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European restructuring and import policies for a textile industry in crisis

Published online by Cambridge University Press:  22 May 2009

Michael B. Dolan
Michael B. Dolan
Affiliation:
Associate Professor of Political Science and Coordinator of the Program on Global and Regional Political Economy in thePaterson School of International Affairs at Carleton University, Ottawa.
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Abstract

In the last ten years, employment in the textile and clothing industry in the European Community has decreased by roughly one million workers. In the face of falling employment, profits, and investment, and of surplus capacity, business and labor have increasingly pressured state and European authorities for adjustment assistance and import protection. Although most industrialized countries face similar pressures, policy making in the member states of the European Economic Community is made difficult by the uneven development of the EEC, which regulates trade policy and state aids to industry and restricts business practices but which is not able to construct interventionist or structural policies. Further complicating the situation is the split between two groups of states that differ profoundly on whether the EEC should adopt a liberal trading, noninterventionist position or a protectionist trade policy combined with state aids to mitigate the economic and social effects of restructuring. Tracing these developments over the last ten years, I argue that contradictions in the European political economy in textiles have led to a protectionist bias in Community policies, notwithstanding important developments in outward processing as a means of restructuring.

Type
Organizing International Trade in Textiles
Information
International Organization , Volume 37 , Issue 4 , Autumn 1983 , pp. 583 - 615
Copyright
Copyright © The IO Foundation 1983

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References

This article is based on research funded by grants from the Social Sciences and Humanities Research Council of Canada and the German Marshall Fund. These funds allowed me to conduct research and interviews in Europe in 1978, 1980, and 1982, which were invaluable. I wish to thank Steven Langdon and Lynn Mytelka, with whom I am working on a larger project on industrial adjustment and the changing international division of labor, for their helpful comments, as well as Peter Katzenstein and the reviewers of this journal.

1. See, for example, Farrands, Chris, “Textile Diplomacy: The Making and Implementation of European Textile Policy 1974–1978,” Journal of Common Market Studies 18 (09 1979), pp. 22–39CrossRefGoogle Scholar; Tsoukalis, Loukas and Ferreira, António da Silva, “Management of Industrial Surplus Capacity in the European Community,” International Organization 34 (Summer 1980), pp. 355–76CrossRefGoogle Scholar; and Strange, Susan, “The Management of Surplus Capacity: Or How Does Theory Stand Up to Protectionism 1970s Style?” International Organization 33 (Summer 1979), pp. 303–34CrossRefGoogle Scholar.

2. The development of common commercial policy in the EEC is discussed in Dolan, Michael B., “Commercial Policy,” in Lasok, Dominic and Soldatos, Panayotis, eds., The European Communities in Action (Brussels: Bruylant, 1981), pp. 285–307Google Scholar; also see Verreydt, E. and Warlbroeck, J., “European Community Protection against Manufactured Imports from Developing Countries: A Case Study in the Political Economy of Protection,” World Bank Staff Working Paper no. 432 (10 1980)Google Scholar.

3. The various strands of industrial policy are discussed in Hodges, Michael, “Industrial Policy: A Directorate General in Search of a Role,” in Wallace, Helen, Wallace, William, and Webb, Carole, eds., Policy-making in the European Communities (New York: Wiley, 1977), pp. 113–35Google Scholar; Hodges, “Industrial Policy,” in Lasok and Soldatos, European Communities in Action; and Ellis, Doreen, “European Industrial Policies: Balancing Interdependence and Interest,” The Annals 440 (11 1978), pp. 122–34Google Scholar.

4. A very brief summary of the different national policies toward the clothing industry is presented in Torre, José de la and Bacchetta, Michael, “European Policies towards the Clothing Industry,” Journal of Common Market Studies 19, 2 (1980), pp. 95–122CrossRefGoogle Scholar.

5. See Farrands, , “Textile Diplomacy”; and Aggarwal, Vinod Kumar, “Hanging by a Thread: International Regime Change in the Textile/Apparel System, 1950–1979” (Ph.D. thesis, Stanford University, 1982)Google Scholar.

6. On the German textile industry, see Froebel, Volker, Heinrichs, Jurgen, and Kreye, Otto, The New International Division of Labour: Structural Unemployment in Industrialised Countries and Industrialisation in Developing Countries (Cambridge: Cambridge University Press, 1980)Google Scholar, parts 1 and 2. The Dutch industry is discussed in Langdon, Steven W., “Industrial Restructuring in the Dutch Textile Industry,” paper prepared for the European Politics Group Conference, Canadian Political Science Association, Ottawa, 12 1981Google Scholar.

