Explain Multi Fiber Agreement

From 1974 to the end of the Uruguay Round, trade was governed by the Multifibre Agreement (AMF). It was a framework for bilateral agreements or unilateral measures to limit imports to countries whose domestic industry had suffered severe damage as a result of the rapid increase in imports. While the governments of the United States and the EU have formally opposed the growing group of stakeholders calling for an extension of the quota regime (either to extend the WTO ATC or to implement immediate alternative measures), imports from China continued to increase in the months following the opening of the textile and clothing trade. One of the most important agreements resulting from the Uruguay round of trade negotiations and, in many ways, a flag bearer of the WTO`s stated objective of liberalizing world trade in a rules-based environment, has quickly become the ultimate litmus test of the WTO. The difficult situation faced by policy-makers and WTO member countries was clear: any extension of quantitative restrictions would undermine the consensus agreement reached ten years earlier, to which countries had to prepare for a decade. Similarly, any extension would run counter to the structural changes and significant investments that would have taken place in anticipation of the abolition of quotas, particularly in China, which had been a full member of the WTO since the end of 2001, with all its rights and obligations. On the other hand, the abolition of quotas has threatened sustainability and hence the existence of a basic manufacturing sector, often seen as the first entry point for countries, as they diversify their economies, for example. B of a simple dependence on exports of raw materials or agriculture. In many developing countries, the clothing sector, in particular, had become the mainstay of formal economic activity, for example in Lesotho and Bangladesh. Given that few countries are able to compete internationally (or against foreign competition) without any form of direct or indirect protection, any threat to the sector in these countries becomes a threat to the job creation, investment inflows, production and foreign exchange earnings they sorely need.

Such a threat also undermines any hard-hit economic diversification resulting from a previous dependence on resource-based exports. Although the ATC has provided the overall framework for textile and clothing quotas and the integration of trade in this sector into normal WTO disciplines, it is not the only instrument for countries to limit imports of textiles and clothing. The alternative measures taken by the WTO and the clauses of China`s WTO accession agreement (Article 242) offer at least some kind of facilitation to countries against any increase in imports that threatens domestic industry. Measures that can be taken in accordance with the WTO are, to a large extent, contained in the “safeguard clauses” that allow Member States to temporarily protect a particular sector through certain trade restrictive measures (including, but not limited to quotas). Similarly, the agreement, in which China has been granted full WTO membership, contains clauses allowing Member States to take restrictive trade measures against any increase in textile and clothing imports from China that threaten market disruptions and orderly trade development (it is interesting to note that neither “market disruption” nor “orderly trade development” is defined in a restrictive manner). These clauses allow import growth to be limited to 7.5% per year and used until the end of 2008. In the months following the final expiration of the ATC, a number of these measures were implemented by countries affected by the expected increase in imports. The United States was the first major importer to use “China`s protection measures” and exercise its rights under China`s WTO accession agreement, instead of a longer process of enforcement of the mesu