the Textiles Industry in th e case of Bangladesh, 2004 (applie d import tariffs and volume in 
dollars) 
 
051015202530
3201
3202
3203
3204
3205
3206
3207
3208
3209
3210
3215
5001
5002
5003
5004
5005
5006
5101
5104
5105
5106
51075109
5110
5201
5202
5203
5205
5206
HS Product GroupTariff Level
0100002000030000400005000060000700008000090000
Import ValueAverage Import value
 
 
                                                      
98 See UNCTAD (2003e). WT/COMTD/LDC/W/37 
Page 80  
 
 05101520253035
5207
53015303
5304
53055306
5307
5308
540254035404
5405
54065501
5502
55035504
5505
55065507
5509
5510
5511
8445
8446
844784488449
8451HS Product GroupTariff Level
0100002000030000400005000060000700008000090000
Import ValueAverage Import value
 
255. The competitiveness of the T&C sector is of special importance for Bangladesh, one of the 
ten most important producers of clothing in the world.99 The majority of fabrics used in the garment 
production have to be impor ted due to the small size of the dom estic textiles industry.  In 2002, 
Bangladesh imported $1.8 billion of textiles and relate d inputs.  This lack of domestic inputs does not 
necessarily translate into a disa dvantage for the domestic clothing industry, as long as the latter can 
access the necessary inputs at world prices and with short time leads.  However, both conditions are 
not fulfilled in the case of Bangladesh.  
256. Chart V.3 illustrates the tariff structure for in puts of the clothing industry in the case of 
Bangladesh.  Except for sewing machines (8425), with a tariff level above 10 per cent, and machines 
for extruding, drawing, texturing or cutting man-made  textiles materials (8444), with a zero tariff, the 
applied tariffs are very high.  For all types of fabrics (5007-6006) used as inputs for the clothing industry a tariff level averaging between 25 and 30 per cent applies.  As a consequence, the domestic 
prices for these products are substantially higher th an on world markets.  The high tariffs allow the 
domestic textiles industry to survive, which has b een unable to meet the demand in terms of quality 
and quantity.  The industry also suffers from out dated machinery, low labour productivity and poor 
management.  A liberalization of the market for fa brics would bring the domestic prices substantially 
down.  The benefits reaped by garment producer s would probably outweigh the costs textile mills 
incur for adjustment.  
                                                     
 
99Mlachila and Yang (2004)  WT/COMTD/LDC/W/37 
 Page 81 
 
 
  
Chart V.3 
Tariff Structure of Inputs used in the Clothing Industry in th e case of Bangladesh, 2004 (applie d import tariffs and volume in 
dollars) 
 
05101520253035
5007
5110511151125113
5204
520852095210
5211
521253095310531154015407
5408
5508551255135514551555166001
6002
60036004
6005
6006
731984448452HS Product GroupTariff Level
050000100000150000200000250000
Import ValueSimple Average Import Volume
 
 
257. The problem of high tariffs on imported inputs  is partly attenuated because the Bangladeshi 
Government applies duty drawback schemes to co mpanies which export 100 per cent of their total 
production.100  These companies are entitled to a drawback  for the amount of duties and taxes paid on 
importation once the product is exported.  The duty draw back is implemented in three ways: flat rate 
drawback, whereby the duty drawback is pre-fixe d by the Government; actual rate drawback, whereby 
the duties and taxes actually paid on imports are re imbursed; and notional drawback.  Most drawback 
claims are processed under the flat rate system  and administered by the Duty Exemption and 
Drawback Office (DEDO).  Due to poor implem entation the delays in reimbursement are 
considerable.  It has been reported that it ta kes on average 58 days and 6 per cent additional 
expenditure for exporters to obtai n a refund cheque from the DEDO. 
258. A more liberal trade regime would not only avoi d the costly reimbursement, but, above all, it 
would contribute to a reduction of the input prices for the clothing industry.  A reduction of input prices should go hand-in-hand with an increase of competitiveness of the domestic textiles sector.  
The increased pressure on prices will force textile firm s to close down or to upgrade their production.  
As a result, the domestic textiles industry may even  increase output and therefore enable domestic 
clothing companies to benefit to a larger extent  from preferential trade arrangements which require 
the compliance with rules of origin.   
259. Inadequate transport infrastructure and burdens ome customs procedures substantially increase 
the lead times and further increase the costs of inputs for both industries.  Additional efforts to 
facilitate trade will help reduce these costs and therefore promote the competitiveness of the T&C 
sector in Bangladesh.  
(iv) Conclusions  
260. In a highly competitive environment the questi on of how to ensure access to these inputs 
becomes increasingly important.  Inputs need not only to be available at low price, but also with short 
time delays.  The majority of LDCs still apply rela tively high tariffs on inputs used in the T&C sector 
                                                     
 
100 WTO (2000b) WT/COMTD/LDC/W/37 
Page 82  
 
 preventing domestic firms from sourcing their input at low prices.  Tariffs artificially raise input 
prices and therefore undermine the competitive position of firms.  Furthermore, the applied average 
tariffs vary substantially betw een product groups, creating additio nal distortions.  Inadequate 
infrastructure and burdensome customs procedures impose additional costs on inputs imported from 
abroad.  The successful development of the T&C sect or therefore requires an open-trade regime and 
continuous efforts to facilitate trade. 
261. The best strategy to liberalize trade consists in an overall reduction of tariffs avoiding tariff 
peaks and tariff escalation.  Drawback schemes for e xport-oriented firms do not work properly in the 
majority of countries and therefore constitute only the second-best trade policy choice.  Liberalizing 
trade in products relevant to the T&C sector will boost its competitiveness in the short run.  Only if 
inputs are available at world prices, the domestic T&C se ctor will be able to compete internationally.  
In the long run, measures to facilitate trade will co ntribute to a reduction in lead times and further 
reinforce the country's competitive position.   
(b) Labour markets  
262. The high share of low-skilled and low-paid la bour is one of the main competitive advantages 
of LDCs in the clothing sector.  Low wages, how ever, are not enough particularly if productivity 
levels are low.  Beyond cheap labour, what is need ed, is adequate education and training for workers 
at all levels.  The government can play a vital ro le in increasing the skills of workers in the T&C 
industries.  
263. Labour markets in LDCs are characterized by th e dualism of informal and formal sector and a 
large pool of low-skilled labour.  Wages paid to low- skilled labour are typically low due in part to the 
high levels of unemployment.  High-skilled labour is  typically rare and wages paid are therefore 
relatively high.  As we have seen above, the tex tiles industry is a capital-intensive industry which 
requires the employment of workers with technical skills.  The lack of work ers with the corresponding 
skills may therefore impede domestic and foreign investment in the textiles industry in LDCs.  
264. LDCs' large pool of low-skilled labour comb ined with a low wage level contributes 
substantially to their attractiveness to clothing firm s.  According to a study by the USITC (2004), in 
2002 the hourly compensation in the garment industry was $0.39 in Bangladesh, $0.49 in Haiti, and $0.33 in Madagascar compared to $0.88 in China.  However, the low-wage rate does not translate 
automatically into a competitive advantage.  Produci ng garments in LDCs implies bearing a variety of 
additional costs as we will see below. 
265. More important, productivity levels in the garmen t sector in LDCs remain below the level of 
competing developing countries.  In Lesotho, for example, the average productivity measured in terms 
of completed T-shirts per worker per day ranged from 16-20, while in similar operations in Kenya, 
ranged from 20-25.
101 Shop floor labour productivity in Lesotho was estimated to be about 50 per cent 
of that in East Asia, and the productivity gap rema ins even after the industry has been around for more 
than a decade.102 Productivity is also low in Cambodia and Bangladesh resulting in a higher ratio of 
labour costs to value added than it is in China, Indi a and Pakistan.  Many US firms therefore consider 
that the difference in productivity between China and LDCs more than offsets the wage difference.103  
266. Another key determinant of the competitiveness of  a country in the garment industry is the 
availability of mid-level managers.  They are t ypically responsible for supervising the production 
process, maintaining product quality,  and implementing changes in orders.  In most LDCs, there is a 
                                                      
101 World Bank (2004a) 
102 Lall (2003) 
103 USITC (2004)  WT/COMTD/LDC/W/37 
 Page 83 
 
 
 dearth of mid-level managers which impacts negati vely on plant efficiency.  As a consequence, 
foreign investors are often forced to bring their managers with them when they start producing in 
LDCs.  Lesotho has high concentration of ex patriates among supervisory and line management 
workers: there is one expatriate worker for every 37 Bosotho worker.104 Skilled labour comprises of 
only 1.1 per cent of the labour force in Cambodia and technical and supervisory staff in the T&C 
sector is usually drawn from overseas operations of the parent companies.  The investors in the 
Madagascar clothing industry are also forced to bring expatriate managers, quality control experts and 
supervisors to establish their operations in the country.105 While the lack of skills may not be a major 
limitation for the kinds of operations that are ca rried out currently, it may limit the  adoption of 
strategies that seek to initiate more complex and hi gher value operations (see below).  Furthermore, 
since using expatriate staff in technical and superv isory positions raises costs,  this could be another 
factor for foreign investors to refrain from investing in LDCs. 
267. The high share of low-skilled and low-paid labour in LDCs provide clothing firms with cheap 
labour input.  However, low wages are not enough in  order to survive in an increasingly competitive 
environment.  What is needed is adequate edu cation and training of workers at all levels.  The 
government can play a vital role in increasing the skills of workers in the T&C industries.  Beyond 
general efforts to increase the e ducational level, LDC governments should undertake sector-specific 
measures, like (1) the creation of technical training institutions, (2) introduction of tax breaks or other 
encouragements for firms that offer training, an d (3) seeking technical assistance that aim at 
knowledge transfers of latest production techniques.  As we have seen in Part 3, some of these 
measures have already been proposed and realized through the Integrated Framework for Technical 
Assistance.  
268. Retailers and consumers in developed c ountries pay increasing attention to working 
conditions and labour rights in T& C producing countries.  Over the last year, consumer associations 
disclosed several cases of labour rights abuses and viol ations in factories that produced for retailers in 
developed countries.  Following the disclosure of th is information retailers suffered loss both in terms 
of their reputation and sales.  As a consequence, retailers have developed firm-specific codes of 
conduct and have committed themselve s to monitor compliance closely.  On a regular basis they carry 
out assessments of labour conditions and social compliance.106  
269. The commitment of LDC governments to comply  with international labour standards may 
therefore be a positive signal for international inv estors.  If international labour standards are 
respected, monitoring costs and the risk of ba d publicity are low for international retailers.  
Cambodia’s experience is a good example of how LDCs  can benefit from the premiums that markets 
may offer for products that are produced with accep table labour standards or in environment friendly 
conditions.  Cambodia has pioneered the pr actice of corporate social responsibility.107 The 
Government has integrated international labour standards in the national labour law and allows 
monitoring by the International Labour Organiza tion.  Smaller LDC producers may apply similar 
strategies in order to gain competitive advantage over larger and more efficient producers to create a 
niche for their products. 
270. Beyond general efforts to increase the educational level which will bear fruit in the long run, 
LDC governments can take sector-specific measures which may stimulate productivity in the short to medium term.  Such measures would include (1) th e creation of technical training institutions, (2) 
introduction of tax breaks or other encouragements for firms that offer training, and (3) seeking 
technical assistance that aims at transferring the latest production techniques.   
                                                     
 
104 World Bank (2004a) 
105 IF (2003b) 
106 IF (2001) 
107 World Bank (2004b) WT/COMTD/LDC/W/37 
Page 84  
 
 271. Section II listed several measures that have alre ady been proposed and realized as part of the 
IF.  Measures have also been taken by LDC govern ments.  The example of the Malagashi training 
institute FORMACO (Formation Madagascar Confec tion) illustrates the difficulties governments face 
when trying to enhance sector-specific educati on.  In Madagascar, the vocational training centre 
FORMACO is available to train employees from th e clothing industry to upgrade their skills and 
knowledge.  The facilities provided by FORMACO are good, however, because of the lack of 
instructors the training centre is not able to teach the needed skills.  The or iginal French instructors 
have left FORMACO, and the best local instructors have been employed by the industry.  As a consequence, the T&C firms are forced to train th eir employees in-house.  It should therefore be a 
priority to revitalize FORMACO.
108   
(c) Capital markets 
272. Access to capital is an important ingredient of  success for firms in any industrial sector.  The 
degree of dependency on the availability of capital is, however, different between the textiles industry 
and the clothing industry.  Textile production requires the extensive use of capita l.  Over recent years, 
textile firms in developed and de veloping countries have invested heavily in new equipment to boost 
productivity.  Up-to-date equipment combined wi th R&D on material application defines the 
competitiveness of today's textile firms.  Compared  to the textiles industry, the clothing industry is 
characterized by a labour-intensive production pr ocess and relatively smaller capital requirements.  
Whereas modern equipment helps to increase produc tivity, cheap and well-trained labour are even 
more determinant for firms' competitiveness.  
273. LDC firms still face many difficulties in accessing capital which severely limits their ability 
to expand their activity.  In recent years many LDCs  have therefore undertaken substantial reforms of 
their financial sector.  An increasing share of the population has now ac cess to the commercial 
banking system and a number of micro-credit schemes have appeared over recent years.  However, despite progress, the banking sector of many LDCs remains weak.  One of the implications of this 
weakness is the difficulty for firms to access bank cr edits.  The majority of banks are still hesitant to 
lend to firms and ask for high levels  of collateral or personal guarantees.  Small firms, like handicraft 
companies, that do not have extensive resources, ar e often excluded from the credit market.  Another 
obstacle is that credits are usually granted for short-term periods preventing the financing of 
long-term projects.  Finally, many banks do not provide trade finance.   
274. The reasons for the unwillingness of banks to gran t more credits are manifold.  The majority 
of banks still consider the business environment in LDCs as very risky.  In addition, banks find it 
difficult to assess accurately the creditw orthiness of borrowers.  More importantly, the legal system is 
often too weak and ineffective to provide an e ffective enforcement mechanism in case a borrower 
defaults.  
275. A restrictive credit market impacts heavily on the development of the private sector.  Firms 
are forced to finance most of thei r investments with internal funds implying that a fast expansion of 
the production capacity becomes very problematic.  Starting a new business that requires up-front 
investments is even harder to manage.  In several LDCs, like Cambodia, the only way for firms to 
access external finance is through informal networks  of family and friends.  In Cambodia, the local 
commercial banks provide only 1 per cent of working capital.
109 Countries with this characteristic 
feature are defined as cash-based economies in which the rate of economic growth is limited by the 
availability of cash due to the absence of debt as a growth tool.   
                                                      
108 IF (2003b) 
109 World Bank (2004b)  WT/COMTD/LDC/W/37 
 Page 85 
 
 
 276. As mentioned above, capital requirements in th e textiles industry differ substantially from 
those in the clothing industry.  High capital inte nsity combined with credit market restrictions 
impedes the development of a textiles industry in mo st LDCs.  Garment firms, which rely heavily on 
low-skilled labour as an input, will tend to suffer l ess from the scarcity of credits.  However, the 
difficult access to capital limits the fast expansion of  clothing firms and constitutes a major barrier of 
entry for new entrepreneurs.  
277. Governments and international agencies have made  substantial efforts to tackle the problem 
of limited access to capital.  It would be highly beneficial for the T&C sector if LDCs carried on the reform measures.  A further liberalization of the banking sector would lead to more entry and 
therefore more competition among banks.  Strengthening the judicial system reduces the reluctance of 
banks to grant credits since an effective en forcement mechanism lowers the losses in case of 
borrowers' defaults.  Many other measures have been suggested and sometimes implemented.  
Bangladesh, for example, introduced successfully micro-credit schemes.  
278. Bangladesh's microcredit programme has been one of the most successful in the world and is 
still expanding rapidly.  The Bangladeshi Governme nt has incorporated microcredit schemes in its 
development strategy for over two decades.  So far, nearly 28 million people in Bangladesh, most of 
them women, benefited from microcredit schemes and the World Bank expects an expansion of 
around 4 to 5 million borrowers in the next four to five years.
110 In 1983, the Centre for Development 
Services (CDS) was established to provide start-up su pport, technical assistance and guidance to small 
entrepreneurs so that they could start their ow n businesses.  In 1999, the CDS initiated the Women 
Entrepreneurship Development programme as part of  its Economic Justice Initiative.  The programme 
not only offers the initial funding and training to start and run a business, but also provides savings 
and credit.  Over the last years, the CDS granted several microcredit loans to small entrepreneurs in 
the clothing industry.  At weekly meetings, the entrepreneurs share their experiences and discuss 
problems of their nascent firms.  
279. The Bangladeshi Government has also establis hed a Microfinance Research and Reference 
Unit which, among other things, de velops national standards for acc ounting, reporting, auditing, and 
basic ownership structures for microfinance instituti ons.  It is also preparing a national policy for 
microcredit.  Currently, the Government with the assistance of the World Bank is introducing a 
regulatory framework, which not only ensures the safety of depositors but also introduces new 
financial products and facilitates microfinance institutions to mobilize funds from the market.111  
280. The example of Bangladesh illustrates how gove rnments can help small entrepreneurs to 
overcome capital constraints.  Even though only fe w small entrepreneurs have been able to expand 
their activity enough to export their products, the sm all business help to create industry-specific skills 
of which export-oriented firms can benefit.  Intr oducing microcredit schemes, similar to the ones in 
Bangladesh, could therefore be one of many measur es to take into consideration to eliminate the 
capital constraint that T&C producers face in LDCs.   
(d) Business environment 
281. Not only direct costs, such as inputs, labour, and capital, determine the competitiveness of a 
sector, but also indirect costs of doing business have an influence.  As several studies show, the international competitiveness of T&C firms in LDCs is weakened by several shortcomings in the 
domestic business environment, like inefficient domestic regulatory regimes, cumbersome customs procedures, or inadequate infrastructure.  A recen t study conducted by the World Bank estimates that 
                                                     
 
110 World Bank (2004c) 
111 World Bank (2004c)   WT/COMTD/LDC/W/37 
Page 86  
 
 for African countries (except Senegal) the indirect costs account for 20 to 30 per cent of total costs, 
compared to 7 to 12 per cent in the case of China and India.
112  
282. Whereas trade policy measures have short-term impacts, it may take longer to achieve 
substantial improvements of the business environment.   This Sub-section tries to identify the most 
important weaknesses in the business environment of LDCs that impact the T&C industries.  It 
stresses the following factors: utilities, transpor t costs, customs procedures, corruption, and 
macroeconomic policy.   
283. The availability of modern and reliable electri city, telecommunication and water services 
contributes substantially to the competitiveness of the T&C sector.  In both industries electricity constitutes the main source of energy at nearly a ll production stages.  Electricity does not only have to 
be available at relatively low cost, but also be pr ovided with a high degree of reliability.  In many 
LDCs power shortages and blackouts are still recurrent.   In addition, the electrification rate is still 
low.  USITC (2004) reports that the limited attrac tiveness of Bangladesh for foreign T&C investors is 
partly due to the underdeveloped electricity system .  In a report prepared for UNIDO on Tanzania's 
T&C sector, the authors judge the power tariff as extremely high.
113  
284. Being part of the international supply chai n also requires access to a modern and reliable 
telecommunication system.  The latter allows firms to operate on a just-in-time basis, adapt quickly to 
changes, and to reduce the occurrence of errors.  In  a survey of major T&C producers in Hong Kong, 
China, the quality of the telecommunication services was regarded as the most important investment 
factor.114  Recently, several LDCs have privatized the telecommunication services increasing the 
reliability of the networks and reducing the costs for consumers. 
285. Water also constitutes a major input in the text iles industry.  Water is needed for dyeing, 
washing and finishing of fabrics.  In many LDCs the water supply system is not adequate,  serving 
only part of the total demand.  For example, it is repo rted that in Lesotho’s in dustrial estates the water 
supply is erratic and inadequate.115 Investment in the maintenance and expansion of the reticulation 
system would have a positive impact on the comp etitive position of LDCs.  However, countries that 
are poorly endowed with fresh water should be careful  with respect to promoting industries which use 
water intensively.  Programmes to improve the co nservation and distribution of water should have 
priority.  
286. Since many LDCs are located far from important  markets in developed countries, transport 
costs constitute an important cost factor.  To date , there is little information on the exact magnitude of 
transport costs in the case of T&C.  The OECD est imates that the average freight costs for shipping 
T&C products to the US amount to 4.3 per cent in  the case of Cambodia and to 5.6 per cent in the 
case of Bangladesh compared to around 2.0 per cen t for countries located in the Caribbean basin.116 
This cost advantage in freight ra tes that countries enjoy, which are close to developed countries, is 
hard to change.  However, many LDCs could bene fit from their proximity to fast-growing markets in 
developing countries.  For example, LDCs located in  East Asia are close to  several fast-growing 
economies.  As soon as the South African economy  recovers, Lesotho could enjoy a substantial 
advantage from its geographical proximity.  Sub- section A above discussed the market potential for 
LDCs' T&C products in developing countries.  
                                                      
112 Eifert et al. (2005) 
113 Ladha (2000) 
114 Spinanger (2004)   
115 IF (2003a) 
116 OECD (2004a)    WT/COMTD/LDC/W/37 
 Page 87 
 
 
 287. Freight costs are only one part of the costs related to the shipments of goods.  Another factor 
that becomes increasingly important is the time factor .  In certain parts of the clothing industry the 
fashion styles change frequently requiring not onl y the possibility to switch production quickly, but 
also to deliver the finished goods rapidly.  Changi ng fashion style also impacts the textiles industry if 
different textiles are needed for the garment produc tion.  In order to remain competitive in both 
industries, it becomes crucial that the goods are clear ed and handled swiftly when they enter or leave 
the country.  
288. Time is becoming increasingly important for anothe r reason.  The clothing industry in several 
LDCs is an integral part of the international suppl y chain, i.e. labour intensive processes, like the final 
assembly of pre-cut fabrics, takes place in the count ries concerned.  Since in an international supply 
chain the production stages are fragmented between c ountries, considerable transport costs arise.  
LDCs will only be able to remain part of the inte rnational supply chain if they manage to reduce the 
clearance and handling costs. 
289. In many LDCs, the clearance and handling of  goods still takes excessively long which 
substantially weakens the competitiveness of domes tic producers.  For example, in the case of 
Madagascar the OECD reports that the average cl earance time for incoming or outgoing containers 
was between four and five days.117 In the case of Cambodia five different government agencies are 
involved in the inspection process which also  impact negatively on the clearance time.118  According 
to UNCTAD (2004a), the shipping time for finish ed goods from LDCs to major markets takes on 
average several days longer than in the case of main producers.  Combined with the longer shipping 
time for inputs, LDCs offer a turnaround time which ca n be 20 days slower than in the case of China. 
290. T&C goods are typically shipped by seaborne transport.  In the case of US imports, 
83 per cent of all imports in T&C arrive in the US in container ships.119 Considering this prevalence 
of maritime export, the efficiency of port infrast ructure is of primary importance.  Cumbersome and 
lengthy customs procedures combined with ineffi cient warehouse management can delay the clearing 
of goods for several days.  Since the time factor is  key in the T&C sector, each additional day lost for 
shipping the good implies a considerable cost.  The empirical study of Hummels (2001) estimates that 
each day lost in shipping time is equivalent to an increase of 0.8 per cent in import tariffs.  LDCs' 
efforts to reduce the clearing time by streamlini ng the customs procedures and rendering the handling 
of goods more efficient could be particularly usef ul for clothing exporters.  Many LDCs are already 
involved in projects aiming at facilitating trade, as described in Section 3.  The successful implementation of these projects would contribute substantially to increasing the competitiveness of 
firms in the T&C sector.  
291. In order to maintain a competitive edge in  the highly competitive and time-sensitive T&C 
market every effort must be undertaken to reduce l ogistical costs.  Governments can play a leading 
role in carrying out this objective.  Improving the efficiency of the clearance of goods does not have 
to be limited to investments in port infrastructure.  Equally important are policy measures that aim at 
enhancing competition in port services and at modernizing customs procedures.  
292. In many LDCs the public sector is still heav ily involved in port management which often 
leads to slow turnaround times and high costs.  For example, in Cambodia the Government runs the 
port of Sihanoukville and levies port charges that are four times higher than those of a same sized port 
in Thailand.
120 As a consequence of the high charges, por t equipment is often underutilized.  More 
importantly, in many LDCs the handling facilities in ports or railheads are insufficient.  Due to the 
                                                      
117 OECD (2004a) 
118 IF (2001) 
119 OECD (2004a)   
120 IF (2001) WT/COMTD/LDC/W/37 
Page 88  
 
 lack of crane and forklifts, combined with a small storage capacity, only a small amount of containers 
can be handled each day.  
293. In several LDCs corruption is rampant and fo rces additional costs on firms.  Corruption can 
occur when the private sector inte racts with the public sector.  Wh atever form corruption takes, it 
represents an unnecessary burden for firms.  Corruption at the customs translates into higher costs for 
clearance and slower turnaround times.  In addition, the payments tend to be relatively lower for large 
consignments and hence prohibitive for small traders.
121 Fighting corruption therefore constitutes 
another important step towards improving international competitiveness. 
294. Finally, a sound macroeconomic environment also facilitates adjustments that can be a result 
of opening up the country to world markets.  Sound macroeconomic policy not only implies low 
inflation rates, but it also translates into low nominal interest rates which in turn stimulate investment.  
There is strong empirical evidence indicating that a low-inflationary environment is favorable for 
economic and employment growth.   
295. Improvements in the business environment have  the potential to considerably increase the 
competitiveness of the T&C sector of LDCs.  Howeve r, the majority of measures to enhance the 
business environment will only bear fruits in the long term.  One possibility to achieve results in the 
medium term is to establish export processing zones.   Sub-section 3 further elaborates on this policy 
measure. 
2. Foreign Direct Investment and the Competitiveness of the T&C Sector 
(a) Introduction 
296. The IMF (2004c) defines foreign direct investment  (FDI) as an investme nt aimed at obtaining 
a lasting interest by a resident entity of one economy (d irect investor) in an ente rprise that is resident 
in another economy (the direct investment enterpri se).  One can distinguish between vertical FDI, 
where each of the affiliates specializes in a differe nt stage of production, and horizontal FDI, where 
the affiliates undertake similar production processes.   
297. There is a consensus among academics and policy- makers that FDI has the potential to make 
a significant contribution to the process of economic  development in host countries.  FDI not only 
generates employment, but it also helps increase productivity, transfer skills and technology and 
enhance exports.  This optimistic view of FDI has led many countries to implement national policies 
to attract FDI.  As a consequence, the FDI flows to developing economies have increased from 
$108 billion in 1994 to $172 billion in 2003.122 Today, FDI constitutes the largest source of external 
finance for developing countries. 
298. Over recent years many LDC governments have expended considerable efforts to create a 
hospitable environment for foreign investors.  Th ese include revisions of laws on investment and 
taxation (such as exemption of import duties, exte nsion of tax holidays) and legal reforms more 
generally.  As a result, LDCs have been able to participate more than proportionally in the surge of 
FDI.  FDI inflows increased from around $1 billion in  1994 to over $7 billion in 2003.  FDI has been 
especially important for small LDCs, particul arly Lesotho, Mauritania, and Mozambique.123 
Compared to global FDI flows, FDI inflows into LDCs may appear small.  However, viewed in 
relation to their gross fixed capital formation FDI inflows represent nearly 25 per cent compared to 
11 per cent in other developing countries.  It has become an objective of national governments as well 
                                                      
121 IF (2001) 
122 UNCTAD (2004a) 
123 World Bank (2005)  WT/COMTD/LDC/W/37 
 Page 89 
 
 
 as the international community to further in crease these flows in order to enhance economic 
development. 
299. The sharp increase in FDI flows to LDCs h as emerged notwithstanding the considerable 
barriers to attracting external private finance.  Empirical studies have shown that FDI hinge strongly 
on each country's investment climate.124 Many LDCs score poorly on measures of corruption, 
efficiency of bureaucracy, and law and order.125 Further, inadequate infrastructure and utilities 
constitutes another constraint for FDI in LDCs.126 Despite these drawbacks many LDCs managed to 
improve the investment climate considerably.  A number of LDCs were able to improve their 
macroeconomic performance, to open up for trade, a nd to strengthen their foreign investment policy 
framework.   
300. Beyond the absolute increase in FDI relatively little is known on the exact nature of FDI in 
LDCs.  The quality of data on FDI in LDCs is po or and the sectoral composition of FDI is often 
unknown.  It is estimated that over the last year s most of the FDI flows to LDCs went into the 
extractive sector, such as mining or oil and gas extr action.  Only a very small number of case studies 
exist on the role of FDI in the T&C sector in developing countries.127 Different country cases indicate 
that FDI in the T&C sector was typically vertical in  nature and undertaken by firms from developing 
countries.  In Lesotho for example, firms from Asia , mainly from Chinese Taipei , invested heavily in 
garment manufacturing over the ten years and today em ploy around 80 per cent of all workers in this 
industry (UNCTAD, 2003a). 
301. International initiatives to promote growth in LDCs (such as AGOA, the Everything-but-
Arms Initiative, the ACP-EU Cotonou  Agreements and the New Partners hip of Africa's Development) 
have helped boost the FDI performance of LDCs.  Favourable quota allocations under the MFA also 
contributed to an increase in sector-specific FDI.  T&C firms from developing countries on which trade barriers are imposed by developed countries, in vested in LDCs in order to obtain better access to 
developed country markets.  In several LDCs, lik e Cambodia, Lesotho, and Madagascar, FDI was the 
main driving force for the development of the T&C sector. 
302. The quota phase out and the ongoing preference erosion may impact negatively FDI in LDCs.  
In many LDCs low labour productivity and the di fficult business environment may offset the cost 
advantage of a low wage level.  Furthermore, FD I in garment manufacturing is often footloose in 
nature and there is a risk that foreign investors rapidly pull out their investment.  
303. Whereas in the past FDI originated nearly excl usively in developed c ountries, transnational 
corporations from developing countries are starting to contribute more and more to world FDI.  Their 
share in world FDI increased from less than 6 pe r cent in the mid-1980s to 8 per cent in 2003.
128 
UNCTAD further reports that the top 50 TNCs from developing countries are becoming transnationalized at a faster pace than TNCs from developed countries.  
304. The growing importance of South-South FD I indicates that developing countries are 
becoming increasingly integrated in international fi nancial markets.  Capital account liberalization 
and financial deregulation have allowed TNCs from the South to invest easily in new, promising, and 
fast-growing markets in other developing countries.
129 Investment in developing countries allow the 
diversification of the investment portfolio and offe r new growth opportunities.  In addition, compared 
                                                      
124 Pigato (2000)  
125 Wei (2000a, 2000b)   
126 World Bank (2005)   
127 UNCTAD (2005a)   
128 UNCTAD (2005b)   
129 Aykut and Ratha (2003)   WT/COMTD/LDC/W/37 
Page 90  
 
 to TNCs from developed countries, TNCs from deve loping countries possess the expertise to deal 
with the economic and political conditi ons of the host developing country.
130 Finally, geographic 
proximity, ethnic and cultural ties facilitate the su ccessful implementation of TNCs from the South to 
other developing countries.131 Proximity to larger economies was a key element for the attractiveness 
of LDCs such as Lesotho and Nepal.132 LDCs' FDI promotion strategies should therefore not only 
focus on firms from developed, but also from developing countries.   
305. The lack of empirical evidence concerning the role of FDI in the development of the T&C 
sector does not allow cross-country comparisons to be  made on how FDI has been allocated so far and 
therefore drawing conclusions about the impact of the quota phase out on FDI decisions.  However, 
there is evidence that in several LDCs FDI played a crucial role for the development of a local T&C 
sector.  The following Sub-section presents four country cases (Lesotho, Madagascar, Cambodia, and 
Bangladesh) and their experience with FDI in the T&C sector. 
 
