“ While the GATT and WTO have worked for several decennaries to advance fairer international trade there are some noteworthy industry exclusions. The planetary fabric industry is one such illustration, foremost being governed by the Multifibre Arrangement ( MFA ) from 1947, and the Agreement on Textile and Clothing ( ATC ) from 1995 until the industry was to the full integrated into normal GATT regulations in 2004 ” . Evaluate and critically analyze the demand for these particular agreements, the deductions that they brought to states and the troubles that arise post-2004.


This assignment is concerned with a critical rating of the undermentioned proportions on GATT and WTO, and their function in the liberization of commercial trade and supplying the member states for the easy entree of the planetary trade market.As it is a sanctioned understanding by member states and their house of statute laws, the international trade differences between the member states can be settled by assorted types of audiences, as to guarantee the smooth and peaceable trade.In the visible radiation of several steps and maps taken by GATT and WTO, there are some industrial exclusions making trade deformations between the member states. For illustration planetary fabric industry, which created enormous trade deformations in the market for the ground of developing states did non follow the regulations against the usage of quantitative limitations in fabric trading.But the limitations maintained in fabric sector were outside the range of GATT regulations, the limitations were authorized under the commissariats of Multifiber understanding. And the intiation of Agreement of fabrics and vesture during the Uruguay unit of ammunition leads to the terminal of MFA in 1994. This assignment follows with the analysis and scrutiny of the demand for particular commissariats like MFA ( Multifiber Agreement ) which subsequently on integrated into ATC ( Agreement on Textiles and Clothing ) and planetary Textile industry station in the context of developing states -LDC ‘s station 2004.


GATT ( General understanding on Trade and Tariff ) is formed in 1947 to make a level signifier to negociate the universe trade jobs.The planetary fabric trade is the procedure which is developed and regulated by the International trade understanding.The chief purpose of the GATT is to advance the free trade without favoritism, decrease of trade barriers and riddance of all restrictive trade patterns such as anti-dumping or counter-vialing duties1.Even there is a opportunity of enforcing anti-dumping responsibilities by the developed states when the cost of the merchandise which is imported is low compared to the exporter place market.As due to this the merchandise manufactured in the imported state will loss the market portion because of the monetary value fluctuations, evidently the demand of the merchandise will be decreased. By taking some of these fortunes, importing states are enforcing heavy responsibilities for the dumping merchandises. Simultaneously if the merchandise from the exporting states has a opportunity of subsidy from the peculiar authorities will be imposed with counter vialing responsibilities by the importation states.


The period after the universe war – Two was important and all the states were more attentive towards the universe economies.At this peculiar motion, every state was more concerned about their economic system and took a measure into the planetary market.With all this alterations different types of trade was initiated and the major trade of some of the states at that clip is textiles.General understanding of trade and tarrif was set up to do free trade with specfifc regulations for the liberisation of international markets.With some dialogues in several unit of ammunitions GATT they cam eup with tendency in free trade in vesture and fabric markets

GATT has failed to accomplish its chief object of free planetary trade.In 1950 ‘s the aims of the GATT were deviated, because of this grounds United provinces and Japan came to an understanding called Voluntary export restraint ( VER ) which controls the Japan exports in measure of fabrics to United provinces markets.This was imposed 2 times on Japan in 1955and 1957 by united provinces authorities. By taking his as a opportunity, some of the developing states like Hong Kong, India and Pakistan have

1.citation pending. ( PDF PAKISTAN )

started the exports of fabrics to the United States markets. United States authorities has initiated for the opportunity of legalising the VER on the same of the states which are non following the quantitative regulations that affect the domestic market in United States. Even Honk Kong did non agreed to subscribe the VER and GATT regulations will non impact the exports of Honk Kong. The same job was in United Kingdom and other European states. As of this, the developed states took an enterprise and lift up for the issue of some understandings take parting in the fabric industry. Finally some of VER understandings was taken topographic point between the British authorities and the exporting states like India, Pakistan and Honk Kong in different old ages.