7. The French textile industry is discussed in Mytelka, Lynn K., “The French Textile Industry: Crisis and Adjustment,” in Jacobson, Harold K. and Sidjanski, Dusan, eds., The Emerging International Economic Order: Dynamics, Constraints and Possibilities (Beverly Hills: Sage, 1983)Google Scholar.

8. The member states have undertaken many nontariff measures that retard the flow ofintra- Community trade. For example, the German government has restricted the sale of wool balls to 20 or 50 gram units, consequently keeping the 10, 25, and 40 gram units produced and sold in other member states out of the German market. In 1981, French border officials systematically checked the imports of Italian knitwear, even though systematic searches are banned for intra-Community trade. The member states usually desist from these activities when confronted by the Commission, although the Commission is sometimes forced to bring proceedings to the Court of Justice, as it had to do against Germany over the restrictions on the sale of wool balls. Safeguard measures, specifically a ban against imports, are taken by individual member states with the concurrence of the Commission against the diversion of specific products from third countries whose quota is exhausted through other member states. Thus, for example, British authorities might prevent the export of sweaters produced in Hong Kong from other member states to the British market.

9. The European textile industry in the context of the changing international division of labor is discussed in Michael Dolan, Steven Langdon, and Lynn Mytelka, “Economic Crisis and Industrial Change: European-African Industrial Restructuring in a Changing World Economy” (manuscript in progress). Already published works on the structure of the industry in Europe include Edwards, Geoffrey, “Four Sectors: Textiles, Man-Made Fibers, Shipbuilding, Aircraft,” in Pinder, John, ed., National Industrial Strategies and World Economy (London: Allanheld, Osmun, 1982), pp. 85–122Google Scholar, and Farrands, Chris, “Textiles and Clothing,” in Strange, Susan and Tooze, Roger, eds., The International Politics of Surplus Capacity (London: Allen & Unwin, 1981), pp. 80–89Google Scholar.

10. EEC Commission, “Commission Communication to the Council on the Situation and Prospects of the Textile and Clothing Industries in the Community,” Com (81) 388 final (Brussels, 27 07 1981), p. 8Google Scholar; and EEC Commission, Directorate-General for Economic and Financial Affairs, “Changes in the Industrial Structure in the European Economies since the Oil Crisis—1973–1978,” special issue of European Economy (Luxembourg: Office for Official Publications of the European Communities, 1979), p. 22Google Scholar.

11. Firms in the United States have several advantages over European firms, including a faster growing market, greater protection from the tariff structure, lower wages, and a cheaper supply of raw materials. See EEC Commission, “Commission Communication to the Council,” 27 07 1981, p. 21Google Scholar.

12. Commission Response to Written Question 1833/80 from the European Parliament.

13. EEC Commission, Spokesman's Group and Directorate-General for Information, “The European Community's Textiles Trade,” Europe Information 44/81 (Brussels, 04 1981). p. 11Google Scholar.

14. EUROPE Documents no. 1110 (25 07 1980), p. 3Google Scholar.

15. It has been estimated that a 1% increase in productivity means a loss of 10.000 jobs per year in the textile sector and 15,000 jobs per year in clothing; thus an average increase of 3% over five years at a constant production level would mean the loss of 375.000 jobs. EEC Commission, “Commission Communication to Ihc Council,” 27 07 1981. p. 15Google Scholar.

16. EUROPE no. 2883 (3 04 1980). p. 16, and no. 3022 (19 November 1980). p. 14Google Scholar.

17. The first two multifiber arrangements and their antecedents are discussed extensively in Aggarwal, “Hanging by a Thread,” and elsewhere, allowing a more cursory and directed analysis here.

18. EEC Commission, “Textiles: the Multi-Fibre Arrangement,” Background Report 1SEC/ B43/80 (London, 11 09 1980)Google Scholar.

19. For example, at that time the member states restricted textile imports on an individual basis and the Community had to mesh these national requirements into the EEC's bilateral agreements with the supplier countries. See EEC Commission, Spokesman's Group and Directorate- General for Information, “The European Community and the Textile Arrangements,” Europe Information (Brussels, n.d.), p. 60Google Scholar; Farrands, , “Textile Diplomacy,” pp. 25–27Google Scholar; and Aggarwal, , “Hanging by a Thread,” pp. 352–56Google Scholar.

20. “Joint Statement” of COMITEXTIL (the body representing the textile producers' federations from the EEC member states) and the European Clothing Manufacturers' Association (Brussels, 10 1976), p. 24Google Scholar.