Table V.5 
FDI Inflows (in million dollars) in selected LDCs 
 
Country Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 
Lesotho FDI inflows  42.6 23.4 28.0 31.7 26.8 32.7 31.5 28.2 27.2 41.9 
 FDI  inward stock  155.7 179.1 207.1 238.8 265.6 298.3 329.7 358.0 385.2 427.1 
Madagascar FDI inflows  5.7 9.7 10.2 13.8 16.1 58.4 69.1 83.5 8.3 50.0 
 FDI  inward stock  162.6 172.4 182.5 196.3 212.4 270.8 339.9 423.4 431.7 481.7 
Bangladesh FDI inflows 11.2 1.9 13.5 139.4 190.1 179.7 280.4 78.5 52.3 120.7 
 FDI  inward stock 354.5 356.4 535.4 988.2 1444.9 1715.4 2429.0 2522.1 2574.4 2695.2 
Cambodia FDI inflows  68.9 150.7 293.7 168.1 242.9 230.3 148.5 149.3 145.1 87.0 
 FDI  inward stock  193.8 355.9 941.8 927.2 1169.9 1400.2 1548.7 1698.0 1843.1 1930.1 
Nepal FDI inflows  7.0 8.0 19.2 23.1 12.0 4.4 -0.5 20.9 2.1 30.0 
 FDI  inward stock 30.8 38.8 58.0 81.0 93.0 97.4 96.9 116.2 118.3 148.3 
Source : UNCTAD, FDI Database. 
 
 
(b) Country case studies on FDI in the T&C sector  
(i) Lesotho:  benefits and challenges of “footloose” foreign investment 
306. Despite the fact that Lesotho is  a land-locked country with a paucity of locational advantages, 
it has been able to attract considerable FDI inflow s.  The success in attracting FDI was mainly due to 
preferential market access to developed countries.  However, Lesotho also offers low labour costs 
(standard monthly wage is about $8 0 to $100), relatively high productivity (experts estimate that the 
productivity level amounts to 70-80 per cent of that found in Asian countries, USITC 2004), access to excellent port facilities in South Africa, and special investment incentives. 
307. The first wave of FDI started in the 1980s wh en investors left South Africa because of 
international trade sanctions.  Lesotho offere d unused MFA quotas as well as duty-free access to the 
European Market under the Lomé Convention.  Fo r several years Lesotho was granted a special 
derogation from the EU for local content requirements, which furthe r increased its attractiveness for 
FDI.  As the EU ended its derogation and as th e quotas started being phased out, several foreign 
investors moved out of Lesotho.  A new boost occurred when foreign investors mainly from 
                                                     
 
130 Wells (1983)    
131 Aykut and Ratha (2003) 
132 World Bank (2005)  WT/COMTD/LDC/W/37 
 Page 91 
 
 
 Chinese Taipei, anticipated the ad option of AGOA in 1999 and inv ested heavily in the clothing 
industry in the 1990s.  About 90 per cent of all FDI in Lesotho was invested in export-oriented garment manufacturing.  As a resu lt, Lesotho became the leading a pparel exporter to the US in Sub-
Saharan Africa, in 2001.  Lesotho therefore cons titutes a good example of a country that benefitted 
from triangular manufacturing.  
308. Today, Lesotho's economy depends heavily on th e clothing industry for growth, employment 
and export revenues.  Ninety-eight per cent of the manufacturing labour force (45.000) works in the apparel industry.  In 2002, out of 40,000 jobs in the clothing industry 38,000 were provided by foreign 
affiliates.
133 The overwhelming majority of output in the clothing industry is exported - more than 
90 per cent of it to the US - and accounts for about three-quarters of Lesotho's total exports.  FDI in 
the clothing industry has created new jobs and helped reduce poverty.  
309. However, FDI has not met all expectations.  FD I created new skills, but spillovers have been 
limited so far.  Furthermore, Lesotho was not able to use FDI to upgrade the productivity of its 
workforce.  Partly due to the re luctance of foreign firms to provide training, the record of skill and 
technology transfer is poor.  Managerial and superv isory positions are mostly held by expatriates.  
Moreover, the concentration of FDI in the produc tion of a few products undermines the long-term 
competitive position of the country.  FDI so far has b een invested in the production of basic trouser 
and knit tops, such as T-shirts.  The concentrati on in few product groups is mainly due to the 
relatively small size of the clothing industry.  In order to exploit economies of scale and to prevent 
changes in the production line, a concentration on fe w product groups is needed.  Finally, FDI in the 
clothing industry has only created few backward linka ges.  As a consequence, almost all inputs for the 
garment production have to be imported, except non-tradable inputs like labour, banking services and 
utilities.  Almost all inputs are imported from Asian countries and some from South Africa. 
310. Since the local content requirements under AGOA and under other preference schemes are 
subject to a certain degree of uncertainty, some fo reign investors have decided to integrate backwards 
and to set up textile firms.  In 2004, investors from Chinese Taipei, finished a state-of-the-art denim 
fabric mill that meets around 70 per cent of the cu rrent denim needs of all Lesotho-based jeans 
exports.  The denim mill is considered as the mo st advanced in Sub-Saharan Africa and is fully 
integrated with several manufacturing firms.134 Not all foreign investors have followed this example 
and some plan to leave if AGOA rules change or are abandoned.  The competitive base for the 
clothing industry remains weak and seems to be highly dependent on trade privileges. 
311. As explained, the clothing industry tends to be "footloose" and therefore, there is the 
possibility that foreign investors retrieve their i nvestments once the trade privileges erode.  Thus, the 
key challenge for Lesotho, as for many other LDCs, is to retain as much FDI as possible and even 
attract more.   
312. The Government of Lesotho has supported FDI by providing tax incentives.  The corporate 
tax was reduced to 15 per cent and imports used  for exports were exempted from any duty.  
According to UNCTAD (2003c), the country's sta ndards of treatment and protection of foreign 
investment are high, however, the legal framework to implement these are weakly developed.  To 
date, no foreign investment law exists and only ve ry few bilateral investment treaties have been 
signed.  Lesotho's good reputation for FDI is widely b ased on its track record.  In order to increase the 
attractiveness for FDI, the introduction of a modern foreign investment law is urgently needed.  The 
law would provide a legal basis for the current good pr actice in the treatment and protection of foreign 
investment.135  The Government is convinced that the long-term commitment of foreign firms to 
                                                      
133 UNCTAD (2003c)  
134 USITC (2004)   
135 UNCTAD (2003c)  WT/COMTD/LDC/W/37 
Page 92  
 
 remain in Lesotho is not only due to the AGOA legisl ation but also to the membership in the South 
African Customs Union (SACU).  The Government hopes that the SACU has a considerable market 
potential for garment products and that Lesotho w ill benefit from the emerging markets, especially in 
South Africa.  The Government therefore works closely with other SACU members and currently 
discusses the possibility of regional integration for textiles and clothing production.  The Government 
favors a configuration where cotton production is concentrated in Zimbabwe, yarn-spinning in 
Botswana, Swaziland, and South Africa, and fa bric and apparel production in Lesotho.  
313. It is still too early to make a judgment but recent data on exports of garments to the US 
suggest that Lesotho is wheathering the ATC phase out.  Exports to the US in February 2005 increased by 23.67 per cent compared to February 2004.  Since the demand from the US has been the 
main driver of output and employment over the last four years, the expected strong US growth in 
2005-2006 should help expand further the T&C sector .  The extension of the existing AGOA until 
2007 gives reasons to believe that Lesotho will remain  an attractive destination for FDI.  The positive 
expectations are shared by the IMF (2005b) wh ich forecasts an overall economic growth rate of 
2.4 per cent for 2005 and 3.0 per cent for 2006.  
314. The recent trend towards a reduction in the depe ndency on imports of textile inputs through 
FDI in new textiles production facilities provides furt her reasons for optimism.  The rules of origin 
applied by the EU require a double-stage processing.  Since the apparel production in Lesotho did not 
fulfill these requirements, Lesotho's exports to the EU have been limited so far.  However, FDI aimed 
at the production of yarn and fa brics would allow Lesotho to bene fit fully of the duty-free access to 
the EU and to the US, if the AGOA legislation will have come to an end. 
315. However, the T&C sector will remain highly depende nt on textile imports in the short run.  In 
addition, the expansion of the T&C sector hinges on the inflow of further FDI.  FDI in the clothing 
industry will only continue if Lesotho is able to create a permanent comparative advantage.  Most 
importantly the Government needs to provide supp ort in order to close the productivity gap with 
respect to other clothing producing countries with si milar wages.  These efforts must be backed up by 
improvement of the physical infrastructure.  Leso tho needs a more efficient transport infrastructure 
and more reliable power and communication servi ces.  The AGOA 'time window' should therefore be 
used wisely. 
316. The strong economic integration with South A frica is not always unambiguously positive.  
Recently, the T&C sector has been negatively affected  by the appreciation of the rand/loti against the 
US dollar, which has lead to a loss in competitiven ess.  However, the free access to the South African 
market also offers a potential that needs to be exploited. 
(ii) Madagascar:  the regional factor 
317. In the case of Madagascar, several factors besides preferential market access and in particular 
proximity to a constrained producer attracted FDI.   In the beginning of the 1990s Mauritian firms 
experienced labour shortages and rising costs in their country and therefore searched for new 
investment opportunities.  Madagascar offered lowe r labour costs, a good quality and easily trainable 
workforce.  Therefore, several Mauritian firms deci ded to expand their prod uction to Madagascar and 
started to invest heavily in the country.  
318. In the late 1990s, it was expected that Mada gascar would also benefit from the AGOA 
legislation.  As a result French, Asian, and, mo re recently, Middle Eastern investors followed the  WT/COMTD/LDC/W/37 
 Page 93 
 
 
 Mauritian investors.  In 2002, out of 80,000 jobs  in the clothing industry, 40 per cent were in 
Mauritian-owned firms, and 30 per cen t in Far Eastern-owned firms. 136 
319. Table V.5 illustrates the sharp increase in FDI during the second part of the 1990s reaching a 
level of over $80 millions in 2001.  During this time, a bout four fifths of foreign investment went into 
EPZ industries.  Within the EPZs, the clothing sector received most of FDI.  The EPZ regime was set 
up in 1990 to attract foreign investment.  This le gislation grants exceptional tax breaks for EPZ firms 
and duty-free imports used in the processing activities.  
320. Table V.5 also shows that international invest ors are highly sensitive to questions concerning 
overall economic and political stability.  The political turmoil in 2002 resulted in a sharp decrease of FDI.  In order to attract continued FDI inflows it will be essential to provide a stable political and 
economic environment.  The latter reduces risks for foreign investors and assures uninterrupted 
supply. 
321. The strong FDI inflow in the country's clothing industry has increased substantially 
Madagascar's export performance.  Today, more th an half of all of Madagascar's exports are in 
textiles and clothing.  Madagascar is especially  competitive in woven shirts.  The main import 
partners for textiles are Mauritius and China, where as exports are mainly directed towards the US and 
the EU due to the preferences under AGOA and Cot onou, respectively.  Exports towards the US 
under AGOA grew from $92 million in  2001 to $314 million in 2004.
137  
322. The clothing industry in Madagascar is still hi ghly dependent on textile imports from mostly 
Asian countries.  The local textiles producers are not able to meet the increasing demand and require 
lead times of up to seven weeks, which corres ponds to the lead time for imported fabrics from 
Pakistan, India, and China.  Furthermore, the domestic textiles industry only produces low-tech 
textiles.  Before the crisis of 2002, foreign investor s started to build up textile mills that would serve 
the domestic clothing industry.  The political turmo il, however, brought this encouraging trend to a 
standstill.  In the future, efforts should be undert aken to attract FDI that aims at expanding the 
domestic textiles industry in the medium and long term.  These measures should be combined with a 
liberal trade policy which ensures access to cheap and easily available inputs, as explained above.  
323. Other weaknesses appear when FDI inflows are studied in greater detail.  Once the trade 
privileges end, FDI inflows may come to an end.  The business environment in Madagascar still lacks 
the quality of that of other developing countries.  Labour costs are very low compared to other developing countries.  The hourly compensation of a worker in garment production averaged around $0.33, compared with $0.38 in Kenya and India, $0.68 in China, and $1.25 in  Mauritius.  However, 
the low level of productivity also reduces this advant age to 5 to 8 per cent compared with Mauritius.  
Furthermore, conducting business in Madagascar invol ves high costs.  The administrative costs of 
importing and exporting goods are extremely high.  Transportation costs are also significant mainly due to poorly developed road networ ks, limited cargo space, and shipping facilities that tend to be in 
disrepair.
138 The electricity and telecommunication infrastructure is also unreliable.  Finally, the 
presence of corruption at every level constitutes another severe impediment for further economic 
development.  If Madagascar wants to remain an a ttractive FDI destination, the Government will need 
to actively tackle these problems.  For a long time, the Government did not have a specific strategy for the development of the clothing sector and FD I.  It was only after the political turmoil of 
2001/2002 that the Government started to actively attract foreign investors.  
                                                     
 
136 Tait (2004) 
137 US Department of Commerce (2005) 
138 IF (2003b) WT/COMTD/LDC/W/37 
Page 94  
 
 324. The open-trade regime combined with trad e preferences for important export markets 
contribute considerably to the attractiveness of Mada gascar for foreign investors.  As in the case of 
Lesotho, Madagascar should take advantage of the current preferential market access in order to 
improve its competitiveness in the T&C sector.  
325. FDI has played a prominent role in the deve lopment of the T&C sector in Madagascar.  
However, much of the investment was short term and could be pu lled out as Madagascar's 
competitive advantage erodes.  In order to conti nue to attract FDI, the problems identified above, 
namely the low productivity, the inadequate infrastru cture, and corruption will need to be addressed.  
Political stability would further help to keep FDI in the country and to attract new FDI. 
(iii) Cambodia:  emphasizing corporate social responsibility 
326. The T&C sector is the most dynamic private sect or in Cambodia and attracted an important 
share of FDI.  According to the UNCTAD FDI Data base, FDI amounted to $14 million in the textiles 
industry and $13.6 million in the clothing industry in  2002.  Foreign firms investing in Cambodia's 
T&C sector originate it their majority from China,  Chinese Taipei, and the Republic of Korea.   
327. Cambodia attracted increasing amounts of FDI during the 1990s.  ASEAN countries, most 
prominently Malaysia, were the main investors in  the country.  However, since 1998 FDI flows to 
Cambodia have been declining, falling from $230 milli on to $87 million in 2003.  This trend can be 
mainly explained by the Asian crisis that induced  ASEAN investors to slow down FDI in Cambodia.  
328. The T&C sector seems to be less affected by the decline in FDI.  Production and employment 
in this sector have increased considerably in  recent years.  According to UNCTAD (2005a), 
employment in the clothing industry amounted to 235,000 workers in 2004.  The export volume of 
clothing increased from $20 million in 1995 to over $1.4 billion in 2003.  Exports to the US, which 
account for two thirds of Cambodia's exports, quin tupled between 1998 and 2004.  Today, Cambodia 
is heavily dependent on clothing exports which a ccount for over 80 per cent of total merchandise 
exports.  The clothing industry is therefore considered  as key for the country's integration in the world 
economy.   
329. Cambodia has been considered as attractive for international investors for mainly three 
reasons: its unused quotas, the country's liberal tr ade and investment policies, and compliance with 
international labour standards.  After the phasi ng out of the quotas, Cambodia will access the US 
market on a most favored nation basis and theref ore loses part of its attractiveness for foreign 
investors.  Although Cambodia has sold much more outside the quota than inside (in volume terms), the phase out may impact negatively the country's T&C sector.  Prices for quota products have been 
nearly five times higher than non-quota prices;
139 the latter have declined steadily since 2000.  In 
order to preserve its position as a large clothing exporter in the post-ATC world, Cambodia's T&C sector will be forced to incr ease its cost competitiveness.  
330. Cambodia has successfully differentiated itsel f from other competitors through corporate 
social responsibility.  It participated in an IL O inspection programme designed to improve factory 
conditions.  This programme resulted from trade nego tiations between the US and Cambodia that also 
included lower tariffs for Cambodian exports.  Ac cording to an ILO report (2002), the compliance 
with international labour standards provided co nfidence to US manufacturers and retailers and 
contributed substantially to the attractiv eness of Cambodia as an FDI destination.  
                                                     
 
139 World Bank (2004b)  WT/COMTD/LDC/W/37 
 Page 95 
 
 
 331. For the moment, it remains unclear whether the commitment to corporate social responsibility 
will be enough to thrive in post-ATC.140 As described above, doing business in Cambodia still 
involves high costs, mainly due to red tape and wi despread corruption.  A study by the World Bank 
(2003) found that in the value chain of producing typical denim jeans the labour content was only 15 per cent.  Most of the other costs were administra tive costs related to the imports of inputs and the 
exports of finished goods.  These costs often outwe igh the competitiveness of Cambodian labour and 
undermine the country's competitiveness.  Even an increase in labour productivity, which is reported 
to be significantly lower than in China woul d only have a limited impact on the overall 
competitiveness of Cambodia's clothing sector.
141 
(iv) Bangladesh:  doing without FDI? 
332. In contrast to the countries presented above, FDI played a minor role in the development of 
the T&C sector in Bangladesh.  The reason for the sm all scale of FDI in Bangladesh was the decision 
by the Government to reserve quotas for domestic produ cers.  This strategy also aimed at enhancing 
diversification and upgrading exports.  As a resu lt, FDI inflows in the T&C sector have been limited 
so far and mostly directed to EPZs.  Accordi ng to UNCTAD (2005a), FDI in the clothing sector 
amounted only to $12.4 million in 2002, less than 5 per cent of all FDI.  It is estimated that in 
Bangladesh 95 per cent of the clothing firms are locally owned, apart in the EPZs.142  
333. Despite the lack of FDI, Bangladesh managed to build up an impressive clothing industry 
over the last twenty years.  At the beginning of the 1980s, the principal export product of Bangladesh was jute and only about 20 clothing factories exis ted exporting $3.5 million.  Today, the clothing 
industry employs between 1.5 and 1.8 million worker s (40 per cent of manufacturing employment) in 
nearly 3.000 units
143 and export earnings reached 3.6 billion in  2003.  Exports of T&C accounted for 
over three quarters of the country's merchandise export in 2003.  
334. Bangladesh widely benefitted from the quota syst em and over 90 per cent of its exports went 
to quota-restrained markets.  With the phase out of the quota system the Government started to 
implement different measures to increase competiti veness of the T&C sector.  However, export 
performance in recent years indicates that not all measures have been successful.  Since 2001, exports 
of textiles and clothing are stagnating. 
335. The Bangladeshi Government is currently seeki ng to attract FDI from clothing and textile 
firms located in South Asia, such as Th ailand, the Republic of Korea, and China.144 It also held talks 
with Germany to get assistance to upgrade technolog y in the textiles and clothing sector.  However, 
since 2000 there has been a downward trend in overa ll FDI.  The relatively poor FDI performance 
reflects the panoply of problems that foreign in vestors face when doing business in Bangladesh: 
inadequate transport facilities and utilities, polit ical unrest, and recurrent natural disasters.  
Furthermore, wages in Bangladesh  are lower than in most of the competing countries, but the 
productivity is also substantially lower.   
336. The Government has recently undertaken diffe rent efforts to expand the local textiles 
industry, including the privatization of several textil e mills.  Further, it is currently upgrading the six 
Institutes of Textile Engineering and Tec hnology and the 28 Textile Vocational Schools.145  T h e  
Government estimates that several billion US do llars are needed to reduce the dependence on 
                                                      
140 UNCTAD (2005a)   
141 USITC (2004) 
142 Juststyle (2003)   
143 Bangladesh Bureau of Statistics (2002), Mlachila and Yang, 2004) 
144 USITC (2004) 
145 UN (2000) WT/COMTD/LDC/W/37 
Page 96  
 
 imported inputs.  Since the production of textiles is a process that requires substantial capital, which is 
rather scarce in Bangladesh, priority could be give n to the production of those textiles that require 
relatively less physical capital.  For example, the technology to produce knitwear requires less 
physical capital than the production of woven fabrics, giving more weight to the role of low wage and 
unskilled labour.  In addition, th e inputs for knitwear can be sourced  locally allowing for short lead 
times and compliance with strict rules of origin.
146  
(v) Nepal:  the remoteness problem  
337. The T&C sector is relatively new in Nepal and onl y started to grow in the beginning of the 
1980s due to the quota system.  Indian garment manufact urers have been the principal source of FDI.  
Over the years, the clothing industry has become the most important export industry accounting for 
over 20 per cent of merchandise exports and about 25 per cent of all exports.147 The clothing industry 
has specialized in the production of low-to-medium value clothing for large retailers and major 
department store chains. 
338. Total FDI to Nepal has been hi ghly volatile over the last ten years.  There was an acceleration 
until 1997, when FDI peaked $23 million.  After a ra pid decline in the thr ee consecutive years, FDI 
flows reached a new record in 2003 of $30 million.  Compared to other countries in the region, Nepal 
received relatively little FDI.  Lao PDR and Mongo lia, which are also landlocked countries, but have 
a lower GDP, received substantially more FDI than Nepal.  The low volume of annual inflows to 
Nepal translates into a small FDI stock.  In 2001, 43 per cent of all FDI went into manufacturing of 
which around one quarter was invested in the T&C sector;148 this constitutes a relatively small 
amount.  
339. Seven countries accounted for over four fifths of FDI.  Over one third of FDI in Nepal comes 
from Indian investors, followed by US and Chinese i nvestors.  Most of foreign investors in Nepal are 
individuals and to a lesser extent corporate en tities.  Although 100 per cent equity ownership by 
foreign investors is allowed, most of FDI is invested in joint ventures.  
340. Nepal hoped to generate technolog y spillovers by attracting FDI.  The main mechanisms for 
technology transfer are by:  (a) skill transfers to workers, (b) introduction of new products and 
(c) forward and backward linkages to the local econom y.  All three ways of technology transfer are 
exploited in Nepal.  FDI companies train their employees on-the-job, in local universities, and management institutions.  The introduction of ne w products encouraged domestic firms to produce 
similar products and upgrade production.  According to experts, several back and forward linkages 
have been created, however, data limitations inhibit precise evaluation.
149  
341. Many experts doubt whether Nepal will be able  to attract further FDI in the T&C sector.150  
Nepal's clothing industry did not manage to benefit from the quota system in order to raise its 
efficiency to a level that allows facing its major competitors.  The production costs are estimated to be 
25 per cent higher than in India and Bangladesh.151 Furthermore, due to the remoteness of the country 
the lead times are three times longer than for India.     
342. In summary, the Nepalese T&C sector will have a hard time to weather the impacts of the 
ATC phasing out.  Many countries in the region have  undertaken a number of steps to increase their 
                                                      
146 Mlachila and Yang (2004) 
147 UNCTAD (2005a) 
148 UNCTAD (2003e) 
149 UNCTAD (2003e)  
150 UNCTAD (2003e); Appelbaum (2004) 
151 UNCTAD (2005a)  WT/COMTD/LDC/W/37 
 Page 97 
 
 
 competitiveness in the T&C sector.  They therefore also raised their relativ e attractiveness for FDI 
compared to Nepal.  Swift reforms are needed to convince foreign investors to invest again in the 
country.  Among the different options that have been considered for the T&C sector the following 
seem to be especially important: (a) upgrading skills and technology, (b) improving trade support 
services, (c) developing of niche markets for unique Nepalese designs, and (d) enhancing trade 
financing.    
(c) Conclusions  
343. LDCs experiencing strong inflows of FDI have been able to develop their T&C sector at a 
fast pace.  However, FDI flows have not lived up to all expectations.  The transfers of skills and 
technology have been limited so far and therefor e have impacted labour productivity to a minor 
extent.  Furthermore, only few backward and forw ard linkages have been created since many LDCs 
lack the appropriate industrial base.  FDI can certa inly facilitate the development of the T&C sector, 
however, it is a requisite to be in ternationally competitive, as the ex ample of Bangladesh illustrates.  
344. It also has to be mentioned that strong FD I inflows do not translate necessarily into a 
longstanding commitment of the foreign investor.  In  several LDCs, FDI in the T&C sector has been 
mainly motivated by favourable quota allocation and preferential market access to markets in 
developed countries.  With the phase out of the ATC,  foreign investors may reconsider their location 
decisions.  In the clothing industry, which is also often characterized as a "footloose" industry, foreign 
investors are able to pull out quickly.  
345. Only if LDCs preserve a competitive edge over other developing countries, will they be able 
to keep foreign investors in the country and to attr act further FDI inflows.  Measures that reinforce the 
competitiveness also strengthen the attractiveness of LD Cs for FDI.  Possible options to achieve this 
objective have been outlined in this report.  Con cerning FDI policies in the T&C sector of LDCs in 
particular, the following opti ons should be considered:  
• Enhance technology and skill transfer.   FDI usually exploits the existing level of 
capabilities, and invests little in building them.152 Efforts could therefore be undertaken to 
facilitate technology and skill tr ansfer between foreign aff iliates and domestic firms.  
Governments may provide special incentives for foreign firms to train and recruit locally 
employees at all levels.  As a result, the ove rall productivity level might rise, increasing the 
attractiveness of the host country.  In additio n, local companies might benefit from possible 
spillovers to upgrade their activities and to im prove their competitive position on export 
markets. 
 
