Welcome to CITI Confederation of Indian Textile Industry

Labelling Becoming the New Face of NTBs?

A serious attempt is currently being made, under the auspices of the USA and EU, to establish a separate international agreement on labelling requirements for textiles, clothing, footwear and travel goods, within the ambit of WTO. By now, they have achieved remarkable success and the exporting countries have been driven to negotiating the text, rather than debating the need for such an agreement. For those who have been watching the way international textile trade had been regulated in the past, this proposal is not an innocuous one. And it is important to ensure that sweet-talking on the intentions of the agreement does not cloud our vision, as had happened during the negotiations for textile specific arrangements on international trade in the past.

The preamble of the current text of the proposed agreement talks of ‘elaborating and building upon the provisions’ of WTO’s Agreement on Technical Barriers to Trade, in respect of the products covered by this agreement. But the text does not explain why such an exercise is required for these products and not for any other products. Labelling is recognised as a potential technical barrier to trade. There are provisions in the Agreement on Technical Barriers to Trade under which notifications can be issued by any contracting party, stipulating labelling requirements. The TBT Agreement also includes elaborate provisions to avoid misuse of these provisions. Establishing a separate labelling agreement for textiles and allied products would only help in circumventing some of these safety norms. And the only significance of these products seems to be that they are all exported mostly by developing countries and imported substantially by developed countries. This makes the proposal to have a separate agreement to permit deviations from the provisions of TBT Agreement for these products suspect. That the proposal has been mooted by the USA and EU makes it only more suspect.

The argument of the sponsors of this proposal that it is meant to be ‘TBT Plus’ is not likely to be taken seriously by those who have seen the implementation of textile specific agreements in the past. The objectives of MFA set out in its preamble included ‘progressively to achieve the reduction of trade barriers and the leberalisation of world trade in these products’ and Article 1 of MFA stated that ‘a principal aim in the implementation of this Arrangement shall be to further the economic and social development of developing countries and secure a substantial increase in their export earnings from textile products’. In practice, MFA was used only for increasing trade barriers and restricting world trade in textile products. And the economic and social development of developing countries, including least developed countries, was extensively hampered by the implementation of MFA.

A proper response from developing countries to the present proposal would have been to summarily reject it and to come together to take such a position. But it appears that their present attempt is restricted to manage some damage control by improving the text. Even in this attempt, it is necessary to pay focussed attention to some of the provisions. Specifying, as has been done in the present text, that declaration of fibre contents can be mandated can lead to disputes. For example, if a garment is labelled as containing 55% MMF and 45% cotton, it can be detained at the customs of the importing country on the argument that the MMF content is less or more than 55%. We have the experience of the quota era when dominant fibre was a decisive factor for product categorisation and a large number of shipments used to get stuck at the US ports on disputes relating to fibre contents.

The provisions for bilateral consultation included in the present text are rather weak and lack the force of relevant provisions in the TBT Agreement. As per clause 7 of the text, most of the safety measures provided in the TBT Agreement can be ignored for the products covered by the proposed agreement on labelling, ‘where urgent problems of safety, health, environmental protection or national security arise or threaten to arise’. It is pertinent to note that we have been able to keep out some of these issues from WTO with great difficulty. Stipulating such action when problems ‘threaten to arise’ makes the risk even more serious. And there is not even any provision allowing recourse to the Dispute Settlement Body for an aggrieved Member, though such recourse has not been specifically denied.

As is well known, textile products had been denied the benefits of GATT/WTO norms on trade regulation from 1961 to 2004 in the case of QRs. The present proposal seems to aim at perpetuating the discriminatory treatment to this sector in the case of technical barriers. The attempt obviously is to back up the unreasonably high tariff on textile products in the USA and EU with equally unreasonable NTBs.