The chief aim of the MFA is clearly stated in the Article 1, is to accomplish the enlargement of trade, the decrease of the trade barriers to such trade and the progressive liberization of universe trade in fabric merchandises while at the same clip guaranting the orderly and euitable development of this trade and turning away of riotous effects. **

MFA ( Multi Fiber Agreement ) has come into force in 1974, which initiated the dialogue of the quotas and limitations with the developing states in order to rearrange and back up the domestic market for their ain fabric industries. Due to the deficiency of specific quota regulation the development states which are exporting, confronting a immense loss in the markets. In order to get the better of this issue the specific quotas has been setup by the importation states and giving a opportunity for all exporting states. By publishing the specific quota system, many developing states got a opportunity of increasing their portion in the universe trade of fabrics and keeping some stableness for fabric production. Obviously by specific quota steps many states have reached some growing in economic development.Inorder to go on this net incomes in trade particularly in fabrics, they negotiated with the developed countires for the addition in quota. Many bilateral understandings between the developed importing states such as United States and European Union and developing exporting states like Bangladesh, India and Pakistan. It is the understanding which is non between the developed states and it will non use between the developed states. Some developed countires have setup a common understandings with some developing states apart from this MFA, those are called non – Master of fine arts understandings.Just in a period of 10 old ages from 1962 to 1972, United provinces have undergone the ‘Bilateral export restraint ‘ understandings with about 32 states, and it got increased to 40 states by 1944.This figure of understandings show how the fabric trade has been developed throughout the universe. The major imports from the developing states to the developed countires is merely because of the low labor cost and prodcution degrees are high.Because of this issues, different developing states are keep on developing alterations the assortments inorder to pull the developed states. In each understanding, there is a alteration with the types of fabrics and vesture..They are traveling with the new assortments of the fabrics and vesture from which they are made will be maintain on including in the understandings in order to avoid the perturbations in the market.MFA was keep on extending, and it was extended for 4 times with the petition of the developing countries.Some of the developed states have been confronting a terrible loss in domestic market before of this understanding and so they keep on coercing the commissions to alter the system, and even the quota system was besides non a consecutive measure to the developed states. With some unit of ammunitions of successful dialogues, they proposed for the Agreement on fabrics and vesture ( ATC ) during Uruguay unit of ammunition. General understanding on trade and duty was modified and changed into WTO. And subsequently on in 1994, WTO was involved and in the Uruguay round the induction of the Agreement on fabrics and vesture ( ATC ) takes topographic point and the quota regulation was so maintain on diminishing in different measure by measure procedure by phases.

MFA was extended in four phases

MFA – I ( 1974-77 )

Multifibre agreement – I is designed inorder to protect the importation states quotas within the exporting states. The quota was wholly depends on the type of the merchandise, which was importing from different states.Such states will be given a specific quota, as that merchandise will non be imported from any of the exporting states. In this phase different types of fabrics were included in the understandings. Even the “ Textile survillence organic structure “ [ TSB ] was setup to supervise the bilateral quota system between the specific importation and exporting states. Misdemeanor of GATT regulations was noticed during this period harmonizing to the TSB study.

MFA – II ( 1978-81 )

MFA – Two is more rigorous compared to MFA – I. During this period the bilateral understandings can be reciprocally modified, if there are any perturbations or duties. This was renewed after the termination of MFA – I for 4 more old ages. GATT ha a fabric commission which recommended some alterations within, taking the jobs between the importation and exporting states occurred during MFA – I into consideration. Furthermore the ‘Reasonable going clause ‘ was included in MFA – II. And there is a diminution in the growing of rates of some of the merchandises.

MFA – III ( 1982-86 )

It came into force in 1982, with some alterations. The fraud between the exporters of the Least developing states were found during the old extension were revised and several alterations were taken to curtail the rerouting of quotas from which the exporters were making their concern. Normally some of the least developed states of all time do n’t hold the imposts and there is a big benefits involved in rerouting the goods. Due to all these grounds “ Reasonable going clause ” was replaced with “ anti-surge clause ” . Here the conditions after the MFA – II were non up to the grade of GATT rules. *

MFA – IV ( 1986-92 )

By taking all clauses into consideration some of the restrains where extended for some of the merchandises i.e. , manmade fibres and vegetable fibres where included to the restrains. During this term, the state which exporting such a merchandises will be issued a specific quota to export merely certain merchandise by the involvement of the importation states. All over to the concern the economic conditions of the developing states and least developed states were turning compared the developed states. Consumption is really less compared to the production and the monetary values are high because of the high rewards of labour and the stuff. Totally some of the context clearly explicating that the MFA was non the right way for universe trade of fabrics. This conditions lead to the formation of Agreement of fabrics and vesture ( ATC ) during the Uruguay unit of ammunition in 1994, to pulverize the quota system in fabric trade.

*citation: honkkong pdf+Pakistan pdf.