• Focus on FDI from developing countries.  Since firms from developing countries are the 
major players in the T&C sector, LDC FDI promo tion strategies should focus on these firms.   
 
• Long-term commitment.   The government might provide incentives that encourage foreign 
investors to undertake long-term investments.  Tax concessions that are spread over several 
years might be one example.  
 
• Develop industrial clusters.  FDI policies should aim at developing industrial clusters.  In 
the T&C sector such clusters are crucial since they allow fo r economies of scale and quick 
turn-around times.  As explained in the intr oduction of the report, both factors increasingly 
contribute to the competitiveness of a country's T&C sector.          
 
                                                      
152 Lall and Urata (2003)   WT/COMTD/LDC/W/37 
Page 98  
 
 • Consistency with development objectives.   FDI policy should form an integral part of the 
development strategy of a country.  Empirical studies further find that promoting FDI does not necessarily translate into an increase in national welfare.
153 The host country's FDI policy 
therefore needs to be well adapted to th e fiscal policies and economic conditions.  
 
346. Once implemented, most of those measures w ill only affect the competitiveness of the T&C 
sector of LDCs in the medium to long run.  Howeve r, maintaining FDI inflows in the short run is a 
necessity for the T&C sector in several LDCs.  Forei gn investors will continue to invest in LDCs, if 
they have the certainty that the business enviro nment and investment climate will improve.  In 
summary, today's decisions which will only have a be aring in the medium and long term may already 
have a positive effect on FDI in the short run.  
3. Export Processing Zones and their Role fo r the Development of the T&C Sector in 
LDCs  
(a) Introduction 
347. Since the late 1950s, export processing zones (EPZs) have become a popular trade policy 
instrument. Today, there are close to 1000 EPZs in 102 countries.  All major T&C producing LDCs 
established EPZs.  In some of these countries an im portant part of the T&C production is located in 
EPZs.   
348. EPZs are either geographically or juridically  bounded areas that offer firms free-trade 
conditions, provided that all goods produced within  the zone are exported.  EPZ firms can be 
domestic, international or joint venture.  EPZs ca n be owned and managed publicly or privately.  
Whereas older EPZs were typically set up and run by the host government, in recent years an 
increasing number of zones are managed by private entities. 
349. Tariff and non-tariff barriers raise the cost of inputs and therefore create a significant obstacle 
for export-oriented industries.  The first-best po licy would be to eliminate all those distortions 
completely.  However, in many LDCs import tariff s still constitute an important source of income and 
non-tariff barriers can only be brought down very slowly.  The establishment of EPZs offers the 
possibility to remove quickly some of the trade ba rriers for the export-oriented part of the economy 
without foregoing considerable tariff revenues.  Ha ving the possibility to obtain intermediate inputs at 
world prices, EPZ firms are able to co mpete effectively in world markets. 
350. Although the EPZs are designed differently, certain  features are common to all EPZs.  First, 
imports of all inputs necessary for the production of exports are duty free.  Second, governments provide regulatory flexibility and grant tax exemptions  to the firms located in EPZs.  Third, the trade 
and services infrastructure is usually above average.   EPZs therefore provide an excellent business 
environment and allow a staged insertion of an economy into world markets.  
351. The favourable business and trade environment of  EPZs is not only beneficial for domestic 
producers, it also attracts FDI.  As mentioned above, FDI has the potential to provide additional 
employment, engender technological transfers, as we ll as backward and forward linkages.  Finally, 
promoting exports may result in su bstantial additional foreign excha nge earnings for the host country. 
352. EPZs attracted considerable attention in the em pirical literature.  Several studies examine the 
impact of EPZs on economic perform ance, employment, and welfare of the host country.  Studies that 
focus on the T&C sector within EPZs are, however, rare.  This Sub-section therefore attempts to 
                                                     
 
153 Hanson (2001)  WT/COMTD/LDC/W/37 
 Page 99 
 
 
 assess the success of EPZs to boost the export perfo rmance and to enhance the competitive position in 
the T&C sector of LDCs.   
(b) The impact of EPZs in the T&C sector in LDCs   
353. LDC governments that decided to establish EPZs hoped that EPZs would not only offer a 
beneficial business for domestic and foreign firm s but that EPZs would also help to boost economic 
development.  In some cases, EPZs fulfilled these e xpectations and became the main driving force 
behind the increase in the country's competitive pos ition.  However, in the majority of cases the 
success of EPZs was limited and contributed only to a minor extent to an improvement of LDC 
competitiveness in the T&C sector.  
354. The technological spillovers generated by EPZs s hould not be overestimated.  In the garment 
industry most of the production processes are low skill and low tech.  The productivity increase of 
workers is therefore often limited.  At the manageri al and supervisory level, foreign companies often 
prefer to employ foreign staff.  As a conseque nce, new organizational a nd managerial methods are 
rarely transmitted to local employees. 
355. The creation of forward and backward linkages is conditional on the industrial base of the 
country.  Most of the LDCs lack a solid indust rial base to create these linkages.  In cases where 
linkages developed they were often spotty and in consistent.  For example, according to the ILO 
(1998) in the case of Bangladesh 94 to 97 per cent of total imports into EPZs is foreign indicating the 
weak backward linkages.  One reason for the fe w backward linkages resides in the fact that 
international companies investing in  EPZs often prefer foreign supp liers because they are considered 
more reliable than domestic firms.  Another reas on is that the quality of domestic products and the 
supply reliability are often low.  In addition, an inadequate physical and business infrastructure 
hampers the creation of backward linkages.  In most of the developing countries the number of 
backward linkages created by EPZ firm s remained below its expectations.154  
356. In order to provide EPZ firms with a comp etitive advantage, governments offer them a 
panoply of tax breaks and tax holidays.  The tax incentive might favor the success of EPZ firms, 
however, they come at the cost of tax revenue losse s.  In LDCs where actual direct tax collection is 
difficult, foregoing tariff income and other indirect taxes can be a matter of serious concern for policy 
makers.  
357. The special treatment of EPZ firms is conditiona l upon their export status in order to limit 
unequal competition between EPZ and non-EPZ firms.  This distinction places a barrier between 
EPZs and the host economy and can have adverse ef fects on the creation of forward and backward 
linkages.  In many cases, EPZ firms are not allowed to sell their products domestically preventing the 
creation of forward linkages.  The drawback schem es act as import subsidies adversely affecting the 
competitive position of domestic producers that provi de EPZ firms with inputs.  As a consequence, 
EPZ firms are necessarily disconnected from the host economy.155  
358. Overall, EPZs in LDCs have often remained be hind their expectations .  Successful EPZs have 
fostered industrialization and economic growth.  Ho wever, EPZs must be understood as only one tool 
in a panoply of governmental policy measures to enhance economic growth.  
                                                      
154 Madani (1999) 
155 Johansson (1994) WT/COMTD/LDC/W/37 
Page 100  
 
 (c) Conclusions: EPZs in the T&C sector in LDCs   
359. The recent evolution towards internationally fra gmented supply chains has several impacts on 
EPZs in LDCs.  On the one hand, production segme ntation reduces the need for specific technical 
expertise.  On the other hand, cheap and low- skilled labour is offered by a number of countries 
providing producers with a large selection of sites.
156  Whereas the first trend favors EPZs, the latter 
reduces the probability that the establishment of  an EPZ becomes a success story.       
360. As is true for FDI, the success of EPZs depends  crucially on a stable economic, political, and 
legal environment.  Sound macroeconomic policy, realistic exchange rate policies and a stable 
political system are important elements in the loca tion decision of international investors.  Clear 
private property and investment laws provide an addi tional incentive for foreign investors to settle in 
EPZs.  
361. EPZs have to be an integral part of the ec onomic policy of a country.  EPZs can help to 
develop the country's capacity for competitive i ndustrial exports.  However, EPZs do not always 
constitute the first best policy as the economy open s up.  An overall liberalization of the economy 
may be more appropriate to achie ve export development and growth.  If countries decide to establish 
EPZs, the latter should loose their significance as the economy becomes more integrated in world 
markets. 
362. The inclusion of a country in a preferential trad e arrangement impacts investment decisions of 
foreign companies and therefore impacts the success of EPZs.  A preferential trade arrangement helps 
to enlarge the market size and to  lower market entry barriers.  
363. A successful zone provides the country with a competitive industrial setup and an efficient 
trade infrastructure.  In several LDCs foreign firms are the main beneficiaries of this positive 
environment.  Governments could provide incentiv es to local entrepreneurs to also exploit this 
favorable setting.  
364. Less strict governmental regulation and monitoring provide a great flexibility to firms located 
in EPZs.  However, lax labour and environmental laws raise concerns  about workers' welfare and the 
environmental impact of EPZs.  In both fields a ba lance needs to be stroke between providing certain 
flexibility and avoiding abuse.  
365. In summary, the establishment of EPZs constitut es a possible short- and medium-term policy 
measure to integrate the domestic economy into world markets.  However, in the long run EPZs should lose importance and policy measures pursuing an  overall liberalization of the trade regime and 
improvements of the business climate should prevail.   
4. Conclusions 
366. This Sub-section examined different measures that LDC governments c ould take to enhance 
the competitiveness of their T&C sector.  Most of the measures considered in this Sub-section have 
already been identified by LDC governments and impl emented in one or the other country with the 
assistance of international and national agencies, as set forth in other sections of this report.  Whereas 
Sections II to IV and Sub-section B above focused on the role of international organizations and 
non-LDC governments, the focus here is on the role  of LDC governments.  A whole range of options 
to tackle supply constraints is addressed, but sp ecial emphasis is placed on trade and trade-related 
policy measures  
                                                     
 
156 Madani (1999)    WT/COMTD/LDC/W/37 
 Page 101 
 
 
 367. Some of the measures could in principle enhance competitiveness in the short run, many 
others will need more time to become effective.  In the present context of post-ATC adjustment, the 
former have absolute priority.  
368. Lowering tariffs on inputs may have a substantia l positive impact in the short run.  Lower and 
more uniform tariffs on inputs translate immediately into lower and less distorted input prices for 
producers.  In order to thrive in an increasingly co mpetitive environment, the clothing industry must 
be able to source its inputs at world prices, and duty drawback schemes are only an imperfect 
substitute for low tariffs.  Where textiles are prot ected for industrial policy purposes, the costs to the 
garment industry should be weighed against the bene fits to the textiles industry and the impact of a 
liberalization reassessed.  Approach es to compensate for foregone tariff revenue would also need to 
be explored with the help of international organizations.   
369. The effects of most measures aimed at enhancing human capital, at facilitating access to 
credits or at improving business environment may take more time to unfold.  Labour markets in LDCs 
provide the necessary cheap labour input for clothing firms.  However, low levels of general and 
professional education result in low productivity whic h offsets the cost advantage of low wages.  
Efforts aimed at enhancing the overall level of educa tion of the work force will need several years to 
produce results.  Specific training courses, however, may be effective in the short run.  Various examples have been discussed in this report.  Anot her problem to tackle is access to capital which is 
difficult for clothing firms and constitutes a major en try barrier for new entrepreneurs.  Liberalization 
of the financial market in LDCs combined w ith sound macroeconomic policy could bring in new 
foreign capital and help overcome this bottleneck, but  only in the long run.  In the short run, the 
introduction of microcredit schemes or special credit facilities for SMEs may show some very 
positive effects, as the case of Bangladesh illustrates.  Finally, the inadequate business environment in 
LDCs considerably raises production costs.  As ou tlined in this report, in ternational agencies in 
collaboration with national governme nts have engaged in various pr ojects to improve the transport 
system, utilities, the rule of law, etc.  However,  the business climate in LDCs improves only slowly 
and much remains to be done.  Measures that have the potential to bear fruit in the short run include 
the streamlining of customs procedures and red tape.   
370. Another option to enhance the business environm ent in the short run is to establish EPZs.  
EPZs raise several economic and legal issues.
157 However, they may allow LDCs to react quickly to 
the loss of attractiveness resulting from the elimination of ATC quotas.  EPZs make it possible for 
governments which are not in a position to improve the business environment in the whole country to 
offer attractive physical and services infrastructur e as well as a favourable business environment to 
both domestic and foreign investors in a geographically  delimited area.  Attracting or retaining FDI is 
crucial for LDCs since capital constraints and technological backwardness hamper severely the 
development of the T&C sector.  EPZs may attract footloose investment with limited spillovers but 
they may as well attract investors with a longer term  perspective which facilitate technological and 
skills transfer and thereby boost the competitiveness of LDCs.   
371. In summary, LDC governments have a crucial ro le to play in leading and coordinating a 
coherent strategy for the T&C sector with the help  of donors and international organizations.  The 
short-term measures suggested in this Sub-section, su ch as trade liberalization, technical training, and 
streamlining of customs procedures, are relativel y easy to implement and have the potential to 
improve substantially the competitive position of firms within a short period of time.  Other short-run 
options, particularly the establishment of EPZs, that  imply stronger government intervention and that 
may lead to considerable market distortions, are mo re controversial.  Despite their advantages, they 
are second-best policy measures and it remains uncl ear whether they are indispensable for the 
development of the T&C sector.  More generally, th e debate on industrial po licy and the appropriate 
                                                      
157 Jayanthakumaran (2003); Madani, (1999); Johansson and Nilson (1997) WT/COMTD/LDC/W/37 
Page 102  
 
 role of governments is more open than ever.
158 Each LDC has its own characteristics and therefore 
needs to define its own specific policy.  
                                                      
158 Rodrik (2005)    WT/COMTD/LDC/W/37 
 Page 103 
 
 
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Page 108  
 
  
    
 
    
 
    
 
     
 
 
ANNEXES  WT/COMTD/LDC/W/37 
 Page 109 
 
 
 ANNEX I 
 
ANNEX I Table 1  
Abbreviations 
 
 
ACP African, Caribbean and Pacific Group of States 
ADB Asian Development Bank 
AGOA United States'African Growth and Opportunities Act 
ASEAN Association of Southeast Asian Nations ATC WTO Agreement on Textiles and Clothing 
 
CARICOM Caribbean Community CBTPA  Caribbean Basin Trade Partnership Act 
CDS Centre of Development Services 
CMT Cut, make and trim COMESA Common Market for Eastern and Southern Africa 
 
DA Development aid DAC Development Assistance Committee 
DC Developing countries 
DDA TCBD  Doha Development Agenda Trade Capacity Building Database 
DEDO Duty Exemption and Drawback Office 
DTIS Diagnostic Trade Integration Study 
 EBA Everything but Arms 
EFF Extended Fund Facility 
EPZ Export Processing Zones  
FDI Foreign Direct Investments  
FIAS Foreign Investment Advisory Services FORMACO Formation Madagascar Confection 
 
GSP Generalized System of Preferences  HS Harmonized system for tariff classification 
 
IF Integrated Framework IFC International Finance Corporation 
ILO International Labour Organization 
IMF International Monetary Fund ITC International Trade Centre 
 
JITAP Joint Integrated Technical Assistance Programme  
LDCs Least-Developed Countries 
 MFA Multifibre Arrangement 
MLCR  Minimum local content requirement 
MSME Micro, Small and Medium Enterprises MTS Multilateral Trading System 
 
ODA Official Development Assistance OECD Organisation for Economic Co-operation and Development 
 
PRGF Poverty Reduction Growth Facility PRSP Poverty Reduction Strategy Paper 
PSD Private sector development 
 R&D Research and Development RMG Ready Made Garment 
 
SAARC South Asian Associa tion for Regional Cooperation 
SACU Southern African Customs Union 
SADC Southern African Development Community 
SME Small and Medium Enterprises SSA Sub-Sahran Africa 
 
(TR)TA/CB (Trade-related) technical  assistance and capacity building 
T&C Textiles and Clothing 
TIM Trade Integration Mechanism WT/COMTD/LDC/W/37 
Page 110  
 
 TRAINS UNCTAD's Trade Analysis and Information System 
 
UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme 
UNIDO United Nations Industrial Development Organization 
ur   Simple average utilization rate UR Trade-weighted av erage utilization rate 
 
WTO World Trade Organization 
 
  
ANNEX I Table 2 Least Developed Countries as of April 2005  
 
 
Afghanistan 
Angola* 
Bangladesh* Benin* 
Bhutan 
Burkina Faso* Burundi* 
Cambodia* 
Cape Verde Central African Republic* 
Chad* 
Comoros Democratic Republic of the Congo 
Djibouti* 
Equatorial Guinea Eritrea 
Ethiopia 
Gambia Guinea* Guinea-Bissau* 
Haiti* 
Kiribati Lao People’s Democratic Republic 
Lesotho* 
Liberia Madagascar * 
Malawi* 
Maldives*  Mali* 
Mauritania* 
Mozambique* Myanmar* 
Nepal* 
Niger* Rwanda* 
Samoa 
São Tomé and Principe Senegal* 
Sierra Leone 
Solomon Islands* Somalia 
Sudan 
Timor-Lesté Togo* Tuvalu 
Uganda* 
United Republic of Tanzania Vanuatu 
Yemen 
Zambia*
 
* WTO Member (as of 16 February 2005). 
Source : United Nations.  To be classified as an LDC, countries must  fall below thresholds established for income, economic diversific ation 
and social development.  For details, see:  www.un.org/special-rep/ohrlls/ldc/default.htm. WT/COMTD/LDC/W/37 
 Page 111 
 
 
 ANNEX I Table 3 
Harmonised System (HS) Nomenclature: Chapters in cluding textiles, clothing and related products 
 
Chapter Description 
 
30  Pharmaceutical Products 39  Plastics and Articles Thereof 
 
42  Articles of Leather; Saddlery and Harn ess; Travel Goods, Handbags and Similar C ontainers; Articles of Animal Gut (Other 
Than Silk-Worm Gut) 
 
50  Silk and Silk Products 
51  Wool, Fine or Coarse Animal Hair ; Horsehair Yarn and Woven Fabric  
52  Cotton, cotton yarns, fibres and fabrics 
53  Other Vegetable Textile Fibres; Paper Yarn and Woven Fabrics of Paper Yarn  
54  Man-Made Filaments  55  Man-Made Staple Fibres  
56  Wadding, Felt and Non-wovens; Special Yarns; Twin e; Cordage, Ropes, Cables and Articles Thereof 
57  Carpets and Other Textile Floor Coverings  58  Special Woven Fabrics; Tufted Textile Fabric s; Lace; Tapestries; Trimmings; Embroidery  
59  Impregnated, Coated, Cove red or Laminated Textile Fabrics; Textile Ar ticles of a Kind Suitable For Industrial Use  
 60  Knitted or Crocheted Fabrics  
61  Articles of Apparel and Clothing Accessories, Knitted or Crocheted  
62  Articles of Apparel and Clothing A ccessories, Not Knitted or Crocheted  
63  Other Made Up Textile Articles; Sets; Wo rn Clothing and Worn Textile Articles; Rags 
64  Footwear, Gaiters and the Like; Parts of Such Articles  
65  Headgear and Parts Thereof  66  Umbrellas, Sun Umbrellas, Wa lking-Sticks, Seat-Sticks, Whips, Riding-Crops and Parts Thereof 
 
87  Vehicles Other Than Railway or Tramway Ro lling-Stock, and Parts and Accessories Thereof  
88  Aircraft, Spacecraft, and Parts Thereof 
 
91  Clocks and Watches and Parts Thereof 94  Furniture; Bedding, Mattresses, Mattress Supports , Cushions and Similar Stuffed Furnishings; 
 Lamps and Lighting Fittings, Not Elsewhere Specified or Included; Illuminated Signs,  
 Illuminated 
 Name-Plates and the Like; Prefabricated Buildings  95  Toys, Games and Sports Requisite s; Parts and Accessories Thereof  
96  Miscellaneous Manufactured Articles  
 
Source : World Customs Organization. WT/COMTD/LDC/W/37 
Page 112  
 
 ANNEX II – Coherence Programmes of the IMF and the World Bank Group 
 
ANNEX II Table 1  
Projects and programmes in selected countries 
 
Type of activities 
Bangladesh  
Cambodia  
Cape Verde  
Ethiopia  
Haiti  
Lao PDR 
Lesotho  
Madagascar  
Malawi  
Mozambique  
Nepal  
Tanzania  
Uganda  
Zambia  
A. Analytical work               
1. World Bank               
a. General  x   x  x x    x    
    b. PSD x x     x        
2. World Bank and IFC               
    a. FIAS: general x x x x  x x x x x x x x x 
    b. FIAS: specific  x              
3. IMF   x  x              
4. Multi-organizational               
     a. DTIS: complete or  ongoing  x  x   x x x x x x   
    b. DTIS: planning            x               x 
B. Projects               
1. World Bank               
    a. Planned x x     x x    x   
    b. Active   x x x   x x x   x x 
    c. Completed x  x     x      x 
2. IFC          x     x             
C. Balance of payment support x               
 
ANNEX II Table 2 
Key components of private sector development projects in selected countries 
 
Activities 
Bangladesh  
Cambodia  
Cape Verde  
Ethiopia  Haiti  Lao PDR Lesotho  Madagascar  
Malawi  
Mozambique  Nepal  Tanzania  Uganda  Zambia  Streamlining of regulatory processes/trade 
facilitation x x                   x x   
Infrastructure provision / economic zones x   x         x         x   
PSD related capacity building in the 
government x   x             x       x 
Entrepreneurial/enterprise capacity building x x x x           x   x x x 
Private infrastructure development   x                         
Financial support to individual firms   x x             x       x 
Investment climate reform/WTO accession     x x               x x   
Support to business organizations /chambers     x x                     
Financial and technical assistance to SMEs       x               x x   
Divestiture of public enterprises       x       x x           
Improved provision of utilities               x x           
Improved efficiency in the use of public funds         x                   
Public investment to attract private i n v e s t m e n t s               x  
  WT/COMTD/LDC/W/37 
 Page 113 
 
 
 Annotated list of World Bank and IMF Programmes and Projects in Selected Countries 
 
1. Bangladesh159 
(a) World Bank 
Project: Private Sector Development Pr oject (proposed and in concept stage) 
 The aim of the project is to help the private se ctor enhance its competitive strength and successfully 
meet the challenges of the Post-MFA world.  Th e concept places considerable emphasis on attracting 
foreign direct investment to enhance competitiveness of the local industry.  The sector is expected to 
benefit from inflow of superior technology an d management.  Linkages that will be developed 
between Bangladeshi and foreign firms are expected to bring about transfer of knowledge needed to 
upgrade many of the local firms.  The project ha s been developed on the basis of bottlenecks to 
private investment and competitiveness identified th rough investment climate assessment, the study of 
non-farm sector and the study of competitiveness.  
The project will be designed to overcome the thr ee major constraints faced by private investors, 
including foreign investors: cumbersome regulator y processes, deficient infrastructure and difficulties 
in obtaining unencumbered land.  The project will  have three components: regulatory reforms and 
streamlining, creation of economic zones where in frastructure including land can be provided for both 
foreign and domestic firms, and capacity building in government specific to PSD issues.  The size of the project is envisaged at to be around $150 million.  
 
Analytical Work: Growth and Expo rt Competitiveness Study (2005)
160 
 
The study shows that policies that protect domestic  industries result in significant anti-export bias, and 
such policies would worsen competitiveness of the Ready Made Garments (RMG) sector in the 
post-MFA period.  The study suggests that better policies such as establishment of central bonded 
warehouses, allowing of FDI outside of the EPZs, ope ning of land borders to  yarn imports, reducing 
of tariffs overall, etc. are required to improve competitiveness.  It also reveals that high and complex tariffs make any duty drawback scheme ineffect ual, discouraging new exports, and limiting export 
diversification.  To take advantage of export op portunities in a changing international environment, 
the study suggests that Bangladesh n eeds to adopt to a more strategic approach ‘behind the borders’,  
to invest in and reform infrastructure, improve  technology and skills, streamline trade, tax, and 
regulatory policies, and improve quality and safety standards.  
 
Project: Export Diversification Project (1999-2004) 
 
The main objective was to accelerat e Bangladesh’s integration into the world economy by expanding 
net export production value through product and market diversification, including increased value 
added.  The project had two broad components: product and market development support to private 
firms and trade management capacity building that  focused on policy and institutions.  The project 
supported a study of the RMG sector.  The first component emphasized entrepreneurial capacity 
building and development of export services.  It also supported a study to develop post-MFA 
adjustment strategy.  The second component focused  on modernization of custom administration and 
trade-capacity development.  
 
                                                     
 
159 For an overview of the T&C sector in Banglades h, see for example US ITC (2004) and Mlachila 
and Yang (2004). 
160 The study was not made available. The summary is extracted from a document retrieved on the 
website of the World Bank (www.worldbank.org). WT/COMTD/LDC/W/37 
Page 114  
 
 Analytical Work: Promoting Rural Non-Farm (RNF) Sector in Bangladesh (2004)
161 
 
This study identifies the constraints to private sector  development in rural areas.  The study based on a 
large survey of rural entrepreneurs found that the major constraint to rural RNF growth were flood 
and natural disasters, poor roads, limited access to finance and transport to markets. 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:162 
 - Promotion Strategy (2003): Assisted the Bureau of Investment to develop its first investment 
promotion strategy, principally by way of co nducting a strategic planning workshop for the 
management and senior staff; 
- Diagnostic (1993): Examined the policy, regulat ory and incentive regime affecting private 
investment and made recommendations for improvements; 
- Institutions (1993): Provided assistance to the Bo ard of Investment on organizational structure 
and functions, operating procedures, personne l policy and establishing a framework for 
investment promotion through the production of promotional materials; 
- Diagnostic (1990): FIAS updated its 1988 diagnos tic review at the Government's request; 
- Institutions (1990): Assisted in strengthening  the institutional capacity of the Board of 
Investment; 
- Diagnostic (1988): Conducted a diag nostic review of the obstacles to increased flows of foreign 
direct investments. 
 (c) IMF  
Analytical Work (2004)
163 
 
The study indicated that low wages and FDI attract ed by generous quotas helped the Bangladesh T&C 
sector achieve high levels of growth, but the country  has not capitalized on it to upgrade and diversify 
its exports.  
 
