ATC a short story

By Christina Wells,2014-04-25 06:31
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ATC a short story

    ATC: A short history


    Goods: Market Access

    Section: Textiles and Clothing

    Unit: ATC: Background

    Slide n? 19

Efforts under the GATT to liberalize trade have always met with particular

    difficulties in textiles and clothing. For more than thirty years, this sector was governed by special regimes: the Short Term Cotton Arrangement

    in 1961, the Long Term Cotton Arrangement from 1962 to 1973, and the

    Multifibre Arrangement from 1974 to 1994. It was of considerable

    significance, therefore, that after more than three decades of

    increasingly complicated systems, Ministers decided to include this

    sector within the scope of the Uruguay Round multilateral trade

    negotiations in 1986. Seven years of complex and difficult negotiations

    resulted in the Uruguay Round Agreement on Textiles and Clothing which

    forms part of the global, single undertaking making up the whole package

    of results from the Uruguay Round. This section presents a brief

    historical background on the evolution of textiles and clothing trade policies, and describes the principal effects of these regimes on trade

    in this sector.

    In the period following immediately after World War II, a major part of international trade was governed by complex national trade regimes.

    Post-war balance-of-payments difficulties in a number of developed

    countries were cited to justify high tariffs, complicated customs

    administration, complex import licensing procedures and a wide range of quantitative restrictions. During the 1950s, however, trade restrictions

    were reduced in the wake of general liberalization efforts pursued in the

    GATT and the IMF.

    The gradual removal of quantitative restrictions following the easing of balance-of-payments difficulties in the developed countries coincided

    with the reestablishment of Japan in world trade in textiles and the

    emergence of a number of developing countries as exporters of textiles

    and, to a lesser extent at that time, clothing. The developing countries,

    in particular, benefitting from access to raw materials and relatively

    low production costs, particularly wages, began to rapidly increase the

    volume of exports of cotton textiles and clothing to the developed country

    markets. The sharp increase in low value imports of cotton textiles

    adversely affected investment and employment in the developed countries

    which faced the prospect of rapid closure of production facilities in the

    sector leading to serious social problems. To alleviate the difficulties,

    some developed countries negotiated with individual governments

    agreements to limit the quantities of exports of cotton textiles or

    "voluntary export restraint" agreements, as they came to be known later.

In 1959 a study was proposed in GATT to find a multilateral solution to

    the problem of "sharp increases in imports, over a brief period of time

    and in a narrow range of commodities which can have serious economic,

    political and social repercussions in the importing countries". In 1960, the CONTRACTING PARTIES recognized the phenomenon of "market disruption"

    which contained the following elements in combination:

"(i) a sharp and substantial increase or potential increase of imports

    of particular products from particular sources;

(ii) these products are offered at prices which are substantially below

    those prevailing for similar goods of comparable quality in the market

    of the importing country;

(iii) there is serious damage to domestic producers or threat thereof;

(iv) the price differentials referred to in paragraph (ii) above do not

    arise from governmental intervention in fixing or formation of prices or

    from dumping practices."

The most significant aspect of this decision was the emphasis on

    particular sources of supply and on substantial price advantage of these

    sources without recourse to government intervention or dumping practices.

    The possibility of selective safeguard action that the concept of "market

    disruption" created constituted a fundamental departure from the

    requirement of Article XIX of GATT.

The Multifibre Arrangement (MFA), more formally the Arrangement Regarding

    International Trade in Textiles, entered into force in 1974. It extended the coverage of the restrictions on textiles and clothing from cotton

    products to wool and man-made fibre products (and from 1986, certain

    vegetable fibre products). The stated objective of the MFA was "to achieve

    the expansion of trade, the reduction of barriers to such trade and the

    progressive liberalization of world trade in textile products, while at

    the same time ensuring the orderly and equitable development of this trade

    and avoidance of disruptive effects in individual markets and on individual lines of production in both importing and exporting

    countries". A further aim was "to further the economic and social

    development of developing countries and secure a substantial increase in

    their export earnings from textile products and to provide for a greater share for them in world trade in these products".

Operationally, the MFA (like the cotton arrangements) provided rules for

    the imposition of quotas, either through bilateral agreements or

    unilateral actions, when surges of imports caused market disruption or

    threat thereof in importing countries. In imposing quotas, importing

    countries were obliged to observe consultation provisions and specific

    rules and standards both in determining a situation of market disruption

    and when introducing and maintaining restrictions on exporting members.

    As a norm they were required to allow for an annual growth rate of six

    per cent in the quotas. A statutory body, the Textiles Surveillance Body,

    carried out a monitoring and reporting function and also handled cases

    of disputes. The MFA terminated on 31 December 1994 upon the entry into

    force of the WTO and its Agreement on Textiles and Clothing on 1 January


During its 21 years, from 1974 to 1994, there were changes and adaptations

    in the operation of the Arrangement. Extensions of the MFA were negotiated

    a number of times, in the course of which new provisions were added and

    new products included. Furthermore, the growth rate of six per cent in quotas envisaged in the MFA was in many cases sharply reduced in practice

    in bilateral agreements. The complex network of bilateral quotas under

    the MFA were also negotiated at short intervals, often every year or so.

    In its last years of operation, six MFA participants

    (Austria/Canada/EEC/Finland/Norway/United States) applied quotas under

    the Arrangement, to varying degrees in terms of products covered and

    countries affected. However, apart from restrictions on former state

    trading countries, the MFA was used almost exclusively to protect against

    imports from developing countries. Switzerland and Japan, which were

    members of the MFA, had no restraint agreements. Sweden dropped all of

    its restraints and withdrew from the MFA in 1991. (Quotas for imports into Sweden were, however, reintroduced when it joined the European Community

    in 1995.) In 1994, its last year of operation, the MFA had 44 Members which

    was, of course, less than half of the GATT membership but accounted for

    most members with an interest in textiles and clothing trade, including

China, which was not a GATT contracting party.

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