Textiles: The MFA, the ATC and Its Self-Termination

In one line

For thirty years the developing world's main manufactured export was governed by bilateral quotas outside the trade rules, and the agreement that ended them was written to abolish itself on 1 January 2005.

In exam wording: the Agreement on Textiles and Clothing provided for the progressive integration of textile and clothing products into GATT 1994 over a ten year transition, phasing out the quotas maintained under the Multifibre Arrangement, and terminated itself on 1 January 2005 by its own Article 9.

What preceded it

A sequence of arrangements, each supposedly temporary. The Short Term Arrangement of 1961 and the Long Term Arrangement of 1962 covered cotton textiles. The Multifibre Arrangement of 1974 extended the regime to wool and man-made fibres and was renewed repeatedly until 1994.

What the Multifibre Arrangement did was to authorise the unauthorisable. It permitted importing countries to impose bilateral quotas, by country and by product, on textile and clothing imports, in derogation from Article I most favoured nation treatment and Article XI on quantitative restrictions.

The scale is what makes it examinable. For thirty years, the single largest category of manufactured exports from developing countries was administered by quota rather than by tariff, allocated among exporting countries by negotiation, and shielded from the two central obligations of GATT. Every argument about the fairness of the trading system starts here.

What the Agreement did

Integration in four stages, Article 2. Products listed in the Annex were to be brought under GATT rules in four steps, each member integrating specified minimum percentages of its 1990 import volume:

Growth rates on remaining quotas, Article 2.13 and 2.14. Quotas still in force had to grow by their existing growth rate increased by sixteen per cent in stage one, twenty five per cent in stage two and twenty seven per cent in stage three.

The transitional safeguard, Article 6. A member could impose a new restriction during the transition where a product not yet integrated was being imported in such increased quantities as to cause serious damage or actual threat of it to the domestic industry, applied member by member on the basis of a sharp and substantial increase from that member.

The Textiles Monitoring Body, Article 8, supervised implementation and examined every measure taken under Article 6.

And Article 9, the self-termination provision: the Agreement and all restrictions under it stood terminated on the first day of the one hundred and twenty first month that the WTO Agreement was in force, that is 1 January 2005, and there was to be no extension.