21. EEC Commission, “New Textile Arrangements,” Background Report ISEC/B33/78 (London, 27 04 1980), p. 2Google Scholar.

22. See note 6 above.

23. EEC Commission, Communication to the Council, Com (76) 720 final (Brussels, 6 01 1977); EEC Council Regulation 3019/77, Official Journal no. L357 (31 12 1977)Google Scholar.

24. EEC, “European Community and Textile Arrangements,” p. 44Google Scholar.

25. Farrands, , “Textile Diplomacy,” p. 29Google Scholar.

26. The European Social Fund provided about 70 million EUA in the 1978–1981 period toward the retraining of roughly 60,000 textile workers. The European Regional Development Fund (ERDF) does finance some textile investment but more relevant is the aid (800 million EUA provided in the 1975–1980 period) for investment and infrastructure projects in the poorer regions, where the textile and clothing industry is disproportionately located.

27. See the European Communities' Official Journal no. L298 (19 10 1978)Google Scholar; EUROPE no. 2551 (1 11 1978), p. 6Google Scholar; and EUROPE no. 2775 (24 10 1979), p. 10Google Scholar.

28. Articles 92–94 and 85–86 of the Rome Treaty.

29. As quoted in “Commission Communication to the Council on General Guidelines for a Textiles and Clothing Industry Policy,” Com (78) 362 final (Brussels, 20 07 1978), p. 2Google Scholar.

30. EUROPE no. 2362 (9–10 01 1978), p. 9Google Scholar.

31. EUROPE no. 2366 (14 01 1978), p. 7Google Scholar.

32. Business Week, 6 March 1977, pp. 43–44; EUROPE no. 2364 (12 01 1978), p. 6Google Scholar.

33. EUROPE no. 2366 (14 01 1978), p. 7Google Scholar.

34. EUROPE no. 2474 (22 06 1978)Google Scholar.

35. Art. 85, para. 3, Rome Treaty.

36. EUROPE no. 2480 (30 06 1978), p. 5Google Scholar.

37. Ibid.

38. Economist, 11 November 1978, pp. 58–60.

39. Indeed, after the fiber cartel was announced, representatives from the oil and chemical industries did approach the Commission seeking similar arrangements for their industries (Economist, 22 April 1978, p. 89).

40. Vouel's support and activity on behalf of the draft proposal is perplexing since, as the Commissioner responsible for competition policy, he might have been expected to oppose it. It has been suggested that Vouel could best control the fate of the proposal (and hence defeat it) by cosponsoring the proposal with Davignon (interview with Community official, June 1980).

41. European Report no. 654 (23 01 1980)Google Scholar, Business Brief, pp. 4–5.

42. EUROPE no. 2836 (28–2901 1980), p. 10Google Scholar.

43. EUROPE no. 2904 (8 05 1980), p. 6Google Scholar.

44. In the renewal of the cartel, the agreement to use bilateral purchasing contracts was annulled: EEC Commission, Eleventh Report on Competition Policy (Brussels, 1982), p. 41Google Scholar. and EUROPE no. 3471 (22 10 1982), p. 14Google Scholar.

45. EUROPE Documents no. 1002 (18 05 1978), p. 2Google Scholar.

46. The European Communities' Official Journal no. C272 (16 11 1978), pp. 3–6Google Scholar.

47. Interview with German national official, June 1980.

48. EUROPE no. 2721 (16–17 07 1979)Google Scholar.

49. EEC Commission proposal to the Council, Com (78) 769 final (11 January 1979).

50. European Parliament, Working Document 1–623/79 (14 January 1980); EEC Council Regulation 2914/79, European Communities' Official Journal no. L326 (22 12 1979)Google Scholar, and EUROPE no. 2815 (22 12 1979), p. 7Google Scholar.

51. Interview with German national official, June 1980; and EUROPE no. 2836 (28–2901 1980), p. 9Google Scholar.

52. A brief introduction to offshore assembly and useful citations are presented in Tharakan, P. K. M., The International Division of Labour and Multinational Companies (Westmead, U.K.: Saxon House, 1979), pp. 95–103Google Scholar. Useful empirical analysis is contained in Finger, J. M., “Tariff Provisions for Offshore Assembly and the Exports of Developing Countries,” Economic Journal 85 (1975), pp. 365–71CrossRefGoogle Scholar, and “Offshore Assembly Provisions in the West German and Netherlands Tariffs: Trade and Domestic Effects,” Weltwirtschaftliches Archiv 113, 2 (1977), pp. 237–49CrossRefGoogle Scholar.

