Textiles after 2005

In order to prepare for the end of the import quota system on 1 January 2005, the European Commission set up a High Level Group to recommend ways of increasing the competitiveness of the European textile industry. In this Communication, the Commission examined several specific measures recommended by the High Level Group and drew the necessary conclusions.

ACT

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, of 13 October 2004 - Textiles and clothing after 2005 - Recommendations of the High Level Group for textiles and clothing [COM(2004) 668 - Not published in the Official Journal].

SUMMARY

The WTO Agreement on Textiles and Clothing and all of its restrictions on imports of textiles and clothing were repealed on 1 January 2005. In preparation, the Commission set up a High Level Group for textiles and clothing at the beginning of 2004. The Group comprised representatives of the Commission and the European Parliament, some Member States, industrialists, retailers and importers, European trade associations, trade unions and representatives of local textile and clothing associations, and its mandate was to put forward recommendations in order to improve the sector's competitiveness and facilitate its adjustment to future challenges.

The economic situation in the textile sector has been difficult. Production and employment fell significantly between 2000 and 2003. The European Union (EU) had less success in its major export markets, and the US dollar/Euro exchange rate made the prices of its products less competitive. Finally, the development of the Euro-Med Area and the prospect of quota elimination led to relocation of production.

The High Level Group presented its first recommendations on 30 June 2004. In this Communication, the Commission examined these recommendations, which cover five areas.

Research and innovation

In the area of research and development, the Commission approved several initiatives proposed by the High Level Group, such as the creation of a European Technology Platform for Textiles and Clothing. It also called on the sector to take part in Community programmes in this area, for example the 7th Framework Programme for Research and Development or the Competitiveness and Innovation Framework Programme. The textile sector can also improve its supply chain management by means of initiatives to develop information society technologies.

Education, training and employment

The Commission highlighted the importance of social dialogue as a means of achieving reforms in this area. It agreed with the High Level Group's analysis of a need for a Europe-wide lifelong learning strategy for the sector and to ensure a better match between supply and demand for training. It also drew attention to European programmes offering the possibility of funding in this area, such as the Leonardo da Vinci programme and certain provisions of the European Social Fund.

Other competitiveness-related issues

The Commission evaluated several issues related to competitiveness, including:

REACH : the textile industry is a highly intensive user of chemicals. For this reason the Commission decided to examine the impact of the chemicals policy on the sector;
Intellectual Property Rights (IPR): the Commission's objectives are to enforce IPR in third countries, raise right-holders' awareness of counterfeiting and tackle counterfeiting and piracy, and it has made provision for the creation of a website on IPR and the organisation of seminars and networking meetings;
access to finance: small and medium-sized enterprises (SMEs) encounter many problems in obtaining credit. Several Community financial instruments have therefore been set up, such as the Financial Services Action Plan, to provide support for SME financing.

Regional aspects

The Commission does not recommend a sectoral approach in the area of regional policy. However, it is necessary to anticipate developments in the sector and put in place appropriate programmes to mitigate the socio-economic impact on those regions where the sector is dominant. Member States must set aside an amount of 1 % of the Structural Funds ' annual contribution for the "Convergence" objective and 3 % of the "Regional competitiveness and employment" objective contribution to cover unforeseen local or sectoral crises linked to economic and social restructuring, or to the consequences of trade liberalisation.

Trade policy issues

With regard to trade policy, the Commission examined four issues which are essential to the competitiveness of European textile companies:

creation of the Euro-Mediterranean Area: the completion of the Euro-Mediterranean Free Trade Area is crucial for the textile sector, as it will enable the sector to maintain the whole chain of production close to the European market and, therefore, attain advantages involving costs, quality and proximity. The Commission is therefore focusing on the conclusion of free trade agreements between the countries concerned;
access to markets: the Commission is working towards opening up the market while at the same time promoting a level playing field, for example within the Doha Agenda negotiations. It is also continuing to call on members of the World Trade Organisation (WTO) to cut their customs duties to the lowest possible level and to eliminate non-tariff barriers;
Chinese imports: the Commission suggested monitoring Chinese imports through customs declarations. It has already taken the initiative of establishing a sustained dialogue with the relevant Chinese authorities;
trade defence instruments: the Commission drew up guidelines, for example for the application of safeguard clauses, and undertook to facilitate the use of existing trade defence instruments.

The Commission pointed out, in conclusion, that in addition to all of these measures initiatives would have to be taken at national and regional levels. Moreover, in order to observe the impact of quota elimination, the Commission recommended that the High Level Group continue its work.

Subsequent developments

The High Level Group continued to meet after quotas had been abolished. It expressed its support for the Shanghai Agreement of 10 June 2005. This agreement provided for a three-year adjustment period during which the rate of increase in imports of textiles from China was restricted in certain categories. Following a crisis during which Chinese textiles were blocked in European ports after their import quotas had been exceeded, the EU and China reached an agreement on 5 September 2005 to clear blocked Chinese textile imports.

On 18 September 2006 the High Level Group adopted a follow-up report entitled "European textiles and clothing in a quota-free environment". It noted that the wave of very low-priced imports from Asia had not reached the level feared and felt that the EU would maintain its technological lead until 2020 at least. Nevertheless, the sector requires radical restructuring. The High Level Group recommended that companies cooperate more, set up large-scale groups of companies and focus their efforts on innovation and development.

Although the activities of the High Level Group for textiles and clothing formally came to an end in September 2006, the Group's members highlighted the importance of continuing to monitor the sector's development and of assessing in 2007 the progress made in implementing the recommendations.

See also