Growth Strategy in an Era of Free Trade

Growth Strategy in an Era of Free Trade

Created: Friday, 18 May 2012 13:38

For poor nations highly dependent on textile and garment exports, the 2005 expiration of the textile quota system (the Multi-Fiber Agreement or MFA) could potentially be devastating to their national economies. Nowhere is this fear more genuine than in Cambodia, whose economy is more dependent on textiles and garment manufacturing than any other in the world. However, unlike most textile producing countries, Cambodia has a unique advantage in the post-quota environment; a labor rights verification system administered by the International Labor Organization that provides rights protection to Cambodians and brand security to buyers.

The Challenge

Can Cambodia’s success story be sustained as its preferential access to lucrative markets is eliminated? Can its approach to promoting business and labor interests be reproduced in other countries?

With support from the World Bank Group and the US-ASEAN Business Council, in 2004 GFI designed and implemented an engagement process to explore ways to use this uniquely just, innovative advantage to protect and expand Cambodia's textile exports. Joined by the European Commission, Australia AID, and the United Nations Development Program, in February 2005 we organized a 2-day conference of leading CEOs, government officials, and other trade and development experts to discuss Cambodia’s unique opportunities in the global marketplace. Hosted by the Royal Government of Cambodia, the conference highlighted Cambodia’s leadership potential in defining new best practices in global trade and investment, and the many reforms aimed at making Cambodia a premier destination for business.

How GFI Addressed the Challenge

In July 2005, GFI collaborated with the Carnegie Endowment for International Peace and Oxfam America to bring the discussion to American policymakers. More than 200 experts from government, industry, and civil society joined us for a wide-ranging discussion of the fate of textile workers and industries in the 21st century.

In 2006, GFI began to extend its work on textiles to other regions of the world, focusing first on the countries participating in the US-Central America Free Trade Agreement. Our efforts to make the global economy work for poor producers is helping bridge the gap between Central American industry, labor, and government, thereby increasing the prospects of better lives for workers and healthier profits for industry (see our hand-out on the Central America Work Program).

Countries like Cambodia face several challenges in the post-MFA context. They must successfully convert its verification system to meet the needs of the private sector, rather than governments, and do it in a way that conveys transparent and credible information to the media and the activist community that has created and motivated the demand for brand security in the first place. They must also establish and maintain successful market niches for themselves and their industries. While premium buyers have sustained this movement until now, the key to long-term success lies in securing business from a wider array of buyers that may be interested not only in high-quality product from Cambodia, but also in their reputation-safe production environment. GFI and its partners will be there, every step of the way.