Trade Restrictions and Hong Kong's Textile and Clothing Industry

Essay by gigga December 2006

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Most textiles and clothing worldwide were exported from China or Japan, above all Hong Kong is one of the most important centres. Quota restrictions regulated the international trade since decades. In January 2005, after the complete phase-out of the old quota restriction, price dumping was expected.

1.1 Long-Term Arrangement Regarding International Trade in Cot-ton Textiles LTA

In 1962, the Long-Term Arrangement Regarding International Trade in Cotton Textiles was signed by the US, after one year having a short-term market sharing arrangement. The LTA followed the Voluntary Export Restrained (VER), which restricted the export of cotton tex-tiles from Japan to the US for five years. Consequently, other Asian countries exported cotton textiles to the US. As LTA defined cotton as a material with 50% or more cotton by weight, exporters started to mix cotton with other fibres and consequently increased their exports. As a result, the textile industry of the US demanded stricter arrangements to protect their indus-tries.

1.2 The Multifibre Arrangement (MFA)

Bilateral agreements were signed, mainly between the US and Japan, Hong Kong or Korea, concluded by negotiating the Multifibre Arrangement in 1974 concerning the export of tex-tiles made of cotton, wool and man-made fibre. The MFA was quantity oriented, it required a quota growth rate of 6% per year. In many cases, the expectations were not fulfilled. 20 years after the introduction, MFA was accepted by 44 members, most of them were GATT mem-bers. The General Agreement on Tariffs and Trade helps to equalize the trade all over the world, but since the beginning of MFA it was in conflict with the GATT rules concerning tariffs and multilateral equalization.

1.3 WTO Agreement on Textiles and Clothing ATC

After the last year of MFA in 1994, the WTO Agreement on Textiles and Clothing was signed and contained decisions of...