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Both developed and developing countries stand to gain substantially from the removal of textile quotas under Multi-Fibre Arrangement (MFA) and the full integration of trade in textiles and clothing into the normal World Trade Organisation (WTO) rules, as per the WTO Agreement on Textiles and Clothing (ATC). According to a note by the UNCTAD Secretariat on implications of MFA termination on 31st December, 2004, developing countries with a comparative advantage in the sector should see their production and exports increase in a post-ATC world, and in developed countries, lower prices for clothing will mean that consumers should be big gainers. Such predictions are of course predicated on the premise that major developed countries will avoid filling the ATC void with a barrage of new barriers. Should they refrain from such trade distortions, developing country firms that respond to market demands, move up the value chain, and capture niche markets are poised to reap substantial gains in a post- ATC world.
Some countries and segments of the industry are likely to experience some level of dislocation and therefore would require assistance with post-ATC adjustment. However, the post-ATC picture needs to be seen in its proper perspective as there are several factors and assumptions that come into play in determining the extent, type and scope of the post-ATC impact. LDCs and small economies might feel the impact of ATC expiry most, and providing support measures to them would be a priority. There are outstanding issues which could affect development gains to be reaped from the ATC expiry, and these issues must be addressed properly. Giving in to protectionist demands to extend the ATC or to replace it by plethora of protectionist non-tariff barriers, including contingency measures, would equate to taking away with one hand what ATC expiration gives with the other, the UNCTAD note says.
The dynamics of textiles and clothing trade will be influenced by the factors discussed above, while the international market for textile and clothing products continues to grow as world population, incomes and standards of living increase. Also, the economies of some populous developing countries are growing fast, and the markets in the South will thus become increasingly important for Southern exporters. The sector also provides tremendous opportunities and prospect for developing countries given their leverage on labour cost, as well as the possibility for positive spillover effects into other sectors, particularly upstream commodities sectors and downstream industries, the note adds
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