BOP support through TIM (2004)  
Bangladesh is one of the two countries that ha ve requested and obtained support under TIM. 
 2. Cambodia
164 
(a) World Bank 
Project: Cambodia Trade Facilitation and Competitiven ess Project (Proposed and in concept stage)  
 The objective is to increase private sector contri bution to poverty reducti on through growth, export 
diversification, and improved service delivery.  It will be done largely by reducing the cost, time and 
transparency of export and import transactions and clearance processes.  The proposed components 
are trade facilitation, diversification and private pa rticipation in infrastructure development.  As 
                                                     
 
161 World Bank (2004) 'Promoting the rural non-farm sector in Bangladesh', Rural Development Unit, 
South Asia Region, Report N° 29719-BD 
162 See http://www.fias.net/data/asia_cty.html 
163 See Mlachila and Yang (2004). 
164 For an overview of the T&C sector in Cambodia, see for example UNCTAD (2003d), Mekong 
Capital (2003), ITC (2002).  WT/COMTD/LDC/W/37 
 Page 115 
 
 
 improvements in trade facilitation are strongly correlate d with increases in trade, the expected benefit 
is improved competitiveness of the garment sector in the short run and diversifi cation of exports in the 
long run.  The project will have three components:  trade facilitation; diversification and private 
participation in infrastructure building.  The di versification component will have programmes to 
support Cambodian producers penetrate the intern ational markets and a possible programme to 
mitigate the effects of adjustments in the garment sector that may include retraining of labour.  
Various options are under consideration to pr ovide critical needs of producers and exporters: 
pre-export financing, insurance, export plan developm ent and market information at producer level.  It 
is being conceived as an investment project  funded by an IDA grant of $10 million. 
 Analytical Work: Seizing the Global Opportunity  – Investment Climate Assessment and Reform 
Strategy (2004)
165 
 
The report employed an investment climate survey of  800 urban, rural, and informal firms to identify 
how the policy and institutional environment impa ct on individual firms, and benchmarked the 
responses of Cambodian firms with those in China, Bangladesh, India and Pakistan.  This report built 
on three earlier reports: (a) Towards a Private Sector  Strategy for Cambodia:  Value Chain Analysis 
(2003), (b) a study of the policy and institution al environment for private participation in 
infrastructure, (c) the Bank’s Doing Business indi cators for Cambodia, and (d) options for trade 
facilitation reform.  A number of recommendations  are proposed, with a particular focus on 
improving trade facilitation practices, integrating ma rkets through institutions such as private value 
chains, and injecting competition and transparency in private participation in infrastructure.  
 
Analytical Work: DTIS - Integration and Comp etitiveness: A Pilot Study Prepared under the 
Integrated Framework for Technical Assistance (2001)166 
 
The DTIS identified obstacles and institutional de velopment needs necessary to promote Cambodia’s 
integration into the global economy.  The main areas in which Cambodia requested technical 
assistance included: macro-economic policy; trad e policy (WTO accession, institutional capacity, 
customs and transport); and sectoral activities (agric ulture, handicrafts, fisheries, garments, tourism 
and labour services).   (b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:
167  
 - Cambodia: Corporate social responsibility in th e apparel sector and potential implications for 
other industry sectors (2005):
168  FIAS provided support to the Ministry of Commerce to redesign 
the labour standards system, which the country ha d developed as part of the 1999 trade agreement 
with the US, into a market-led strategy.  The study tested the assumption that labour standards 
offer an export market niche, and redesigned th e existing monitoring and reporting system in way 
that meets the information needs of the industry’s international buyers; 
- Investment policy - Law (2004): Assisted the G overnment in preparing and implementing the 
regulations to the Amended Law on Invest ment by producing drafting guidelines; 
- Investment policy - Law (2002): Provided inputs  to an official position paper for proposed 
amendments to the Investment Law; 
                                                      
165 See World Bank (2004b) 
166 See IF (2001) 
167 See http://www.fias.net/data/asia_cty.html 
168http://www.ifc.org/if cext/economics.nsf/AttachmentsByTi tle/Cambodia+CSR+Project+Brief/$FILE/
Cambodia+CSR+Project+Brief.pdf WT/COMTD/LDC/W/37 
Page 116  
 
 - Incentives (2001): Assisted the Government in ass essing the revenue implications of different 
scenarios considered by Government under the pr oposals to amend the investment incentives 
regime; 
- Investment policy - Incentives (2001): Assisted the Government to move from discretionary, 
expectation-based investment incentives to au tomatic performance-based incentives available to 
all qualifying investments; assisted by prepari ng drafting guidelines to amend the appropriate 
legislation; 
- Incentives (2000): Assisted the Government in moving from discretionary, expectation-based 
investment incentives to automatic, performance- based incentives to offer a competitive general 
tax environment to all investors; 
- Incentives (1997): Assisted in developing a system  for monitoring investment incentives granted 
to foreign investors; 
- Investment policy: Law (1994): Helped in the pr eparation of a new foreign investment law. 
 
(c) IMF  
Analytical work: The impact of MFA wit hdrawal on exports and balance of payments
169  
 
3. Cape Verde 
(a) World Bank 
Project: Growth and Competitiveness Project (ongoing)170 
 
The objective is to broaden the base for private participation in Cape Verde's economic growth, 
enhance private sector competitiveness, and further develop its financial sector. Project components 
include:  (a) financial sector reform including pe nsion reform, (b) investment climate reform that 
includes support for Cape Verde’s accession to the WTO, (c) institutional capacity building to support 
public institutions that interface with private sect or, and (d) private sector capacity building to 
improve capabilities of Cape Verdean firms.  
 
Project: Private Sector Capacity-Building Project (1996-2001)171 
 
The project had two main components: private sector  development and financial sector development.  
The specific objectives were: (a) for the private sector, to enhance the country's foreign-exchange 
earnings, attract foreign investments, and improve th e performance of private enterprises;  and (b) for 
the financial sector, to enhance the functioning of  the Central Bank as a monetary authority and 
improve financial intermediation th rough the strengthening of banks  and non-banking institutions.  
Subcomponents under the private sector developm ent were to provide support the export and 
investment promotion center (PROMEX), one of th e activities of which was to develop an export 
processing zone, and to provide support to domestic  enterprises through the chambers of commerce.  
 
                                                      
169 See IMF (2004a). 
170 World Bank (2003) 'Cape Verde – Growth and Competitiveness Project', Project Information 
Document, Report n° PID11489 
171 World Bank (2001) 'Implementation Completion Report: Capacity Building for Private Sector 
Promotion', Report n° 23041  WT/COMTD/LDC/W/37 
 Page 117 
 
 
 (b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:172 
 
- Administrative Barriers (2003):  Pursued previous advisory work on "Investment Promotion 
Strategy" and "Tax & Incentives" with an Admi nistrative Barriers review.  Following submission 
of the report, an Action Plan has been devel oped by local stakeholders, with assistance from 
FIAS, the Africa PSD Region and the local counterpart team; 
- Administrative Barriers (2002):  Implemented a survey of regulatory costs; 
- Incentives (2002):  Reviewed the tax system and fi scal incentives offered to private investors; 
- Promotion strategy (2000):  Provided assistance to  the Investment and Export Promotion Agency 
(PROMEX) in its effort to upgrade its activities and design a new investment promotion strategy 
for the next few years; 
- Institutions (1995):  Assisted in the evalua tion of the investment promotion agency. 
 
4. Ethiopia173 
(a) World Bank 
Project: Private Sector Development Capacity-Building Project (active)174 
 
The key objective of the project is to facilitate in creased participation of the private sector in the 
economy by creating conditions for improving its pro ductivity and competitiveness.  This goal will be 
achieved by helping accelerate the process of di vestiture of public enterprises and facilitating 
increased private participation; improving the business environment and increasing competition and 
the contestability of markets; strengthening the linkages and integration of the Ethiopian economy 
into the global markets; strengthening support for technical and business management skills and thus 
improving the productivity at the firm level.  The project integrates a set of complementary and mutually reinforcing activities to support enterprise needs, including a matching grant fund, tools for business schools to better train managers, and a busin ess plan competition to catalyze innovation, and 
entrepreneurship.  
 The project consists of three components: acc elerating the implementation of privatization 
programme;  improving the business environment th rough implementation of competition policy and 
accession to the WTO; and strengthening the interna tional competitiveness of the private sector and 
the capacities of its representative organizatio ns.  One of the sub-components under the 
competitiveness building component is a scheme to pr ovide matching grants to firms to finance the 
costs of training and/or technical assistance.  Another sub-component will improve the capacity of the faculty of business and economics at the Addis Ababa University.  The third sub-component provides technical and financial assistance to Ethiopian Small and Medium Enterprises (SME).    
Analytical Work: Developing Exports to Promote Growth, Volume 1 (2002)
175  
 
Textiles and clothing was one of the sectors cove red in the report.  The report emphasized the 
potential for exports, given preferential access to ma rkets available to the country under the AGOA 
and the EBA, and the need for duty-free facilities for the garment industry.   
                                                      
172 See http://www.fias.net/data/sub_cty.htm 
173 For an overview of the T&C sector in Et hiopia, see for example Lande et al (2005). 
174 World Bank (2004) 'Project Appraisal documen t: Private Sector Development Capacity Building 
Project', Report n° 30758-ET 
175 World Bank (2002) 'The Federal Democratic Republic of Ethiopia – Developing Exports to 
Promote', Growth. Report n° 23294-ET. WT/COMTD/LDC/W/37 
Page 118  
 
  
Analytical Work:  DTIS (2002)
176 
 
The IF Implementation Plan was presented to the National Steering Committee on 4 June 2004.  The 
Implementation Plan contained 43 prioritized actions , mostly focused on private sector development 
and trade issues. 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:177 
 
- Promotion Strategy (2001): Assisted the Ethiopian  Investment Authority (EIA) in developing a 
strategic approach for promoting FDI in Ethi opia and provided advice on improving Ethiopia’s 
business environment; 
- Institutions (2000): Provided training to the EIA to help strengthen its capacity for investment 
promotion; 
- Diagnostic (1997): Reviewed the investment clim ate and the approval process for foreign direct 
investment. 
 
5. Haiti178 
(a) World Bank 
Project: Economic Governance Reform Operation – EGRO (Active)179 
 
The Economic Governance Reform Operation Project  (EGRO) supports the Government's efforts to 
adopt measures that will increase the transparency of , and efficiency in the use of public resources and 
external assistance with increasing participation of the private sector, and civil society in 
decision-making, and provision of services.  The EGRO supports reform measures in the following 
areas: fiscal management, budget processes and fi nancial control; public sector procurement; anti-
corruption strategy; human resource management; effi ciency and transparency in the management of 
public enterprises, and road maintenance; public -private partnerships, and governance in the 
education and health sectors;  civil society m onitoring of economic governance reforms;  and, 
enhanced public information system. 
 (b) IFC  
Project: Grupo M
180 
 
The project provided corporate financing to a ver tically integrated apparel manufacturer in the 
Dominican Republic.  A component of the project is a loan to finance an export zone promoted by 
Grupo M focusing on clothing production in the Republic of Haiti (the Haiti Project).  The IFC also has helped the company improve its performance w ith respect to labour practices in its facilities in 
both the Dominican Republic (DR) and Haiti.  
 
The Haiti Project is a phased development of a 500,000 m2 site on the border of Haiti and DR.  
Phase 1 of the investment programme will develop an area of 150,000 m2 for a total investment of 
                                                      
176 See http://www.integratedframework.org/countries/ethiopia.htm 
177 See http://www.fias.net/data/sub_cty.htm 
178 For an overview of the T&C sector in Haiti, see for example US ITC (2004). 
179 World Bank (2004) 'Haiti – Economic Governance Reform Operation Project', Report n° 30882 
180 Project n° 20744.  See 'Summary of Project Information' on IFC's website for details.  WT/COMTD/LDC/W/37 
 Page 119 
 
 
 $11 million.  Upon completion, Phase 1 is expected  to generate 1,500 direct jobs and up to 
3,000 indirect jobs for Haitian workers in the adj acent area.  Subsequent development is expected to 
include outside customers producing apparel, f ootwear and other products who would lease or 
purchase facilities built to order by the zone develo pment company, which will be 100 per cent owned 
by Grupo M.  The total site area would allow up to 40 factory units providing as many as 
20,000 direct jobs and 40,000 indirect jobs at full capacity.  
 6. Lao People’s Democratic Republic
181 
(a) World Bank/IFC 
Analytical Work: Realizing the d evelopment potential of Lao PDR (2004)182 
 The report notes that phasing out of MFA quotas poses a major threat to the country's T&C sector.  
Garment exports were down in the first half of  2003 and potentially could fall further unless 
production and transport costs are reduced significantly .  Investments in the sector have also have 
fallen.  Competitiveness of the sector, particularly w ith regard to labour productivity, in relation to 
China and Viet Nam is questionable.   
 
Analytic Work: DTIS (just initiated)
183 
 
Some of the cross-cutting issues that are likely to be  addressed in the DTIS are trade policy, market 
access, trade facilitation, private sector developmen t, WTO accession and skills development.  The 
effect of phasing out of quotas on investment and empl oyment is one of the sectoral issues that will be 
examined.  
 
(b) World Bank and IFC 
Investment policy: Economic Zones (1992) : Reviewed the feasibility of an export-processing zone to 
promote FDI. 
 7. Lesotho
184 
(a) World Bank 
Analytical Work: Lesotho Private Sector Development Strategy (Under finalization)185 
 
The Bank is providing support through economic sector work as an input into the preparation of the 
Private Sector Development Project.  A major part  of the ESW was value chain analysis of four 
sectors, including the T&C sector, to identify key constraints to competitiveness and growth.  The major cross sectoral issues were low labour produc tivity, poor state of physical infrastructure, heavy 
reliance on imported inputs, the lack of market and technical information and the effect of the AIDS 
epidemic.  Some constraints specific to the T& C sector were the lack of product and market 
diversification strategy, high concentration of ex patriate supervisory and line management that 
increase overhead costs and poor  availability of water.  
 
                                                     
 
181 For an overview of the T&C sector in  Lao PDR, see for example UNIDO (2002). 
182 World Bank (2004) 'Lao PDR Country Economic Memorandum Realizing the Development 
Potential of Lao PDR', Volume 1: Summary Overview. Report n° 30188-LA 
183 See http://www.integratedframework.org/countries/laopdr.htm 
184 For an overview of the T&C sector in Lesotho, see for example US ITC (2004). 
185 World Bank (2004) 'Lesotho Private S ector Development Strategy', Draft WT/COMTD/LDC/W/37 
Page 120  
 
 Analytical Work: Lesotho Growth and Employ ment Options Study (under finalization)  
 
The report focused on retaining and strengthening th e T&C sector and integrating it with the local 
private sector to improve its competitiveness.  It drew heavily on a donor-funded study on the clothing 
industry. 
Analytical Work: DTIS (2003)
186 
 
The main issues covered included: economic and po licy setting; integration into global markets and 
investment and trade; regional and global trade ar rangements; building institutional capacity; foreign 
direct investments.  It is expected that one of the PRSP priority areas will be private sector development (PSD).  This will enhance the synerg y between the Lesotho IF and its PRSP.  More 
specifically, the PSD strategy will focus on:  admini strative requirements, customs modernization, and 
integration between foreign investments and domestic private sector. 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:187 
 
- Administrative Barriers (2004): Provided technical assistance in designing a modernized and 
computerized Company Registry an d for the reform of the licensing system for manufacturing and 
trading enterprises; 
- Administrative Barriers/Investment policy (1997) : Conducted a detailed review of administrative 
barriers to private investment, as well as the investment legislation; 
- Promotion strategy (1991): Assisted in the prep aration of an investment promotion strategy; 
- Diagnostic (1990): Prepared a diagnostic review of the investment climate. 
 
8. Madagascar188 
(a) World Bank  
Project: The Integrated Growth Poles Project (Proposed)189 
 
Export manufacturing is one of the three identified components for development.  The project entails 
an extensive multi-sector development programme that  will be implemented in three strategic regions 
of the country: the district of Nosy Be, the Antanana rivo/Antsirabe axis, and the district of Tolagnaro.  
The proposed project development objective is to support private sector led growth through the provisioning of a legal, physical and business envir onment in three selected regions (called “growth 
poles”), conducive to private investment.  The overall outcome of the project for these regions will be 
increased employment and skills development opport unities, improved access to infrastructure, more 
efficient supply chains and thus increased househol d incomes leading to poverty reduction.  The 
proposed project is also expected to have catalytic  effect in the growth poles areas and demonstration 
effects on other regions in Madagascar.  
                                                     
 
186 See IF (2003a). 
187 http://www.fias.net/data/sub_cty.htm 
188 For an overview of the T&C sector in Madagascar , see for example US ITC (2004) and Lande et al. 
(2004). 
189 Project Information Document (PID) Concept Stage, Report N° AB731  WT/COMTD/LDC/W/37 
 Page 121 
 
 
 Project: Second Private Sector Development Project (active)190 
 
The Second Private Sector Development Project was designed to enable the Government to improve 
access, reliability, and affordability of  key utilities, including transport.  It will complete divestiture of 
four state-owned enterprises, and some small, and medium enterprises, and will liberalize reforms in 
corresponding sectors, i.e., agro-industry, air tran sport, energy, finance, and telecommunications, 
thereby creating opportunities for private investment s.  The components are to strengthen the capacity 
of the three autonomous sector regulators, including  the capacity at the Center for Facilitation of 
Enterprise Creation; implement privatization process es, by strengthening the Technical Secretariat for 
privatization through technical assistance provisi on and advisory assistance; and finance, and support 
the operational setup of the recently created center for the coordination of activities of micro and 
small enterprises  
Analytical Work: DTIS (2003)
191 
 
The main issues of the DTIS were trade policy an d market access, developments in the primary 
sector, lessons from case studies in the manufacturing sector, tourism, trade support infrastructure, pro-poor trade strategy.  The discussion at the Na tional Workshop in which the study was presented 
focused on investment climate and credits, agricultura l diversification, cotton industry, trade reform 
(tariffs, customs, negotiating capacity and market  access), strengthening competitive advantages.  In 
Madagascar, the IF has provided a strong impetu s to trade reforms that focus on reduction, 
simplification and consolidation of taxes and duties. 
 
(b) IFC 
Project: Cottonline S.A .192  
 
Cottonline will establish an apparel factory specializ ing in products for US and European markets.  
The project consists of setting up a 600 sewing machines, apparel manufacturing factory in the 
country specializing in knit and woven casual wear for the US and European markets.  The company was incorporated in July 2001 and currently utili zes 300 sewing machines.  IFC’s investment will be 
used for financing the additional capital investment needed to complete the project and for funding a 
part of the working capital requirement of the proj ect.  At full capacity, the company will be capable 
of producing 12 million garments per year and empl oy 1,750 people.  The plant will use modern 
manufacturing equipment that conforms to EU re quirements for operator and product safety.  Initial 
customers of the project will be US companies such  as GAP Inc. under the provisions of the African 
Growth and Opportunity Act (AGOA). 
 
(c) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:
193  
 
- Administrative Barriers (1999): Prepared an assessme nt of the country's administrative barriers to 
investment; 
- Promotion strategy (1992): Developed a strategi c plan for investment promotion following an 
earlier diagnostic study of the investment climate; 
                                                      
190 World Bank.  2001.  Project Appraisal Document – Second Private Sector Development Project, 
Report N° 20988-MAG 
191 See IF (2003b). 
192http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f 011b50ff6e85256a550073ff1c/37da77d8e3af47988
5256d1e00500523?OpenDocument 
193 http://www.fias.net/data/sub_cty.htm WT/COMTD/LDC/W/37 
Page 122  
 
 - Investment policy (1990):  Assisted in the revision of the 1985 investment code and the 
preparation of a draft of new legislation for the creation of export-processing zones; 
- Diagnostic (1989): Undertook a diagnostic re view of the investment climate. 
 
9. Malawi 
(a) World Bank 
Project: The Privatization and Utility Reform Project (active)
194 
 
The objective was to improve the quality of and access to economic and physical infrastructure for 
private sector development.  The project consiste d of four components:  1) the privatization 
component to support the developm ent of divestiture options and/or  implementation of the chosen 
divestiture methods for utility divestitures, 2) s upport to regulatory institutions to enhance the 
operations of the Malawi Communications Regulator y Authority for postal and telecommunications 
regulation and electricity for power regulation, 3) postal sector support to support the three-year 
business plan of Malawi Posts Corporation to help the postal service progress towards full-cost 
recovery after its separation from the Malawi Telecom Limited (MTL), and 4) pre-privatization 
assistance to support restructuring activities in Electricity Supply Corporation of Malawi Limited including the conducting of a tariff study and est ablishing a financial management system.  
 
Analytical Work: DTIS (2004)
195 
 
Some of the issues that the discussion focused on we re the transport sector, trade facilitation, trade 
policy formulation and coordinatio n, and enhancing the capacity and trade support institutions.  
Follow-up activities included a trade and transport facilitation audit by the World Bank to strengthen 
the country’s trade integration and competitiveness.   This audit was completed in September 2004. 
 
(b) World Bank and IFC 
Analytical and advisory work pr ovided through FIAS includes: 196 
 
- Promotion strategy (1995): Assisted in the design of an investment promotion strategy. 
- Institutions: Investor tracking software (1994): Installed the software developed for foreign 
investment tracking in the i nvestment promotion agency. 
- Investment policy (1992): Assisted the Govern ment in redefining its approach to private 
investment through deregulation, a new approach to investor servicing through the creation of an IPA, an Investment Policy Statement and, inter alia , an Investor's Guide. 
- Diagnostic (1991): Conducted a dia gnostic review of the investment climate and assisted in the 
preparation of an investment policy statement, investor's guide and statute establishing an 
investment promotion agency. 
 
                                                     
 
194 World Bank (2000) 'Project Appraisal Document: Privatization and Utility Reform Project', Report 
n° 20485-MAI 
195 See IF (2004). 
196 See http://www.fias.net/data/sub_cty.htm  WT/COMTD/LDC/W/37 
 Page 123 
 
 
 10. Mozambique 
(a) World Bank 
Project: The Enterprise Development Project (active)197 
 
The project aims to broaden the base of private pa rticipation in Mozambique's economic growth.  The 
project consists of three components: 1) The technical-learning-in-firms component focuses on 
building technical capabilities of majority Mozambi can-owned firms in manufacturing and exports.  
The component supports the establishment of the Firm Competitiveness Office, Training and 
Advisory Office, and Linkage Program Office, to fo ster technical learning;  2) Under the finance 
component, two financial products w ill be made available for firms in all sectors - a special facility 
designed to provide small, first-time bank borrowe rs with loans amounting to a maximum of $15,000; 
and a traditional facility to finance loans up to $300,000 for small- and medium-scale borrowers;  
3) The institutional capacity-building component w ill enhance the capabilities of private and public 
institutions to deliver business support services;  and support the Government agencies in their 
transformation process from maintaining control f unctions to providing business facilitation and 
promotion services, including improving their capab ility to identify and ease bureaucratic rigidities 
 
Analytical Work: DTIS (Expected completion in 2006)198  
 
The World Bank has prepared a transport and tr ade facilitation audit.  This audit has been 
incorporated in the DTIS. 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:199 
 - Administrative Barriers [Implementation]:  Provided implementation assistance for removal of 
administrative obstacles to investment; 
- Administrative Barriers (2001):  Reviewed and evaluated the process of removing administrative 
barriers since the 1996 FIAS administrative barriers study;  recommended measures for deepening the reforms and removing the remaining barriers; 
- Administrative Barriers (1996):  Conducted a deta iled review of specific barriers to private 
investment; 
- Institutions (1994):  Assisted in the instituti onal development of the investment promotion 
agency; 
- Diagnostic (1993):  Conducted a diagnostic  review of the investment climate; 
- Diagnostic (1992):  Assessed the overall i nvestment environment of the country; 
- Investment policy:  Swaps (1991): Conducted a re view of the debt equity conversion programme. 
 
                                                     
 
197 Project Information Document Enterprise Development Project, Report n° 6979 
198 http://www.fias.net/data/sub_cty.htm 
199 http://www.fias.net/data/sub_cty.htm WT/COMTD/LDC/W/37 
Page 124  
 
 11. Nepal 
 
(a) World Bank 
Analytical Work: The development policy review (2005)
200 
 
Analytical Work: DTIS (2003)201 
 
The Nepal Trade and Competitiveness Study incl uded the following topics: trade regime and 
performance; accession to the WTO; price comp etitiveness and productivity; facilitating trade:  
customs and transport;  labour markets; regulatory framework and foreign direct investment;  case 
studies (carpet industry, garments, tea processing,  agriculture and tourism);  discussion forums 
included a special session on trade issues, strengthening the linkages between the PRSP and trade policy. 
 
(b) World Bank and IFC 
Analytical and advisory work pr ovided through FIAS includes:  
 
- Sector: Infrastructure (1999):  Examined the le gal and institutional framework for FDI in the 
country's infrastructure; 
- Incentives (1997):  Reviewed the incentives regi me and the legal framework for foreign 
investment; 
- Diagnostic (1993):  Conducted a diagnostic  review of the investment climate. 
 
12. Uganda
202 
(a) World Bank 
Project: Private Sector and Competitiveness Project II (active)203 
 The overall objective of the Second Private Sector Competitiveness Project for Uganda is to create 
sustainable conditions for enterprise creation and grow th that responds to local and export markets.  
The project, which will reduce the cost of doing bus iness and encourage investment, will enable the 
private sector to be better positioned to respond to op portunities in specific categories of the market.  
The project will increase the number of formal ente rprises, the number of people employed and the 
number of skilled employees leading to an increase in output per worker.  The project has the 
following three components.  Component one will provi de priority infrastructure and related facilities 
to support the growth of industria l and business sector, particularly through enhancing the availability 
of serviced industrial land in a modern, well-pl anned Industrial Park.  Component two aims to 
improve enterprise creation and growth, particular ly in Micro, Small, and Medium Enterprises 
(MSMEs), by changing enterprise behaviour toward  investment in skills, including investment in 
skills for women, raising productivity and improving th e quality, standards, and reliability of MSME 
producers participating in export value chains.  Co mponent three will help address critical issues in 
the business environment, including: (i) improvements in the land registry and survey training school; 
                                                     
 
200 World Bank. 2005.  Nepal Policy Development Review: Restarting Growth and Poverty Reduction, 
Report N° 29382-NP 
201 See IF (2003c). 
202 For an overview of the T&C sector in Ug anda, see for example Lande et al. (2004). 
203 World Bank. 2004.  Project Appraisal Document, Second Private Sector and Competitiveness 
Project, Report N° 29639-UG  WT/COMTD/LDC/W/37 
 Page 125 
 
 
 (ii) improvements to the business registration servi ce; and (iii) support to the Uganda Law Reform 
Commission and revision of key legislation.  
Project: East African Trade and Transport Facilitation Project (under preparation) 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:
204 
 
- Administrative Barriers (2004): Reviewed the admi nistrative barriers to investment and focused 
on specific issues affecting key export-oriented sectors; 
- Incentives (1998): Provided advice on international "best practice" in i nvestment incentives and 
export-processing zones in the context of revising the Investment Act of Uganda; 
- Investment policy (1998): Reviewed the draft Investment Promotion Bill; 
- Administrative Barriers (1997): Conducted a detailed review of administrative barriers to private 
investment; 
- Institutions: Investor tracking software (1995): Installed the software developed for foreign 
investment tracking in the I nvestment Promotion Agency; 
- Diagnostic (1990): Prepared a diagnostic review of the investment climate. 
 
13. United Republic of Tanzania 
(a) World Bank 
Project: Private Sector Development Project (under preparation) 
 
The objective is to encourage th e development of a healthy and competitive domestic private sector 
through an increase in the number of businesses,  growth of existing businesses, and increased 
formalization of information business.  This will be achieved by reducing the cost of doing business, 
increasing the capacity of local private sector to par ticipate in domestic and international markets.  
The project is expected to have three components:  investment climate—to reduce the cost of doing 
business;  finance - to increase access to financial services for MSMEs; and private sector capacity - 
increase private sector responsiveness to viable opportunities.  
Project: East Africa Trade and Transport Facilitation Project (under preparation) 
 
Analytical Work: DTIS (under completion)205 
 
(b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:206  
 
- Competition Policy (2004): Conducted a conference to analyze the relationship between 
competition, productivity, competitiveness, economic  growth, and poverty reduction and review 
the state of competition; 
- Competition Policy (2002): Assessed the relati onship between competition policy and FDI to 
improve the existing institutional framework and encourage competition in product and service 
markets; 
                                                      
204 See http://www.fias.net/data/sub_cty.htm 
205 See http://www.integratedframework.org/countries/tanzania.htm 
206 See http://www.fias.net/data/sub_cty.htm WT/COMTD/LDC/W/37 
Page 126  
 
 - Institutions/Promotion strategy (1999): Reviewed th e country's investment promotion agency and 
its proposed strategic plan; 
- Investment policy (1999): Completed a review  of Zanzibar's draft investment law; 
- Investment Policy: Swaps/ Forex (1993): Revi ewed policies to encourage foreign direct 
investment with special attention to ex change controls and debt-equity swaps. 
 
