Agreement on Textiles and Clothing

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The Agreement on Textiles and Clothing (ATC) succeeded the Multi Fibre Arrangement (MFA), and facilitated the gradual dismantling of quotas for world textile trade that the MFA had put into place. Thus, the Agreement on Textiles and Clothing (ATC) stipulated a systematic and progressive elimination of the Multi Fiber Arrangement (MFA) over a span of ten years. This process culminated on 1 January 2005. The ATC aims to abolish quota restrictions on textiles and clothing in global trade by 2005.

Contents

Under the MFA, quotas were imposed on the export of textiles and garments from developing countries to developed nations from 1974 to 1994. [1] [2] [3]

Background

Prior to 1939, there were no records of restrictions on the import of cotton textiles. However, following the Second World War, limitations on cotton textiles imports were first imposed through voluntary export restraints. Both the United States and United Kingdom adopted this approach. Despite certain West European countries easing their balance-of-payments restrictions in 1958, they still maintained unwarranted restrictions on the import of cotton textiles from specific origins. Eventually, these were referred to as "residual restrictions" within the context of the General Agreement on Tariffs and Trade (GATT). [4]

Throughout the post-World War II era, there has been a distinct system in place governing international textile trade, which operates independently from standard multilateral trade regulations. [2] The Agreement on Textiles and Clothing (ATC) was the outcome of negotiations during the Uruguay Round of Trade Negotiations. It superseded the Arrangement Regarding International Trade in Textiles (Multi-Fibre Arrangement, or MFA), which had been established on 20 December 1973. The MFA was written specifically to control rapid changes in the textile trade. Textile products were among the most labor-intensive to make and easily shipped. [1] [5] [6]

Following the expiration of the ten-year transition period of ATC implementation, trade in textile and clothing products ceased to be subject to quotas under a special regime outside the normal World Trade Organization/General Agreement on Tariffs and Trade rules. From this point onward, textile trade came under the governance of the general rules and disciplines embedded in the multilateral trading system. [1] [6] [5]

Quota system

In the quota system, the fundamental unit was known as the restraint category or quota category. These categories were defined as consolidated subgroups of textile and apparel products that shared specific characteristics or raw materials. In addition to imposing comprehensive restrictions on imports from designated suppliers, this system also distributed market share among these suppliers through the implementation of country-specific quotas. [7]

Aftermath

On January 1, 2005, the Agreement on Textiles and Clothing (ATC) and all the restrictions associated with it came to an end. This marked the conclusion of the ten-year period during which the ATC was put into practice. [1] As a result, the trade in textile and clothing products was no longer limited based on special rules outside of the regular rules of the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT). Instead, it now adhered to the general rules and regulations of the global trading system. [1]

In international trade, market access allows companies to sell goods and services in foreign markets, subject to conditions like tariffs or quotas. It is a more attainable goal in trade negotiations than achieving completely barrier-free trade. [8]

Abolition of quota restrictions created vast opportunities for export expansion from developing countries, especially China, India, and Pakistan, which were the most likely to benefit. [1] [9] [10] Given the scale and competitive nature of China's manufacturing sector, numerous studies forecasted that China, and to a lesser extent India, would exert dominance over global markets in the post-quota era. [11] In the liberalized categories, imports from China to the EU saw a near doubling in value during the initial three quarters of 2005, with an even steeper rise in volume due to substantial unit price declines. Chinese imports predominantly substituted exports from other developing nations, leaving the overall import value relatively stable. [11] Between 2004 and 2005, United States imports exhibited a value surge of over 50 percent, while China's market share in textiles and clothing grew from 20 to 28 percent. [11]

The ATC also had a significant impact on manufacturing countries. For instance, in Canada, which used quotas to protect its manufacturers from cheaper goods from developing countries, the ATC's tariff and quota reductions led to the closure of many local plants and layoffs of workers in Winnipeg. Some companies relocated to countries with lower labor costs like Guatemala, Mexico, Bangladesh, and China. [12] In the United States, following the termination of the Agreement on Textiles and Clothing the textile industry has tended to be concentrated in certain regions, [2] such as Los Angeles. [13]

Market access

Various types of market access arrangements exist (including PTA, FTA, CECA, CEPA, Customs Union, Common Market, TIFA, BIT, and others), each characterized by its unique implementation framework and scope. [14] Trade agreements can offer preferential market access, [15] leading to diverse economic benefits such as trade creation, market expansion, capital accumulation, and improved productivity. A Free trade agreement (FTA) is an international deal between cooperating states to form a free-trade area. There are two types: bilateral agreements involve two countries easing trade restrictions for business expansion, while multilateral agreements involve three or more countries, and are more challenging to negotiate. [16] FTAs play a pivotal role in fostering export growth for the exporting countries. [17]

Related Research Articles

The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."

