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From 1974 until the end of the Uruguay Round, the trade was governed by the
Multifibre Arrangement
(MFA). This was a framework for bilateral agreements or unilateral actions that established quotas limiting imports into countries whose domestic industries were facing serious damage from rapidly increasing imports.
The quotas were the most visible feature. They conflicted with GATT’s general preference for customs tariffs instead of measures that restrict quantities. They were also exceptions to the GATT principle of treating all trading partners equally because they specified how much the importing country was going to accept from individual exporting countries.
Since 1995, the WTO’s Agreement on Textiles and Clothing
(ATC) took over from the Mulltifibre Arrangement. By 1 January 2005, the sector
was fully integrated into normal GATT rules. In particular, the quotas came to an end, and importing countries
are no longer be able to discriminate between exporters. The Agreement on Textiles and Clothing
no longer exists: it’s the only WTO agreement that had self-destruction built in.
Integration:
returning products gradually to GATT rules back to top
Textiles and clothing products were returned
to GATT rules over the 10-year period. This happened gradually, in four
steps, to allow time for both importers and exporters to adjust to the
new situation. Some of these products were previously under quotas. Any
quotas that were in place on 31 December 1994 were carried over into the
new agreement. For products that had quotas, the result of integration
into GATT was the removal of these quotas.
The agreement stated the percentage of
products that had to be brought under GATT rules at each step. If any of
these products came under quotas, then the quotas had to be removed at
the same time. The percentages were applied to the importing country’s
textiles and clothing trade levels in 1990. The agreement also said the
quantities of imports permitted under the quotas had to grow annually,
and that the rate of expansion had to increase at each stage. How fast
that expansion would be was set out in a formula based on the growth
rate that existed under the old Multifibre Arrangement (see table).
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Four
steps over 10 years back to top
The schedule for freeing textiles and garments products from import quotas (and returning them to GATT rules), and how fast remaining quotas
had to be expanded.
The example is based on the commonly-used 6% annual expansion rate of the old Multifibre Arrangement. In practice, the rates used under the MFA varied from product to product.
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Step |
Percentage of products
to be brought under GATT (including
removal of any quotas) |
Percentage of products
to be brought under GATT (including
removal of any quotas) |
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Step 1:
1 Jan 1995 (to 31 Dec 1997) |
16%
(minimum, taking 1990 imports as base) |
6.96%
per year |
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Step 2:
1 Jan 1998 (to 31 Dec 2001) |
17% |
8.7%
per year |
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Step 3:
1 Jan 2002 (to 31 Dec 2004) |
18% |
11.05%
per year |
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Step 4:
1 Jan 2005
>Full integration into GATT (and final elimination of quotas).
>Agreement on Textiles and Clothing terminates. |
49%
(maximum) |
No quotas left |
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The actual formula for import growth under quotas
was:
by
0.1 x pre-1995 growth rate in the first step;
0.25 x
Step 1 growth rate in the second step; and
0.27 x
Step 2 growth rate in the third step. |
Products brought under GATT rules
at each of the first three stages had to cover the four main types of
textiles and clothing: tops and yarns; fabrics; made-up textile
products; and clothing. Any other restrictions that did not come under
the Multifibre Arrangement and did not conform with regular WTO
agreements by 1996 had to be made to conform or be phased out by 2005.
If further cases of damage to the
industry arose during the transition, the agreement allowed additional
restrictions to be imposed temporarily under strict conditions. These
“transitional safeguards” were not the same as the safeguard measures
normally allowed under GATT because they can be applied on imports from
specific exporting countries. But the importing country had to show that
its domestic industry was suffering serious damage or was threatened
with serious damage. And it had to show that the damage was the result
of two things: increased imports of the product in question from all
sources, and a sharp and substantial increase from the specific
exporting country. The safeguard restriction could be implemented either
by mutual agreement following consultations, or unilaterally. It was
subject to review by the
Textiles Monitoring Body.
In any system where quotas are set for individual exporting countries, exporters might try to get around the quotas by shipping products through third countries or making false declarations about the products’ country of origin. The agreement included provisions to cope with these cases.
The agreement envisaged special treatment for certain categories of countries
— for example, new market entrants, small suppliers, and least-developed countries.
A Textiles Monitoring
Body (TMB) supervised the agreement’s implementation. It consisted
of a chairman and 10 members acting in their personal capacity. It monitored
actions taken under the agreement to ensure that they were consistent,
and it reported to the Goods Council which reviewed the operation of the agreement before each
new step of the integration process. The Textiles Monitoring Body also
dealt with disputes under the Agreement on Textiles and Clothing. If
they remained unresolved, the disputes could be brought to the WTO’s regular
Dispute Settlement Body. When the Textiles and Clothing Agreement
expired on 1 January 2005, the Textiles Monitoring Body also ceased to
exist.
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on textiles
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