Last month published an article criticising Oxfam, claiming that it has advocated for the abolition of the quota system and is therefore insensitive to the harmful effects that quota phase-out will have on many poor countries. Here, Oxfam hits back and explains how it views the challenges facing the global garment industry.

For nearly 50 years, industrialised countries have used quota restrictions to protect their markets against imports of textiles and clothing from competitive developing countries.

First, extending the quota regime is simply not an option. The US, EU and Canada have already notified the WTO of their plans for lifting quotas at the end of the year.

Article 9 of the 1995 WTO Agreement on Textiles and Clothing makes very clear that quotas cannot be continued beyond the end of the ten-year phase out period.

In a speech this spring, Pascal Lamy emphasised this: "Let me be quite clear about this: extending the textile quotas will not solve anything. We cannot turn the clock back".

For this reason, in its briefing paper "Stitched Up", Oxfam does not provide an analysis of the costs and benefits of the quota system; we take its phase-out as given and focus on policies that will save jobs in such countries as Bangladesh.

Second, Oxfam has never claimed that removing quotas will help all developing countries. The argument for lifting quotas is that on aggregate this will yield net benefits for developing countries.

India and China, the two countries that are expected to benefit most from the lifting of quotas, between them contain more than a third of a billion people living in absolute poverty (on less than one dollar a day). Growth of the textile and clothing industry in these countries should have a significant impact in reducing poverty.

We are perfectly aware, however, that Bangladesh and a number of other very poor countries will be hard hit when quotas are lifted. Oxfam's paper was co-authored by colleagues in Bangladesh and Sri Lanka who work with the industry and see its problems on a daily basis.

What can be done?
What can be done for the countries that will suddenly find themselves exposed to greater global competition in textiles and clothing when quotas are lifted?

There is definitely a need for southern governments to take action to promote investment in their industries.

We make specific proposals for this in our paper: "In the long run, southern governments must consider the business environment needed to promote the competitiveness of the garment industry…

"...Progress towards transparent, predictable and accessible legal institutions, and efficient customs administrations with minimal corruption are essential to attract investment. Improved roads, ports, rail networks, and airports, and access to reliable sources of energy, water, and telecommunications are also vital."

However, Oxfam does not believe that northern governments can be exonerated of all responsibility for the survival of the garment industry in poor and vulnerable countries. Take for instance Pondicherry, the town in South India that saw its main business collapse due to unfounded anti-dumping proceedings by the EU. As a result, thousands of poor people lost their jobs.

Rules of Origin
Our briefing paper also analyses the obscure yet important technical provisions of trade agreements called Rules of Origin. In the Ministerial Declaration that launched the Doha Round of trade negotiations, industrialised countries committed themselves "to the objective of duty-free, quota-free market access for products originating from Least Developed Countries".

Yet at present, even under the EU's "Everything But Arms" initiative, which is supposed to provide duty-free access to all LDC textile and clothing exports, half of Bangladesh's exports and nearly two-thirds of Cambodia's exports pay tariffs when entering the EU.

The reason that poor countries like Bangladesh and Cambodia are still being taxed on their textile and clothing exports is because Rules of Origin are much stricter than necessary.

While the prevailing business model means that several countries will typically be involved in the production of a garment, rules of origin often require the majority of a good's value to be added in the country of export in order for preferences to be obtained. This is completely unrealistic given that value added in assembly - the stage most often conducted in LDCs - is usually 25-30 per cent of the total.

By denying that exports are made in their final country of processing, Rules of Origin withhold desperately needed trade preferences from the world's poorest countries. That is why LDCs are currently lobbying with Oxfam for a relaxation in Rules of Origin in the EU.

More liberal Rules of Origin could have significant benefits for countries like Bangladesh. When Canada relaxed its rules of origin requirements in 2003 under its Market Access Initiative for LDCs, imports from Bangladesh doubled in a year.

Was Chinese fabric used in the production of those imports? Undoubtedly. Was this bad for Bangladesh? No. A simple 10 per cent increase in exports of garments may not represent a proportional increase in export earnings due to a small value addition; however, a 10 per cent increase in exports translates into approximately 200,000 more jobs for poor people in Bangladesh.

Finally, there is the issue of corruption. Corruption is clearly a major impediment to poverty reduction in many countries, including in South Asia, and must be tackled. This is why Oxfam supports grassroots organisations in the region that seek to hold their local and national institutions to account.

Instead of haggling about the details of the benefits and costs of the quota system, it is time for urgent, realistic action to face the difficulties wrought by the phase-out of quotas.

A multifaceted approach is required to address a complex problem in a complex industry. Oxfam is working with NGOs, southern and northern governments, businesses and trade unions around the world. We hope others will join our efforts.

By Catherine Barber, economic policy adviser, Oxfam GB Research Team; Jonathan Rose, a policy analyst for Oxfam Great Britain in Bangladesh; and Balachandiran Gowthaman, country representative for Oxfam Community Aid Abroad in Sri Lanka. All undertake research for Oxfam International's "Make Trade Fair" campaign.

To view the article that prompted this response - "NGOs provide less than charitable boost to fair trade" - click here.