<span class="mw-page-title-main">World Trade Organization</span> Intergovernmental trade organization

The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and enforce the rules that govern international trade. It officially commenced operations on 1 January 1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs and Trade (GATT) that had been established in 1948. The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP.

<span class="mw-page-title-main">Trade agreement</span> Wide ranging taxes, tariff and trade treaty

A trade agreement is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common trade agreements are of the preferential and free trade types, which are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.

<span class="mw-page-title-main">Non-tariff barriers to trade</span> Type of trade barriers

Non-tariff barriers to trade are trade barriers that restrict imports or exports of goods or services through mechanisms other than the simple imposition of tariffs. Such barriers are subject to controversy and debate, as they may comply with international rules on trade yet serve protectionist purposes.

The Australia – United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States modelled on the North American Free Trade Agreement (NAFTA). The AUSFTA was signed on 18 May 2004 and came into effect on 1 January 2005.

The Multi Fibre Arrangement (MFA) governed the world trade in textiles and garments from 1974 through 1994, imposing quotas on the amount developing countries could export to developed countries. Its successor, the Agreement on Textiles and Clothing (ATC), expired on 1 January 2005.

Trade can be a key factor in economic development. The prudent use of trade can boost a country's development and create absolute gains for the trading partners involved. Trade has been touted as an important tool in the path to development by prominent economists. However trade may not be a panacea for development as important questions surrounding how free trade really is and the harm trade can cause domestic infant industries to come into play.

Quota Elimination is an initiative to eliminate the use of quotas in all textile and clothing trade between nations which are members of the World Trade Organization (WTO). Doing so was one of the key commitments undertaken at the WTO Uruguay Round in 1994 to retire the Multi Fibre Arrangement. The ATC, that is the WTO Agreement on Textile and Clothing, is the regulation governing textile and clothing and implements this commitment.

A free-trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. There are two types of trade agreements: bilateral and multilateral. Bilateral trade agreements occur when two countries agree to loosen trade restrictions between the two of them, generally to expand business opportunities. Multilateral trade agreements are agreements among three or more countries, and are the most difficult to negotiate and agree.

<span class="mw-page-title-main">Market access</span> Ability to sell goods and services across borders

In international trade, market access refers to a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to conditions or requirements, whereas under ideal free trade conditions goods and services can circulate across borders without any barriers to trade. Expanding market access is therefore often a more achievable goal of trade negotiations than achieving free trade.

The Agreement on Agriculture (AoA) is an international treaty of the World Trade Organization. It was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on January 1, 1995.

<span class="mw-page-title-main">Voluntary export restraint</span>

A voluntary export restraint (VER) or voluntary export restriction is a measure by which the government or an industry in the importing country arranges with the government or the competing industry in the exporting country for a restriction on the volume of the latter's exports of one or more products.

Economic Partnership Agreements (EPAs) are a scheme to create a free trade area (FTA) between the European Union and other countries. They are a response to continuing criticism that the non-reciprocal and discriminating preferential trade agreements offered by the EU are incompatible with WTO rules. The EPAs date back to the signing of the Cotonou Agreement. The EPAs with the different regions are at different states of play. The EU has signed EPAs with the following countries: the Southern African Development Community (SADC), ECOWAS, six countries in Eastern and Southern Africa, Cameroon, four Pacific states, and the CARIFORUM states. Their defining characteristic is that they open up exports to the EU immediately, while exports to the partner regions is opened up only partially and over transitioning periods.

<span class="mw-page-title-main">Rules of origin</span> Rules to attribute a country of origin to a product

Rules of origin are the rules to attribute a country of origin to a product in order to determine its "economic nationality". The need to establish rules of origin stems from the fact that the implementation of trade policy measures, such as tariffs, quotas, trade remedies, in various cases, depends on the country of origin of the product at hand.

Qualifying industrial zones (QIZs) are industrial parks that house manufacturing operations in Jordan and Egypt. The QIZ program was introduced in 1996 by the U.S. Congress to stimulate regional economic cooperation. Goods produced in QIZ-designated areas in Egypt, Jordan and the Palestinian territories can directly access U.S. markets without tariff or quota restrictions, subject to certain conditions. To qualify, goods produced in these zones must contain a small portion of Israeli input. In addition, a minimum 35% value to the goods must be added to the finished product. The idea was first proposed by Jordanian businessman Omar Salah in 1994.

<span class="mw-page-title-main">Trade in Morocco</span>

Moroccan trade is still dominated by its main import and export partner France, although France's share in Moroccan trade is declining in favour of the US, the Persian Gulf region and China. If seen as a single entity, the EU is by far Morocco's largest trading partner.

In economics, a tariff-rate quota (TRQ) is a two-tiered tariff system that combines import quotas and tariffs to regulate import products.