During the Uruguay round the induction of the Agreement on fabrics and vesture takes topographic point in 1994.Agreement on fabrics and vesture was singed eventually at Marrakesh ministerial meeting. By this Multifibre understanding came to an terminal and the quota system which was apparatus with bilateral understandings between the developed importation and developing exporting states. Even some states were given a specific quota because of the merchandises which they export.Rules of the GATT were strengthen up and they initiated Agreement on fabrics and vesture. The chief purpose of the understanding on fabrics and vesture is to give up the quota system of fabric trading between developed and developing states and pulverize the limitations in trade between the states and everything should come under GATT regulations. In a period of 10 old ages, by the phase wise procedure the quotas system is demolished. Obviously there is opportunity for limitation between trade with any states if it proves the article XIX, but it should be proved by the state. Normally this happens when the importing state exceeds the bound, or else if there is a diminution in market of the ain states merchandise with the merchandises of other states. At the clip of Agreement on fabrics and vesture induction, many importing states have about 81 restraint understandings with developing WTO states. Several single quotas and non – MFA understandings were in force at that period of time* .

The quota system which was developed antecedently, should be integrated into GATT must be done in four phases with specific per centums in each phase. When any of the merchandises which are included in the peculiar phase will be integrated and they are non eligible for MFA limitations. The first stage of the integrating into GATT done on 1 January 1995.During this period 16 per centum volume of fabric imports quota was integrated. Second phase integrating is on 1 January 1998 of approximately 17 per centum of the imports.In 1 Jan 2002 3rd phase of the integrating takes topographic point of about 18 per centum of the quota of imports. Finally on 1 January 2005 it was approximately 49 per centum of the quota of imports were integrated to GATT * , with this the Agreement on fabrics and vesture rule of quota destruction is executed and different types of merchandises to be phased in with four phases.The opportunity of stage in merchandises were left to the pick of importing states to the determined volume. Some fixed rates of growing in the degrees of quota for the limitation of the selected merchandises which are stage in.In first stage, rate of the limitation is 16 per centum. And in the 2nd stage it was increased to 25 per centum.Finally in 3rd stage there is an addition with 27 per centum.At this specific clip of transitional period there is a opportunity of the new limitations under ‘traditional precaution mechanism ‘ . Precautions are initiated merely when the domestic market was affected by the importation merchandises. These precautions can be applied with merely the study and reappraisal of Textile supervising organic structure [ TMB ] .And the limitations can be applied to the merchandises those which are non integrated to GATT. Every merchandise has a certain clip bound of about three old ages and there is no extension for merchandise or up to the integrating of the specific merchandise into GATT.Those states are non allowed to cut down trade with mark degree of exports and imports in 12 months.As, if the continuance is more than 12 months at that place should be a proviso for non less than 6 per centum in growing. Some particular commissariats were included in this understanding to cover with ‘circumvention ‘ , which involves transshipments frauds, fraud declarations and rerouting of trade. *All concern states should believe of the concern differences against fabrics and vesture imports pieces taking some steps due to the grounds of the general trade policy.If any member states breaches the regulations can confront an action with relevant governments in World trade organisation ( WTO ) .Each and every alteration should be notified to Textile supervising organic structure [ TMB ] as it is setup by WTO for supervising the frauds and alterations in the regulations of understanding. And eventually in Jan 2005 ATC was terminated after the quota system was given up.


During the period of 1980 ‘s, the major exports of the fabrics and vesture are from Japan, India, Honk-Kong, Singapore and some of the Asiatic states. Due to the quota riddance, some of the industrialists were happy because they have the better range to set up their fabric company ‘s even in some other parts apart from their ain states. Environmental jobs were raised due to the use of dyes and pesticides to the cotton and yarn.These pesticides and dyes can do a serious wellness hazards to the farm workers and the individuals who works in fabric industries. And the consumer who buys the merchandise can confront some allergic jobs. Hence these issues may coerce to the Eco-labeling of textile merchandise. Eco-labeling is one of the issue which can curtail the quota, if the specified merchandise does non hold the grade will non be allowed to export.Even at the period of phasing out Agreement on fabrics and vesture ( ATC ) , many developing states were given the Anti-dumping regulations in order to curtail the imports to the developed states. Because due to the high influx of fabrics from other states may impact the place states markets in loss. In order which was affected by the merchandises must be proved by assorted types of trials. When the imported goods are sold at lower monetary values.then it should confront the ‘Dumping Test ‘ . If the company in the developed state was affected by this exports will confront an ‘Injury Test ‘ and causality trial for the dumping causes any jobs. There is no opportunity of claiming a compensation for the loss in the state because of the anti-dumping. And the other safety was the safe-guard step, which is a non-discriminating mode. If the state which is affected the exports was applied to the safe guard step. Then the peculiar state should counterbalance the trade with grant in duty of equal values to the loss. After the phase-out China ‘s WTO accession Agreement which helps the united provinces and some of the member states opposed the trade from China, because the imports from China were making the jobs in the markets. The major cause for the quota system to let the globalisation.By this each and every states can setup their industries anyplace in the universe.The chief cause for the imports are merely from developing states is because of the low cost of the labour and the handiness of the natural stuffs. Fabric and dress industries generates the high ratio of labour and creates high rate of occupations.The first measure in puting up the fabric industry is the labour.The skilled labour should be paid in immense sum as the industry is chiefly based on skilled workers. Competition in the market can be seen between the industries is with the skilled labour.Many of the developing states like China, India and some of the Asiatic states were benefited by the quota stage out, as the development states even can setup the fabric industries in the underdeveloped states as the labour cost is low and happening the efficient market topographic point for trade and supply of goods. During the period of quotas many developing states industries which produce fabrics and dresss were benefitted because of the high monetary values for the little measures of merchandises which they import. At that peculiar period of clip largely all the exporting states found growing in the market portion and net incomes. The state which was chiefly benefited was China. The major employment in this state is the labour for agricultural work and fabric industries. Because of the high handiness of the labour, there is no alterations in the rewards of the labour. In the period during the twelvemonth 2005, the major market was occupied by China in exporting of fabrics to united provinces. It was approximately 52 percent addition in 2005 compared to 2004, and 18 per centum during the period of 2004.Not merely in united provinces but besides European fabric markets were occupied by China in 2005. **

