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for governments to negotiate trade agreements. It operates
a system of trade rules. Since 1948, the General Agreement
on Tariffs and Trade (GATT) had provided the rules for the
system. Whereas GATT had mainly dealt with trade in goods,
the WTO and its agreements now cover trade in services, and
in traded inventions, creations and designs (intellectual
property).
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Pakistan is the greatest sufferer from the quotas regime as
it has the highest percentage of textiles and clothing
exports among all developing countries. Pakistan can
therefore benefit greatly from the freer trade in textile
and clothing and this Agreement provides for possibilities
of expansion of its quota bound exports annually by 10
percent. Pakistan’s export of textile and clothing are
marred by another factor, as we are on a lower end of the
quality and unit prices for almost all textiles and
clothing exports. Under quota free environment, Pakistan
can get benefit in the export of textile raw material also.
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Acknowledgement
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TABLE OF CONTETNTS
EXECUTIVE SUMMARY...........................................................................................................................I
ACKNOWLEDGEMENT...........................................................................................................................IV
1. INTRODUCTION......................................................................................................................................1
1.1 RESEARCH TITLE........................................................................................................................................1
1.2 RESEARCH PROBLEM...................................................................................................................................1
1.3 OBJECTIVES...............................................................................................................................................1
1.4 RATIONALE FOR THE RESEARCH....................................................................................................................2
1.5 BACKGROUND/IMPORTANCE OF THE PROPOSED WORK.......................................................................................2
METHOD........................................................................................................................................................5
2.1 QUANTITATIVE RESEARCH...........................................................................................................................5
2.2 QUALITATIVE RESEARCH.............................................................................................................................5
2.3 DESCRIPTIVE RESEARCH..............................................................................................................................6
3. TEXTILE INDUSTRY IN PAKISTAN....................................................................................................8
3.1 COTTON GINNING SECTOR.........................................................................................................................10
3.2 COTTON SPINNING SECTOR........................................................................................................................10
3.3 WEAVING AND MADE-UP SECTOR..............................................................................................................11
3.4 COTTON CLOTH SECTOR...........................................................................................................................11
3.5 TEXTILE DOWN STREAM INDUSTRY .............................................................................................................12
3.6 FILAMENT YARN MANUFACTURING INDUSTRY .............................................................................................14
3.7 ART SILK AND SYNTHETIC WEAVING INDUSTRY ..........................................................................................14
4. HOSIERY INDUSTRY OF PAKISTAN................................................................................................15
5. PAKISTAN HOSIERY MANUFACTURERS ASSOCIATION (PHMA).........................................19
5.1 PHMA CENTRAL OFFICE...........................................................................................................................22
6. WORLD TRADE ORGANIZATION (WTO).......................................................................................23
6.1 WHAT IS THE WORLD TRADE ORGANIZATION?............................................................................................23
6.2 IS IT A BIRD, IS IT A PLANE?.......................................................................................................................23
6.3 ABOVE ALL, IT’S A NEGOTIATING FORUM ….................................................................................................23
6.4 IT’S A SET OF RULES …............................................................................................................................24
6.5 AND IT HELPS TO SETTLE DISPUTES ….........................................................................................................25
6.6 BORN IN 1995, BUT NOT SO YOUNG............................................................................................................25
6.7 THE OBJECTIVES OF WTO.........................................................................................................................26
7. IMPACT OF WTO ON PAKISTAN’S HOSIERY INDUSTRY.........................................................28
7.1 AGREEMENT ON TEXTILE AND CLOTHING (ATC).........................................................................................28
7.2 INTEGRATION PROCESS..............................................................................................................................30
7.3 ANTI-DUMPING DUTIES ON TEXTILES AND CLOTHING...................................................................................33
7.3.1 Members applying Duties............................................................................................................34
7.3.2 Members affected.........................................................................................................................34
7.4 END OF TEXTILE QUOTA: IMPLICATIONS FOR PAKISTAN.................................................................................35
8. GOVERNMENT REFORMS FOR BETTERMENT OF HOSIERY INDUSTRY...........................40
8.1 TEXTILE CITIES PROJECT...........................................................................................................................41
9. CONCLUSION AND RECOMMENDATIONS ...................................................................................43
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9.1 REMEDY THROUGH FOREIGN DIRECT INVESTMENT (FDI).................................................................................43
9.2 IMAGE BUILDING OF PAKISTAN TO ATTRACT FDI .......................................................................................43
9.3 FOCUS ON VALUE ADDITION......................................................................................................................43
9.4 TECHNOLOGY UP-GRADATION & CAPACITY BUILDING....................................................................................44
9.5 HUMAN RESOURCES DEVELOPMENT ...........................................................................................................44
9.6 ACCREDITATION AND CERTIFICATION...........................................................................................................45
9.7 REDUCING THE COST OF DOING BUSINESS IN PAKISTAN .................................................................................45
9.8 NEED FOR IMPROVING HOSIERY PRODUCTION...............................................................................................45
9.9 SHOULD OPT FOR “MARKET ORIENTATION” STRATEGY..................................................................................46
9.10 DIVERSIFICATION...................................................................................................................................46
9.11 WELL-DEVELOPED INFRASTRUCTURE.........................................................................................................47
9.12 EMPHASIZING MORE ON FINISHED GOODS...................................................................................................47
9.13 MISCELLANEOUS...................................................................................................................................47
REFERENCES.............................................................................................................................................49
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TABLE OF FIGURES AND TABLES
1.3 Objectives
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• To analyze the impact of Free Trade Zone on the
Hosiery Industry of Pakistan?
