Trade and Textiles

Trade and Textiles

Table of contents
1. Introduction
2. The major product groups
3. The major exporters and importers of textiles
4. The multifiber agreements and GAFTT
5. Conclusion: the current and future role of China and other major exporters
6. References

Introduction
The development of the modern textile industry is characterized by the unequal development and clear division of the world market on the exporters and importers of textile products. At the same time, it should be pointed out that the producers of textile are basically focused on the developed of common rules of game for all producers in order to prevent the unfair competition and guarantee the equal conditions of the development of all producers. In this respect, it is particularly noteworthy to underline that one of the major challenges the producers of textile are currently facing are numerous quotas that are established by the countries which do not produce the sufficient amount of textile and are forced to import from other countries.
In such a situation, they attempt to create artificial barriers on the way of textile produced by other countries that naturally produce a negative impact on the development of the market and create the basis for the unfair competition. As a result, the smaller producers of textile are often in a disadvantageous position compared to the larger producers of textile such as China, India, and other countries. Nevertheless, the position of exporters of textile steadily grows stronger and gradually they attempt to change the current situation for better. This is why traditional multifiber agreements were replaced by Uruguay accords which basically target at the creation of the open textile market and create conditions for the development of the free textile trade worldwide.
The major product groups
On analyzing the current situation in the market, it should be said that basically it is possible to distinguish several major product groups which may be positioned according to the place of their production, price and usage. What is meant here is the fact that textile industry is traditionally characterized by the huge diversity of its products. This is why it would be useless to create the general classification but, instead, it would be more effective to define the major product groups which reflect the general trends in the world textile market.
In this respect, one of the major group of products is represented by countries which are among the major exporters of textile product, such as China, India, some countries of the Middle East, Latin America and others. This group of products is represented by various fabrics since the exporters of fabrics supply its products to other countries where they are later used in the textile industry to produce clothes. As a rule, the major suppliers are developing countries where the local agriculture creates ample opportunities for the production and export of fabrics and, where, as a rule, the local textile industry cannot use all the fabrics for the production of clothes and other final products.
Another group of products is the products produced in developing countries, such as clothes and other products made with the use of textiles. The characteristic feature of this group of products is a relatively low price and the lack of originality. As a rule, this products are produced in accordance with licensed agreements with some major producer in developed countries or, what is even more widely spread, these products are simply made in accordance with standards that meets the current demand in the world market. In fact, these products do not represent famous brands but rather imitate them.
By the way, the products of the famous brands may be viewed as another group of products. Traditionally, these products were produced in developed countries where the major popular and fashionable brands are situated but in recent years the development of the international textile markets forces popular brands to shift production from developed countries such as the EU or the US to developing countries such as China, Turkey, countries of Latin America, etc. (Pine and Gilmore, 1999, p.104). As a result, the production of textiles gradually shifts from developed to developing countries.
The major exporters and importers of textiles
In such a situation, it is quite natural that the major producers and exporters of textiles are developing countries among which it is possible to single out China, India, Pakistan, Turkey, countries of the Middle East, Latin America, including Brazil. Basically, it is due to developing countries the world textile market demand is satisfied and often the supply exceeds the current demand on textiles.
At the same time, it should be pointed out that there are objective reasons for such a change in the world textile industry since in the past the position of developed countries, especially European ones, such as France, Italy, as well as the position of the US was quite strong, but nowadays they are losing their position and become the major consumers and importers of textiles. Among the objective factors that determine such a change in the world textile trade, it is possible to name the lack of raw materials and the cost of labor force.
To put it more precisely, developing countries which are the major exporters of textiles at the present moment are characterized by relatively well developed agriculture that can provide them with a constant and stable supply of materials for the textile industry. In such a way, local companies producing textiles are situated practically next to the sources of materials used in the textile industry. In such a way, they can save costs on transportation. For instance, huge cotton fields in Asia provide local countries with ample opportunities to develop the local textile industry. Basically, it is countries of the Middle East and China that are the major producers of such products. By the way, the latter is also well-known for its silk which has been exported from China since ancient epochs. Naturally, nowadays, China occupies the leading position in this segment of the textile market in the world as well as in other segments.