Fabric industry and the manufacturers of fabrics were extremely affected before the quota system every bit good as after the quota system. The major drawback of the industry in United States is High cost of production because of high rewards to labour and the natural stuff cost is excessively high. Apart from this after the induction of the quota system, fabrics form the China was the major consequence to the United States. Due to this consequence most of the workers in the fabrics industries had lost their occupations and the fabric industries faced immense loses because of the inputs of fabric from different developing states.Even after the phase-out of the quota system China was keep on geting the markets in the united states.As of this in 2008, WTO accession understanding came into consequence to curtail the import from China as it was making heavy perturbations in the local markets. Not merely China, but some of the developing states were benefited by this quota stage out and all the developed states were faced the market loss in fabric and dress industry.

Markets occupied the riddance of quota system,1995

Markets occupied after the riddance of quota system,2005

Beginning: Comtrade database ( Hildegunn Kyvik Norda , WTO Discussion epaper )

At this period of clip some if the fabric associations from Middle east states and other developed states were requested World trade organisation ( WTO ) , for a meeting to reexamine the extension of the quota system stage out.Safe guard quotas were ruled out strong expostulations on United provinces and European unioun by china.European unioun and China came to an understanding in the restriction of the fabric and vesture imports. *

*Geoff Dyer and Raphael Mindel “ EU and China in fabric Truce ” , Financial Times, FT.com on June,2005.


Fabrics and vesture occupies the major portion of the Indian economic system. During the period of 2003, Textile and vesture exports are about 23 per centum in Indian exports.It is merely sector which is the major Godhead of occupations and the foreign exchange.India has has a capableness of natural stuffs production of natural and unreal merchandises and even in whirling ability.In the first three pase outs, merely 20 per centum of the merchandises were integrated and 80 per centum of the merchandises were integrated during the 2005 which leads to loss in occupations and income in some of the developing states as well.Atfer China, India is the major exporter of the fabrics to united provinces.Their is growing of about 30 prcent in the period 2005 compared to all the major exporters.Imports to the European unioun was grown up to 11 per centum during the perioads between January and May,2005.Suddenly all the monetary values of the exports of all states fell except India.India got a 5 per centum rise in the monetary values of exports.With the riddance of the quota system, the major impact is on the employeement due to the fluctuations in the exports and the market instability.In all the developing states the major per centum of the employees involved in fabric and dress industries are women.And the major impacts were positive every bit good as negative.Some of the developing states faced loss due to the diminution of the monetary values as the developed states will derive with this alteration, as the consumers are benefited with the low monetary values of textiles.Hence the impacts includes both the losingss and additions with in the developing nations.The exports from India and Asiatic states are restricted and per centum of the exports were decreased as there is high rate of revenue enhancements and prices.Some the less restricted Asiatic states were gained at the period of Agrememnt on fabrics and vesture ( ATC ) .After that, the United provinces and European unioun were given a binding quotas in many classs of dresss and fabrics from india.Within the research, it clearly explains a combination of losingss every bit good as net incomes and per centum of the exports were rise after 2005*

*Prasad, A. and Jain-chandra ; Sonali ; The impact on India on Trade liberization in the Textile and Clothing Sector ( November 2005 ) IMF Working Paper, Vol, pp 1-39,2005.