The EU Loses its Rag

How much notice, exactly, did the world need? A deadline to scrap global quotas on textile exports was set by trade negotiators 10 years ago. This week, less than a month before the quotas are due to expire, the European Union - which yesterday stepped up its campaign to appoint Pascal Lamy, its former trade commissioner, as the new head of the World Trade Organisation - has decided that something should be done to hold back China's likely domination of the world textile market.

The EU's view of the textile issue is mostly wrongheaded, and some of its solutions are even more so. China will indeed most likely gain considerably from the elimination of quotas: by some estimates it will gain about half the world export market for clothing, up from a 21 per cent share in 2002. But as well as benefiting consumers, liberalisation should give opportunities to other poor countries that can adapt.

The EU's warning to China no doubt reflects a mixture of protectionist fears about its own remaining textile companies and concerns about developing countries like Bangladesh that have benefited from quotas by developing a garment assembly industry.

The first of these motives is mistaken. The textile industry is shrinking inexorably in rich countries, the US's attempts to hold back the tides of change notwithstanding, and its passing should not be resisted. The second is more understandable; with few transferable skills among the workforce and weak transport infrastructure, poor and geographically remote garment-producing countries may find it difficult to switch production to other industries.

But urging voluntary export restraint on the Chinese, as the EU is doing this week, will do more to hurt consumers than to protect producers elsewhere. The Commission's idea that China limit cotton imports - reducing a source of demand for poor African cotton-growers - verges on absurdity.

If the EU wants to help textile exporters threatened by Chinese competition, it should concentrate on improving its preferential trade regime for very poor countries, following Canada's example by easing the "rules of origin" that have the effect of requiring developing countries to import textiles from the EU so they can export completed garments back to it.

Even this is likely to be little more than a palliative that eases the transition. The long-run solution for nations wishing to retain international competitiveness is to produce higher value-added garments, not try to undercut China on basics. That few developing country garment exporters have done this so far is regrettable. But there is little evidence that continuing to penalise consumers by extending the transition period would do much good.

The end of the quota regime and its fragmentation of the global textile industry is overdue. In a week that its candidate sought to lead the global campaign to liberalise trade, the EU should accept its passing.