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Developing countries look at textiles and clothing — exports of which amounted to $331 billion last year representing 8.3% of world trade in manufactures — as one major manufacturing sector in which they have competitive advantage. They also believe that trade success in this area would be an important step up in the industrial development ladder.

In the old GATT, the Multifibre Arrangement (MFA) governed a large portion of the exports of textiles and clothing from developing countries, to the main developed countries. Under the MFA (1974-94), developed countries were able to establish quotas on textiles and clothing outside normal GATT rules.

The ATC requires members to liberalize trade in textiles and clothing in two ways. Members must progressively bring ("integrate") all textiles and clothing products under normal WTO rules in four steps (16% in the first stage beginning in 1995, a further 17 per cent at the second stage in 1998, a further 18 per cent in the third stage in 2003 and the remaining 49% in the final stage on 1 January 2005). Members that maintain quota restrictions (Canada, the European Union, Norway and the United States), must progressively enlarge the quotas by increasing the annual growth rates by a set percentage at each stage. When the products subject to quotas are integrated, the quotas are removed.

A special safeguard mechanism protects members from damaging surges in imports during this transitional period. A quasi-judicial body — the Textiles Monitoring Body (TMB) — supervises the implementation of the ATC, including the examination of disputes.

At the review of the first stage of integration and in the current preparations for Seattle, developing country textile exporters have voiced serious concerns over what they view as lack of meaningful commercial benefits for them as the major importers have opted to integrate products of less export interest to developing countries with few quotas being removed. They have also criticized new restrictions imposed by a major importer through the use of the ATC safeguards as well as other measures taken by importing countries such as anti-dumping actions and changes in country-of-origin rules.

There is also the fear that with most of the quotas being kept for the final stage, the major importers might not be able to meet their obligations. A group of developing-country exporters (the ITCB) has suggested that in Seattle, Ministers secure liberalization of the sector by requiring major importers, among other things, to remove half of the existing quotas by the beginning of the year 2002.

The major importing members maintain that they have been observing scrupulously the requirements of the Agreement. In turn, they have criticized a lack of market-access improvements in other members in this sector as well as cases of quota circumvention through misdeclaration at customs of where the products come from.

Leading traders in clothing, 1998 (US$ billions)