• What will be the role of Pakistan Manufactures
Association (PMHA) in the upcoming WTO Scenario?
• Strategies adopted to secure the future of Hosiery
Industry of Pakistan.
• To analyze the threats and opportunities for Hosiery
Industry of Pakistan regarding impact of WTO.
• Ways to promote products of Hosiery Industry of
Pakistan into foreign and local market.
• In the future it should be a positive sign or
disaster for Hosiery Industry of Pakistan.
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industry back.
3
exports', organized by the Air Cargo Agents Association of
Pakistan (ACAAP), he said only 37% of external trade is in
textile quota exports, which would also have a fair chance
to grow in the new trade scenario, if the exporters adopt
modern technology to improve quality of products, develop
supply chains, reduce cost of business, and increase
productivity.
4
Method
5
that the goal of understanding a phenomenon from the point
of view of the participants and its particular social and
institutional context is largely lost when textual data are
quantified.
6
(Landman 1988: 59). The emphasis is on describe rather than
on judge or interpret.
The aim of the latter is that when the total record has
been compiled, revision of the documents can occur so that
the perceptions derived at can be thoroughly investigated.
Because the total population during a specific
investigation can not be contemplated as a whole,
researchers make use of the demarcation of the population
or of the selection of a representative test sample. Test
sampling therefore forms an integral part of descriptive
research. In descriptive research the following steps
should be included:
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• Information retrieval. The application of appropriate
information retrieval techniques to comply with the
criteria set for authenticity and competency is
relevant.
• General planning. Any research requires sound planning.
• Report writing. The report entails the reproduction of
factual information, the interpretation of data,
conclusions derived from the research and
recommendations.
• We should make sure that we understand the meaning of
the terminology used. Consult the recommended sources
for detailed explanations. However, further reference
must be made to aspects related to test sampling.
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The textile sector has spearheaded the export bonanza of
manufactured goods for some time. Its share in the economy
along with its contribution to exports, employment, foreign
exchange earnings, investment and value added in industry;
make it the single largest determinant of the growth in the
manufacturing sector. It has a one-fifth weightage in the
quantum index of large-scale manufacturing and a 46 percent
share in overall manufacturing activity. Pakistan has
emerged as one of the major cotton textile product
suppliers in the world market with a share in world yarn
trade of about 30 percent and 8 percent in cotton cloth.
The share of textiles in export earnings is 68 percent with
a value of around $ 8 billion. The value addition in the
sector accounts for 9 percent of GDP and its share in
overall employment is 38 percent. During the last four
years, the government in collaboration with the private
sector has embarked upon a plan to combat the challenges of
opening up to foreign competition in the next calendar year
(WTO:2005) and then (SAFTA) when all quotas will be
abolished. Pakistan has been seeking the removal of these
quota barriers for some time and its vertically integrated
textile sector is all set to capitalize on this imminent
change in quota regime.
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3.1 Cotton Ginning Sector
There are 1221 Ginning factories in Pakistan of which
1075 are in the Punjab and the remaining 146 are in
Sindh. The total capacity is approximately 20 million
bales per year (assuming a 100 day ginning season).
Against capacity, the total production of ginned
cotton is 10.0 million bales suggesting an excess
capacity of ginning in the country. Ginning is the
sector which is first in the process of value addition
leading to readymade garments or other textile
products. Unfortunately, the ginning sector is out-
dated and needs modernization.
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3.3 Weaving and Made-up Sector
The patterns in the weaving and made-up sector which
is comprised of hosiery, garments, towels, canvas, and
bed wear are different from those of the spinning
sector. The weaving and made-up sector has three
different sub sectors i.e. integrated textile units,
independent weaving units, and power loom units.
