What does it mean for garment workers?
The Agreement on Textiles and Clothing (ATC):
The ATC is an agreement to phase out the Multi Fibre Arrangement by the year 2005. The aim is to bring trade in textiles and clothing into line with the rules of the newly established Word Trade Organisation. This agreement is seen as operating in the interests of developing countries, since it increases their access to the previously protected markets of industrialised countries. Little attention is paid to what the implications are for workers, even though there are likely to be massive changes in the location of the industry. It is important to look at what the ATC will mean in practice not only for different countries, but also for companies and for workers themselves.)
What was the MFA? Since 1974 world trade in textiles and garments has been governed by the Multi Fibre Arrangement. This provided the basis on which industrialised countries have been able to restrict imports from developing countries. Every year countries agree quotas - the quantities of specified items which can be traded between them. The exporting country then allocates licenses to firms to export a certain proportion of each quota.
Why was the MFA introduced?
The MFA was brought in as a supposedly short term measure, mainly to give industrialised countries a breathing-space to adjust to competition from imports from developing countries. Special measure were seen as necessary for textiles and garments because the labour intensive nature of the industries meant that it was becoming relatively easy for developing countries to compete in a global market. The MFA does not apply to trade between rich industrialised countries themselves.
What has been the effect of the MFA?
The MFA has not prevented a massive shift in the production of textiles and garments to developing countries. Asia has become the world’s foremost exporter, Initially production was concentrated in the East Asian countries Korea, Hong Kong, Singapore and Taiwan but by the middle of the 1980s other Asian countries were becoming major producers. Clothing exports from Thailand for example increased five-fold between 1980 and 1989. However the shift would have been greater without the continuous restrictions of the MFA. It is estimated that some developing countries have lost billions of dollars of foreign exchange due to the imposition of trade restrictions.
The MFA has also had a marked affect on the distribution of the industries between different developing countries. Quotas have been negotiated on a country by country basis and have been established at different levels. This has affected the ability of industries to expand. For example strict quotas generally operate on imports from Korea and Hong Kong, whilst the EU imposes no restrictions on textile and clothing imports from a group of Least Developed Countries. The rapid expansion of the garment industry in Bangladesh during the 1980s was partly due to the fact that as an LDC it was able to establish that exports to the EU should be duty free and unrestricted by the quota system.
The quota system has also increased global restructuring. Outward processing by successful Asian countries, particularly Korea and Hong Kong, has been partly to advantage of unused quotas or the LDC status of other countries. Hong Kong now concentrates on non-quota high quality specialised products, using China as an outward processor to fill its own quotas on basic goods.
Other methods have be used for “engineering” quotas which often makes it difficult to trace the source of finished goods. These include transshipment (making a product in one country, shipping it to another and re-exporting it as a product of the second country), sewing on false “made in” labels or falsifying documents.
The new rules of trade:
At the GATT Uruguay Round it was agreed that a method was needed for integrating trade in textiles and garments into the mainstream rules and procedures of the new World Trade Organisation. The new WTO rules were designed to encourage the expansion of international trade through the progressive removal of quotas and tariffs. The protectionist policies of the MFA could not be sustained within this framework. This removal of the MFA was seen by many developing countries as one of the few clear gains from the free trade agenda and was one of the principle reasons for signing up to other agreements in the Uruguay Round.
The Agreement on Textiles and Clothing:
The ATC is an agreement to phase out the MFA over a period of ten years. It outlines a programme for the integration of all products into GATT rules by 2005.It applies to all WTO members whether or not they were signatories to the MFA.
Timetable for the phase - out:
The main provision of the agreement is a timetable for the progressive removal of quotas. Complete integration will be achieved at the end of the ten year transition period, i.e. by 2005. The agreement provides a complete list of all the products which need to be integrated.
There are two aspects to this process :-
1. Integration of products.
Integration is required to take place in four stages. Each stage must include products for each of four groups:-
1. tops and yarns
2. fabrics
3. made up textile products
4. clothing
It is up to the importing country which items are selected within each group.
2. Progressive raising of quotas
At each of the first three stages of integration there has to be an annual increase in the quota level of those products still under the MFA.
Other provision in the ATC:
Several articles in the Agreement have affected implementation of the phase out. They were the result of strong lobbying by the USA and EU and include :-
Transitional Safeguard Measures (Article 6)
Article 6 continues to permit the application of MFA-type safeguard actions . The provisions are intended to prevent a sudden rise in imports of specific products from causing serious damage to the importers domestic industry. In order to be introduced there has to be evidence of significant damage.
Reciprocal market access
Article 7 links the integration process to increased access to developing countries markets. The EU and USA want greater access to overseas markets for textiles and for upmarket clothing. This was seen as the price developing countries had to pay for the phase out of the MFA.
False origins
The ATC requires developing countries to demonstrate that they have adopted effective measures to prevent transshipment or false declaration of origin. Importing countries can impose sanctions (e.g. reduce quotas ) in the event of evidence of malpractice.