<span class="mw-page-title-main">Commercial policy</span>

A commercial policy is a government's policy governing international trade. Commercial policy is an all encompassing term that is used to cover topics which involve international trade. Trade policy is often described in terms of a scale between the extremes of free trade on one side and protectionism on the other. A common commercial policy can sometimes be agreed by treaty within a customs union, as with the European Union's common commercial policy and in Mercosur. A nation's commercial policy will include and take into account the policies adopted by that nation's government while negotiating international trade. There are several factors that can affect a nation's commercial policy, all of which can affect international trade policies.

China became a member of the World Trade Organization (WTO) on 11 December 2001, after the agreement of the Ministerial Conference. The admission of China to the WTO was preceded by a lengthy process of negotiations and required significant changes to the Chinese economy. China's membership in the WTO has been contentious, with substantial economic and political effects on other countries, and controversies over the mismatch between the WTO framework and China's economic model. Assessing and enforcing compliance has become issues in China-US trade relations, including how China's noncompliance creates benefits for its own economy.

This article is intended to give an overview of the trade policy of South Korea. In 1945 Korea was liberated from the Empire of Japan at the end of World War II. A destructive drought in 1958 forced Korea to import large amounts of food grains. In 1950, the Korean war broke out, which destroyed more than two-thirds of the nation's production facilities and most of its infrastructure. Trade policy of South Korea has taken many shifts, from import substitution to globalization and there has been significant impact on the economy for the same.

References

  1. 1 2 3 4 5 6 "WTO | legal texts - Marrakesh Agreement". www.wto.org. Retrieved 2023-07-30.
  2. 1 2 3 Lester, Simon (2005). "The Agreement on Textiles and Clothing". The World Trade Organization: Legal, Economic and Political Analysis. pp. 411–435. doi:10.1007/0-387-22688-5_9. ISBN   978-0-387-22685-9.
  3. ↑ "Agreement on Textiles and Clothing". WTO Analytical Index. 2012. pp. 597–632. doi:10.1017/CBO9781139177955.007. ISBN   978-1-107-02525-7.
  4. ↑ "The drafting history of the Agreement on Textiles and Clothing". 2008-05-10. Archived from the original on 2008-05-10. Retrieved 2023-07-30.
  5. 1 2 Brambilla, Irene; Khandelwal, Amit; Schott, Peter (August 2007). China's Experience Under the Multifiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC) (Report). Cambridge, MA: National Bureau of Economic Research. doi:10.3386/w13346.
  6. 1 2 WTO Analytical Index: Agreement on Textiles and Clothing (Report). WTO Analytical Index. World Trade Organization. 2023-01-23. doi:10.30875/618fbe7e-en.
  7. ↑ Curran, Louise (6 March 2007). "Clothing's big bang: the impact of the end of the ATC on developing country clothing suppliers". Journal of Fashion Marketing and Management. 11 (1): 122–134. doi:10.1108/13612020710734445.
  8. ↑ "What Is Market Access in International Trade?". Investopedia. Retrieved 2023-07-30.
  9. ↑ Wahab, Yasmin Abdul; Jalil, Abdul (2017). "Post-Atc Impacts on Product Intensive and Extensive Trade Margins: A Quantitative Analysis". Pakistan Economic and Social Review. 55 (2): 315–336. JSTOR   26616716.
  10. ↑ Mayer, Jorg (2005). "Not Totally Naked: Textiles and Clothing Trade in a Quota-Free Environment" (PDF). Journal of World Trade. 39: 393–426. doi:10.54648/TRAD2005030. S2CID   166648667.
  11. 1 2 3 Nordås, Hildegunn Kyvik (2009). "Textiles and clothing". The Princeton Encyclopedia of the World Economy. Princeton: Princeton University Press. pp. 1086–1091. ISBN   978-0-691-12812-2. JSTOR   j.ctt7sfvn. ProQuest   189252017.
  12. ↑ 6 Human Resources and Skills Development Canada. 2004. Labour Market Bulletin-Winnipeg,
  13. ↑ Barrett, Beth (15 November 2004). "GARMENT INDUSTRY SNAG 2005 TEXTILE AGREEMENT COULD HIT LOS ANGELES CLOTHING WORKERS HARD". Daily News. Los Angeles. p. N1. ProQuest   282493466.
  14. ↑ "What is economic integration and what are the different types of trade agreements? - Civilsdaily". 2016-02-25. Retrieved 2023-07-30.
  15. ↑ Fugazza, Marco; Nicita, Alessandro (March 2013). "The direct and relative effects of preferential market access". Journal of International Economics. 89 (2): 357–368. doi:10.1016/j.jinteco.2012.09.001.
  16. ↑ "Online Free Trade Agreement Certificate (FTAC) - ICC Academy". www.edumaritime.net. Retrieved 2023-07-30.
  17. ↑ Srivastava, Ajay; Mathur, Vijay K. (9 February 2023). "How FTAs can lift textile exports". The Hindu BusinessLine.
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