53. EEC Commission Proposal for a Council Regulation, Com (81) 61 final (Brussels, 17 March 1981), p. 1.

54. EEC Commission, “Commission Communication to the Council,” 27 07 1981, p. 55Google Scholar.

55. Internal estimates of the EEC Commission. Precise statistics concerning outward processing are not available because some of the member states do not collect statistics on OPT and national definitions vary.

56. About 45% of the offshore assembly of textiles and clothing is done in Yugoslavia, about 40% in other Eastern European countries (Romania, Hungary, and Poland), and the remaining 15% in Greece, Malta, Portugal, Spain, Tunisia, Morocco, and Cyprus.

57. EEC Commission Response to Written Question no. 497/80 of the European Parliament, 8 October 1980.

58. Labor productivity in the German clothing industry decreased by 4% between 1975 and 1978, while productivity increased in other European countries (Commission's reply to Written Question no. 322/80 of the European Parliament, 15 July 1980).

59. Interview with German national official, June 1980. The “basket” system is explained briefly in EEC, “European Community and the Textile Arrangements,” pp. 40–42Google Scholar.

60. Tharakan, , International Division of Labour, p. 131Google Scholar.

61. Finger, , “Offshore Assembly Provisions,” p. 134Google Scholar.

62. See Dolan, , “Commercial Policy,” pp. 297–303Google Scholar; Council Decision 75/210/EEC, Official Journal no. L99/7 (27 03 1975)Google Scholar; and Council Decision 77/809/EEC, Official Journal no. L360/1 (20 12 1977)Google Scholar.

63. European Report no. 577 (3 03 1979)Google Scholar.

64. EEC Commission Proposal to the Council, Com (79) 32 final (Brussels, 1979). The sources for this discussion are internal EEC documents. Due to the contentious nature of the proposal, it was not released to the public.

65. European Trade Union Committee–Textiles, Clothing and Leather, “Trade Union Organisation with Respect to Outward Processing” (Brussels, 10 03 1980)Google Scholar.

66. Internal Community documents.

67. EEC Commission, “Proposal for a Council Regulation,” Com (81) 61 final (Brussels, 17 03 1981)Google Scholar.

68. The Commission's change of heart is noted in an insightful article by David, Rhys, “Commission Modifies Plans to Restructure Industry,” Financial Times, 18 05 1979Google Scholar.

69. EEC Commission Response to Written Question 497/80 of the European Parliament, 8 October 1980; and elsewhere.

70. EUROPE no. 2958 (18 07 1980), p. 8Google Scholar; and EEC Commission Response to Written Question 322/80 of the European Parliament, 15 July 1980.

71. EUROPE Documents no. 1110 (25 07 1980)Google Scholar.

72. Ibid., p. 5; and EUROPE no. 2986 (26 09 1980), p. 16Google Scholar.

73. The antidumping duties were directed toward a number of firms, including American Cyanamid for acrylic fibers and Monsanto, Eastman, and DuPont for polyester yarns; and the duties against yarns were renewed with some modifications in February 1983. See EEC Commission, “Synthetic Fibres”; Council Regulation 3429/80, Official Journal no. L358/91 (31 12 1980)Google Scholar; and EUROPE no. 3555 (25 02 1983), p. 5Google Scholar.

74. EUROPE no. 3016 (7 11 1980), p. 3Google Scholar, and no. 3080 (18 February 1981), p. 13. The import penetration of American corduroy and denim went from 10 to 13% and from 24 to 31%, respectively, in the 1977–1980 period.

75. Articles discussing the European reaction to American textile exports to the EEC countries appear in EUROPE no. 2863 (6 03 1980), p. 9Google Scholar; EUROPE no. 2986 (26 09 1980), p. 16Google Scholar; and European Report no. 759 (14 03 1981), External Relations, pp. 6–7Google Scholar.

76. EUROPE no. 3012 (1 11 1980), p. 7Google Scholar.

77. EUROPE no. 3033 (4 12 1980), p. 11Google Scholar.

78. This discussion is based primarily on position papers regarding MFA3 that were issued by COMITEXTIL and MAILLEUROP, the European Hosiery and Knitwear Industry, and by the textiles committee of the European Trade Union Committee in 1980 and 1981.

79. EEC Commission Communication to the Council, Com (81) 129, “Information Memo,” P-21 (Brussels, 04 1981)Google Scholar.

