THE MULTIFIBRE ARRANGEMENT AND ITS EFFECTS ON DEVELOPING COUNTRIES

Abstract

The multifibre arrangement (MFA) provides for bilateral quotas against textile and clothing exports from developing countries. Thus, although it is administered under the auspices of the General Agreement on Tariffs and Trade (GATT) the MFA derogates two GATT principles: nondiscrimination and the avoidance of quantitative restrictions. The impact of the MFA on developing countries is examined in the article. Four important short-term effects of the MFA on exporting developing countries are: (a) the forgoing of exports; (b) the transfer of quota rents; (c) the shift to unrestricted exporters; and (d) the upgrading of products. In the long term the MFA discourages newcomers from becoming successful exporters of textile and clothing products. Although it also encourages foreign investment in unrestricted developing countries, in general the MFA is harmful to current and potential exporters of textiles and clothing in developing countries, and it benefits domestic producers of textiles and clothing in the importing industrial countries.