Multi Fibre Agreement

Products imported in each of the first three stages under GATT rules were to cover the four main types of textiles and clothing: yarns and yarns; Substances; Elaborate textile products; and clothes. All other restrictions that are not covered by the multifibre agreement and do not comply with the regular WTO agreements until 1996 were to be met or expire until 2005. At the beginning of 2005, China`s exports of textiles and clothing to the West increased by 100% or more in many respects, leading the United States and the EU to highlight China`s WTO accession agreements, which allowed them to limit the growth rate to 7.5% per year until 2008. In June, China agreed with the EU to limit the rate to 10% for three years. No such agreement was reached with the United States, which reported its own import growth rate of 7.5%. [Citation required] While the governments of the United States and the EU have formally opposed the growing group of stakeholders calling for an extension of the quota regime (either to extend the WTO ATC or to implement immediate alternative measures), imports from China continued to increase in the months following the opening of the textile and clothing trade. One of the most important agreements resulting from the Uruguay round of trade negotiations and, in many ways, a flag bearer of the WTO`s stated objective of liberalizing world trade in a rules-based environment, has quickly become the ultimate litmus test of the WTO. The difficult situation faced by policy-makers and WTO member countries was clear: any extension of quantitative restrictions would undermine the consensus agreement reached ten years earlier, to which countries had to prepare for a decade. Similarly, any extension would run counter to the structural changes and significant investments that would have taken place in anticipation of the abolition of quotas, particularly in China, which had been a full member of the WTO since the end of 2001, with all its rights and obligations.

On the other hand, the abolition of quotas has threatened sustainability and hence the existence of a basic manufacturing sector, often seen as the first entry point for countries, as they diversify their economies, for example. B of a simple dependence on exports of raw materials or agriculture. In many developing countries, the clothing sector, in particular, had become the mainstay of formal economic activity, for example in Lesotho and Bangladesh. Given that few countries are able to compete internationally (or against foreign competition) without any form of direct or indirect protection, any threat to the sector in these countries becomes a threat to the job creation, investment inflows, production and foreign exchange earnings they sorely need. Such a threat also undermines any hard-hit economic diversification resulting from a previous dependence on resource-based exports. Although the ATC has provided the overall framework for textile and clothing quotas and the integration of trade in this sector into normal WTO disciplines, it is not the only instrument for countries to limit imports of textiles and clothing. The alternative measures taken by the WTO and the clauses of China`s WTO accession agreement (Article 242) offer at least some kind of facilitation to countries against any increase in imports that threatens domestic industry.