 
 WORLD TRADE  
ORGANIZATION  G/C/W/496/Rev.1 
22 November 2004 
 
 (04-5051) 
Council for Trade in Goods   Original:   English 
  
POST-ATC ADJUSTMENT-RELATED ISSUES 
 
Initial Submission on Post-ATC Adjustment-related Issues from
 
Bangladesh, Dominican Republic, Fiji, Jamaica , Madagascar, Mauritius, Mongolia , Nepal , 
Sri Lanka and Uganda  
 
Revision  
  
 The following communication, dated 29 September,  is being circulated at the request of the 
above-mentioned Delegations. 
 
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1. The textile and clothing industry is of v ital importance for the ec onomy of many developing 
countries due to its contribution to GDP, inco mes, employment and exports. The Agreement on 
Textiles and Clothing (ATC) adopted during the Uru guay Round constituted an important step in the 
process of integrating this sector within the multilateral trading system.  2.  The ATC was devised to ensure the smooth in tegration of the textiles and clothing sector in 
the multilateral trading system by addressing the restri ctions on trade in textiles and clothing, and to 
ensure that developing countries benefited from an increased participation in the system. During these 
ten years of the implementation of the ATC, there have been mixed results for producers of textiles 
and clothing throughout the developing countries.   3.  There is a number of documents in available literature on the impact of the elimination of the 
quota system and further liberalisation of the sector. While, overall the studies suggest that the 
elimination of quotas and further liberalisation of the sector may be beneficial for developing 
countries as a whole and for the global economy in term s of efficiency gains and consumer welfare, 
they also indicate that there will be winners a nd losers. However, available information already 
indicates that the predicament of the LDCs and ot her small and vulnerable economies are already very 
serious. The textiles and clothing industry in these countries will have to undergo major restructuring 
to meet the challenges for surviv ing in a fiercely competitive environment. The attendant adjustment 
costs will be enormous with staggering implicati ons for the LDCs and ot her small and vulnerable 
economies having significant impacts in terms of ec onomic and social disruptions. This calls for 
concerted efforts by the international community and the development as well as trading partners to 
identify and implement relevant measures with a vi ew to solving the problems of those countries. 
 
4. It should be pointed out that all the analytical work done so far has focused mainly on the global effects of the liberalisation of trade in the textiles and clothing sector. There is now more than ever before a need for a more focused and disaggreg ated analysis at country level in order to assess 
the magnitude of the adjustment process in the affected developing countries. Indications are clear 
that the prospects of the LDCs and other small a nd vulnerable economies in particular, will worsen by 
the end of the phase- out in the coming months. Therefore, urgent measures should be put in place to 
address the concerns of the losers in the system a nd ensure smooth transition in order to avoid the 
disastrous economic and social conditions in these c ountries upon the expiry of the ATC agreement.  G/C/W/496/Rev.1 
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5. Assumptions and estimates made in one of  the studies place the loss of jobs worldwide 
around 27 million. In the same breath, it is now known that job loses especially for women will be highest. The textiles and clothing sector has been predominantly the sector offering the largest job 
opportunities for female employment. Alternative em ployment for females in as large numbers as in 
this sector are practically inexistent. Furthermore,  job losses as a result of contraction and closures of 
textiles and clothing factories will compound the prob lems of unemployment, thereby creating social 
unrest and increasing poverty.  6. Activities will be disrupted not only in this sector per se but will also induce negative multiplier effects permeating throughout other sectors in the respective countries. While the direct 
contribution of this sector to the overall economic  growth and development is high, one should not 
underestimate its linkages to other related economic sectors, such as banking and insurance, transport 
and logistics and other service providers, particul arly in the small enterprise segment. The overall 
economic and social consequences can therefore be very disastrous.   
7. The unbalanced distribution of the benefits of  the liberalisation in this sector is cause for 
serious concern. The losers in this process have se en their market share shrink drastically while the 
few winners have seen phenomenal growth. If this trend remains uncorrected , the Doha Round would 
be utterly disappointing for these countries. Ho w will the objectives of placing their needs and 
interests “at the heart of the Doha Programme” be achieved? Paragraph 2 of the Doha Ministerial Declaration recalling the Preamble of the Marrakesh  Agreement, enjoins WTO Members to “continue 
to make positive efforts designed to ensure that  developing countries, and especially the least-
developed among them, secure a share in the growth  of world trade commensur ate with the needs of 
their economic development. In this context, enhanced market access, balanced rules and well-
targeted, sustainably financed technical assistan ce and capacity-building have important roles to 
play”. 
 
8. The post-ATC adjustments are fundamental to addressing and reinvigorating production and 
competitiveness in the LDCs and other small and vulnerable economies. In particular, the small 
suppliers will face acute hardship in adjusting to the new situation. The economic transition will be 
difficult and painful if one considers that they al ready have to face a high level of indebtedness and 
high costs of inevitable social safety nets to cu shion the shock of these adjustments. Corrective 
measures need therefore be adopted and implemente d within WTO and other related agencies within 
the framework of policy coherence among concerned in stitutions in order to enable the textiles and 
clothing sector of the adversely affected countries to adapt to the increasingly challenging market 
conditions.   
9. The new market environment implies that ther e is ability and capacity to supply products on 
more competitive terms. This requires restructuring and modernising the textiles and clothing industry 
in these countries. However, the lack of resources  and capacity to address issues of international 
competitiveness constitute serious set back if measu res are not taken within the multilateral trading 
system to support the countries for both mitigating the adverse impact of trade liberalisation and 
withstanding the stiff competition from major players in the international market.  
 
 10. Keeping in view the aims and objectives of th e WTO of contributing “to raising standards of 
living, ensuring full employment and a large and steadily growing volume of real income and effective demand”, the Marrakesh Agreement recognizes the need for positive e fforts to ensure that 
developing countries, and especially the least develo ped among them, will participate in the growth in 
international trade commensurate with  their needs for development.  
 11. As  part of its mandate for overseeing the functioning of the WTO Multilateral Trade 
Agreements, the Council for Trade in Goods (CTG) has had within the purview of its work the 
oversight of the implementation of the ATC. With the expiry of the ATC and the integration of the  G/C/W/496/Rev.1 
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textiles and clothing sector in the multilateral tradi ng system, the CTG will now have to play an even 
more important function in this particular sector. Positive measures will need to be identified and put 
in place to address the difficult predicament of th e LDCs and other small a nd vulnerable economies.  
In this context, it is the considered view of th e LDCs and other small a nd vulnerable economies that 
an urgent work plan be undertaken by the CTG. 
 
12. Based on the above considerati ons, it is of utmost importance that the WTO, through the work 
of the CTG, undertakes an in-depth analysis of the adjustment-related issues and costs that may arise 
in various developing countries that are affected as a result of the phase-out of the quota system under the ATC. There is a need to ensure a smooth transition and minimising the disruptions resulting from 
the adjustment process.  
 13. With this in mind, the following proposals are made:  
• The WTO Secretariat should carry out a study  aiming at identifying the adjustment-
related issues and costs that may arise with the phase-out of the ATC, including 
recommendations on measures to address such i ssues. This study should look at the 
global impact of the phasing-out of the ATC agreement in a disaggregated manner at country level for the LDCs and other small and vulnerable economies who are the losers in the process;    
 
• The CTG should establish a Work Programme  to discuss with a view to finding 
solutions to the problems identified as ab ove as well as those raised by Members in 
relation to the adjustment-related issu es costs concerning the ATC phase-out.  
 
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