EN Official Journal of the European Union CE 65/6

(2004/C 65 E/007)

WRITTEN QUESTION E-3350/02

by Ilda Figueiredo (GUE/NGL) to the Commission

(26 November 2002)

Subject: Trade agreements and the liberalisation of the textile and clothing sector

On 6 November the Commission announced the signing of the EU-Brazil Memorandum of Understanding on the liberalisation of the textile trade, in which the EU undertakes to remove all textile quotas applicable to Brazil. The Commissioner Pascal Lamy said that the agreement constituted a clear signal that the EU is ready to open up its textile market earlier than the deadline of 2005 envisaged by the WTO. This means that it is willing to call into question compliance with the Agreement on Textiles and Clothing (ATC), whilst the Commission, in its answer to Written Question E-3079/01 (1), did not consider that such bilateral agreements would jeopardise the timetable for the ATC. On the same day, in the context of aid to developing countries and as a follow-up to the WTO Doha Round, it submitted a proposal to reduce customs tariffs by 70 % for all non-agricultural products, proposing drastic cuts in quotas and tariffs covering textile products and footwear, without mentioning any compensatory measures for the sectors affected.

These proposals follow other recent agreements aimed at anticipating the strategy of liberalising the trade in textiles and clothing, so that this sector (like the agricultural sector) may become a bargaining counter for openings in other sectors covered by the negotiations, for example services, public contracts or investment. The reason for the timetable laid down in the ATC was to delay opening up the market to more sensitive products, in order to give the industry time to restructure and adapt to a situation of liberalisation. At the time it was considered in some quarters that the deadline of 10 years for the ATC was too short, in view of the socio-economic impact of liberalisation, especially in regions dependent on the sector and countries such as Portugal, where textiles, clothing and footwear play an important role in production, export and employment.

In this context can the Commission answer the following questions:

— What is the socio-economic impact expected to be in the textile, clothing and footwear sector in the EU, and particularly in Portugal, of the Memorandum of Understanding concluded with Brazil and of the proposal to reduce tariffs by 70 % in the WTO Doha Round negotiations? Has the Commission carried out or commissioned a study on the socio-economic impact? Has it consulted the social partners representing the sector?

— What is expected to be gained by the de facto anticipation of the ATC and what will the socio-economic impact be? On what research or premises is this strategy based?

— What compensatory measures are expected to be taken to minimise the socio-economic impact on the textile, clothing and footwear sectors?

Answer given by Mr Lamy on behalf of the Commission

(15 January 2003)

The quota increase proposed for Brazil in the Memorandum of Understanding, initialled on 8 August 2002 and signed on 7 November 2002, will give new export opportunities to Brazil. However, the Union imports from Brazil amount to 0,9 % in quantity and 0,3 % in value of the total Union imports of textiles and clothing (around EUR 72,5 billion in 2001). Any increase from the Memorandum is thus unlikely to have a major overall impact. Moreover, given that the textiles and clothing industry is distributed throughout the Community, the Commission does not anticipate particular difficulties for Portugal with 4,4 % of Community production, and 10,9 % of employment in the sector in 2001. These concessions were not for free, as in exchange, Brazil commits not to exceed certain maximum levels of tariffs for the whole textile and clothing sector (these levels are maximum 14 % for yarns, 16-18 % for fabrics, and 20 % for clothing). An additional tax of 1,5 % should be eliminated upon its expiry planned for the end of 2002. Furthermore, both parties agree to refrain from adopting any non-tariff measures, which could hinder trade in textile and clothing products. This will address in particular a problem concerning customs valuations in Brazil raised by the Union industry. In the context of the on-going Union-Mercosur negotiations, both parties agree to seek an early elimination of the customs duties applied to textile and clothing products, either upon entry into force or at the latest in the first stage of the industrial tariff dismantling schedule.

