Uruguay Round Agreement On Textiles And Clothing

Although customs barriers are clearly important, the main obstacle to trade in textiles and clothing lies in a series of quantitative restrictions that have existed for decades. Prior to the 1960s, there were many voluntary quotas and restrictions – the so-called “hard core” residual restrictions – that had opposed the removal of quantitative restrictions in much of non-agricultural trade after the creation of the GATT. The short-term agreement on international cotton textile trade extended to 1961-62, followed by the long-term agreement on international cotton textile trade for the period 1962-1973. The aim of these regimes was to control trade in order to avoid “market disruptions” in industrialized countries. In some cases, some interests in developing countries also saw them as a means of participating in cartel-like rents. Developing countries reluctantly agreed to participate in these agreements because they feared that the alternative would be even stricter restrictions imposed by industrialized countries outside the multilateral trading system. However, these plans were neither temporary nor limited. Successive multi-fibre agreements (MABs) followed with restrictions that extended to more and more types of fibers and clothing items. Some Arab textile and clothing exporters will see their preferential status eroded in some industrial markets as a result of the Uruguay Round agreement.

Given that several Arab countries have duty-free access to the European Union (Egypt, Tunisia and Morocco), a reduction in tariffs on the MFN will reduce the preferential margin of these countries compared to other TEXTILE and clothing suppliers in the European Union. It is important to note that this erosion of preferences applies to products benefiting from an increase in quotas under the agreement. Given that importing countries have considerable discretion in structuring quota liberalization, the extent of preference erosion and its effects over the transition period will vary from country to country, as well as from their different export markets. Given the progressive and discretionary nature of liberalization under the agreement, it is difficult to generalize the effects of preference erosion on Arab exporting countries. The loss of preferential status is expected to lead to increased competition from already limited and efficient low-priced suppliers in the European Union market. It is therefore likely that the textile and clothing industry will to some extent be a displacement of Arab textile and clothing exporters into the European Union market. The extent of this eviction will depend on its relative cost competitiveness and the underlying structural factors. As has already been said, competition from Central and Eastern European countries in the European Union market could represent a greater structural change for some Arab countries than the Uruguay Round. Macro-financial assistance is a system of bilaterally negotiated agreements under a multilateral framework limiting exports of textiles and clothing from developing countries to participating industrialized countries. Macro-financial assistance should provide “temporary” protection to the textile and clothing industry in industrialized countries to enable them to adapt to foreign competition and allow exporters from developing countries to have “orderly” access to markets in industrialized countries. In practice, it has been semi-permanent in four successive phases: MFA I (1974-1977), MFA II (1978-81), MFA III (1982-86) and MFA IV (1986-July 1991 and renewed three times until December 1994). The AMF has more than 40 participants and covers 80% of the world`s textile and clothing exports with around 100 bilateral restriction agreements.

The extent of coverage has varied in exports from developing countries, with the most severe restrictions on the most efficient producers. Bilateral restrictions on AMF quotas (based on estimated AMF price rates) are approximately 15