14. Zambia 
(a) World Bank 
Project: Support to Economic Ex pansion and Diversification (2004)
207 
 
The Project's overall objective was to help reduce th e vulnerability of the Zambian economy to shocks 
by supporting the diversification of  its sources of growth.  This is to be achieved by improving sector 
specific policy and regulatory frameworks and strengt hening the capacity of government agencies to 
implement them.  The development objective will also be supported through selective public 
investments that stimulate privat e investments.  The project has the following four components: 
tourism component; accelerated development of supply chain linkages;  gemstones;  and beneficiary 
institutions.   
Project: Enterprise Development Project (2003)
208 
 
The objectives of the project were to complete and support the economic reform programme in 
Zambia.  Specifically, the project supported firm-lev el efforts at restructuring by: a) enhancing 
Zambian firms' technical know- how; b) enhancing Zambian firm's access to finance; and 
c) strengthening the financial system and availabilit y of information resources.  The project had the 
following components:  a) matching grant scheme, u sed to stimulate the use of support services to 
assist firms in their re-orientation;  b) multi-pur pose credit facility, provided through the commercial 
banks to finance investments as well as stimulate e xports;  and c) institutiona l development, supported 
through technical assistance for financial in stitutions and the Export Board of Zambia. 
 (b) World Bank and IFC 
Analytical and advisory work provided through FIAS includes:
209 
 
- Administrative Barriers (2004): Provided guidanc e to the Government in the design and 
implementation of a reform programme for admi nistrative barriers to increase investment and 
business activity; 
- Investment Policy (2004): Reviewed proposals s ubmitted by the Zambia Investment Center for 
amendment of the Investment Act, and for cha nges in the investment strategy and policy for 
re-introduction of investment incentives; 
- Diagnostic (2003): Participated in selected m eetings of a Country Economic Memorandum 
mission (taking place simultaneously with the FIAS  Administrative Barriers Study mission), and 
provided inputs for sections of the CEM chapter dealing with investment climate and business 
environment issues related to gr owth and poverty alleviation; 
                                                      
207 Updated Project Information Document, Report N° AB845 
208 Implementation Completion Report, Enterprise Development Project, Report N° 27559 
209 http://www.fias.net/data/sub_cty.htm  WT/COMTD/LDC/W/37 
 Page 127 
 
 
 - Sector (Infrastructure) (1999): Examined the moda lities of facilitating foreign investment in the 
infrastructure sector; 
- Diagnostic (1993): Conducted a diagnostic re view of the investment climate. 
 
 WT/COMTD/LDC/W/37 
Page 128  
 
 ANNEX III – Trade-Related Technical Assistance and Capacity Building 
 
ANNEX III Table 1 
DAC countries and other countries and agencies reporting to the DDA TCBD 
 
 
DAC MEMBERS (23) 
Australia   
Austria 
Belgium   Canada   
Denmark   
European Commission   Finland   
France   
Germany   Greece   
Ireland   
Italy   Japan 
Luxembourg   
Netherlands   New Zealand   
Norway   
Portugal   Spain   
Sweden   
Switzerland United Kingdom 
United States 
 
OTHER PROVIDERS OF TRTA/CB (4) 
Argentina   
Czech Republic   
Hong Kong, China Iceland   
 DONOR AGENCIES (26) 
African Development Bank (AfDB)   
Arab Monetary Fund (AMF)   
Asia Pacific Economic Cooperation (APEC)   Asian Development Bank (ADB)   
Commonwealth Secretariat   
European Bank for Reconstruction and Development (EBRD)   Food and Agriculture Organization (FAO)   
Inter-American Development Bank (IADB)   
International Bank for Reconstruc tion and Development (IBRD)   
International Developm ent Agency (IDA)   
International Monetary Fund (IMF)   
International Trade Centre (ITC)   Islamic Development Bank (IDB)   
Organisation for Economic Co-operation and Development 
(OECD)   United Nations (UN)   
United Nations Conference for Trade and Development 
(UNCTAD)   United Nations Development Programme (UNDP)   
United Nations Economic and Social Commission for Asia and 
Pacific (UNESCAP)   United Nations Economic Commission for Africa (UNECA)   
United Nations Economic Commission for Europe (UNECE)   
United Nations Economic Commission for Latin America and the Caribbean (UNECLAC)   United Nations Economic Commission for Western Asia 
(UNESCWA)   
United Nations Industrial Development Organization (UNIDO) World Customs Organization (WCO)   
World Intellectual Property Organization (WIPO)   
World Trade Organization (WTO)  
  WT/COMTD/LDC/W/37 
 Page 129 
 
 
  
ANNEX III Table 2 
DTIS Cambodia: Action Matrix (excerp ts related to textiles and clothing) 
 
Observations Type of Action Responsible Agencies /External 
Support 
Increase understanding of the true competitive advantage of garments. Determine capacity of Cambodian producers to 
compete post 2004.  
Compare costs and quotas facing main competitors and assess prospects for productivity gains Ministry of Commerce/ Ministry of 
Social Affairs/Ministry of Labor 
and Vocational Training. 
Assess the impact of existing preferential arrangements on Cambodia's cost structure. Council for the Development of 
Cambodia. Overcome existing tariff and quota 
restrictions (e.g. on local content requirements and product standards). Increase capacity to analyze impact of market access 
restrictions and to negotiate better. IMF Resident Customs Adviser. 
Achieve a more efficient and equitable 
distribution of quota rents. Determine the distribution of benefits/rents arising from 
the existing system and develop alternative options.  
Increase labour market flexibility in 
garments sector. Explore alternative profit-sharing system such as 
flexible year-end bonuses instead of minimum wages.  
Other issues Examine role of small and medium firms. 
Examine options for promotions of Cambodian product. 
Conduct analysis of EBA initiative and GSP access. Provide assistance with quality and standards. 
Examine options for saving on wastage in production.  
Source:  IF (2001)
   
 
 
ANNEX III Table 3 
Lesotho: Recommendations and Action Pl an, Annex to Chapter 8 of the DTIS 
 
Infrastructure Requirements Major Actions Recommendations Responsibility 
Serviced industrial sites Provide additional serviced 
industrial sites Provide services to industrial estates in 
Ha Tikoe, Mafeteng, and Mohale's Hoek GoL / LNDC 
Factory shells Provide additional factory 
shells Facilitate investors to build their own shells 
 
Build factory shells fo r committed investors LNDC 
GoL / LNDC 
Reliable water supply Upgrade water supply. Enhance wa ter supply to existing industrial 
estates GoL / WASA 
Logistical capacity Increase handling capacity at 
Mascon railhead  
 Improve customs clearance 
efficiencies Conclude strategy plan  and negotiations for 
the development of Mascon site 
 Facilitate the development of Mascon site into 
a modern container handling and storage 
facility  
Develop full customs clearance facilities on 
Maputsoe/Ficksburg border GoL / LNDC / 
Customs 
Fabric knitting mills Encourage and promote the 
development of fabric knitting 
mills in Lesotho Designate a new industrial estate as a potential 
site for wet industry development 
 Provide services and wastewater treatment 
facilities to the new wet industry estate 
 Facilitate investors who wish to establish 
fabric knitting mills and dye plants LNDC / GoL 
Cost competitiveness Establish productivity and 
training institute Implement comprehensive training programme 
to upgrade factory efficiencies and 
productivity improvement GoL / 
Industrialists 
    
Source: Integrated Framework (2003a) 
 WT/COMTD/LDC/W/37 
Page 130  
 
 ANNEX III Table 4  
DTIS Malawi: Action Matrix (excerpt related to textiles and clothing) 
 
Opportunity or 
Barrier Actions Support Measures Responsible 
Agencies Time Frame 
Evaluate the implications of AGOA 
post-2004 rule of origin requirements 
for the Malawi garment industry, in particular its relation to its sourcing of 
cloth and accessories.  Develop 
negotiating strategy with Government and regional counterparts in preparation for successor AGOA 
programmes. Technical assistance in 
developing AGOA-related 
strategy.  MOCI, Trade 
Associations Q2 2004 
Intensify efforts to encourage FDI in 
the garment sector. Investment targeting 
programme MIPA/MOCI Intensify 
ongoing activity 
Facilitate strengthening of the 
Garment and Textiles Manufacturers 
Association (GTMA) in order to 
address emergent industry problems and improve public/private sector 
consultations. Technical Assistance in 
developing a GTMA 
Secretariat and action 
programme. MOCI, Chamber 
of Commerce and 
Industry Q3 2004 Generally unrealized 
opportunity for 
garment exports to the United States 
under the AGOA 
initiative. 
Strengthen the capacities for product 
design and development among SME 
garment companies. Training programme or 
secondment of retired 
international garment 
executives. MOCI Q1 2005 
Weak performance 
and uncertainty 
surrounding DWM 
that inhibit textiles exports as well as 
forward and 
backward linkages. Accelerate the process of privatizing 
DWS and if necessary during an 
interim period put in place a 
management contract No support necessary Privatization 
Commission Implemented 
Source: IF (2004) 
 
 
ANNEX III Table 5 
DTIS Nepal: Action Matrix (excerpt  related to textiles and clothing) 
 
Objective Action Recommended Policy/Legislative 
change Technical 
Assistance Time Frame and Agencies 
Review and accept alternatives to 
letters of credit Yes No Short-term, NRB, MOICS 
Rationalize quota allocation system 
to promote efficient firms Yes No Short-term, MOICS, GAN 
Eliminate requirement for business 
credibility license and two separate certificates of origin Yes No Short-term, MOICS, NCC, GAN Garment: Reducing 
finance and transaction costs. 
Prepare garment development 
action plan and implement Yes Yes Short and medium-term, MOICS, 
private sector 
Source : Integrated Framework (2003c) 
 
 
 
ANNEX III Table 6 
DTIS Senegal: Matrix (excerpt related to textiles and clothing) 
 
Objectives Measures Responsible Agencies Time Frame 
Evaluate existing training 
programmes Ministry of Industry Start end-2002 
Strengthen subcontracting practices  Start end-2002 Stimulate production and 
exports of the textiles sector 
Privatize SOTEXKA  2003 
Source : IF (2002) 
 
  WT/COMTD/LDC/W/37 
 Page 131 
 
 
 ANNEX IV – Non-Reciprocal Preferences Schemes 
 
ANNEX IV Table 1 
European Cotonou ACP and US AGOA eligible countries  
 
European Cotonou ACP eligible countries  
 
Angola 
Benin 
Burkina Faso Burundi 
Cape Verde 
Central African Republic Chad 
Comoros 
Democratic Republic of the Congo Djibouti 
Equatorial Guinea 
Eritrea Ethiopia 
Gambia 
Guinea Guinea-Bissau 
Haiti 
Kiribati Lesotho 
Liberia 
Madagascar Malawi 
Mali 
Mauritania Mozambique 
Niger 
Rwanda Somalia Samoa, American 
São Tomé and Principe 
Senegal Sierra Leone 
Solomon Islands 
Sudan Tanzania 
Togo 
Tuvalu Uganda 
Vanuatu 
Zambia 
 US AGOA eligible countries (as of 2004) 
 
Angola 
Benin 
Cape Verde Chad 
Democratic Republic of the Congo 
Djibouti Ethiopia 
Gambia 
Guinea Guinea-Bissau 
Lesotho 
Madagascar Malawi 
Mali 
Mauritania Mozambique 
Niger 
Rwanda São Tomé and Principe 
Senegal 
Sierra Leone Tanzania 
Uganda 
Zambia 
 
 
 
  
 WT/COMTD/LDC/W/37 
Page 132 ANNEX IV Table  2 
Coverage, preferences, and utilization of non-reciprocal preferential schemes  
 Non-reciprocal preferential scheme, 2004 
TEXTILEf Australia  Canada  EUa (2003)  Japana 
 GSP  GSP LDC  GSP GSP LDC  EBA Cotonou  GSP GSP LDC 
            
Total lines reported for textiles according to ATC definition 649 (HS 8 digits)  1,097 (HS 8 digits)  893 (HS 8 digits)  1,459 (HS 9 digits) 
Share (per cent) of total lines with ad valorem tariffs 100  98.8  99.7  85.1 
Share (per cent) of total lines with non ad valorem tariffs 0  1.2  0.3  14.9 
Share (per cent) of total lines under MFN duty-free treatment 15.9  34.3  1.2  3.5 
Share (per cent) of total lines dutiable under MFN treatment 84.1  65.7  98.8  96.5 
Share (per cent) of MFN dutiable lines covered with preferences 1.5 100  39.8 100  100 100  86 99.4b 
            
Total imports of textiles from eligible LDCs (US$ millions) 5.0  37.5  244.2 60.0  14.4 
Share (per cent) of total imports under MFN duty-free treatment 84.7  7.6  17.3 0.05  47.4 
Share (per cent) of total imports dutiable under MFN treatment 15.3  92.4  82.7 99.95  52.6 
Share (per cent) of MFN dutiable imports covered with preferences 0 100  22.9 100  100 100  99.4 100 
             
Duty rates and preferences for textiles at the tariff line            
Average MFN rate [std. dev.] 9.2 [6.2]  7.8 [6.4]  6.9 [2.5]  6.0 [2.5] 
Tariff peak: maximum duty 25  18.5  12.2  25c 
Average duty of the scheme (non covered products included) [std. dev.] 9.18 [6.2] 0 [0]  6.7 [6.2] 0 [0]  0 [0] 0 [0]  3.7 [3.0 ] 0.1 [1.3] 
Average preference margin over all tariff lines [std. dev.] 0.05 [0.5] 9.2 [6.2]  1.1 [2.3] 7.8 [6.4]  6.9 [2.5] 6.9 [2.5]  2.4  [2.2] 5.9 [2.3] 
Average preference margin over traded tariff lines [std. dev.] 0.03 [0.1] 5.7 [5.1]  1.6 [2.7] 11.2 [6.0]  8.0 [2.3] 7.5 [2.5]  2.9 [3.1] 4.9 [3.5] 
Average preference margin over traded and covered tariff lines [std. dev.] 0.5 [0] 7.5 [2.5]  4.5 [2.8] 13.4 [3.8]  8.0 [2.3] 7 .5 [2.5]  4.0 [3.0] 6.3 [2.5] 
     (1) variation coefficient of preferences = std. dev / average - 0.3  0.6 0.3  0.3 0.3  0.75 0.4 
            
Utilization rate of preferences value for textiles at the tariff line            
Simple average of tariff lines [std. dev.] 12.5 [0] 46.0 [48.8]  20.1 [32.1] 40.5 [44.1]  54.7 [41.3] 62.4 [41.4]  0 [0] 68.9 [ 42.3] 
     (2) variation coefficient of utilization = std. dev / average - 1.1  1.6 1.1  0.8 0.7  - 0.6 
     (3) relative variation of u tilization to preferences = (2) / (1) - 3.7  2.7 3.7  2.7 2.3  - 1.5 
Share (per cent) of preference-covered traded lines with ur = 0 0 33.3  49.3 39.9  27.4 22.1  100 21.7 
Share (per cent) of preference-covered traded lines with ur = 1 0 33.3  4.5 17.1  14.8 29.2  0 50.0 
Aggregated (preference and trade-we ighted average of tariff lines) 12.5  32.2  30.3 69.1  83.1 83.9  0 88.0 
Value of preferences actually  utilized as a percentage of total im ports - 0.4  0.3 10. 3  7.2 5.2  0 3.1 
 
 
 
  
  WT/COMTD/LDC/W/37
 Page 133 
ANNEX IV Table  2 (continued) 
  
 Non-reciprocal preferential scheme, 2004 
TEXTILEf Switzerlanda  United States 
 GSP LDC  GSP GSP LDC AGOA CBTPA 
       
Total lines reported for textiles according to ATC definition 749 (HS 8 digits)  1,005 (HS 8 digits) 
Share (per cent) of to tal lines with ad valorem tariffs 0.4  96.6 
Share (per cent) of total lines with non ad valorem tariffs 99.6  3.4 
Share (per cent) of total lines under MFN duty-free treatment 0.5  15.7 
Share (per cent) of total lines dutiable under MFN treatment 99.5  84.3 
Share (per cent) of MFN dutiable lines covered with preferences 99.9  8.3 9.1 n.a. n.a. 
        
Total imports of textiles from eligible LDCs (US$ millions) 4.7  285.8 1.6 2.2 
Share (per cent) of total imports under MFN duty-free treatment 0  19.1 11.2 15.4 
Share (per cent) of total imports dutiable under MFN treatment 100  80.9 88.8 84.6 
Share (per cent) of MFN dutiable imports covered with preferences 100  1.6 1.6 12.9 18.8 
        
Duty rates and preferences for textiles at the tariff line       
Average MFN rate [std. dev.] 3.6 [3.2]  7.9 [5.6] 
Tariff peak: maximum duty 39.8d  40.4e 
Average duty of the scheme (non-covered products included)  [std. dev.] 0 [0]  7.6 [5.9] 7.5 [5.9] n.a. n.a. 
Average preference margin over all tariff lines [std. dev.] 3.6 [3.2]  0.3 [1.4] 0.4 [1.5] n.a. n.a. 
Average preference margin over traded tariff lines [std. dev.] 3.8 [2.7]  0.4 [1.7] 0.4 [1.8] 0.6 [0.9] 0.6 [1.0] 
Average preference margin over traded and covered tariff lines [std. dev.] 3.8 [2.7]  5.6 [4.5] 5.6 [4.5] 8.0 [0.9] 8.3 [0.0] 
     (1) variation coefficient of preferen ces = std. dev / average  0.7  0.8 0.8 0.1 0 
       
Utilization rate of preferences value for textiles at the tariff line       
Simple average of tariff lines [std. dev.] 60.1 [47.6]  73.7 [37.8] 0 [0] 33.3 [57.8] 0 [0] 
     (2) variation coefficient of utiliza tion = std. dev / average 0.8  0.5 - 1.7 - 
     (3) relative variation of utilization to preferences = (2) / (1) 1.1  0.6 - 17 - 
Share (per cent) of preference-covered traded lines with ur = 0 37.3  10.5 100 66.6 100 
Share (per cent) of preference-covered traded lines with ur = 1 37.3  47.4 0 33.3 0 
Aggregated (preference and trade-weighted average of tariff lines) 95.6  76.8 0 37.5 0 
Value of preferences actually u tilized as a percentage of tota l imports 1.0  0.0 0.0 0.0 0.0 
  
 WT/COMTD/LDC/W/37 
Page 134  
ANNEX IV Table  2 (continued) 
  
 Non-reciprocal preferential scheme, 2004 
CLOTHINGf Australia  Canada  EU (2003)  Japan 
 GSP  GSP LDC  GSP GSP LDC  EBA Cotonou  GSP GSP LDC 
            
Total lines reported for clothing  according to ATC definition 278 (HS 8 digits)  272 (HS 8 digits)  375 (HS 8 digits)  562 (HS 9 digits) 
Share (per cent) of total lines with ad-valorem tariffs 100  98.5  100  100 
Share (per cent) of total lines with non ad-valorem tariffs 0  1.5  0  0 
Share (per cent) of total lines under MFN duty-free treatment 11.2  5.1  0  0 
Share (per cent) of total lines dutiable under MFN treatment 88.8  94.9  100  100 
Share (per cent) of MFN dutiable lines covered with preferences 0 100  12.2 100  100 100  8.5 100 
            
Total imports of clothing from  eligible LDCs (US$ millions) 3.4  486.7  4118.2 221.2  83.3 
Share (per cent) of total imports under MFN duty-free treatment 6.7  0.3  0  0 
Share (per cent) of total imports dutiable under MFN treatment 93.3  99.7  100  100 
Share (per cent) of MFN dutiable imports covered with preferences 0 100  0.3 100  100 100  1.7 100 
             
Duty rates and preferences for clothing at the tariff line            
Average MFN rate [std. dev.] 20.5 [8.8]  16.8 [4.5]  11.8 [1.3]  9.3 [1.8] 
Tariff peak: maximum duty 25  19  12.2  13.4 
Average duty of the scheme (non covered products included) [std. dev.] 20.5 [8.8] 0 [0]  16.4 [4.9] 0 [0]  0 [0] 0 [0]  8.8 [2. 9] 0 [0] 
Average preference margin over all tariff lines [std. dev.] 0 [0] 20.5 [8.8]  0.4 [1.3] 16.8 [4.5]  11.8 [1.3] 11.8 [1.3]  0.5 [1.9] 9.3 [1.8] 
Average preference margin over traded tariff lines [std. dev.] 0 [0] 20.0 [9.2]  0.4 [1.4] 17.2 [3.9]  11.6 [1.4] 11.6 [1.4]  0 .5 [2.0] 9.6 [1.5] 
Average preference margin over traded and covered tariff lines [std. dev.] - 23.6 [4.1]  3.6 [2.3] 17.9 [1.9]  11.6 [1.4] 11.6 [1.4]  7.2 [3.1] 9.6 [1.5] 
     (1) variation coefficient of preferences = std. dev / average - 0.2  0.6 0.1  0.1 0.1  0.4 0.2 
            
Utilization rate of preferences value for clothing at the tariff line            
Simple average of tariff lines [std. dev.] - 37.8 [45.4]  12.3 [20.0] 71.6 [37.3]  37.8 [28.4] 76.0 [30.1]  0 [0] 40.3 [43.3] 
     (2) variation coefficient of utilization = std. dev / average - 1.2  1.6 0.5  0.8 0.4  - 1.1 
     (3) relative variation of u tilization to preferences = (2) / (1) - 6  2.7 5.0  8.0 4.0  - 5.5 
Share (per cent) of preference-covered traded lines with ur = 0 - 57.7  50.0 13.9  4.3 5.2  100 37.9 
Share (per cent) of preference-covered traded lines with ur = 1 - 11.5  0 8.0  0 22.5  0 19.8 
Aggregated (preference and trade- weighted average of tariff lines) - 68.2  11.7 93.5  50.2 88.7  0 66.6 
Value of preferences actually  utilized as a percentage of total im ports - 15.5  0.0 16. 8  6.0 10.4  0 5.9 
  
  WT/COMTD/LDC/W/37
 Page 135 
ANNEX IV Table  2 (continued) 
 
 Non-reciprocal preferential scheme, 2004 
CLOTHINGf Switzerland  United States 
 GSP LDC  GSP GSP LDC AGOA CBTPA 
       
Total lines reported for clothing  according to ATC definition 323 (HS 8 digits)  568 (HS 8 digits) 
Share (per cent) of to tal lines with ad-valorem tariffs 0  89.3 
Share (per cent) of total lines with non ad-valorem tariffs 100  10.7 
Share (per cent) of total lines under MFN duty-free treatment 0  5.1 
Share (per cent) of total lines dutiable under MFN treatment 100  94.9 
Share (per cent) of MFN dutiable lines covered with preferences 100  3.1 3.1 n.a. n.a. 
       
Total imports of clothing from  eligible LDCs (US$ millions) 73.5  4620.6 822.8 328.3 
Share (per cent) of total imports under MFN duty-free treatment 0  0 0.05 0.6 
Share (per cent) of total imports dutiable under MFN treatment 100  100 99.95 99.4 
Share (per cent) of MFN dutiable imports covered with preferences 100  0.02 0.02 99.99 99.6 
        
Duty rates and preferences for clothing at the tariff line       
Average MFN rate [std. dev.] 2.9 [2.0]  11.5 [8.1] 
Tariff peak: maximum duty 21.8  32.0 
Average duty of the scheme (non covered products included)  [std. dev.] 0 [0]  11.4 [8.2] 11.4 [8.2] n.a. n.a. 
Average preference margin over all tariff lines [std. dev.] 2.9 [2.0]  0.1 [1.0] 0.1 [1.0] n.a. n.a. 
Average preference margin over traded tariff lines [std. dev.] 2.8 [1.7]  0.1 [1.1] 0.1 [1.1] 16.1 [10.0] 17.5 [10.6] 
Average preference margin over traded and covered tariff lines [std. dev.] 2.8 [1.7]  5.7 [5.8] 5.7 [5.8] 16.4 [8.0] 18.2 [7.3]  
     (1) variation coefficient of preferen ces = std. dev / average  0.6  1.0 1.0 0.5 0.4 
       
Utilization rate of preferences value for clothing at the tariff line       
Simple average of tariff lines [std. dev.] 43.8 [42.4]  58.5 [31.9] 0 [0] 79.8 [34.8] 71.3 [37.9] 
     (2) variation coefficient of utiliza tion = std. dev / average  0.97  0.5 - 0.4 0.5 
     (3) relative variation of utilization to  preferences = (2) / (1) 1.6  0.5 - 0.8 1.3 
Share (per cent) of preference-covered traded lines with ur = 0 31.8  12.5 100 9.2 13.2 
Share (per cent) of preference-covered traded lines with ur = 1 16.6  12.5 0 34.5 32.9 
Aggregated (preference and trade-weighted average of tariff lines) 47.6  67.3 0 97.9 67.7 
Value of preferences actually u tilized as a percentage of tota l imports 2.5  0.0 0.0 17.7 12.8 
       
a Country did not provide HS 30, 39, 42, 70, 87, 88, 91, 94, 95, 96 information on utilization for textiles. 
b products 640610110, 640610190, 640610200, 640699100, 640699200, 911390110 and 911390190 not covered by preferences. 
c HS 640699100, d HS 54072000, e HS 64061030. 
f See the ATC definition in Statistical appendix. 
Source:  WTO (IDB), countries notifications and Secretariat’s calculations.  WT/COMTD/LDC/W/37 
Page 136  
 
 ANNEX IV Technical Notes 
1. Calculation of Utilization Rates 
Given that, as already mentioned, access to non-re ciprocal preference is always conditional upon 
fulfillment of certain conditions, assessing the extent to  which exports eligible for preferences request 
preferential access is of paramount interest.  Note  that the focus here is on the extent to which 
preferences are utilized for any good which is expor ted by a preference-receiving country rather than 
on the broader issue of the supply response to preferences, i.e. the fact that countries do or do not fully exploit available preferences by exporting more. Preference utilization measures what has been actually saved in terms of tariffs due to the use of the 
preferential regime instead of the MFN relative to wh at could have been saved if all eligible imports 
had been charged the preferential rates.  Hence,  the following formula is used to compute the 
utilization of the preference (ur) for a given tariff item: 
 
**
**PREF MFN PREF PREF
PREF
TOTAL MFN TOTAL PREFimports tariff imports tariffurimports tariff imports tariff−=−. 
 
Imports PREF corresponds to the amount of imports which enters into the preference-giving country 
using the offered preferential regime.  Imports TOTAL  simply indicates the total value of imports.  As for 
the tariffs, tariff PREF is the preferential duty from which an LDC can benefit while tariff MFN is the 
MFN duty.  Note that where tariff PREF  = 0, the utilization rate for a given tariff line reduces to: 
 
PREF
PREF
TOTALimportsurimports= . 
 
The simple average of utilization rates across tari ff lines is computed.  All lines enter the simple 
average calculus in the same way, regardless of  the volume of trade and of the extent of the 
preferences provided.  As in the case of the preference margins above, a measure of variation around 
the simple average (i.e. the standard deviation) is  also calculated which indicates whether the pattern 
of utilization of preferences at the tariff line is rather homogeneous or not. Another measure of utilizati on overall utilization rate (UR)  for textiles and clothing respectively.  This 
rate, which can also be denominated as the prefer ence and traded-weighted average over all tariff 
lines, is defined as: 
 
,, , ,
,, , ,(* * )
(* * )N
PREF i MFN i PREF i PREF i
i
PREF N
TOTAL i MFN i TOTAL i PREF i
iimports tariff imports tariff
UR
imports tariff imports tariff−
=
−∑
∑. 
 
