Economic dissertation3 - Essay Example

The EU has progressively liberalized textile and clothing imports under quotas to a present level of only 25% of total imports.(Heagreaves,2004)(Smook, 2005) Though the barriers to the entry into the EU market has increased considerably in terms of quality, innovation, lead-time and design, the benefits of ‘Chinese imports without quota’ remains attractive. If the top importers of textile apparel into the whole world EU is assessed, China ranks in the first place, but only accounts for 19.

9% of the market. The growth of China with increased penetration of EU will possibly assist in sustaining competitiveness in China, which will make it less reliant on US market. (Smook, 2005) The globalization, of China, in the phasing-out quota, will produce new challenges in the competitiveness, since quotas imposed were generally based on historical exports to those countries and bilateral relationships. Countries for which quotas provided a shield against their low competitive ability will lose out, and countries like China can only go forward through greater competitiveness.

China joined the WTO late, at a stage when the 10- year quota phase-out (MFA) was already in progress and as a result, a number of textile and apparel items were quota free overnight. And simultaneously, with joining the WTO, the Chinese Government was actively engaged in new political and economic reform. Large investment in the manufacturing industry increased exports, and the start of the phasing-out of State Owned Enterprises (SOE’s) increased unemployment. This resulted in the increase in production and exports.

Overall Chinese textile and apparel imports to the US alone grew by 117% in 2002, and another 75% by August 2003 in some quota categories (Heagreaves, 2004) (Smook, 2005) The massive and growing population of China provides for low cost of labour which can be a great advantage in achieving low cost production. The