Another important factor that contributes consistently to the development of the textile industry in developing countries is the cost of labor force which differs dramatically in developed and developing countries. It is not a secret that the cost of labor force in Europe or the US is substantially higher than in China or other developing countries, such as Mexico, or Turkey, for instance, which are situated close to the major markets consuming textiles, i.e. the US and the EU respectively. In such a way, exporters of textiles are basically developing countries where the production of textiles is considerably cheaper than in developed countries. As a result, many popular brands working in textile industry prefer to shift their production from well-developed countries to developing ones.
It is worthy of mention that China is the leading textile exporter which supplies its products to many countries of the world, including well-developed ones such as the US and the EU. The share of India is also very high. They are followed by countries of the Middle East and Latin America.
As for the major importers, the situation is quite different. Basically, it is the US and the EU that are the major consumers of textiles and, therefore, it is these countries that are the major importers of textiles, though often they attempt to maintain the local textile production but the objective situation in the world market forces them to increase import from developing countries.
The multifiber agreements and GAFTT
Basically, in the past the international textile trade was regulated by the multifiber agreements which were signed between the major exporters and importers of textiles. At the same time, the development of this system, which had existed since 1961 to 2004, proved the fact that it is out of date and should be substituted by new, more effective one. One of the major reasons for the change of the multifiber agreements was the growing inequality between producers of textiles worldwide. In actuality, the multifiber agreements gradually became a tool of the pressure from the part of importers on producers of textiles, which the former attempted to use to get textiles at the volume and price that was profitable for them (Volti, 2005, p.207).
To put it more precisely, the multifiber agreements actually imply the existence of definite quotas for exporters which they cannot exceed and, therefore, it was often vitally important, especially for smaller exporters, to gain a large quota in order to maintain its performance and continue their development. On the other hand, such agreements actually created practically perfect conditions for the development of unfair competition because often the choice of supplier and the quota given to a particular country or producer was defined not on the basis of quality or price but on the basis of the current economic or even political interests of the major importers of textiles. For instance, the EU often attempted to push on China and some other Asian countries by means of limitation of their quotas in the supply of European countries with textiles. The similar trend could be observed in the policy of the US.
As a result, the world textile industry could not develop normally in accordance with the principles of open market economy. Naturally, such a situation was absolutely unacceptable since the modern economy is characterized by the process of globalizations which implies the elimination of financial and fiscal barriers between countries and development of the free trade. In terms of this process, it was extremely important to refuse from the practice of multifber agreements and start an absolutely new system of relations in international textile trade based on the principles of free trade. To meet this goal, the Uruguay Round accords were signed by the major exporters and importers of textiles, which were the members of the WTO, that led to the development of GATT, which actually regulates the free textile trade between countries. However, the process of liberalization of international textile trade is still quite slow. Basically, GATT Uruguay Round that started in 1986 and lasted till 1993 targeted at the trade liberalization and the major goal of the agreement was to improve market access for agricultural products, including those used in textile industry, such as cotton, and reduce domestic support of agriculture in the form of price-distorting subsidies and quotas, eliminate over time export subsidies on agricultural products and harmonize to the extent possible sanitary measures between member countries. In such a situation, barriers and quotas on textile trade between member countries could be minimized. In fact, the Uruguay agreements were supposed to put an end to the practices of the establishment of quotas on export-import of textiles which were the result of MFA, which actually governed the world trade in textiles and garments imposing quotas on the amount developing countries could export to develop countries. These practices have expired by 2005 and initiatives of Uruguay Round were extremely important since the elimination of quotas could open larger markets to major exporters of textiles, representing developing countries.
Conclusion: the current and future role of China and other major exporters
Nevertheless, past barriers and present slow liberalization of international textile trade cannot prevent China and other major exporters of textile from the further development and gaining a larger share of the market. In fact, China is apparently the world leader in textile industry and the major exporter in the world. In this respect, it should be said that at the present moment China has already gained about 40% of the US textile market and is one of the major supplier of textile in other developed and developing countries that import textile (Volti, 2005, p.132).
The current trends indicate to good perspectives for the further growth of Chinese export, though the position of other major exporters, such as India, is also considered to be quite good. On the other hand, it should be pointed out that specialists (Pine and Gilmore, 1999, p.210) warn that in the future it is the major suppliers that will dominate in the market, while smaller producers, such as some countries of the Middle East, Asia and even Latin America will decrease their presence in the world textile market because of the domination of such giants as China and India.

References
Pine, J. and Gilmore, J. (1999). The Experience Economy, Boston: Harvard Business School Press.
Volti, R. (2005). Society and Technological Change. New York: Random House.