‘Quotas on fabrics have been counter-productive’

With talk doing the rounds indicating that the department of trade and industry could extend the quota system on imports of certain lines of Chinese textiles and clothing, questions are being asked about the suitability of this supposed control measure. One of the loudest voices has been that of the Trade Law Centre (tralac). Tralac researchers Johann van Eeden and Taku Fundira found from their 18 months monitoring the quota system that, although there has been a reduction in textile and clothing imports from China, SA importers were finding alternative sources for the quota-line merchandise. “So,” they asked, “is the imminent decision to extend the quota system by the department the best measure to promote and develop the textiles and clothing industry in SA? Or is it time for a call to consider other alternative measures to achieve the same goal?” At the end of the first year of the quota system in late 2007, they produced the paper: “A full year analysis of trade flows between SA and China”. • Amongst the findings, they noted that: • Chinese imports in these textile/clothing quota lines declined by 50%, from R4 271-million to R2 143-m (i.e. the Chinese imports were 50% of the relevant 2006 value); • The Chinese market share in quota lines consequently declined from 76% to 50%; and • Other sources were compensating some R849-m for the fall in Chinese imports. • In the updated version of “SA quotas on Chinese clothing and textiles: 18-month economic review”, the following key points were noted: • Chinese imports in the targeted lines have stabilised at the levels observed after the significant drop in these imports at the start of 2007; • Other exporting countries have continued to strengthen their position in the SA clothing and textile market, both within and outside those lines targeted by the quotas; and • SA exports within the quota lines appear to have stabilised in nominal terms since the imposition of the quotas and are only slightly down. In real terms this still implies a reduction in exports over the 18-month period. So, effectively, the quota system was not fully protecting the SA textile and clothing industries, as the Chinese imports were being largely substituted by other cut-price source countries. And, in his answering comments to tralac, Alan B Jarvis of Tern Sportswear suggested that the quota system, in its present format, was actually damaging, not protecting, the SA industry. “The original request made by the industry via Clotrade,” he said, “requested protection against clothing but NOT fabric.” However, the agreement eventually signed by the government included fabric. “The effect of this,” said Jarvis, “was to deny the clothing manufacturers access to Chinese fabrics at world competitive prices, stopping them procuring many fabrics not freely available in SA.” He felt that this was actually causing employment losses – as the SA textile industry did not have the capacity to make up the difference, and retailers were forced to source outside the country.