Is the Chinese Textile Industry a Threat for Europe?

Topics: European Union, World Trade Organization, International trade Pages: 11 (3670 words) Published: March 29, 2006
Is Chinese Textile Industry a threat for Europe?

"Napoleon said of China "Let China sleep, for when she wakes, she will shake the world." This assumption turned out to be true, particularly these two last decades. As a matter of fact, China has undergone two restructuring processes: the industrialization and the transition from a centrally planned to a market economy since the early 1980's. Thus, Chinese government has been implementing an economic reform to reinforce its rapid growth. China is now awake and is already a major actor of the world economy, widely open to the world. It has reduced its trade barriers and has managed to attract huge foreign direct investments thanks to which China could improve its competitiveness. There is a particular area in which China has become a leader: the textile industry. After the end of the Multifibre Arrangement, China's textile exports rose astonishingly. China's share of the US$350 billion global textile market is expected to rise from its current 20 percent to a maximum of 60 percent in the coming years. Indeed thanks to its low-wages, China became the place where western textile companies outsource their production. Now China's success lead European firms to wonder how to remain competitive. How to face the big Chinese competitor? This paper aims at dealing with the textile issue. First we will deal with the Chinese openness to the world especially through its WTO membership and the consequences of the end of the Multifibre Agreement on the Chinese textile. Then, we will analyze the Chinese textile industry and see why China is getting so huge benefits from this sector. Finally, we will conclude by asking ourselves whether China is truly a threat for Europe.

I – the Consequences of China's Openness to the World on its Textile Industry The accession of China to the World Trade Organization
After almost fifteen years of negotiations between China and The World Trade Organization (WTO), an agreement was eventually reached in September 2001. These negotiations were dealing with the Chinese conditions of membership to the WTO. By reaching such an agreement China accepted to bring its trade regime into conformity with the WTO requirements. As a result, China committed itself to take several measures to open and liberalize its economy in order to better integrate in the world economy and offer a more predictable environment for trade and foreign investment in accordance with WTO rules. Following are some of the main measures China undertook to enter the WTO. First, China would have to provide non-discriminatory treatment to all WTO Members. All foreign individuals and enterprises, including those not invested or registered in China, must be accorded treatment no less encouraging than that accorded to enterprises in China with respect to the right to trade. Then, China would have to eliminate dual pricing practices as well as differences in treatment accorded to goods produced for sale in China in comparison to those produced for export. In addition to this, price controls would not be used for purposes of affording protection to domestic industries or services providers. Moreover, the WTO Agreement would be implemented by China in an effective and uniform manner by revising its existing domestic laws and performing new legislation fully in compliance with the WTO Agreement. Finally, within three years of accession all enterprises will have the right to import and export all goods and trade them throughout the customs territory with limited exceptions. On the other hand, during a "12-years period starting from the date of accession there would be a special Transitional Safeguard Mechanism in cases where imports of products of Chinese origin cause or threaten to cause market disruption to the domestic producers of other WTO members. However, prohibitions, quantitative restrictions or other measures maintained against imports from China in a manner inconsistent...

References: Porter, Michael (1990) The Competitive Advantage of Nations. London: Macmillan (p.72)
Porter, Michael (1990) The Competitive Advantage of Nations
Porter, Michael (1990) The Competitive Advantage of Nations. London: Macmillan (p.118)
Friedman Thomas L (2005), The Worl Is Flat, New York : Farear, Strauss and Giroux, (p.114)
Yun-Chung Chen (2004), Restructuring the Shanghai Innovation System: The Role of Multinational Corporations ' R&D Centers in Shanghai, Working Paper from Hong Kong University of Science and Technology, (p.4)
Nolan, P
Nolan, P. (2003). China at the Crossroads. Cambridge. Polity Press, 2004, (p.68)
Friedman Thomas L (2005), The Worl Is Flat, New York : Farear, Strauss and Giroux, (p.117)
Gilles Denis et Ghislain de Montalembert (2005), L 'Avenir du Luxe est Français, Le Figaro (p.31)
Friedman Thomas L (2005), The Worl Is Flat, New York : Farear, Strauss and Giroux, (p.115)
Linda Lim(21 February 2005), China Shows the Way in a Quota-Free Market, Yale Center for the Study of Globalization,
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Textile Industry Essay
  • Essay about Indian Textile Industry
  • Textile Industry Essay
  • Global Outsourcing in the Textile Industry Essay
  • Essay on Pest Analysis of Textile Industry
  • The Chinese Fireworks Industry Essay
  • FDI in the Chinese Telecommunication Industry Essay
  • textiles Essay

Become a StudyMode Member

Sign Up - It's Free