The Ending of the Multi-Fibre Agreement

Essay by masudhasan83 September 2007

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CONTENTS Page No1. INTRODUCTION32. IMPLICATIONS OF THE PHASEOUT OF THE MFA43. IMPACTS - END OF THE MFA ON WORKERS AND COMMUNITIES3.1 NEGATIVE IMPACTS ONINTERNATIONAL BUSINESS ORGANISATION63.2 POSITIVE COUNTERPART BUSINESSORGANISATIONS AND BEHAVIOUR74. GLOBAL TEXTILE AND CLOTHING ARE CHANGING75. WINNER AND LOSER86. JOB FEAR87. HOW ARE COUNTRIES REACTING?97.1 CHINA97.2 INDIA107.3 PAKISTAN117.4 BANGLADESH127.5 COMBODIA127.6 EYGPT148. CONCLUSION 149. REFERENCES15INTRODUCTIONThe Multi Fibre Arrangement (MFA) (a.k.a. Agreement on Textile and Clothing (ATC)) governed the world trade in textiles and garments from 1974 through 2004, imposing quotas on the amount developing countries could export to developed countries. It expired on 1 January 2005.

The MFA was introduced in 1974 as a short-term measure intended to allow developed countries to adjust to imports from the developing world. Developing countries have a natural advantage in textile production because it is labour intensive and they have low labour costs. According to a World Bank/IMF study, the system has cost the developing world 27 million jobs and $40 billion a year in lost exports.

REPORTHowever, the Arrangement was not negative for all developing countries. For example the EU imposed no restrictions or duties on imports from the very poorest countries, such as Bangladesh, leading to a massive expansion of the industry there.

At the GATT Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organisation. The Agreement on Textiles and Clothing provided for the gradual dismantling of the quotas that existed under the MFA. This process was completed on 1 January 2005. However, large tariffs remain in place on many textile products.

Bangladesh is expected to suffer the most from the ending of the MFA, as it will now face more competition, particularly from China. Poorer countries within the developed world, such as Greece and Portugal, are also expected to lose out.