Textile And Clothing Industry In India

And Phasing Out Of The MFA

                                                                                           P K Ganguly

THE Textiles industry in India roughly employs around 35 million people (in 2000-2001), making it the second largest employer in the country after agriculture. The economic significance of the industry is further established by the fact that it contributes about 18 per cent of the industrial production in the country and about 30 per cent of its export earnings.

The industry has several vast sectors within it, viz, the mill sector, the clothing or garment sector, the handloom sector and the powerloom sector. Each of these sectors employs lakhs of workers and also contributes significantly to the national economy.

The tradable commodities under textiles include readymade garments (clothing), cotton yarns, fabrics, silk and woolen products, etc.

GARMENT SECTOR

The garment sector, however, has emerged as the most globalised sector in the world today. This sector alone employs about 3.6 million workers. A large segment of the garment sector comprises of a vast domestic market, while another significant segment caters to the export market. Most of the units producing for exports are in Tirupur, Delhi and Mumbai. According to the ministry of commerce, 51 per cent of the total textile exports in 2000-2001, was from the garment sector alone. Nearly 80 per cent of Indian clothing exports go to the USA and the EU where they face quota restrictions. Apart from agriculture and Patents, textiles and clothing in particular are the murkiest elements on the stage of world politics. The struggle on these two sectors continued throughout the Uruguay round for eight years. Textiles and clothing still remain as the most contentious issues.

The export orientation and thereby production of garments for exports in India is a trend that started in the 1970s, with some exports to Africa and mostly to the erstwhile Soviet Union.

THE MFA

Since 1974 bilateral quotas negotiated under the Multi-Fibre Arrangement (MFA) governed the world export of textiles and clothing. This continued till 1994. Under the MFA, quotas were imposed by the developed countries on imports from the developing countries. The new Agreement on Textiles and Clothing (ATC) arrived at Marrakesh in 1994 as a part of the GATT agreement, sought to phase out the MFA in four phases over 10 years i.e. by December 31, 2004. So on December 31, 2004 the MFA would come to an end, and from January 1, 2005, trade in textiles and clothing will come fully under WTO. The philosophy is that there will be “free trade” under WTO without any quota regime.

Firstly, according to the ATC, 51 per cent of the quotas on imports from the developing countries were to be removed by December 2002, and then the remaining 49 per cent to be removed by December 2004. But at the Cancun Ministerial meeting of WTO in September, 2003 it was seen that the USA followed by the EU had not implemented even 50 per cent of their obligations. The Review Meeting held in Geneva in July 2004, to review the implementations after Doha and Cancun, did not review the implementation of the ATC at all. Already murmurs are being heard as reported in the press that some countries want to postpone the ATC beyond 2004. Thus it is still not certain when the so-called “free trade” and quota-free regime under WTO will begin. Also, even if the MFA comes to an end on December 31, there is no assurance regarding complete withdrawal of the quota regime by the USA and EU.

It should be noted that the developing countries including India wanted complete dismantling of the MFA during the Uruguay Round. The EU wanted its continuation. But the USA took the middle path and the ATC was finally signed to phase out the MFA by 2004.

India particularly was and still having euphoria about the shape of things to come after the WTO takes over the trade in textiles and clothing. The government expects to increase the exports of textiles, most particularly garments by about 4-5 times when the free trade with the quota free regime starts in January 2005. Based on such euphoric presumptions, the Satyam Committee made its recommendation to remould the Textile Policy in such a manner that it becomes consistent with the globalised economy and trade under the WTO regime. So the new Textile Policy (2001) was formulated, exposing all its sectors to the ravages of the WTO’s “free trade” philosophy.

The question arises, who gained when trade was actually “free” in the world. The UNCTAD report after the Marrakesh agreement had rightly pointed out that since 1970, the developing countries have always been at the receiving end in world trade. The rich North has been dominating over the poor South. In India also, the trade balance was never positive, i.e. exports never exceeded the imports.

The other aspect we have to see is that, in a free trade and quota free regime under WTO, India will have to face extremely stiff competition from other Asian countries like China, South Korea, Philippines, Indonesia, Thailand, Bangladesh, Srilanka, etc.

Further, in the free trade regime, India will also have to open its own domestic market to all other countries in the world particularly to the rich North. In a liberalised regime in the globalised economy under the WTO, we are already having very adverse effects on our trade and economy.

Already under pressure from America, the government has dereserved many items of production in the SSI, including handloom. The Satyam Committee also made recommendation for dereservation on the ground that reservation of any item of production does not have any meaning in an era of liberalisation. This apart, the government has also withdrawn the quantitative restrictions on imports.

Also, there will be several barriers, which the ongoing, WTO trade polices and the rich North have given us. Protectionism, anti-dumping measures, environmental issues, labour rights, child labour issues, etc – all put brakes on exports from India and the poor South.

THE AXE FALLS ON LABOUR

Whatever may happen in trade from January 2005 is a matter of speculation and arguments and counter arguments. But the working classes in any case will have to suffer on account of imperialist globalisation and the WTO.

It is certain that the adverse impact will be on the workers. With prices offered by the lead firms i.e. the MNCs, the exporters will try to cut their costs. Since fabric and other inputs have a direct bearing on the final quality of the product, these costs cannot be reduced beyond a point. So the axe will fall on labour.

We are already experiencing how globalisation encourages contractualisation and informalisation of production and economy leading to severe exploitation of the workers. The textile and clothing industry is one of the worst affected in this respect.

Even as a precursor to the full fledged WTO regime, there is allround violation of workers’ rights. There are high levels of casual employment, long working hours, no employment security, very low levels of wages, lack of any social security, more exploitation of women workers, no labour laws or trade union rights. Even the minimum standards set by the ILO Conventions are violated, namely, Freedom of Association and Right to Collective Bargaining (Conventions 87 and 98); Ban on Forced Labour (Convention 29); Determination of Minimum Wage; Ban on Child Labour (Convention 138); on the issue of migrant labour, on health, safety, occupational diseases and so on.

Already several national seminars are being organised to discuss the shape of the post-MFA textile industry and the workers. It has now become imperative for the CITU and the trade union movement to discuss the issue and decide the plans to meet the challenge.