Problems facing power looms encompass poor technology,
scarcity of quality yarn and the lack of institutional
financing for their development from an unorganized to
an organized sector. The government under the Textile
Vision 2005 has focused more on providing credit and
other facilitative support to diversify the products,
especially to cater to the needs of the high value
added sector like the garment industry.
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value terms and 2.45 percent in quantitative terms.
The unit value of cotton cloth increased by 13.89
percent, which is partly compensation for a higher
input cost during the year under review. This sector
served as the main engine for downstream industries
like bed wear, made-ups and garments.
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is distributed into small, medium and large-scale
units, most of them, having 50 machines or less. This
sector is attracting considerable investment and many
new units are coming up in the organized sector every
year. This sub-sector is facing multi-dimensional
problems like high value addition in competing
countries and its inelasticity in shifting the burden
of increased prices of yarn, cotton cloth or other
inputs to the end user. The sector performed poorly
during July-April 2003-04 because its exports declined
both in terms of quantity and value by 24.1 percent
and 7.5 percent respectively in spite of a 22 percent
increase in unit value in the international market.
The value of exports declined from $ 891.2 million
last year to $ 824.1 million this year.
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3.6 Filament Yarn Manufacturing Industry
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4. Hosiery Industry of Pakistan
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per cent capacity utilization. Out of these machines 35
percent are circular knitting, 15 per cent flat knitting
for manufacture of tubular/flat knitted fabrics, and
remaining 50 per cent are available for socks knitting. The
installation share of circular knitting machines in Sindh
is 59 per cent, in Punjab 39 per cent and in NWFP 2 per
cent.
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technology. These firms exclusively export a daily average
of 500 kgs knit fabrics and hosiery.
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of knitted goods it is necessary to have deep knowledge and
technique of different type/style of circular knitting
machines according to required quality of fabrics. A number
of circulars knitting machines of different brands are
available in international markets. Pakistan has also been
manufacturing small size circular knitting machine at
Faisalabad.
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5. Pakistan Hosiery Manufacturers Association
(PHMA)
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The industry sustains directly livelihood of 210,000
skilled workers and their families; 490,000 unskilled
workers and their kith and kin. Another 350,000 people
benefit in allied cottage industries. Thus the industry
provides directly and indirectly sustenance to well over a
million people.
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products have the largest consumption. Observe and sports
event and one will find millions and millions of people
young and old, male and female, all wearing knitted
products. Large multinationals, all over the world
advertise their products with their messages printed on t-
shirts.
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5.1 PHMA central office
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6. World Trade Organization (WTO)
The WTO was born out of negotiations; everything the WTO
does is the result of negotiations
23
negotiations, under the “Doha Development Agenda” launched
in 2001.
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6.5 And it helps to settle disputes …
The last and largest GATT round, was the Uruguay Round
which lasted from 1986 to 1994 and led to the WTO’s
creation. Whereas GATT had mainly dealt with trade in
goods, the WTO and its agreements now cover trade in
services, and in traded inventions, creations and designs
(intellectual property).
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6.7 The objectives of WTO
♦ To trade in services.
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of activities. They deal with: agriculture, textiles and
clothing, banking, telecommunications, government
purchases, industrial standards, food sanitation
regulations, intellectual property, and much more. But a
number of simple, fundamental principles run throughout all
of these documents. These principles are the foundation of
the multilateral trading system. The main purpose of these
agreements is to ensure that international trade flows as
freely as possible and the rules are “transparent” and
“predictable.” They serve as a forum for trade
negotiations. These agreements, negotiated and signed by a
large number of the world’s nations make up the core of the
WTO. They are contractual, negotiated and signed by
governments binding them to keep their trade policies
within agreed limits.
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7. Impact of WTO on Pakistan’s Hosiery Industry
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GATT system. It is now going through fundamental change
under a 10-year schedule agreed in the Uruguay Round. The
system of import quotas that has dominated the trade since
the early 1960s is being phased out.
From 1974 until the end of the Uruguay Round, the trade was
governed by the Multifibre Arrangement (MFA). This was a
framework for bilateral agreements or unilateral actions
that established quotas limiting imports into countries
whose domestic industries were facing serious damage from
rapidly increasing imports. The quotas were the most
visible feature. They conflicted with GATTs general
preference for customs tariffs instead of measures that
restrict quantities. They were also exceptions to the GATT
principle of treating all trading partners equally because
they specified how much the importing country was going to
accept from individual exporting countries.