80. Textile Asia, September 1981, pp. 23–26.

81. EUROPE no. 3179, 15 07 1981, p. 7Google Scholar.

82. EUROPE no. 3247, 11 11 1981, p. 5Google Scholar; and various other issues of EUROPE and European Report.

83. EUROPE no. 3250 (16–1711 1981), p. 8Google Scholar.

84. GATT, Textiles Committee, Com. Tex/W/120, 20 November 1981, “Proposal for a Protocol Extending the Arrangement Submitted by Developing Exporting Countries, Participants in the Arrangement.”

85. For example, Textile Asia, February 1982, pp. 27–30.

86. Ibid., p. 12.

87. The “Protocol Extending the Arrangement Regarding International Trade in Textiles” and the “Conclusions of the [GATT] Textiles Committee adopted on 22 December 1981” are reproduced in EUROPE Documents no. 1185 (7 01 1982)Google Scholar. While the Protocol is the important legal document, the guidelines for the bilateral negotiations are specified in the statement of the GATT Textiles Committee.

88. Textile Asia, February 1982, p. 27.

89. EEC Council, “Projet de procès-verbal de la 752ème session du Conseil tenue à Bruxelles, le jeudi 25 fèvrier 1982,” 4875/1/82 reév. 1; and European Report no. 847 (27 02 1982), Internal Market, pp. 12–16Google Scholar.

90. EUROPE no. 3438 (6 09 1982), p. 10Google Scholar.

91. EUROPE no. 3475 (28 10 1982), p. 6Google Scholar.

92. Negotiations with Argentina were held up “for political reasons,” and Taiwan was dealt with unilaterally on terms comparable to the other dominant suppliers. See EUROPE no. 3507 (15 12 1982), p. 7Google Scholar, and the Official Journal no. L/374 (13 12 1982)Google Scholar.

93. See note 79 above.

94. GATT, Textiles Committee, Com. Tex/W/119, “Statement by the Representative of the European Communities on 20 November 1981,” 20 November 1981, p. 4.

95. See Item no. 13 in the “Conclusions of the Textiles Committee adopted on 22 December 1981.”

96. European Report no. 847 (27 02 1982)Google Scholar.

97. Interviews with representatives of the member state governments and the Commission, conducted in March 1982.

98. Ibid. Also, EEC Council Regulation 636/82, Official Journal no. L76 (20 03 1982)Google Scholar.

99. Ibid., Article 2(3).

100. EEC Council Regulation 3589/82, Official Journal no. L374 (31 12 1982)Google Scholar, Annex XIII.

101. In 1981 the Commission began a posteriori monitoring of all aid projects to ensure that the schemes were being applied appropriately. Under these guidelines, all aids to the textile industry are monitored-even those included in general and regional aid schemes, which are not submitted in advance to the Commission for examination and which for the most part are outside the Commission's authority. See the EEC Commision, various issues of the annual Report on Competition Policy (Brussels)Google Scholar.

102. Interviews with representatives of member state governments and the Commission, March 1982.

103. Langdon, “Industrial Restructuring.”

104. Several excellent comparative studies have appeared, including Strange, “Management,” Tsoukalis and Ferreira, “Management of Industrial,” and Edwards, “Four Sectors.”

105. On shipbuilding, in addition to the citations in the previous note, see Chris Cragg, “Shipping and Shipbuilding,” in Strange, and Tooze, , International Politics, pp. 90–101Google Scholar.

106. On the steel industry, additional to the aforementioned comparative studies, see Stephen Woolcock, “Iron and Steel“ in Strange, and Tooze, , International Politics, pp. 69–79Google Scholar; Walter, Ingo, “Protection of Industries in Trouble-The Case of Iron and Steel,” The World Economy 2 (05 1979), pp. 155–87CrossRefGoogle Scholar; Joliet, René, “Cartelisation, Dirigism and Crisis in the European Community,” The World Economy 3 (01 1981), pp. 403–45CrossRefGoogle Scholar; and Jones, Kent, “Forgetfulness of Things Past: Europe and the Steel Cartel,” The World Economy 2 (05 1979), pp. 139–54CrossRefGoogle Scholar.

107. Economist, 23 April 1982, p. 52, and 14 May 1983, pp. 75–78.

108. For a general discussion of the EEC and industrial adjustment, see Woolcock, Stephen, “Industrial Adjustment: The Community Dimension,” in Hodges, Michael and Wallace, William, eds., Economic Divergence in the European Community (London: Allen & Unwin, 1981), pp. 58–79Google Scholar.