It is simply the ratio of two sums: the first adds up the value of preferenc es actually utilized for each 
tariff line i, and is divided by the second which values th e total amount of given preferences over the 
N existing items.  This measure thus allocates a highe r weight to tariff lines which are relatively more 
traded and the margin of preference  of which is relatively larger. 
In case of a full duty-free access preferentia l scheme, the formula just becomes: 
,,
,,(* )
(* )N
PREF i MFN i
i
PREF N
TOTAL i MFN i
iimports tariff
UR
imports tariff=∑
∑.  WT/COMTD/LDC/W/37 
 Page 137 
 
 
  
And if all MFN duties were to be equal and a fu ll duty-free access was granted to a country, it would 
further simplify to:  
,
,N
PREF i
i
PREF N
TOTAL i
iimports
UR
imports=∑
∑, 
 
that is simply the sum of all imports under the pr eferential regime over the total value of imports.  
This very often measures utilization in the literatu re.  Yet the assumption of completely homogenous 
MFN duties and full duty-free preferential access is only a rough approximation of reality. Another insightful indicator is constituted by the va lue of preferences utilized as a percentage of total 
imports.  It measures the actual benefits that LDCs are able to rip off from a non-reciprocal preference 
programme. 
 Finally, both tables 3a and 3b provide the share of tariff lines with utilization rates of zero and one, on 
top of the measures developed above.  
2. Rules of Origin
210 
Regime-wide rules of origin (RoO)  
 All non-reciprocal preference schemes (NRPS) have regime-wide RoO, including various 
combinations of de minimis  (or tolerance) rules, cumulation, and absorption (or roll up) provisions. 
 
The de minimis  criterion stipulates a maximum percentage of non-originating materials that can be 
used without affecting the origin of final product.  By establishing a cutoff level for non-originating materials below which origin is automatically conferred, a de minimis criterion generally facilitates 
compliance except in the presence of a value content requirement.   
Cumulation allows NRPS producers from preference- benefiting countries to import non-originating 
materials from other NRPS beneficiaries without aff ecting the final product’s originating status.  
Three types of cumulation rules are distinguished: bilateral, diagonal and full cumulation.   Bilateral cumulation is most common and applies to  trade between two partners in a NRPS.  It 
stipulates that producers in the beneficiary count ry A can use inputs from the preference-giving 
country B without affecting the final good’s originating status.  
 Under diagonal cumulation, beneficiary countries incl uded in the same NRPS can use materials that 
originate in any beneficiary country as if the materials were originating in the country where the 
processing is undertaken.  
 
Finally, under full cumulation, all stages of proc essing or transformation of a product within the 
NRPS’s set of beneficiary countries can be counted as qualifying content regardless of whether the processing is sufficient to confer originat ing status to the materials themselves. 
 Full cumulation is less common than diagonal but is app lied by the EU in its agreements with Algeria, 
Morocco and Tunisia and in the Cotonou Agreemen ts.  It allows for greater fragmentation of 
                                                     
 
210 Adapted from Cadot, de Melo and Tumurchudur (2005). WT/COMTD/LDC/W/37 
Page 138  
 
 production processes and deeper integration among be neficiary countries.  However, note that it 
requires information on the entire value chain whereas diagonal cumulation requires only proof that materials qualify, which may be ascertained on the basis of certificates of origin.  The documentation required of exporters may t hus be more complex and bur densome under full cumulation. 
 
The absorption or roll-up principle allows non-orig inating materials which have acquired origin by 
meeting specific processing requirements to maintain th is origin when used as input in a subsequent 
transformation.  In other words, the non-origina ting materials are no longer taken into account in 
calculating value added.  The roll-up or absorption principle is used in all NRPSs  
Product-specific RoOs
 
 In general, two broad criteria are used to identify origin:  - The “wholly-obtained or produced” criterion appli es to commodities entirely grown, harvested or 
extracted from the soil in the beneficiary country’s territory or manufactured there from inputs 
themselves wholly obtained, thereby precluding the use of second-country components; 
- The more complex “substantial transformation” crite rion, used in the majority of cases, defines 
various levels of requisite transformation. 
 In NRPSs with product-specific RoOs, verificati on of the substantial-transformation criterion is 
legally based on four basic components of RoO, all subject to the regime-wide rules described above 
(cumulation, absorption, etc.).  First is a Change of Tariff Classification (CTC ) which requires the final product to belong to a 
different tariff classification than imported inputs ente ring its production process.  The change of tariff 
classification can be defined at various degrees of aggregation.  The most aggregate definition is a 
change of chapter (CC).  A “chapter” in the World Customs Organization’s Harmonized System is a category defined at the two-digit level of aggregatio n, i.e. a very high degree of aggregation (in other 
words, a broad category).
211 Thus, a change in chapter is a stri ngent transformation requirement.  Next 
comes a change in heading (CH) defined at the fou r-digit level.  Because the breadth of the required 
transformation is lesser (HS-4 categories are narrower than HS-2 ones), this requirement is less 
stringent than the previous one.  Next comes a change in sub-heading (CS) defined at the six-digit 
level, and finally a change in tariff classification at the item level (CI) defined at the 8-10 digit.  
 Second, exceptions can be attached to a particular change in tariff classification; such exceptions are 
henceforth designated by the acronym ECTC.  Excep tions usually prohibit the use of non-originating 
materials from certain sub-headings, headings or ch apters, and thus, contrary to what their name 
might suggest, reinforce the stringency of a CTC.
212  
 
                                                      
211 Adopted in 1988 and used by 190 countries and Customs Unions, the Harmonized System, which 
covers 98 per cent of world trade, comprises 96 chapters (two-digit level), 1'241 headings (four-digit level) and 
5’485 sub-headings (six-digit level).  Beyond the six-digit level, harmonization of national nomenclatures is 
incomplete.  It should be kept in mind that the breadth of an HS category at a given level of aggregation can vary considerably from one good to another.  See Brenton and Imagawa (2004). 
212 For instance, the EU’s Single List confers origin to biscuits made of imported materials from any 
chapter except chapter eleven, which includes fl our.  Similarly, under NAFTA’s ROOs, tomato ketchup, defined 
at the HS-6 level qualifies as originating if it is made of imported inputs of any other chapter (HS-2 level) 
except sub-heading HS 200290 (tomato paste). This means that, in order to qualify, ketchup may contain 
imported fresh tomatoes but not imported tomato paste. This requirement is said to have been included in order to protect Mexican tomato paste producers from Chilean  competition (on this, see Brenton and Imagawa 2004 or 
Palmeter 1997).  WT/COMTD/LDC/W/37 
 Page 139 
 
 
 Third are Value Content (VC) criteria.  VC crite ria specify a minimum fraction of the final good’s 
value that must be added by the exporting country.  VCs can be expr essed in one of three ways:  (i) a 
minimum Regional Value content (RVC);  (ii) a mi nimum difference between the value of the final 
good and the costs of imported inputs (import content, MC);  and (iii) a minimum Value of originating Parts (VP). 
 
Fourth and last are Technical requirement (TECH) criteria.  Typically used in Textiles & Clothing, TECH criteria require the final product to unde rgo certain particular manufacturing operations. 
 WT/COMTD/LDC/W/37 
Page 140  
 
 ANNEX V – Other Means to Tackle Constraints Affecting LDC Exports 
 
ANNEX V Table 1  
Textiles and clothing tariffs of developing co untries and imports (in US$ '000) from LDCs 
  TARIFFS OF DEVELOPING COUNTRIES  
AND IMPORTS (IN US$ '000) FROM SELECTED LDCsa  WORLD IMPORTS 
  CLOTHING  TEXTILES  BOTH  CLOTHING TEXTILES BOTH 
  Avg Tar StDev Imports  Avg Tar StDev Imports  Imports  Imports 
Total (avg/sum)  23.8 2.7 226,146  15.4 7.1 159,983  386,129  33,063 61,086 94,150 
               
Singapore     0.0 0.0 127,496  0.0 0.0 3,827  131,323  1,813 1,016 2,829 
India * 30.0 0.0 6,151  26.0 4.7 60,360  66,511  38 899 937 
South Africa * 19.2 14.0 21,490  14.3 10.2 8,198  29,689  249 556 805 
Turkey * 12.1 1.3 2,299  7.7 2.3 26,603  28,902  314 2,727 3,042 
Sri Lanka     9.7 1.7 20,576  3.5 6.6 2,434  23,010  109 1,227 1,337 
Mexico        35.0 0.0 13,011  19.6 6.1 8,030  21,040  3,292 5,473 8,765 
Mauritius     74.6 19.1 1,800  14.6 29.1 10,528  12,327  24 357 381 
Hong Kong, China  0.0 0.0 8,677  0.0 0.0 3,211  11,888  15,895 12,375 28,270 
Korea, Rep. of    12.7 1.2 7,423  9.0 2.0 4,093  11,516  2,124 3,070 5,194 
Taipei, Chinese  12.6 1.4 3,567  8.2 3.7 3,064  6,631  860 1,127 1,986 
Argentina     22.5 0.0 5,323  19.1 3.5 384  5,707  141 276 418 
China         19.6 1.8 2,271  13.6 5.2 3,135  5,406  1,351 13,284 14,634 
Indonesia     13.7 2.3 18  9.0 4.1 4,768  4,786  33 876 910 
Egypt    2  36.9 15.5 4,394  4,395  11 198 209 
Malaysia      15.5 7.9 1,031  14.5 9.5 2,045  3,076  173 904 1,078 
Brazil        21.5 0.0 1,529  18.0 3.7 1,408  2,937  166 868 1,034 
Pakistan      30.0 0.0 4  25.6 7.7 2,177  2,182  9 200 209 
Jordan        28.7 5.4 98  9.5 11.9 1,690  1,788  86 385 471 
Philippines   15.0 0.0 74  7.4 3.9 1,613  1,687  59 1,251 1,310 
Senegal       20.0 0.0 72  16.6 4.9 1,306  1,378  8 40 48 
Chile         6.0 0.0 851  6.0 0.0 264  1,115  500 366 866 
Malawi        24.9 1.0 34  18.8 8.9 1,040  1,074  4 32 36 
Thailand * 33.3 4.4 129  18.0 6.1 890  1,018  148 1,554 1,702 
Cyprus        11.9 1.3 932  7.1 2.5 82  1,014  201 100 301 
Tanzania      25.0 0.0 22  17.8 7.5 643  665  16 46 62 
Ghana         20.0 0.0 26  16.9 4.8 593  619  11 68 79 
Uruguay       21.5 0.0 81  17.8 3.8 454  535  42 57 99 
Costa Rica    13.8 1.5 4  7.9 4.0 524  528  257 177 435 
Côte d'Ivoire  20.0 0.0 46  16.6 4.9 398  444  7 33 40 
Togo          20.0 0.0 43  16.2 5.1 374  416  7 13 21 
Venezuela     20.0 0.0 342  17.8 3.2 7  349  268 206 474 
Rwanda        29.8 1.9 22  17.9 7.3 259  281  0 0 0 
Peru          20.0 0.5 122  16.3 4.8 155  277  90 194 284 
Oman          5.0 0.0 146  5.0 0.3 89  235  53 171 224 
Gabon         30.0 0.0 107  19.8 8.6 92  198  7 8 14 
Colombia      20.0 0.0 53  17.7 3.5 119  171  75 541 616 
El Salvador   24.8 2.3 31  15.7 7.2 136  166  640 396 1,036 
Cuba          22.7 7.5 98  15.1 5.8 31  129  102 88 190 
Mauritania    20.0 0.0 9  13.4 8.1 115  124  0 0 0 
Honduras      14.9 1.4 0  10.5 5.5 107  107  50 36 85 
Guatemala     17.8 1.6 32  11.3 5.5 65  97  85 128 213 
Bolivia       10.0 0.0 1  10.0 0.0 74  76  17 53 69 
Paraguay      21.8 1.4 3  17.8 4.1 55  57  22 27 49 
Jamaica       19.8 1.7 7  4.0 7.9 47  53  53 46 99 
Nicaragua     14.9 1.4 8  5.8 4.0 43  51  27 19 45 
Barbados      39.3 21.1 26  8.9 9.2 17  42  20 20 40 
Trinidad and Tobago  19.8 1.7 21  4.5 7.9 18  39  16 55 70 
Ecuador       20.0 0.0 26  17.6 3.8 10  36  64 129 193 
St. Lucia  24.8 1.9 10  6.8 8.1 3  13  0 0 0  WT/COMTD/LDC/W/37 
 Page 141 
 
 
 ANNEX V Table 1 (continued) 
  TARIFFS OF DEVELOPING COUNTRIES  
AND IMPORTS (IN US$ '000) FROM SELECTED LDCsa  WORLD IMPORTS 
  CLOTHING  TEXTILES  BOTH  CLOTHING TEXTILES BOTH 
  Avg Tar StDev Imports  Avg Tar StDev Imports  Imports  Imports 
               
Maldives      25.0 0.7 4  19.6 10.2 6  10  14 32 46 
Bahamas       24.2 6.8 0  27.2 8.8 6  6  46 29 75 
Panama        12.4 3.0 0  5.7 6.7 2  2  90 51 141 
Viet Nam      48.7 7.4   30.5 15.1   0  345 1,707 2,052 
Tunisia       42.4 3.7   33.6 12.7   0  527 1,454 1,981 
Saudi Arabia  5.2 1.3   6.7 4.2   0  932 1,000 1,933 
Morocco       49.7 3.0   37.4 9.2   0  258 1,515 1,773 
Bangladesh    30.9 5.0   26.3 9.7   0  149 1,307 1,456 
Kuwait  4.0 0.0   4.0 0.0   0  340 230 570 
Lebanon  5.0 0.0   2.4 5.8   0  240 204 443 
Syrian Arab Republic   67.3 18.5   30.9 17.9   0  1 336 337 
Iran, Islamic Rep. of  90.0 0.0   49.3 25.7   0  4 290 295 
Bahrain  5.0 0.0   5.0 0.4   0  54 174 228 
Qatar  4.0 0.0   4.0 0.0   0  64 112 176 
Brunei Darsm  0.0 0.0   0.7 2.0   0  32 135 168 
Botswana * 19.2 14.0   14.3 10.2   0  75 70 145 
Sudan         45.0 0.0   26.2 9.4   0  48 90 138 
Ethiopia      40.0 0.0   30.0 13.3   0  40 68 108 
Algeria       30.0 0.0   24.2 8.2   0  41 60 102 
Zimbabwe      47.5 25.0   19.3 9.2   0  14 68 82 
Nepal  24.5 2.9   12.7 5.9   0  11 67 78 
Swaziland * 19.2 14.0   14.3 10.2   0  24 54 78 
Benin  20.0 0.0   16.4 5.0   0  9 63 72 
Kenya  35.0 0.9   24.7 6.3   0  12 60 71 
Namibia * 19.2 14.0   14.3 10.2   0  46 22 68 
Nigeria       55.0 0.0   51.2 22.6   0  16 51 67 
Uganda        15.0 0.0   11.8 4.0   0  15 30 45 
Zambia        25.0 0.0   16.7 6.5   0  12 19 31 
Eritrea       25.0 0.0   8.8 5.6   0  15 16 30 
Papua New Guinea  29.9 1.1   3.8 8.4   0  11 20 30 
Cameroon      30.0 0.0   20.0 8.6   0  8 17 25 
Guyana        19.9 1.4   8.0 6.2   0  9 13 22 
Madagascar    16.9 3.5   11.0 9.3   0  5 16 21 
Niger         20.0 0.0   16.6 4.9   0  3 16 19 
Mozambique  25.0 0.0   18.3 8.9   0  5 13 18 
Suriname * 10.0 0.0   14.6 5.4   0  9 8 17 
Angola * 20.0 0.0   11.8 8.4   0  0 0 0 
Belize        19.9 1.4   7.9 5.9   0  0 0 0 
Bhutan        30.0 0.0   16.4 10.4   0  0 0 0 
Burkina Faso  20.0 0.0   16.4 4.9   0  0 0 0 
Burundi  40.0 0.0   34.3 11.6   0  0 0 0 
Cambodia      30.3 10.5   15.8 13.1   0  0 0 0 
Chad          30.0 0.0   20.0 8.6   0  0 0 0 Congo         30.0 0.0   20.0 8.6   0  0 0 0 Djibouti      33.0 0.0   32.9 1.8   0  0 0 0 
Dominica      19.7 1.7   6.7 6.7   0  0 0 0 
Dominican Republic  19.9 1.6   5.7 7.8   0  0 0 0 
Grenada       19.9 1.4   8.0 5.9   0  0 0 0 
Lesotho * 37.2 8.7   20.3 6.0   0  0 0 0 
Mali          20.0 0.0   16.4 5.0   0  0 0 0 
 WT/COMTD/LDC/W/37 
Page 142  
 
 ANNEX V Table 1 (continued)  
  TARIFFS OF DEVELOPING COUNTRIES  
AND IMPORTS (IN US$ '000) FROM SELECTED LDCsa  WORLD IMPORTS 
  CLOTHING  TEXTILES  BOTH  CLOTHING TEXTILES BOTH 
  Avg Tar StDev Imports  Avg Tar StDev Imports  Imports  Imports 
               
Myanmar       16.3 5.8   8.5 6.3   0  0 0 0 
Seychelles    43.0 11.4   11.4 15.4   0  0 0 0 
Vanuatu       15.2 2.6   10.0 6.7   0  0 0 0 
Yemen         15.0 0.0   10.5 4.9   0  0 0 0 
Antigua and 
Barbuda  19.9 1.4   8.0 6.0   0  0 0 0 Central African 
Republic 30.0 0.0   20.0 8.6   0  0 0 0 
Dem. Rep. of Congo 20.0 0.6   14.3 5.0   0  0 0 0 Equatorial Guinea 30.0 0.0   20.0 8.6   0  0 0 0 
Guinea-Bissau  20.0 0.0   16.4 5.0   0  0 0 0 
Lao PDR 10.0 0.0   8.9 3.2   0  0 0 0 
Libyan Arab Jama. 27.6 38.0   17.0 19.3   0  0 0 0 
St. Kitts and Nevis 24.4 2.6   7.2 7.9   0  0 0 0 
St. Vincent & the G. 19.9 1.4   8.0 5.9   0  0 0 0 
 
* Countries having NAV tariffs.  The averages  and deviations are calculated for AV tariffs. 
a See text for details. 
Source:  Tariffs: IDB/TARMAC databases.  Last year as is shown in "s ources" table.  Developing country imports from LDCs: IDB/TARMAC da tabases.  
Average of 2000-2003.  World Imports: WTO statistics database, average 2001-2003.  WT/COMTD/LDC/W/37 
 Page 143 
 
 
  
ANNEX V Table 2 
Sources of data and number of tari ff lines by sector and by duty nature 
    CLOTHING  TEXTILES  TOTAL 
 Last yeara Source  Ad Val No Ad V Total  Ad  Val No Ad V Total    
Algeria      2003 Tar  238  238  606  606  844 
Angola       2002 Tar  232 1 233  562 12 574  807 
Antigua and 
Barbuda 2001 Idb  295  295  628  628  923 
Argentina    2001 Idb  238  238  699  699  937 
Bahamas      2002 Idb  255 1 256  589 1 590  846 
Bahrain      2003 Idb  270 2 272  714 1 715  987 
Bangladesh   2003 Tar  262  262  656  656  918 
Barbados     2003 Idb  296  296  633 1 634  930 
Belize       2003 Tar  296  296  627  627  923 
Benin        2003 Idb  235  235  583  583  818 
Bhutan       2002 Tar  233  233  599  599  832 
Bolivia      2002 Idb  243  243  627  627  870 
Botswana     2002 Idb  40 256 296  406 1388 1794  2090 
Brazil       2002 Idb  240  240  690  690  930 
Brunei Darsm 2001 Idb  235  235  796  796  1031 
Burkina Faso 2003 Idb  233  233  591  591  824 
Burundi      2003 Idb  233  233  581  581  814 
Cambodia     2003 Tar  336  336  610  610  946 
Cameroon     2001 Idb  233  233  586 1 587  820 
Cent.Afr.Rep 2002 Tar  233  233  586 1 587  820 
Chad         2002 Tar  233  233  586 1 587  820 
Chile        2003 Idb  404  404  714  714  1118 
China        2003 Idb  293  293  752  752  1045 
China Taiwan 2003 Idb  360  360  803  803  1163 
Colombia     2003 Idb  243  243  634  634  877 
Congo        2002 Tar  233  233  586 1 587  820 
Dem. Rep. of Congo  2003 Tar  242 1 243  679  679  922 
Costa Rica   2002 Idb  256  256  782  782  1038 
Côte d'Ivoire 2002 Idb  226 13 239  591 2 593  832 
Cuba         2003 Idb  237  237  565  565  802 
Cyprus       2002 Idb  375  375  898  898  1273 
Djibouti     2002 Tar  237  237  507 45 552  789 
Dominica     2001 Idb  296  296  627  627  923 
Dominican Republic 2002 Idb  239  239  630  630  869 
Ecuador      2002 Idb  243  243  627  627  870 
Egypt        2002 Tar   630 630  620 48 668  1298 
El Salvador  2002 Idb  236  236  648  648  884 
Equatorial Guinea    2002 Tar  233  233  586 1 587  820 
Eritrea      2002 Tar  233  233  597  597  830 
Ethiopia     2002 Tar  233  233  610  610  843 
Gabon        2000 Idb  233  233  587  587  820 
Ghana        2002 Idb  233  233  592  592  825 
Grenada      2000 Idb  295  295  627  627  922 
Guatemala    2003 Idb  238  238  632  632  870 
Guinea-Bissau 2003 Tar  235  235  583  583  818 
Guyana       2002 Idb  297  297  627  627  924 
Honduras     2003 Idb  238  238  632  632  870 
India        2002 Idb  123 112 235  403 161 564  799 
Indonesia    2002 Idb  407  407  766  766  1173 
Iran, Islamic Rep. of 2003 Tar  235  235  564  564  799 
Jamaica      2001 Idb  296  296  626 1 627  923 
Jordan       2003 Idb  245  245  695  695  940 
Kenya        2001 Idb  234  234  604  604  838 
Korea, Rep. of 2003 Idb  333  333  962  962  1295 WT/COMTD/LDC/W/37 
Page 144  
 
  
ANNEX V Table 2 (continued)  
    CLOTHING  TEXTILES  TOTAL 
 Last yeara Source  Ad Val No Ad V Total  Ad  Val No Ad V Total    
             
Kuwait       2002 Tar  233  233  552  552  785 
Lao PDR 2001 Tar  233  233  552  552  785 
Lebanon      2002 Tar  240  240  582  582  822 
Lesotho      2001 Tar  295  295  1733 104 1837  2132 
Libyan Ara Jama.  2002 Tar  298  298  653 2 655  953 
Madagascar   2002 Idb  288  288  756 1 757  1045 
Malawi       2003 Idb  236  236  580  580  816 
Malaysia     2001 Idb  249  249  877 1 878  1127 
Maldives     2002 Idb  234  234  581  581  815 
Mali         2003 Tar  235  235  583  583  818 
Mauritania   2001 Idb  233  233  632  632  865 
Mauritius    2002 Idb  249  249  587 4 591  840 
Mexico       2003 Idb  355  355  846  846  1201 
Morocco      2002 Idb  553  553  2805  2805  3358 
Mozambique   2003 Tar  235  235  569  569  804 
Myanmar      2002 Idb  260  260  604  604  864 
Namibia      2002 Idb  40 256 296  406 1388 1794  2090 
Nepal        2003 Idb  239  239  573  573  812 
Nicaragua    2003 Idb  238  238  643  643  881 
Niger        2002 Idb  233  233  592 1 593  826 
Nigeria      2002 Tar  233  233  573 1 574  807 
Oman         2001 Idb  265  265  744  744  1009 
Pakistan     2001 Idb  233  233  584  584  817 
Panama       2002 Idb  482  482  796  796  1278 
Papua New Guinea 2003 Tar  248  248  575 1 576  824 
Paraguay     2003 Idb  240  240  690  690  930 
Peru         2003 Idb  279  279  637  637  916 
Philippines  2002 Idb  233  233  593  593  826 
Qatar        2002 Tar  233  233  552  552  785 
Rwanda       2003 Idb  238  238  646 1 647  885 
Saudi Arabia 2003 Tar  273  273  708  708  981 
Senegal      2002 Idb  233  233  593  593  826 
Seychelles   2001 Tar  230 3 233  552  552  785 
Singapore    2003 Idb  337  337  593  593  930 
South Africa 2002 Idb  40 256 296  406 1388 1794  2090 
Sri Lanka    2001 Idb  244  244  596  596  840 
St. Kitts and Nevis 2002 Idb  332  332  626 1 627  959 
St. Lucia     2002 Idb  296  296  628  628  924 
St. Vincent & the G. 2003 Tar  296  296  627  627  923 
Sudan        2002 Tar  238  238  586  586  824 
Suriname     2000 Tar  1 295 296  23 604 627  923 
Swaziland    2002 Idb  40 256 296  406 1388 1794  2090 
Syria        2002 Tar  372  372  1503 1 1504  1876 
Tanzania     2003 Idb  236  236  597  597  833 
Thailand     2003 Tar  307  307  1487  1487  1794 
Togo         2002 Idb  233  233  591  591  824 
Trinidad and Tobago 2003 Tar  296  296  629  629  925 
Tunisia      2003 Idb  550  550  1272  1272  1822 
Turkey       2001 Idb  990  990  2478 5 2483  3473 
Uganda       2001 Idb  233  233  574  574  807 
Uruguay      2002 Idb  276  276  816  816  1092 
Vanuatu      2002 Tar  234  234  574  574  808 
Venezuela    2003 Idb  241  241  645  645  886 
Viet Nam     2003 Tar  394  394  760  760  1154  WT/COMTD/LDC/W/37 
 Page 145 
 
 
 ANNEX V Table 2 (continued)  
Yemen        2000 Tar  233  233  626  626  859 
Zambia       2001 Idb  238  238  657  657  895 
Zimbabwe     2002 Idb  4 232 236  652 42 694  930 
             
a Last year available in IDB-TARMAC databases.  WT/COMTD/LDC/W/37 
Page 146  
 
 ANNEX V Table 3 
Main inputs required in the textiles industr y (Product Classification according to HS) 
 
