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Multi-Fibre Arrangement (MFA)

The Agreement on Textiles and Clothing (ATC), successor to the MFA, was introduced in 1995 as a ten-year plan following the Uruguay Round of trade negotiations. The purpose of its introduction, at the insistence of those developing countries with textile exporting industries, was to fully integrate textiles and clothing into normal General Agreement on Tariffs and Trade (GATT) rules and promote a more liberal, less distorted market.

The most visible form of the ATC was the quota system imposed by importers (primarily the European Union, United States and Canada). These distorted normal trading patterns in these products to protect domestic producers, but also with the effect of enabling small developing countries to compete with more competitive countries such as China and India.

Textiles and clothing are among the sectors where developing countries have the most to gain from multilateral trade liberalisation. Many countries in the developing world, and particularly women are highly dependent on this industry, the loss of which would be devastating for many countries and least developed countries.

Many people could be rendered jobless in the garment industry with the threat of loss of markets following termination of quotas. Yet statistics reveal that the removal of quotas and a reduction in tariffs could add 18 percent to the value of trade in textiles.

These quotas have been gradually eliminated - though the majority, and all of those on the most sensitive products, were left until last - and were finally ended on 1 January 2005. From this date 191 quotas on imports of textiles and clothing from 14 countries have disappeared.

The main benefits however of having a quota system were that countries were able to protect their own industries whilst guaranteeing some minimum market access and protection from newer and more efficient suppliers. The MFA protected developed country industry but penalised their consumers by artificially restricting supply and raising prices.

These quotas have now been gradually eliminated so market share will be determined by competitiveness rather than by quotas that has shaped international trade in textiles and clothing for over thirty years. Trade liberalisation means the removal of artificial barriers to international trade. This includes export subsidies, restrictive import quotas and tariffs.

There are several countries that are likely to be affected, some like China and India stand to gain while several others including Bangladesh, Cambodia, Laos, Nepal, and Sri Lanka are likely to lose out. The problem could be further exacerbated by the large numbers of female workers employed in the textiles and clothing sectors in some of these countries, such as Bangladesh and Cambodia where almost 80% of the work force in this sector comprises women workers, raising issues of alternative decent employment options.

DFID is funding a 4-country project on the MFA phase out including Bangladesh, Nepal, Cambodia and Laos. These projects are funded from the Poverty Reduction Fund with the Asian Development Bank, and targeted at those countries likely to feel the effects of the MFA phase-out.

The purpose of this project is to help recipient Governments address the risk of unemployment by better understanding poverty and gender issues related to the phase-out of MFA, and includes creating alternative employment opportunities.

Last updated: 4 October 2005

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