The Multifibre Arrangement
The Multifibre Arrangement
The Arrangement Regarding International Trade in Textiles, more commonly known as the Multifibre Arrangement (MFA), originated in 1974 and has been renewed several times since then. The MFA is an agreement among the governments of over 40 countries establishing rules concerning trade in textiles and garments made of cotton, wool, and synthetic fibres. The MFA establishes rules, sanctioned by the General Agreement on Tariffs and Trade (GATT), by which quotas can be levied against producer countries. The specific arrangements are established on a bilateral basis between producer and consumer nations. The MFA initially was signed to assist the textile industries in developed countries that were facing significant foreign competition. These industries, which tend to be labor intensive, also have formed a strong political bloc in industrial countries and are exerting significant governmental influence. The MFA was directed to help the textile industries gain "breathing space" in competing with the industries in developing countries and then provide for a gradual liberalization of trade. Liberalization has not occurred, hqwever, due to the strong political force of the developed-country industries.
Unlike the commodities agreements described earlier, which often focus on price, the MFA operates primarily on quantitative restrictions. In addition, it allows discriminatory treatment by importers against exporter nations. GATT rules require a most-favored-nation (MFN) status for countries so that all countries in the MFN category are treated similarly in terms of tariffs or quotas. The MFA, however, allows the importer countries to apply differential sanctions against exporter countries.
The major beneficiaries of the MFA are the import-competing textile industries in the developed countries as well as the quota-holding producers. Many of these producers have shifted production into higher value added products or have sold those quotas to others. Significant graft and corruption also have appeared in some of the quota-holding countries. In 1987 a U.S. garment manufacturer established an assembly facility in Mexico to take advantage of low wage rates and favorable tariff arrangements between Mexico and the United States. The manufacturer also had quotas from the Mexican government to export the product to the United States, but when the manufacturer attempted to ship the finished goods to the United States, U.S. Customs would not allow the goods to enter. Customs keeps track of the quota allotted to Mexico by product category and the value of shipments made to the United States, and when the value of shipments equals the allotted quota, other shipments are disallowed. Apparently, more quotas had been allotted by the Mexican government than were permitted under the agreement with the United States. Either someone made a mistake, or quotas were sold illegally.
According to UN estimates, the textile and garment industry is the largest employer in the developing countries. As a result, developing countries are endeavoring to loosen the MFA to allow entry of more goods to industrial countries, such as the United States, the world's largest textile importer. Quota-holding companies and the import-competing industries in the developed countries have set up strong barriers to liberalization.36 The MFA has created significant trade friction between the producer and consumer countries. Many industrialized countries, including the United States, would like to see the MFA within GATT. However, this free trade stance is a difficult one for President Bush, because it would seriously damage textile producers in the United States.
The Arrangement Regarding International Trade in Textiles, more commonly known as the Multifibre Arrangement (MFA), originated in 1974 and has been renewed several times since then. The MFA is an agreement among the governments of over 40 countries establishing rules concerning trade in textiles and garments made of cotton, wool, and synthetic fibres. The MFA establishes rules, sanctioned by the General Agreement on Tariffs and Trade (GATT), by which quotas can be levied against producer countries. The specific arrangements are established on a bilateral basis between producer and consumer nations. The MFA initially was signed to assist the textile industries in developed countries that were facing significant foreign competition. These industries, which tend to be labor intensive, also have formed a strong political bloc in industrial countries and are exerting significant governmental influence. The MFA was directed to help the textile industries gain "breathing space" in competing with the industries in developing countries and then provide for a gradual liberalization of trade. Liberalization has not occurred, hqwever, due to the strong political force of the developed-country industries.
Unlike the commodities agreements described earlier, which often focus on price, the MFA operates primarily on quantitative restrictions. In addition, it allows discriminatory treatment by importers against exporter nations. GATT rules require a most-favored-nation (MFN) status for countries so that all countries in the MFN category are treated similarly in terms of tariffs or quotas. The MFA, however, allows the importer countries to apply differential sanctions against exporter countries.
The major beneficiaries of the MFA are the import-competing textile industries in the developed countries as well as the quota-holding producers. Many of these producers have shifted production into higher value added products or have sold those quotas to others. Significant graft and corruption also have appeared in some of the quota-holding countries. In 1987 a U.S. garment manufacturer established an assembly facility in Mexico to take advantage of low wage rates and favorable tariff arrangements between Mexico and the United States. The manufacturer also had quotas from the Mexican government to export the product to the United States, but when the manufacturer attempted to ship the finished goods to the United States, U.S. Customs would not allow the goods to enter. Customs keeps track of the quota allotted to Mexico by product category and the value of shipments made to the United States, and when the value of shipments equals the allotted quota, other shipments are disallowed. Apparently, more quotas had been allotted by the Mexican government than were permitted under the agreement with the United States. Either someone made a mistake, or quotas were sold illegally.
According to UN estimates, the textile and garment industry is the largest employer in the developing countries. As a result, developing countries are endeavoring to loosen the MFA to allow entry of more goods to industrial countries, such as the United States, the world's largest textile importer. Quota-holding companies and the import-competing industries in the developed countries have set up strong barriers to liberalization.36 The MFA has created significant trade friction between the producer and consumer countries. Many industrialized countries, including the United States, would like to see the MFA within GATT. However, this free trade stance is a difficult one for President Bush, because it would seriously damage textile producers in the United States.
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