Product group Product name 
 
3201 Vegetable tanning extracts, tannins, salts and derivs 3202 Inorganic, synthetic organic tanning substances 
3203 Colouring matter of vegetable or animal origin  
3204 Synthetic organic colouring matter 3205 Colour lakes and prep arations based thereon 
3206 Colouring matter nes, inorganic luminophores  
3207 Ceramic, glass pigments, opacifiers, colours, enamels 
3208 Polymer based paints, varn ishes in non-aqueous medium 
3209 Polymer based paints, va rnishes in aqueous medium 
3210 Paints and varnishes nes, water pigments for leather 3215 Ink 
5001 Silk-worm cocoons suitable for reeling 5002 Raw silk (not thrown) 
5003 Silk waste  5004 Silk yarn not for retail 
5005 Yarn spun from silk waste, not put up for retail  
5006 Silk yarn retail, silk worm gut 5101 Wool, not carded or combed 
5102 Fine or coarse animal hair, not carded or combed  
5103 Waste of wool or animal  hair, except garneted stock 
5104 Garnetted stock of w ool or of animal hair 
5105 Wool and animal hair, carded or combed 
5106 Yarn of carded wool, not retail 5107 Yarn of combed wool, not retail 
5108 Yarn of fine animal hair, not retail 
5109 Yarn of wool or of fine animal hair, retail 
5110 Yarn of coarse animal hair or of horsehair  
5201 Cotton, not carded or combed 
5202 Cotton waste (including yarn  waste and garnetted stock) 
5203 Cotton, carded or combed 5204 Cotton sewing thread 
5205 Cotton yarn not sewing thread >85% cotton, not retail 
5206 Cotton yarn (except sewing thread) <85% cotton, not retail 5207 Cotton yarn (except sewing thread), retail  
5301 Flax, raw or processed, not spun, flax tow and waste  
5302 True hemp, raw or processed but not spun 5303 Jute, other bast fibres, raw or processed, not spun  
5304 Sisal, Agave, raw, processed, not spun, tow and waste 
5305 Coconut, abaca, ramie, veg fi bres nes, not spun, waste  
5306 Flax yarn 
5307 Yarn of jute, bast fibre except flax, true hemp  
5308 Yarn of other vegetable textiles fibres, paper yarn 5402 Synthetic filament yarn (not sewing thread), not retail 
5403 Artificial filament yarn (ex cept sewing thread), not retail 
5404 Synthetic monofilament >67 dt ex <1mm, strip, straw<5mm wid 
5405 Artificial monofilament >67 dtex t<1mm, strip, straws t<5mm  
5406 Man-made filament ya rn (except sewing), retail 
5501 Synthetic filament tow 5502 Artificial filament tow 
5503 Synthetic staple fibres, not processed 
5504 Artificial staple fibres, not carded or combed 5505 Waste, noils, garnetted stock of manmade fibres 
5506 Synthetic staple fibres, ready for spinning 
5507 Artificial staple fibres, carded or combed, not spun 5509 Yarn (not sewing thread), synt hetic staple fibre, not retail 
5510 Yarn (not sewing thread), artif icial staple fibre, not retail 
5511 Yarn (other than sewing thread),  of man-made staple fibres, retail 
8445 Machines for processing textiles fibres  
8446 Weaving machines (looms) 
8447 Machines for knitting, lace, embroidery, tufting, etc 
8448 Auxiliary machinery and parts for textiles machinery 8449 Machinery for making felt, nonwovens, including hats  
8451 Machinery nes, to clean , iron, impregnate textiles 
  WT/COMTD/LDC/W/37 
 Page 147 
 
 
 ANNEX V Table 4 
Main inputs required in the clothing industry (4-digit HS Classification) 
 
Product Group Product name 
 
5007 Woven fabric of silk or of silk waste 5110 Yarn of coarse animal hair or of horsehair  
5111 Woven fabric of carded w ool or fine animal hair 
5112 Woven fabric of combed wool or of combed fine animal hair 
5113 Woven fabric of coarse  animal hair, horse hair 
5208 Woven cotton fabric, >85 % cotton, <200g/m2 
5209 Woven cotton nes, >85 % cotton, >200g/m2 
5210 Woven cotton, <85 % cotton with manmade fibre, <200g/m2 5211 Woven fabric, <85 % cotton with manmade fibre, >200g/m2 
5212 Woven cotton fabric, nes 
5309 Woven fibres of flax 5310 Woven fabric of jute or  of bast fibres of 53.03 
5311 Woven fabrics of other vegetable fibre or paper 
5401 Sewing thread of man-made filaments 5407 Woven synthetic filament  yarn, monofilament >67dtex 
5408 Woven fabric of artificial f ilament yarn, monofilament yarn 
5508 Sewing thread of man-made staple fibres 5512 Woven fabric with >85 % synthetic stable fibres 
5513 Woven fabric with >85 % synt hetic + cotton, <170g/m2 unbl/blchd 
5514 Woven fabric with >85 % synthe tic + cotton, >170g/m2 unbl/blchd  
5515 Woven fabric of synt hetic staple fibres, nes 
5516 Woven fabric <85 % artificial staple fibre 
6001 Pile fabrics, including l ong pile fabrics and terry fa brics, knitted or crocheted 
6002 Knitted or crochete d fabrics of a width not exceeding 30 cm 
6003 (HS 2002-) Knitted or crocheted fabr ics of a width not exceeding 30 cm 
6004 (HS 2002-) Knitted or crocheted fabr ics of a width not exceeding 30 cm  
6005 (HS 2002-) Warp knit fabrics (including those made on galloon knitting machines) 
6006 (HS 2002-) Other knitted or crocheted fabrics 
7319 Sewing needles, knitting needles,  etc, hand use, iron or steel  
8444 Machines to extrude, draw , cut manmade textiles fibres  
8452 Sewing machines (not book sewing), related furniture WT/COMTD/LDC/W/37 
Page 148  
 
  
ANNEX V Table 5 
Average tariffs on main inputs required in the textil es industry (Product Classification according to HS) 
 
 Bangladesh  Cambodia Lesotho Madagascar Malawi Maldives Nepal Senegal Tanzania 
HS 2004 2003 2001 2001 2001 2003 2004 2004 2003 
          
3201 8.75   0   7.5 5 0 
3202 7.5 7  0 5  5 7.5 0 
3203 7.5 7  0 0 25 15 5 0 
3204 7.5 7  0 5  5 5.5 0 
3205 7.5 7 0 0  25 15 10 0 
3206 7.5 7  0 5  15 5.71 0 
3207 7.5 7  0 12.5 25 15 5 0 
3208 19.17 35  5 25 25 40 20 22.5 
3209 21.25 35  5 25 25 32.5 20 25 
3210 25 35 10 0 25  40 20 17.5 
3215 22.5 7 0 0 11.67 11.67 10 13.33 15 
5001 0 7        
5002 22.5   0   5   
5003 15        0 
5004 22.5   0   5  10 
5005 22.5   0   5  10 
5006 22.5  0 0   5   
5101 7.5   0 10  0  0 
5102    0   5  0 
5103     10  5  0 
5104 15   0      
5105 11.25   0   5 5  
5106 7.5 7  0   5  10 
5107 7.5 7  0   5   
5108    0   5   
5109 7.5   0 25 15 5 20 10 
5110 22.5   0      
5201 0 7   10  0 5 0 
5202 8.75 7  0 5  0 5 0 
5203 0 7  0 5 15 0 5 0 
5204 15 7 20 0 15 15 5 10 25 
5205 15 7  0 5  5 10  
5206 7.5 7  0 5  5 10 10 
5207 7.5 7  0 25  5 12.5 10 
5301 22.5      5 5 0 
5302    0 5   5 0 
5303 22.5 7  0 5 25 5 5 0 
5304 22.5   0 5  5 5 0 
5305 22.5      5 5 0 
5306 22.5 7  0   5   
5307 22.5      10  10 
5308 22.5 7  0  25 10 10 10 
5402 15.7 7 15 0 5 25 10 10 10 
5403 15 7  0 5  10 9.17 10 
5404 30 7  0 10   10 10 
5405 30    10  10 10 10 
5406 15 7 5 0 10  10 20 10 
5501 7.5 7  0 5  5 10 0 
5502 7.5 7  0   5  0 
5503 0 7  0   5 10 0 
5504 0 7  0   5  0 
5505 0   0   5 10 0 
5506 0 7  0   5 10 0  WT/COMTD/LDC/W/37 
 Page 149 
 
 
  
ANNEX V Table 5 (continued)  
 Bangladesh  Cambodia Lesotho Madagascar Malawi Maldives Nepal Senegal Tanzania 
HS 2004 2003 2001 2001 2001 2003 2004 2004 2003 
          
5507 0      5 10 0 
5509 15 7  0   10 10 10 
5510 15 7  0 5  10 10 10 
5511 15 7  0 25  10 20 10 
8445 0 15 0 5 0  5 5 0 
8446 0 15  5 0  5  0 
8447 0 15 0 5 0  5 5 0 
8448 8.44 15 0 1.67 0 20 5 5 9.09 
8449 7.5 15     5 5 0 
8451 0 15 0.71 4.38 3.75 20 5 6.88 1.25 
Source: TRAINS. 
 
 
 
 WT/COMTD/LDC/W/37 
Page 150  
 
  
ANNEX V Table 6 
Main inputs required in the clothing industry (4-digit HS Classification) 
 
 Bangladesh  Cambodia Lesotho Madagascar Malawi Maldives Nepal Senegal Tanzania 
HS 2004 2003 2001 2001 2001 2003 2004 2004 2003 
          
5007 30 7 0 10 25 15 15 20 15 
5110 22.5 7 0 0 25 15 5 10 10 
5111 30 7 22 5 25 15 15 20 15 
5112 30 7 22 5 25 15 15 20 15 
5113 30 7 22 5 25 15 15 20 15 
5208 30 7 21.81 5 25 15 5 18 19.5 
5209 30 7 21.92 5 25 15 5 18.13 20.31 
5210 30 7 21.83 5 25 15 15 18 20 
5211 30 7 21.92 4.92 25 15 15 18.13 20.31 
5212 30 7 21.83 4.83 25 15 5 18 20 
5309 30 7 18 3.75 5 25 15 20 15 
5310 30 7 0 10 5 25 15 20 15 
5311 30 7 0 3.57 5 25 15 20 15 
5401 22.5 7 16.25 0 5 15 10 12.5 25 
5407 30 7 22.32 0 25 15 15 20 21 
5408 30 7 21.78 0 25 15 15 20 21.67 
5508 22.5 7 20 0 5 15 10 10 25 
5512 30 7 22 0 25 15 15 20 15 
5513 30 7 22 0 25 15 15 20 22.5 
5514 30 7 22 0 25 15 15 20 22.5 
5515 30 7 22 0 25 15 15 20 25 
5516 30 7 22 0 25 15 15 20 22.5 
6001 30 35 22 20 25 25 15 20 15 
6002 30 7 22.76 20 25 25 15 20 25 
6003 30     25 15 20  
6004 30     25 15 20  
6005 30     25 15 20  
6006 30     25 15 20  
7319 30 7 0 5 25 25 10 20 25 
8444 0 15 0 5 0 20 5 5 0 
8452 11.25 13.67 0 4.17 0.83 20 5 5 9.17 
Source : TRAINS. 
 
 
  WT/COMTD/LDC/W/37 
 Page 151 
 
 
  
    
 
    
 
    
 
     
 
  
STATISTICAL APPENDIX 
  WT/COMTD/LDC/W/37 
Page 152  
 
 STATISTICAL APPENDIX Table 1 
ATC definition according to HS classification (6 digit)  
 
Textiles 
 
300590 392112 392113 392190  
 
420212 420222 420232 420292  
 500400 500500 500600 500710 500720 500790 510510 510521 510529 510530 510531 510539 510610 510620 510710 510720 510810 510820 510910 510990 511000 511111 511119 511120 511130 511190 511211 511219 511220 511230 511290 511300 520411 520419 
520420 520511 520512 520513 520514 520515 520521 520522 520523 520524 520526 520527 520528 520531 520532 520533 520534 
520535 520541 520542 520543 520544 520546 520547 520548 520611 520612 520613 520614 520615 520621 520622 520623 520624 520625 520631 520632 520633 520634 520635 520641 520642 520643 520644 520645 520710 520790 520811 520812 520813 520819 
520821 520822 520823 520829 520831 520832 520833 520839 520841 520842 520843 520849 520851 520852 520853 520859 520911 
520912 520919 520921 520922 520929 520931 520932 520939 520941 520942 520943 520949 520951 520952 520959 521011 521012 521019 521021 521022 521029 521031 521032 521039 521041 521042 521049 521051 521052 521059 521111 521112 521119 521121 
521122 521129 521131 521132 521139 521141 521142 521143 521149 521151 521152 521159 521211 521212 521213 521214 521215 
521221 521222 521223 521224 521225 530610 530620 530710 530720 530820 530890 530911 530919 530921 530929 531010 531090 531100 540110 540120 540210 540220 540231 540232 540233 540239 540241 540242 540243 540249 540251 540252 540259 540261 
540262 540269 540310 540320 540331 540332 540333 540339 540341 540342 540349 540410 540490 540500 540610 540620 540710 
540720 540730 540741 540742 540743 540744 540751 540752 540753 540754 540761 540769 540771 540772 540773 540774 540781 540782 540783 540784 540791 540792 540793 540794 540810 540821 540822 540823 540824 540831 540832 540833 540834 550110 
550120 550130 
550190 550200 550310 550320 550330 550340 550390 550410 550490 550510 550520 550610 550620 550630 550690 550700 550810 550820 550911 550912 550921 550922 550931 550932 550941 550942 550951 550952 550953 550959 550961 550962 550969 550991 
550992 550999 551011 551012 551020 551030 551090 551110 551120 551130 551211 551219 551221 551229 551291 551299 551311 
551312 551313 551319 551321 551322 551323 551329 551331 551332 551333 551339 551341 551342 551343 551349 551411 551412 551413 551419 551421 551422 551423 551429 551431 551432 551433 551439 551441 551442 551443 551449 551511 551512 551513 
551519 551521 551522 551529 551591 551592 551599 551611 551612 551613 551614 551621 551622 551623 551624 551631 551632 
551633 551634 551641 551642 551643 551644 551691 551692 551693 551694 560110 560121 560122 560129 560130 560210 560221 560229 560290 560311 560312 560313 560314 560391 560392 560393 560394 560410 560420 560490 560500 560600 560710 560721 
560729 560730 560741 560749 560750 560790 560811 560819 560890 560900 570110 570190 570210 570220 570231 570232 570239 
570241 570242 570249 570251 570252 570259 570291 570292 570299 570310 570320 570330 570390 570410 570490 570500 580110 580121 580122 580123 580124 580125 580126 580131 580132 580133 580134 580135 580136 580190 580211 580219 580220 580230 580310 580390 580410 580421 580429 580430 580500 580610 580620 580631 580632 580639 580640 580710 580790 580810 580890 
580900 581010 581091 581092 581099 581100 590110 590190 590210 590220 590290 590310 590320 590390 590410 590490 590491 
590492 590500 590610 590691 590699 590700 590800 590900 591000 591110 591120 591131 591132 591140 591190   
600110 600121 600122 600129 600191 600192 600199 600210 600220 600230 600240 600241 600242 600243 600249 600290 600291 
600292 600293 600299 630110 630120 630130 630140 630190 630210 630221 630222 630229 630231 630232 630239 630240 630251 630252 630253 630259 630260 630291 630292 630293 630299 630311 630312 630319 630391 630392 630399 630411 630419 630491 
630492 630493 630499 630510 630520 630532 630533 630539 630590 630611 630612 630619 630621 630622 630629 630631 630639 
630641 630649 630691 630699 630710 630720 630790 640520 640610 640699 650100 650200 650400 650590 660110 660191 660199   
701911 701912 701919 701940  
 870821 880400  
 
911390 940490 950291 961210  
Clothing 
 
610110 610120 610130 610190 610210 610220 610230 610290 610311 610312 610319 610321 610322 610323 610329 610331 610332 
610333 610339 610341 610342 610343 610349 610411 610412 610413 610419 610421 610422 610423 610429 610431 610432 610433 
610439 610441 610442 610443 610444 610449 610451 610452 610453 610459 610461 610462 610463 610469 610510 610520 610590 610610 610620 610690 610711 610712 610719 610721 610722 610729 610791 610792 610799 610811 610819 610821 610822 610829 
610831 610832 610839 610891 610892 610899 610910 610990 611010 611011 611012 611019 611020 611030 611090 611110 611120 
611130 611190 611211 611212 611219 611220 611231 611239 611241 611249 611300 611410 611420 611430 611490 611511 611512 611519 611520 611591 611592 611593 611599 611610 611691 611692 611693 611699 611710 611720 611780 611790 620111 620112 620113 620119 620191 620192 620193 620199 620211 620212 620213 620219 620291 620292 620293 620299 620311 620312 620319 
620321 620322 620323 620329 620331 620332 620333 620339 620341 620342 620343 620349 620411 620412 620413 620419 620421 
620422 620431 620432 620433 620439 620441 620442 620443 620444 620449 620451 620452 620453 620459 620461 620462 620463 620469 620510 620520 620530 620590 620610 620620 620630 620640 620690 620711 620719 620721 620722 620729 620791 620792 
620799 620811 620819 620821 620822 620829 620891 620892 620899 620910 620920 620930 620990 621010 621020 621030 621040 
621050 621111 621112 621120 621131 621132 621133 621139 621141 621142 621143 621149 621210 621220 621230 621290 621310 621320 621390 621410 621420 621430 621440 621490 621510 621520 621590 621600 621710 621790 
 
Note: Full descriptions of the commodity h eadings of H1 and H0 are given in publica tions of the series "Harmonized Commodity 
Description and Coding System" issued by the World Customs Organi zation.  To identify the appropriate HS code for many commodit ies, 
users can refer to the "HS Commodity Data Base" a CD-ROM product issued by the World Customs Organization.  Furthermore, nation al 
statistical offices may have descriptions of the HS headings ava ilable, like the US Bureau of the Census at their web pages for  foreign trade.   
  WT/COMTD/LDC/W/37
 Page 153STATISTICAL APPENDIX Table 2 
Trade in ATC textiles and clothing by main partners, in US$ '000 and percentages, for latest year available   
              
Bangladesh, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 351566 27.0  EU (15) 115192 32.3  Hong Kong, China 44917 44.2  EU (15) 2082152 57.4 
Hong Kong, China 277591 21.3  United States 51310 14.4  China 19646 19.3  United States 1368207 37.7 
Taipei, Chinese 201043 15.4  Iran, Islamic Rep. of 39597 11.1  Taipei, Chinese 9555 9.4  Canada 90789 2.5 
India 157317 12.1  Turkey 26648 7.5  Korea, Rep. of 9077 8.9  Switzerland 23209 0.6 Korea, Rep. of 107536 8.2  Sudan 22449 6.3  Singapore 5337 5.3  Norway 16338 0.5 Indonesia 46882 3.6  Syria 17621 4.9  EU (15) 4689 4.6  Mexico 10569 0.3 Thailand 37027 2.8  Australia 9602 2.7  India 2558 2.5  Hong Kong, China 7331 0.2 
Pakistan 26557 2.0  Canada 9332 2. 6  Indonesia 1176 1.2  Japan 5683 0.2 
Malaysia 24481 1.9  Japan 7227 2.0  Malaysia 703 0.7  India 4120 0.1 
Singapore 17057 1.3  Indonesia 6395 1.8  Un ited States 654 0.6  Hungary 1852 0.1 
               World 1304276 100.0  World 356208 100.0  World 101603 100.0  World 3629392 100.0                
Benin, 2002               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 27201 42.7  EU (15) 6662 58.9  Free Zones 2294 22.9  EU (15) 117 45.8 
EU (15) 12066 19.0  Nigeria 2210 19.6  Thailand 2270 22.6  Nigeria 29 11.3 
Côte d'Ivoire 7365 11.6  Senegal 624 5.5  China 2046 20.4  Côte d'Ivoire 20 7.8 
India 4745 7.5  Ghana 567 5.0  EU (15) 1266 12.6  Cameroon 16 6.4 Ghana 4656 7.3  Burkina Faso 356 3.2  Hong Kong, China 944 9.4  Kenya 11 4.2 
Free Zones 1854 2.9  Côte d'Ivoire 249 2.2  Korea, Rep. of 224 2.2  Angola 10 4.1 
Taipei, Chinese 1237 1.9  Congo 216 1.9  Singapore 218 2.2  Niger 10 3.7 Thailand 891 1.4  Free Zones 210 1.9  United States 166 1.7  Guatemala 10 3.7 Hong Kong, China 650 1.0  China 91 0.8  India 152 1.5  Free Zones 6 2.5 Singapore 583 0.9  Cameroon 46 0.4  Côte d'Ivoire 129 1.3  Chile 6 2.3                
World 63666 100.0  World 11301 100.0  World 10027 100.0  World 256 100.0  
 WT/COMTD/LDC/W/37 
Page 154  
STATISTICAL APPENDIX Table 2 (continued)  
              
Burkina Faso, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Côte d'Ivoire 2997 24.7  Côte d'Ivoire 3951 46.2  EU (15) 749 38.0  EU (15) 25 74.7 
EU (15) 2604 21.5  EU (15) 2661 31.1  China 564 28.6  Togo 2 6.4 
China 1993 16.4  Switzerland 771 9.0  Côte d'Ivoire 353 17.9  United States 2 5.8 
United States 1446 11.9  Dem. Rep. of Congo 420 4.9  India 110 5.6  Côte d'Ivoire 2 5.7 
India 600 4.9  Algeria 254 3.0  United States 54 2.7  Niger 1 4.0 Ghana 592 4.9  Singapore 152 1.8  Ghana 23 1.2  Equatorial Guinea 1 2.3 
Benin 326 2.7  Togo 89 1.0  Hong Kong,  China 20 1.0  Switzerland 0 1.1 
Viet Nam 202 1.7  Niger 51 0.6  Pakistan 12 0.6  - - - Nigeria 200 1.6  Japan 44 0.5  Morocco 11 0.5  - - - Syria 168 1.4  Senegal 44 0.5  Mali 10 0.5  - - -                World 12132 100.0  World 8546 100.0  World 1971 100.0  World 34 100.0 
               
Burundi, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
EU (15) 873 24.1  Dem. Rep. of Congo 8 71.1  Hong Kong, China 139 21.0  Dem. Rep. of Congo 11 96.2 
Thailand 675 18.7  Rwanda 3 28.9  EU (15) 104 15.7  Angola 0 3.8 
Kenya 308 8.5  - - -  Untd Arab Em 102 15.3  - - - 
Uganda 292 8.1  - - -  Thailand 80 12.0  - - - Untd Arab Em 222 6.1  - - -  Indonesia 79 11.9  - - - Korea, Rep. of 206 5.7  - - -  Kenya 54 8.2  - - - Hong Kong, China 181 5.0  - - -  China 34 5.1  - - - United States 173 4.8  - - -  Nigeria 33 5.0  - - - 
India 169 4.7  - - -  Korea, Rep. of 24 3.6  - - - 
China 168 4.7  - - -  India 7 1.0  - - -                World 3615 100.0  World 11 100.0  World 665 100.0  World 12 100.0  
  WT/COMTD/LDC/W/37
 Page 155 
STATISTICAL APPENDIX Table 2 (continued)  
              
Cambodia, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Hong Kong, China 304225 42.4  United States 8866 43.0  Hong Kong, China 31941 73.1  United States 1115843 69.7 
China 151010 21.0  China 4154 20.1  China 8680 19.9  Canada 59536 3.7 
Taipei, Chinese 128813 17.9  Hong Kong, China 2607 12.6  Taipei, Chinese 856 2.0  Japan 6536 0.4 Malaysia 29259 4.1  Philippines 1629 7.9  Malaysia 797 1.8  EU (15) 4614 0.3 
Korea, Rep. of 28021 3.9  Viet Nam 1037 5.0  Singapore 475 1.1  Mexico 1778 0.1 Viet Nam 14154 2.0  Taipei, Chinese 585 2.8  United States 285 0.7  Singapore 1363 0.1 
Indonesia 12670 1.8  EU (15) 509 2.5  Viet Nam 233 0.5  Malaysia 919 0.1 
Singapore 12496 1.7  Singapore 390 1.9  EU (15) 123 0.3  Hong Kong, China 597 0.0 Thailand 9090 1.3  Indonesia 266 1.3  Thailand 92 0.2  Untd Arab Em 465 0.0 EU (15) 7810 1.1  Sri Lanka  159 0.8  Korea, Rep. of  83 0.2  Philippines 206 0.0 
               World 717685 100.0  World 20630 100.0  World 43692 100.0  World 1600360 100.0 
               
Central African Republic, 2003           
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Chad 529 47.7  Caribbean n.e.s. 86 38.9  EU (15) 36 29.4  EU (15) 12 94.4 
Cameroon 203 18.4  EU (15) 66 29.8  Lebanon 23 18.5  United States 0 3.2 
EU (15) 196 17.7  Côte d'Ivoire 17 7.5  Togo 21 16.9  Togo 0 2.4 
Nigeria 37 3.3  China 15 6.6  Cameroon 19 15.3  - - - China 35 3.2  Togo 11 5.0  Thailand 8 6.8  - - - Lebanon 34 3.0  Hong Kong, China 11 4.9  Senegal 6 5.1  - - - Togo 19 1.7  Guinea 2 0.9  Switzerland 6 4.9  - - - Switzerland 16 1.5  Cameroon 0 0.0  Hong Kong, China 2 1.5  - - - 
Tanzania 6 0.6  Nigeria 0 0.0  India 1 1.2  - - - 
Japan 0 0.0  - - -  Japan 0 0.2  - - - 
World 1108 100.0  World 221 100.0  World 122 100.0  World 12 100.0 
Note: Clothing export data refer to 2002.            
 WT/COMTD/LDC/W/37 
Page 156  
STATISTICAL APPENDIX Table 2 (continued)  
              
Gambia, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
EU (15) 2443 39.9  Sierra Leone 335 70.0  EU (15) 324 33.7  EU (15) 11 52.2 
China 2141 35.0  Senegal 100 20.9  Hong Kong,  China 316 32.9  Sierra Leone 9 41.2 
India 410 6.7  EU (15) 12 2.6  United States 116 12.1  Mauritania 1 5.5 United States 340 5.5  Nigeria 11 2.3  China 82 8.6  United States 0 1.1 Hong Kong, China 299 4.9  United Stat es 11 2.2  Thailand 30 3.1  - - - 
Taipei, Chinese 161 2.6  Guinea 5 1.1  Cyprus 27 2.8  - - - 
Korea, Rep. of 95 1.6  Pakistan 4 0.8  South Africa 13 1.3  - - - 
Thailand 49 0.8  Mauritania 0 0.1  Untd Arab Em 8 0.9  - - - Pakistan 41 0.7  Switzerland 0 0.0  Singapore 8 0.8  - - - Untd Arab Em 40 0.6  - - -  Taipei, Chinese 5 0.5  - - -                World 6121 100.0  World 478 100.0  World 961 100.0  World 21 100.0 
               
Guinea, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 2997 22.2  Côte d'Ivoire 8 100.0  EU (15) 2199 22.7  EU (15) 101 68.7 
India 2809 20.8  - - -  Morocco 1753 18.1  Mali 20 13.3 
Hong Kong, China 2533 18.8  - - -  Thailand 1159 12.0  Cameroon 8 5.6 
EU (15) 2069 15.3  - - -  Hong Kong, China 1012 10.5  Côte d'Ivoire 7 4.4 Untd Arab Em 588 4.4  - - -  Indonesia 928 9.6  Dem. Rep. of Congo 3 2.2 Thailand 452 3.3  - - -  Untd Arab Em 476 4.9  Mauritania 3 2.1 Morocco 391 2.9  - - -  India 407 4.2  Canada 3 1.8 Senegal 246 1.8  - - -  China 379 3.9  Liberia 1 0.7 
United States 229 1.7  - - -  Australia 369 3.8  Senegal 1 0.7 
Singapore 212 1.6  - - -  Saudi Arabia 255 2.6  Benin 0 0.3                World 13485 100.0  World 8 100.0  World 9672 100.0  World 147 100.0  
  WT/COMTD/LDC/W/37
 Page 157 
STATISTICAL APPENDIX Table 2 (continued)  
              
Lesotho, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Hong Kong, China 31393 29.2  South Africa 10205 42.7  South Africa 13988 77.4  United States 149856 64.1 
South Africa 26814 25.0  United States 9206 38.5  China 1604 8.9  South Africa 41495 17.8 
China 16671 15.5  Canada 4471 18.7  Unite d States 1022 5.7  Canada 20144 8.6 
Taipei, Chinese 10553 9.8  Singapore 1 0.0  Taipei, Chinese 813 4.5  Taipei, Chinese 13572 5.8 Turkey 7190 6.7  Taipei, Chinese 1 0.0  Singapore 582 3.2  EU (15) 8646 3.7 Singapore 5661 5.3  Hong Kong, China 0 0.0  Hong Kong, China 49 0.3  Japan 12 0.0 
Malaysia 3495 3.3  - - -  Thailand 12 0.1  Singapore 0 0.0 
United States 2047 1.9  - - -  Korea, Rep. of 7 0.0  Hong Kong, China 0 0.0 India 1306 1.2  - - -  Indonesia 4 0.0  - - - Pakistan 1154 1.1  - - -  Australia 0 0.0  - - -                World 107349 100.0  World 23884 100.0  World 18082 100.0  World 233727 100.0 
               
