Textiles & clothing sector is very important for developing economies

16 Jun '10

6 min read

The WTO, OECD and UNCTAD, in a joint report on G20 trade and investment measures released on 14 June 2010, noted the imposition of fewer trade restrictions but warned “they are accumulating”. In a separate report to WTO members on trade-related developments, Director-General Pascal Lamy confirmed this trend but urged governments to remain “vigilant” and to give priority to “exiting current restricting measures”. The OECD and UNCTAD also released a separate report on G20 investment measures.

This Report reviews trade and trade-related developments in the period from 1 November 2009 to mid-May 2010.

Despite the severity of the global financial crisis and its widespread impact on economies around the world, governments have largely resisted resort to trade barriers.

The global economic recovery has been evolving better than expected in the last six months, but the recovery is still subject to significant downsize risks. In many parts of the world the strength of the rebound is moderate. World GDP is expected to grow by 4.2 per cent in 2010 (compared with a decline of 0.5 per cent in 2009), mainly driven by good performance in emerging developing countries. Merchandise trade is forecast to expand by 9.5 per cent in 2010 after the unprecedented decline of 12.2 per cent a year earlier. In advanced economies, unemployment is projected to stay close to 9 per cent through 2011 and then to decline only slowly. Trade has an important role to play in firmly anchoring the economic recovery, and offers a sustainable, non-debt creating source of growth and development.

The sectoral analysis in the last section of this report illustrates the situation in three particularly sensitive areas (car industry, iron and steel sector, and textiles and clothing), where the global crisis seems to have been felt much harder and where governments implemented a number of trade and trade-related measures to help these sectors overcome the crisis. The analysis shows that these sectors were confronted with adjustment problems long before the crisis and that important challenges are still in front of them. They are characterized by high employment, overcapacity and were already the focus for trade restrictions.

The automobile industry was hit hard by the global crisis with demand falling sharply. Governments implemented a number of measures to support producers' balance sheets and to sustain consumer demand. The iron and steel industry was also heavily affected by the crisis. Many governments adopted fiscal stimulus packages, as well as a number of trade-specific measures, to support this industry. Trade-restricting measures in the textiles and clothing sector have been limited.

The textiles and clothing industry plays a significant role in international trade, representing on average 4.7 per cent of total world exports. The sector is very important for developing economies, accounting for almost 30 per cent of their total merchandise exports, and is also of significance to some OECD countries.

Since the end of the Multi-Fiber Agreement in 2005, substantial structural changes have been taking place in the textiles and clothing industry. The complete integration of the sector into the multilateral trading system after 40 years of import quotas had an impact on the world shares of exports across countries, with larger countries gaining greater market shares. In addition, the sector has been continuously moving towards full scale competition. In fact, the capital-intensive textiles segment and the labor intensive clothing industry are increasingly integrated through vertical supply chains which involve not only production but also distribution and sales activities.

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