In reaching bilateral agreements concerning market access in the sector — to date there are three, with Sri Lanka, Pakistan and now Brazil — the Commission is working to fulfil the negotiating directives given by the Council on 9 November 2000, by obtaining market access concessions in the textiles and clothing sector from our trading partners (e.g. tariff reductions, binding in the World Trade Organisation (WTO) and commitments on non-tariff barriers) in return for which the Community can offer improvements in their quota regimes. During the whole negotiation process, the Commission is keeping the Member States informed via the 133 (Textiles) Committee and thus any Member State's position is carefully considered. Furthermore, Euratex as the European representative of the sector is normally closely involved in the preparation of the Commission's negotiating position in the case of bilateral agreements; this was the case for the Union-Brazil Memorandum, which counted on the support of Union industry and actually of all the Member States.

The Commission does not consider that these agreements are jeopardising the original timetable for full liberalisation and the removal of all quotas: what they do is either increase quotas or suspend them vis-à-vis third countries on a case by case basis on a bilateral basis and in exchange of balanced market access commitments by those countries which are of export importance to Union industry. Indeed, the schedule remains in place and maintains 1 January 2005 as the date of full liberalisation pursuant to the WTO agreement on Textiles and Clothing. Certainly, the Commission considers that further agreements pursuant to the above mandate would benefit the European textiles and clothing industry — for the improved access to the third markets included in such agreements — and therefore contribute positively to full liberalisation in 25 months time. And as this last agreement demonstrates, the Commission does negotiate on a case-by-case basis.

Regarding the Community submission to the WTO on market access for non-agricultural products, there seems to be some misunderstanding as to its content. In fact, the initiative is aimed at meaningful liberalisation through elimination of tariff peaks and high tariffs as well as reduction of tariff escalation in all sectors and by all countries, but does not put forward any specific percentage for tariff reduction As regards the specific case of textiles, the Community proposal aims at full reciprocity as tariffs for textiles and clothing should be brought within a same narrow common range by all WTO Members. For the Union such move does also require that non-tariff barriers are substantially reduced by all Members in order not to frustrate the increase in market access gained through tariff reduction. By removing peaks and high tariffs, the proposal is intended to achieve improved effective access on markets of interest to the Union industry, and to stimulate South-South trade through greater access to developing countries markets, whose increasing importance for developing countries' exporters cannot be underestimated.

Since the Commission is not envisaging any de facto anticipation of the elimination of the Agreement on Textiles and Clothing (ATC) quotas, the question of assessment of its impact is not relevant. As regards the impact of the final elimination of quotas in 2005 as foreseen in the ATC, the Commission has commissioned a study, not yet completed, as to the possible impact of the elimination of quotas in 2005. Moreover, in May 2003, the Commission is organising a major conference with all interested parties (of which importers, exporters, industry, trade unions, consumers, government representatives) to assess the consequences of such elimination and the future of the textile and clothing industry globally.

Since the Commission is not envisaging anticipating any wholesale elimination of quotas before they are due to expire in 2005, there should be no question of providing any compensation in favour of Union industry, all the more since the agreements such as the one with Brazil are based on a balance of market access between the two parties.

Finally, the Commission would like to remind the Honourable Member that the ATC constitutes a delicate outcome of multilateral trade negotiations putting an end to a policy of more than thirty years of trade protection, during which period the industry hopefully had the opportunity to benefit and to restructure in order to prepare for the liberalisation at hand. At this juncture, it is not conceivable to go back on this important achievement of the Uruguay Round. In the specific case of Portugal — as the question has been raised — it is essential to recall that, an exceptional measure via a ECU 400 million grant of financial assistance to Portugal for a specific programme for the modernization of the Portuguese textile and clothing industry for the period 1995 to 1999, has been taken by the Council in 1995 (2). This Community assistance was meant to enable the Portuguese textile industry to adapt to the new requirements of the international situation and increasing international competition following the ATC. The Commission trusts that such initiative has borne its fruits.

(1) OJ C 172 E, 18.7.2002, p. 25.

(2) Council Regulation (EC) No 852/95 of 10 April 1995 on the grant of financial assistance to Portugal for a specific programme for the modernisation of the Portuguese textile and clothing industry, OJ L 86, 20.4.1995.