Madagascar, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 97689 44.6  EU (15) 5179 41.2  China 4726 58.4  United States 120819 51.2 
EU (15) 38569 17.6  Maur itius 633 5.0  EU (15) 1300 16.1  EU (15) 98014 41.5 
Taipei, Chinese 18637 8.5  Lesotho 517 4.1  Mauritius 546 6.7  South Africa 12107 5.1 
Hong Kong, China 16079 7.3  Hong Kong, Chin a 151 1.2  Thailand 401 5.0  Canada 1225 0.5 
Free Zones 13681 6.3  South Africa 73 0. 6  Indonesia 266 3.3  Mauritius 967 0.4 
Mauritius 12213 5.6  Liberia 19 0.2  United States 215 2.7  Kor ea, Rep. of 938 0.4 
India 4630 2.1  United States 16 0.1  Hong Kong, China 123 1.5  Taipei, Chinese 302 0.1 Sri Lanka 3555 1.6  Comoros 15 0.1  Singapore 91 1.1  Comoros 274 0.1 
Pakistan 2910 1.3  Saudi Arabia 14 0.1  Free Zones 88 1.1  Switzerland 238 0.1 
Singapore 2046 0.9  Sri Lanka 13 0.1  India 78 1.0  Japan 139 0.1                World 218797 100.0  World 12565 100.0  World 8095 100.0  World 235966 100.0  
 WT/COMTD/LDC/W/37 
Page 158  
STATISTICAL APPENDIX Table 2 (continued)  
              
Malawi, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Taipei, Chinese 7642 21.1  Mozambique 1073 54.5  South Africa 1257 22.2  United States 20809 60.9 
South Africa 6083 16.8  EU (15) 583 29.6  China 1233 21.8  South Africa 12728 37.3 
China 4684 12.9  Zimbabwe 183 9.3  Taipei, Chinese 790 14.0  Canada 490 1.4 India 4216 11.6  Zambia 77 3.9  Kenya 385 6.8  Mozambique 96 0.3 Hong Kong, China 4063 11.2  South Africa 36 1.8  Thailand 380 6.7  EU (15) 33 0.1 Zimbabwe 2357 6.5  Madagascar 4 0.2  United States 340 6.0  Zimbabwe 7 0.0 
EU (15) 1650 4.5  United States 3 0.2  EU (15) 289 5.1  Zambia 2 0.0 
Tanzania 1479 4.1  Malaysia 2 0.1  India 189 3.3  Uganda 1 0.0 Pakistan 714 2.0  Mauritius 2 0.1  Zimb abwe 169 3.0  Untd Arab Em 0 0.0 
Singapore 635 1.7  Senegal 2 0.1  Pakistan 100 1.8  - - -                World 36270 100.0  World 1969 100.0  World 5651 100.0  World 34165 100.0 
               
Maldives, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Sri Lanka 25461 69.0  ... ... ...  Sri La nka 9206 65.5  United States 36116 100.0 
Hong Kong, China 4455 12.1  ... ... ...  Thailand 2549 18.1  Sri Lanka 12 0.0 
Singapore 1664 4.5  ... ... ...  Indi a 576 4.1  EU (15) 0 0.0 
Untd Arab Em 1502 4.1  ... ... ...  Indonesia 488 3.5  - - - Thailand 1036 2.8  ... ... ...  Singapore 369 2.6  - - - India 917 2.5  ... ... ...  EU (15) 242 1.7  - - - Indonesia 441 1.2  ... ... ...  Untd Arab Em 102 0.7  - - - EU (15) 412 1.1  ... ... ...  Hong Kong, China 92 0.7  - - - 
Malaysia 385 1.0  ... ... ...  Australia 89 0.6  - - - 
South Africa 150 0.4  ... ... ...  Malaysia 88 0.6  - - -                World 36878 100.0  ... ... ...  Worl d 14056 100.0  Wo rld 36128 100.0  
  WT/COMTD/LDC/W/37
 Page 159 
STATISTICAL APPENDIX Table 2 (continued)  
              
Mozambique, 2002              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
South Africa 4261 25.9  South Africa 136 67.8  South Africa 1401 42.2  South Africa 5283 88.8 
China 3789 23.1  Malawi 9 4.5  Thailand 580 17.5  United States 303 5.1 
India 2363 14.4  Congo 0 0.1  China 551 16.6  Untd Arab Em 130 2.2 Zimbabwe 2198 13.4  Australia 0 0.0  EU (15) 380 11.4  Argentina 41 0.7 EU (15) 900 5.5  EU (15) 0 0.0  Hong Kong, China 190 5.7  - - - Taipei, Chinese 557 3.4  - - -  Indonesia 71 2.1  - - - 
Japan 446 2.7  - - -  India 23 0.7  - - - 
Untd Arab Em 376 2.3  - - -  Untd Arab Em 22 0.7  - - - Hong Kong, China 294 1.8  - - -  United States 20 0.6  - - - Thailand 268 1.6  - - -  Morocco 10 0.3  - - -                World 16430 100.0  World 201 100.0  World 3316 100.0  World 5951 100.0 
               
Nepal, 2003               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
India 83522 42.5  India 40134 43.2  India 16042 38.2  United States 163159 72.9 
China 37395 19.0  EU (15) 21103 22.7  China 13857 33.0  EU (15) 26060 11.6 
Thailand 19905 10.1  United States 19660 21.1  Thailand 5380 12.8  India 23616 10.6 
Indonesia 14838 7.6  China 2443 2.6  Taipei, Chinese 1654 3.9  Canada 3220 1.4 Taipei, Chinese 13748 7.0  Switzerland 2347 2. 5  United States 950 2.3  Japan 3127 1.4 
Hong Kong, China 7319 3.7  Bangladesh 1767 1.9  Hong Kong, China 858 2.0  Switzerland 594 0.3 
Korea, Rep. of 4646 2.4  Canada 1172 1.3  Singapore 713 1.7  Bhutan 550 0.2 
EU (15) 3444 1.8  Turkey 1030 1.1  Japan 659 1.6  Thailand 432 0.2 
Singapore 3286 1.7  South Africa 799 0.9  Korea, Rep. of 601 1.4  Egypt 371 0.2 
Pakistan 1972 1.0  Japan 653 0.7  Indonesia 451 1.1  Untd Arab Em 320 0.1                World 196362 100.0  World 92965 100.0  World 41997 100.0  World 223721 100.0  
 WT/COMTD/LDC/W/37 
Page 160  
STATISTICAL APPENDIX Table 2 (continued)  
              
Niger, 2003               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
EU (15) 10974 49.8  EU (15) 6389 53.9  Thailand 833 25.5  Nigeria 10 60.0 
China 2766 12.6  Nigeria 3300 27.8  EU (15) 637 19.5  EU (15) 7 40.0 
Côte d'Ivoire 2764 12.6  Côte d'Ivoire 1943 16.4  China 606 18.5  - - - Nigeria 1192 5.4  Burkina Faso 164 1.4  United States 413 12.6  - - - Serbia,Mtneg 613 2.8  Togo 34 0.3  Togo 356 10.9  - - - United States 529 2.4  Ghana 21 0.2  Nigeria 91 2.8  - - - 
Turkey 492 2.2  Algeria 3 0.0  Iceland 57 1.7  - - - 
Ghana 427 1.9  United States 3 0.0  Côte d'Ivoire 53 1.6  - - - Benin 332 1.5  Benin 2 0.0  Untd Arab Em 40 1.2  - - - Japan 298 1.4  Japan 2 0.0  H ong Kong, China 33 1.0  - - - 
               World 22017 100.0  World 11861 100.0  World 3274 100.0  World 17 100.0 
               
Rwanda, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Kenya 1246 24.4  Uganda 442 81.1  India 985 42.6  Dem. Rep. of Congo 18 90.5 
Untd Arab Em 1031 20.2  Ethiopia 38 7.0  Untd Arab Em 416 18.0  South Africa 1 4.7 
Tanzania 621 12.2  Dem. Rep. of Congo 20 3.6  Kenya 401 17.3  EU (15) 1 3.0 
EU (15) 542 10.6  EU (15) 16 3.0  EU (15) 249 10.8  Kenya 0 1.9 Uganda 503 9.8  Switzerland 15 2.7  Tanzania 88 3.8  - - - Taipei, Chinese 307 6.0  Burundi 13 2.3  Egypt 33 1.4  - - - India 211 4.1  Tanzania 1 0.2  South Africa 32 1.4  - - - Israel 171 3.4  Untd Arab Em 1 0.1  Uganda 29 1.3  - - - 
Korea, Rep. of 142 2.8  Kenya 0 0.0  China 26 1.1  - - - 
China 84 1.6  - - -  N.Mariana Is 17 0.7  - - -                World 5106 100.0  World 545 100.0  World 2313 100.0  World 20 100.0  
  WT/COMTD/LDC/W/37
 Page 161 
STATISTICAL APPENDIX Table 2 (continued)  
              
Senegal, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 14446 27.9  Gambia 2082 20.1  EU (15) 3365 35.6  EU (15) 366 50.3 
EU (15) 12788 24.7  Mauritania 1847 17.8  China 2266 23.9  Gambia 78 10.8 
India 2987 5.8  EU (15) 1436 13.8  Hong Kong, China 1210 12.8  Gabon 69 9.5 United States 2879 5.6  Guinea 1352 13.0  Indonesia 775 8.2  Cape Verde 64 8.8 Thailand 2630 5.1  Côte d'Ivoire 1222 11. 8  Thailand 483 5.1  Bunkers 56 7.8 
Côte d'Ivoire 2572 5.0  Congo 553 5.3  Turkey 315 3.3  Guinea 44 6.0 
Japan 2127 4.1  Togo 346 3.3  Côte d' Ivoire 178 1.9  Mauritania 31 4.3 
Benin 2122 4.1  Burkina Faso 296 2.9  Morocco 167 1.8  Untd Arab Em 10 1.4 Hong Kong, China 1829 3.5  Mali 289 2.8  Mauritius 93 1.0  Morocco 6 0.9 
Korea, Rep. of 1435 2.8  Gabon 163 1.6  Untd Arab Em 91 1.0  Mali 1 0.1                World 51848 100.0  World 10373 100.0  World 9462 100.0  World 727 100.0 
               
Sierra Leone, 2002              
               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
EU (15) 1062 25.2  ... ... ...  EU (15) 223 40.7  ... ... ... 
Switzerland 716 17.0  ... ... ...  Hong Kong, China 155 28.3  ... ... ... 
Hong Kong, China 599 14.2  ... ... ...  China 37 6.7  ... ... ... China 352 8.4  ... ... ...  Ecuador 26 4.8  ... ... ... Untd Arab Em 275 6.5  ... ... ...  Côte d'Ivoire 25 4.5  ... ... ... Korea, Rep. of 228 5.4  ... ... ...  Thailand 23 4.3  ... ... ... United States 176 4.2  ... ... ...  Untd Arab Em 13 2.4  ... ... ... 
India 141 3.3  ... ... ...  Indonesia 9 1.7  ... ... ... 
South Africa 90 2.1  ... ... ...  Lebanon 9 1.6  ... ... ... Ecuador 89 2.1  ... ... ...  Gambia 8 1.4  ... ... ...                World 4216 100.0  World 104 100.0  World 547 100.0  ... ... ...  
 WT/COMTD/LDC/W/37 
Page 162  
STATISTICAL APPENDIX Table 2 (continued)  
              
Tanzania, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 19511 33.9  EU (15) 3784 18.4  Hong Kong, China 3733 23.7  EU (15) 3011 60.5 
India 16076 28.0  Kenya 3609 17.5  China 3506 22.3  United States 817 16.4 
Pakistan 3921 6.8  South Africa 2256 11. 0  Thailand 2630 16.7  Uganda 350 7.0 
South Africa 2866 5.0  Saudi Arabia 1655 8.0  South Africa 1298 8.2  South Africa 318 6.4 
Untd Arab Em 2564 4.5  Malawi 1367 6.6  Indonesia 873 5.5  Kenya 297 6.0 EU (15) 2109 3.7  Japan 1136 5.5  India 823 5.2  Rwanda 58 1.2 
Indonesia 1841 3.2  Zambia 1121 5.4  Untd Arab Em 807 5.1  Malawi 26 0.5 
Kenya 1727 3.0  United States 1004 4.9  EU (15) 720 4.6  Comoros 25 0.5 Egypt 1645 2.9  Mozambique 586 2.8  Switzerland 698 4.4  Mozambique 21 0.4 United States 853 1.5  Dem. Rep. of Congo 560 2. 7  Kenya 240 1.5  St. Kitts and Nevis 18 0.4 
               World 57502 100.0  World 20594 100.0  World 15753 100.0  World 4979 100.0 
               
Togo, 2003               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
China 7053 34.5  Ghana 1992 34.3  Hong Kong, China 4204 40.0  EU (15) 148 28.7 
Côte d'Ivoire 2615 12.8  Benin 1282 22.1  China 2616 24.9  Burkina Faso 85 16.6 
EU (15) 2310 11.3  Mali 1071 18.5  Indonesia 1287 12.2  Morocco 66 12.8 
Nigeria 2052 10.0  Nigeria 411 7.1  Thailand 1167 11.1  Niger 53 10.4 
Hong Kong, China 1802 8.8  Burkina Faso 269 4.6  EU (15) 257 2.4  Hong Kong, China 36 7.1 India 1778 8.7  EU (15) 260 4.5  Singapore 206 2.0  Senegal 22 4.3 Ghana 548 2.7  Free Zones 133 2.3  Viet Nam 165 1.6  Free Zones 19 3.7 Pakistan 454 2.2  Gabon 113 1.9  Untd Arab Em 108 1.0  Cameroon 16 3.1 
Taipei, Chinese 310 1.5  Niger 97 1.7  Norway 91 0.9  Dem. Rep. of Congo 15 2.9 
Thailand 272 1.3  Côte d'Ivoire 77 1.3  Ghana 65 0.6  Benin 12 2.3                World 20445 100.0  World 5802 100.0  World 10517 100.0  World 515 100.0  
  WT/COMTD/LDC/W/37
 Page 163 
STATISTICAL APPENDIX Table 2 (continued)  
              
Uganda, 2003              
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
Kenya 10346 24.5  Dem. Rep. of Congo 239 45.2  China 4240 27.7  United States 781 94.2 
China 8334 19.7  Rwanda 129 24.4  Untd Arab Em 2393 15.6  Canada 40 4.8 
Untd Arab Em 8170 19.3  Tanzania 108 20.5  Hong Kong, China 2053 13.4  Kenya 7 0.8 India 4744 11.2  Taipei, Chinese 21 4.1  Thailand 2043 13.3  Sudan 1 0.1 Pakistan 2590 6.1  Kenya 20 3.8  Kenya 1677 11.0  Tanzania 0 0.0 EU (15) 1481 3.5  Congo 11 2.0  India 798 5.2  - - - 
South Africa 908 2.1  Nigeria 0 0.1  South Africa 731 4.8  - - - 
Hong Kong, China 802 1.9  Indonesia 0 0.0  EU (15) 424 2.8  - - - Taipei, Chinese 705 1.7  India 0 0.0  Indonesia 180 1.2  - - - Bangladesh 671 1.6  South Africa 0 0.0  Sri Lanka 117 0.8  - - -                World 42292 100.0  World 528 100.0  World 15315 100.0  World 828 100.0 
               
Zambia, 2002               
TEXTILES  CLOTHING 
Imports   Exports  Imports   Exports 
partner value share   partner value share  partner value share   partner value share 
South Africa 8189 33.7  EU (15) 8449 33.9  South Africa 3934 40.3  Zimbabwe 25 38.0 
Zimbabwe 3287 13.5  South Africa 6449 25.9  China 1580 16.2  South Africa 24 36.4 
EU (15) 2040 8.4  Mauritiu s 5921 23.8  EU (15) 1301 13.3  Tanzania 10 15.5 
Taipei, Chinese 1598 6.6  Switzerland 1843 7.4  Zimbabwe 811 8.3  Malawi 4 6.3 Pakistan 1517 6.2  Botswana 967 3.9  India 515 5.3  EU (15) 1 1.3 Untd Arab Em 1458 6.0  Dem. Rep. of Congo 308 1.2  Untd Arab Em 358 3.7  Mozambique 1 1.2 China 1390 5.7  Sierra Leone 239 1.0  Hong Kong, China 318 3.3  United States 1 0.8 
India 1220 5.0  Tanzania 218 0.9  Thailand 316 3.2  Dem. Rep. of Congo 0 0.2 
Kenya 625 2.6  Zimbabwe 209 0.8  Mauritius 153 1.6  Burundi 0 0.2 
Hong Kong, China 546 2.2  Malawi 164 0.7  Indonesia 109 1.1  Japan 0 0.1 
World 24287 100.0  World 24913 100.0  World 9755 100.0  World 65 100.0 
Source : UNSD Comtrade Database. 
  
 WT/COMTD/LDC/W/37 
Page 164  
STATISTICAL APPENDIX Table 3  
LDCs trade (in US$ '000) in ATC products at HS 2-digit level    
              
 HS 30  HS 39  HS 42  HS 50  HS 51  HS 52  HS 53 
 exports imports  exports imports  expor ts imports  exports imports  exports im ports  exports imports  exports imports 
Bangladesh, avg of 2001 and 2003 1 358  2 2545  288 266  14015 5730  802 14404  28591 539163  130399 2241 
Benin, avg of 2000 to 2002 203 300   42   224   1  0 50  6098 42277   5 
Burkina Faso, avg of 2000 to 2002 1 609  0 18  0 113  0 2   7  4160 2109   5 
Burundi, avg of 2000 to 2002 5 171   12   24   0   14  9 878   1 
Cambodia, avg of 2001 to 2003  221  32 2242  934 25  87 64   69  170 31556  0 4 
Cent. Afr. Rep, avg of 2001 to 2003 0 17   40  2 3      1  363 259    
Gambia, avg of 2000 to 2002  83   37  0 32  1 3   7  173 5206   2 
Guinea, avg of 2000 to 2002  52   54   1081      30  13 5754   2 
Haiti, avg of 1995 to 1997          11      7     
Lesotho, avg of 2000 to 2002 0 35  13 11  1 55  87 235  4 865  8498 25404  0 122 
Madagascar, avg of 2001 to 2003 0 350  12 939  54 1551  6 6878  761 27753  10543 28865  142 263 
Malawi, avg of 2001 to 2003 0 736  5 340  0 513  1 5   141  713 9752  0 654 
Maldives, avg of 2001 to 2003  64   15   151   44   16   14570   15 
Mali, avg of 1999 to 2001 175 288  0 157   253  0 28   5  1417 4642  0 5 
Mozambique, avg of 2000 to 2002 1 1176  1 105  3 229   20  3 37  40 4336  14 31 
Nepal, 2003  503   3009  103 574  173 2068  103 10559  313 44240  6634 220 
Nepal, avg of 1998 to 2000  51  0 939  1 213  93 5157  1321 16652  228 35157  1907 83 
Nepal, avg of 2000 and 2003  263   2157  52 310  116 5140  1864 27483  157 34394  3371 136 
Niger, avg of 2001 to 2003  228   84  3 124  1 6  28 6  7934 11613   0 
Rwanda, avg of 2001 to 2003  308  0 56   84   1   4  70 185   5 
Senegal, avg of 2001 to 2003  1197  560 1036  1 338  4 318   34  2955 11708   68 
Sierra Leone, 2002 0 119  73 706   587   1      249    
Tanzania, avg of 2001 to 2003 12 792  10 622  30 3556  4 18  0 25  3726 14074  456 736 
Togo, avg of 2001 to 2003  198   41   364   0   16  201 9110   18 
Uganda, avg of 2001 to 2003 33 1115  11 754   1377  2 7   1  246 1330  14 203 
  
  WT/COMTD/LDC/W/37
 Page 165 
STATISTICAL APPENDIX Table 3 (continued) 
              
 HS 54  HS 55  HS 56  HS 57  HS 58  HS 59  HS 60 
 exports imports  exports imports  expor ts imports  exports imports  exports im ports  exports imports  exports imports 
Bangladesh, avg of 2001 and 2003 7443 193410  4979 388773  34215 7906  4282 1023  17159 66564  640 39751  11613 138981 
Benin, avg of 2000 to 2002 6 487  118 14297  12 497   96  18 819  64 130  0 16 
Burkina Faso, avg of 2000 to 2002 0 568  1 2943  1 678  2 61  7 168  699 870  8 46 
Burundi, avg of 2000 to 2002  256  0 568  0 130   40   56   118   4 
Cambodia, avg of 2001 to 2003 1615 16974  9028 327927  645 3897  68 326  98 23057  3 1213  2127 200171 
Cent. Afr. Rep, avg of 2001 to 2003 0 4  23 19   370  0 7   10   10    
Gambia, avg of 2000 to 2002 5 1078  12 712  2 115  1 92  3 92  4 23   4 
Guinea, avg of 2000 to 2002  445   833   353  0 150   87   928   29 
Haiti, avg of 1995 to 1997 0   18   655   29   638   0   15  
Lesotho, avg of 2000 to 2002 3 4512  0 742  0 918  1 777  3 4062  15 194  62 11684 
Madagascar, avg of 2001 to 2003 479 8560  152 5934  693 1062  3 433  1066 4275  6 930  620 15770 
Malawi, avg of 2001 to 2003 23 2264  17 7773  44 1053  9 502  1 435  1 1922  33 2056 
Maldives, avg of 2001 to 2003  3031   11   8256   299   2698   242    
Mali, avg of 1999 to 2001 4 302  3128 1756  2 349  0 258  1 192  8 358  2 142 
Mozambique, avg of 2000 to 2002 1 1099  25 1662  63 2880  9 256  32 675  11 1348  1109 372 
Nepal, 2003 25401 19118  15706 53624  2820 1654  41145 2324  893 7943  36 5787  3499 33143 
Nepal, avg of 1998 to 2000 6328 11937  3860 7180  5678 638  140518 1803   25052  25 3929  99 1645 
Nepal, avg of 2000 and 2003 17129 10567  7853 33791  5603 854  93751 1956  447 28135  26 5053  1749 17010 
Niger, avg of 2001 to 2003 1 108  31 1356  9 45  7 621  4 171  6 238  0 1 
Rwanda, avg of 2001 to 2003 9 991  529 970  0 380   99  1 71   124   3 
Senegal, avg of 2001 to 2003 231 6959  1709 6741  388 4174  28 653  58 2348  128 1204  2 158 
Sierra Leone, 2002  168   291   84   78   249   37   26 
Tanzania, avg of 2001 to 2003 319 6020  789 5804  4699 10979  6 896  210 461  92 1591  1907 325 
Togo, avg of 2001 to 2003 39 176  148 3010  3087 127  1 37  1 40  20 460  10 22 
Uganda, avg of 2001 to 2003 30 1919  115 11132  269 3698  2 391  20 987  8 262   138 
  
 WT/COMTD/LDC/W/37 
Page 166  
STATISTICAL APPENDIX Table 3 (continued) 
              
 HS 61  HS 62  HS 63  HS 64  HS 65  HS 66    
 exports imports  exports imports  exports imports  exports imports  e xports imports  exports imports    
Bangladesh, avg of 2001 and 2003 1593772 16099  2312587 127064  154225 4534  2543 4675  26706 72   155    
Benin, avg of 2000 to 2002 49 2615  111 5042  78 965   36  0 8  2 39    
Burkina Faso, avg of 2000 to 2002 2 935  127 897  70 966   28  0 46   74    
Burundi, avg of 2000 to 2002 0 262  4 335  3 1965   0   5   30    
Cambodia, avg of 2001 to 2003 1274382 1492  67903 39304  8425 1772  89 689  10023 8  0 90    
Cent. Afr. Rep, avg of 2001 to 2003 0 75  4 53  19 137  1 5   1   23    
Gambia, avg of 2000 to 2002 13 546  3 520  3 196   11   15   47    
Guinea, avg of 2000 to 2002 2 3210  313 5110  46 2323   12   62   245    
Haiti, avg of 1995 to 1997 6122   17322   328      13        
Lesotho, avg of 2000 to 2002 72135 10878  142350 7417  154 4636  2528 4255  63 82  2356 205    
Madagascar, avg of 2001 to 2003 98496 2492  110683 3008  1741 2780  25 70  295 338  33 358    
Malawi, avg of 2001 to 2003 9312 1689  23182 2410  497 4940  1 17  0 69  0 209    
Maldives, avg of 2001 to 2003 25062 5681  9352 8141   2422   1   71   142    
Mali, avg of 1999 to 2001 12 3697  6 1187  9 1528  1 60  2 30   55    
Mozambique, avg of 2000 to 2002 5090 2036  3786 2633  131 3517  27 84   121  0 220    
Nepal, 2003 43619 1316  178545 40261  10730 4956  17 2995  1560 438   876    
Nepal, avg of 1998 to 2000 9836 411  136344 6570  9753 2834  4 420  720 70   707    
Nepal, avg of 2000 and 2003 29776 785  184888 23819  12771 3522  11 1572  1248 281   618    
Niger, avg of 2001 to 2003 2 300  34 2596  19 1572  2 10  0 47  0 66    
Rwanda, avg of 2001 to 2003  732  7 933  64 1772   46   49  0 162    
Senegal, avg of 2001 to 2003 207 2286  220 4871  548 4355  0 189  2 123  0 71    
Sierra Leone, 2002  252   284  29 1008   3   23   159    
Tanzania, avg of 2001 to 2003 3492 4920  272 9900  3513 5765  173 159  6 195  23 486    
Togo, avg of 2001 to 2003 63 4009  312 4302  186 1801   10  0 17  7 69    
Uganda, avg of 2001 to 2003 84 4775  224 8664  207 8860  8 113   220  1 202    
  
  WT/COMTD/LDC/W/37
 Page 167 
STATISTICAL APPENDIX Table 3 (continued) 
              
 HS 87  HS 88  HS 91  HS 94  HS 95  HS 96    
 exports imports  exports imports  exports imports  exports imports  e xports imports  exports imports    
Bangladesh, avg of 2001 and 2003 1 145   24  9 57  0 62   369  4 258    
Benin, avg of 2000 to 2002  1      3  2 40      18    
Burkina Faso, avg of 2000 to 2002  0   98   0  0 108  1 1   46    
Burundi, avg of 2000 to 2002  0   2   1   10      26    
Cambodia, avg of 2001 to 2003  35   10   3  243 23      7    
Cent. Afr. Rep, avg of 2001 to 2003           6     2 54    
Gambia, avg of 2000 to 2002  2         53      52    
Guinea, avg of 2000 to 2002  1   6   0  0 27   0   12    
Haiti, avg of 1995 to 1997          0           
Lesotho, avg of 2000 to 2002  5   2     2 166   6   62    
Madagascar, avg of 2001 to 2003  3   2  1902 39  8 69  0 1  4 126    
Malawi, avg of 2001 to 2003  3   0   0  6 59   0   98    
Maldives, avg of 2001 to 2003  0   0   13   278      94    
Mali, avg of 1999 to 2001 0 0   0   0  0 23      31    
Mozambique, avg of 2000 to 2002 0 6   1   1  11 128   1  1 68    
Nepal, 2003  1   4   531  5 1030  2 1   69    
Nepal, avg of 1998 to 2000  8   0     21 96      6    
Nepal, avg of 2000 and 2003  0   2   265  21 659  1 0   43    
Niger, avg of 2001 to 2003  1        1 115   0   39    
Rwanda, avg of 2001 to 2003  1         48      20    
Senegal, avg of 2001 to 2003  2   58   3  3 129   0  0 144    
Sierra Leone, 2002           9      14    
Tanzania, avg of 2001 to 2003 0 9   19  0 8  18 216   1   101    
Togo, avg of 2001 to 2003  1      1  22 96   0   25    
Uganda, avg of 2001 to 2003  3   1   2  59 73   1   95    
                     
Source : UNSD Comtrade Database. 
 
 
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