1. Coping with Industrial Restructuring and MFA Phase out Experience of UI ZENSEN Toru Nakajima Central Executive Standing Committee Member UI ZESNEN

2. Economic Recovery after WW II In spite of the import regulation in the markets of the developed countries, the Japanese textile industry kept growing up to 1955 as a leading industry in Japanese economy.

3. Improvement of Industrial Structure Japanese textile industry faced structural excess of equipments because there remained import regulation against Japan in the western countries after Japan ’ s affiliation to WTO. Measures for improvement of industrial structure to strengthen international competitiveness of the Japanese textile industry; 3 major pillars: modernizations of equipments, adjustment of the size of companies, disposal of excessive equipments In 1970s, Japan lost international competitiveness and faced excessive import of textile products China ’ s comeback to international community, development of textile industry in other Asian countries, Strengthening voluntary regulation of textile export to U. S., establishment of MFA Trade balance of textile turned excess of imports over exports in 1987 and Japanese textile industry faced the crisis of hollowing out by shrinking production equipments and shifting of operation overseas, which required further reform of industrial structure.

4. Japan ’ s response 1. Abolishment of excessive equipments To prevent textile companies cutting each other ’ s throat Initiative by the government and industry Cost of abolishment was compensated by government subsidy and assistance of beneficial companies

5. Japan ’ s response 2. Support for companies which change business or sell out companies Guidance committee was set up in the industry Guidance and assistance for change of business Special long-term and low interest loan for start up a new business by government-affiliated banks Tax cut for liquidation income and profit by selling a company

6. Japan ’ s response 3. Support for unemployed workers Job placement within textile industry Job placement and skill training for other industries Various subsidy schemes (for companies and for workers)

7. Japan ’ s response Joint demand of labour and management against the government Precondition of the joint demand ￬ Prior consultation of labour and management

8. Japan ’ s response No impact to Japan by Phase out of MFA ⇒ Import penetration rate: over 80% ⇒ Production of high-grade goods through industrial structure reform Japan aim to expand its export to China ⇒ More Chinese people are quality goods oriented

9. Will Textile Export of Asian Countries Increase?

10. Impact of Termination of MFA 1. More opportunity of export 2. Cost down: No cost needed to purchase quota 3. Specialization of industry with high export competitiveness 4. Loss of export opportunity for items with no export competitiveness (Vested interest protected by quota)

11. Share of imported clothes from China in the US Non-liberalized item Liberalized item * Estimated based on the figures from Apr. to Oct. (%)

12. Share of woven goods import from China in the US Liberalized item *Estimated based on the figures from Apr. to Oct. (%) Non-liberalized item

13. Prices of textile goods imported from China in the US comparison 2001 → 2004 Non-liberalized item Liberalize item *Estimated based on the figures from Apr. to Oct. (%)

14. Quota premium in the major countries and regions (2002-2003) TextileApparel U.S.A.EUU.S.A.EU China20.01.036.054.0 India3.01.020.0 Pakistan9.89.410.39.2 ASEAN*0.01.07.03.0 Korea, Taiwan 0.01.02.50.3 （ Ratio in FOB price ： % ） *ASEAN: calculated based on the figures for Indonesia, Philippine and Thailand *ASEAN: calculated based on the figures for Indonesia, Philippine and Thailand

15. Result of Phase out of MFA; Export of textile exporting Asian countries to U.S. and Europe should increase. However, China will substantially grow, India will also. On the other hand, some countries will lose. Why? Consumers see Quality and Price when they buy

16. Advantage of China Quality Most advanced machines Improvement of skill Cost Higher productivity by most advance machines Domestic sourcing of textile materials (cotton, chemical fiber, etc.) Huge domestic market Prompt response to business talk: Network of oversea Chinese Human resource

17. Equipment shipment of major textile machines companies and share of shipment to China （ 2003) 0 200 400 600 800 1000 0 2 4 6 7 Discontinuous yarn machine Shuttleless weaving machine Shuttle weaving machine (10 thousand ） （ 10 thousand ） (10 thousand) 61% 71% 0 5.0 1.0 1.5 2.0 2.5 96% ChinaChinaChina

18. Response of Losing Countries Tripartite cooperation among government ， employers and trade unions Improvement of quality, cost down, transference to high value-added products, etc. Most advanced facilities --- Low-interest loan Change of business, company closure --- Support for workers who lost jobs