IT IS WELL-KNOWN that textile lobbies of developed economies are making a last-ditch stand to protect their turf by trying to push back the end-2004 deadline for the abolition of quota system of exports. Their plea is that, post-quotas, large textile manufacturing countries such as China and India will swamp the developed economies, whose textile industry could well go into oblivion. In this context, it is rather ironic that New Delhi should decide to help China and its other competitors by reducing incentives for Indian textile exporters. Not surprisingly, the Synthetic and Rayon Textiles Export Promotion Council has taken strong exception to the recent 45 per cent across-the-board reduction in DEPB rates on a range of textile items and intermediates, terming it a "huge disincentive to the Indian textile industry and exporters... when competing countries... are taking steps to make their textile exports more competitive... ". The Government move is, no doubt, to make up the revenue loss following the excise duty changes on textiles in the Budget. Understandable, but it is shortsighted to take a step that would hit textile exports at a time when the segment needs all the help it can get to face the competition in the world market.

While this is vis-à-vis the domestic textile industry, on the external front New Delhi will have to take on the challenge of quota extension attempts. Though neither Washington nor Brussels figures officially, both are surely backing their industry lobbies which are trying, by proxy, to move the World Trade Organisation to get the Multi Fibre Arrangement extended. Indeed, such a move should have been anticipated by the international community when in Istanbul in March six American and Turkish textile groups demanded that the quota-mechanism be extended by three years. Then, in June, the Global Alliance for Fair Trade in Textiles and Clothing, representing 47 countries, called for an emergency WTO meeting "to address concerns regarding the phase-out" of the quota system. In mid-July, the subject was sought to be brought up at the WTOformally with Mauritius calling for a meeting to discuss the quota issue, supported by Bangladesh and Nepal, which also saw threats to their protected textile exports from China.

This demand was rightly turned down. Instead, as the WTO Director-General, Mr Supachai Panitchpakdi, said, the scheduled meeting of the Council of Trade in Goods — which will anyway look at the quota phaseout — could discuss the differences, especially the "adjustment costs" for textile exporters liable to be affected the most by the quota withdrawal. China appears to be the most feared textile exporter, particularly in view of the abnormally low-priced products it pushes into the world market. There is clear evidence to this (Chinese textile companies and organisations have themselves drawn attention to this undesirable phenomenon), but the remedy does not lie in upsetting the trade liberalisation process by tinkering with such milestone accords as the Agreement on Textiles and Clothing. Another point being underplayed is that India, Brazil, Pakistan and Egypt, among others, will also be affected by the artificially-low Chinese prices, a problem that will have to be tackled using the WTO dispute settlement mechanism.

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