Jul 4, 1985

TEXTILES: THIRD WORLD MFA MEMBERS URGE DEFEAT OF U.S. BILL.

GENEVA, JULY 2 (IFDA/CHAKRAVARTHI RAGHAVAN)— Twenty-eight Third World exporting country-members of the Multifibre Arrangement (MFA) have appealed to key members of the U.S. congress to defeat pending legislation for new restrictions against textile and clothing imports from the Third World.-

The 28, who are participating in "the programme of cooperation among developing countries, exporters of textiles and clothing", have addressed their appeals to chairmen of the Senate Finance Committee and the House ways and means Committee, and the Senate and House Subcommittees on Trade.-

The 28 have also sent copies of their appeals to senior U.S. administration officials urging them to continue their efforts "to break the momentum of congressional support for the bill".-

The bill, "textiles and apparel trade enforcement act of 1985", introduced in both houses of the U.S. Congress in March, and known as the Jenkins bill after its author, has attracted a very large number of sponsors.-

The U.S. President has threatened to use his veto on the bill, butt there are that the bill might garner two-thirds majority in each house to thwart a presidential veto.-

Third World countries exported in 1984 approximately 16 billion dollars worth of textile and clothing products.-

"If the bill passes it will mean the end of credibility for future bilateral or multilateral trade agreements and would do irreparable damage to the multilateral trading system", Felipe Jaramillo of Colombia, the chairman of the programme, said Tuesday.-

The bill, he underlined, would impose restrictions on imports of textiles and clothing from the Third World countries, but not from other sources like the European Community, Japan and other Industrial countries.-

The bill, if adopted, would "effectively abrogate" the U.S. bilateral and multilateral obligations under the MFA, as well as trade agreements and commitments under GATT rules and principles, the aide memories that the 28 have sent along with their appeal points out.-

Even more, by stepping over the fundamental most-favoured-nation principle underlying all basic trade agreements and committments, "this bill would cause irreparable damage to the multilateral trading system".-

Jaramillo said that if the bill was passed and became law, The Third World countries would undoubtedly bring the issue before the GATT, and the Textile Surveillance Body set up under the MFA to oversee and monitor the arrangements.-

The negotiations on the future of the MFA, he noted, were due to begin in the Textiles Committee on July 23, but was expected to go on till next year.-

The MFA-3 is due to expire at end of July 1986.-

Asked whether the Third World exporting countries would negotiate on the future of the MFA, if the U.S. bill was not enacted but kept pending, Jaramillo said the group was yet to make up its mind on this.-

The aide memories has challenged the purported rationale for the bill, and points to some of the serious "factual inconsistencies and misconceptions" about the impact of the imports on the domestic industry.-

While U.S. data show that during 1980-84, U.S. consumer spending on apparel grew at an annual eight percent, or 5.5 percent when adjusted for inflation, the bill assumes only a one percent growth rate (and seeks to restrict imports on that basis).-

During the period, far from wages in the sector having fallen, average earnings actually increased by 2.5 percent in the textile industry, while it increased by 3.5 percent in the apparel industry.-

The after-tax profits of the U.S. textile industry also showed an average 12 percent increase.-

In 1984 there was an actual recovery in job losses compared to 1983, though overall employment in the sector remained below the levels of 1980.-

But as in other manufacturing sectors, productivity gains and technological changes, rather than imports, have been primarily responsible for declining employment.-

Labour shedding in textiles has averaged three percent from 1980-84, and that in apparel one percent.-

If import penetration had been the cause of loss of jobs, since import penetration in apparel is much greater than in textiles, job losses in apparel should have been greater than in textiles, the aide memories points out.-

The substantial increase in U.S. trade deficits in textiles and apparel from 1983 to 1984, should be seen against the perspective of the much larger increase in overall merchandise deficit, caused primarily by the strong U.S. dollar, the faster growth of U.S. economy relative to rest of the world, and reduced exports to the debt-ridden Third World countries.-

Four-fifths of the overall merchandise deficit was due to trade in deficit in manufactures other than textiles and clothing.-

If the bill is enacted, it would increase the cost to consumers, and hurt U.S. textile and apparel firms depending on intermediate inputs through imports.-

It will also hurt U.S. export industries, particularly agriculture, machinery, and even textiles that export heavily to Third World countries.-

By cutting the exports, and thus foreign exchange earnings, of Third World countries, the bill would aggravate their debt and balance-of-payments problems.-

The gap in the U.S. market due to restrictions on imports from the Third World would be taken up by the non-restrained industrial exporters, and not by domestic producers, particularly given the strong U.S. dollar.-

It would also encourage U.S. textile and apparel firms to invest billions in more machinery, that might improve competitiveness, but would accelerate job losses and depress wages further.-