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restrictions to be imposed temporarily under strict
conditions. These transitional safeguards are not the same
as the safeguard measures normally allowed under GATT
because they can be applied on imports from specific
exporting countries. But the importing country has to show
that its domestic industry is suffering serious damage or
is threatened with serious damage. And it has to show that
the damage is the result of two things: increased imports
of the product in question from all sources, and a sharp
and substantial increase from the specific exporting
country.
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At each of the first three stages, products should be
chosen from each of the following categories: tops and
yarns, fabrics, made-up textile products, and clothing.
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importing country that overall imports of a product were
entering the country in such increased quantities as to
cause serious damage - or to threaten it - to the relevant
domestic industry, and that there was a sharp and
substantial increase of imports from the individual country
concerned. Action under the safeguard mechanism could be
taken either by mutual agreement, following consultations,
or unilaterally but subject to review by the Textiles
Monitoring Body. If taken, the level of restraints should
be fixed at a level not lower than the actual level of
exports or imports from the country concerned during the
twelve-month period ending two months before the month in
which a request for consultation was made. Safeguard
restraints could remain in place for up to three years
without extension or until the product is removed from the
scope of the agreement (that is, integrated into the GATT),
whichever comes first.
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In the context of a major review of the operation of the
agreement to be conducted by the Council for Trade in Goods
before the end of each stage of the integration process,
the Council for Trade in Goods shall by consensus take such
decisions as it deems appropriate to ensure that the
balance of rights and obligations in this agreement is not
upset. Moreover, the Dispute Settlement Body may authorize
adjustments to the annual growth of quotas for the stage
subsequent to the review with respect to Members it has
found not to be complying with their obligations under this
agreement.
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the reaction to dumping contrasts with the approach of the
Subsidies and Countervailing Measures Agreement.)
34
7.4 End of Textile Quota: Implications for Pakistan
35
With the abolition of quota, Pakistan will have greater
access to the world market, in general, and to the US
market, in particular. The new era will give a push to our
textile exports of those products, which are limited due to
quota constraints. At the moment, many Pakistani exporters
are manufacturing and exporting textile products from
countries, which have plenty of unutilized quota or
countries which are quota free like Myanmar and Bangladesh.
When the quota system will disappear, these Pakistanis may
come back to Pakistan. However, they may move to countries
where they could find tariff advantages. In this
forthcoming scenario, Pakistan government can provide
incentives to these entrepreneurs to move to Pakistan.
Under quota free environment, Pakistan can get benefit in
the export of textile raw material also.
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developed countries remained out of the ambit of
the quota system. Today 130 countries are
producing textiles and clothing for export
markets comprised of about 30 nations.
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range of poorer countries even though they were
not competitive. These marginal countries are
likely to be squeezed out in the post quota world.
o Availability of fabric
o Infrastructure for Marketing and Transport
o Low Wages
o Favorable Trading Terms
o Proximity to the Market
38
o At Factory Level
o Staff Training
o New Machinery & Technology
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8. Government Reforms for Betterment of Hosiery
Industry
Textiles which also include hosiery being export based are
a major earner of foreign exchange and have always remained
a priority. The government has been at the forefront of the
formulation of a high powered committee which has already
given its deliberations in the form of the “Textile Vision
2005”. The Vision is aimed at establishing an open market
driven, innovative and dynamic Textile sector which is
internationally integrated, globally competitive and fully
equipped to exploit the opportunities created by the quota
free textile trade beyond January 2005.
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Figure 2: Installed Capacity of Textile Industry
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infrastructure facilities, like water supply, a better
sewerage system and uninterrupted electricity supply etc.
The textile city will have other supporting services as
well like banking and finance, insurance and postal
services and Internet and E-commerce.
42
9. Conclusion and Recommendations
43
like garments, Hosiery, knitwear and other textile made-
ups, the export volume of textiles can be increased by
manifolds. In this respect top priority should be given to
stitching industry that leads to highest value addition and
employment generation.
44
9.6 Accreditation and Certification
45
made from a combination of natural and man-made fabrics,
are preferred in clothing the world over. In Pakistan 20%
protective duty on the import of Polyester Fibre is levied
on account of which 25% polyester fabrics is blended with
man-made fabrics, while a country like Bangladesh blend 35%
Polyester. This scarcity has resulted in the poor
contribution by Pakistan in this sector.
9.10 Diversification
46
9.11 Well-developed infrastructure
9.13 Miscellaneous
47
♦ A comparative study taking into account the inputs
costs, tax rates prevailing in the bordering countries
should be conducted.
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References
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