Assessing the Impact of the Phasing-out of the Agreement on Textiles and Clothing on Apparel Exports on the Least Developed and Developing Countries
- Author(s): Appelbaum, Richard P.
- et al.
On January 1, 2005, the Multifiber Arrangement (MFA), which establishes quotas on different categories of apparel and textile imports to the US and the EU, will be fully phased out. The quota system, which has been in force for nearly thirty years, has resulted in the global dispersion of textile and apparel production, by restricting imports from countries that – based on market conditions – would have a larger volume of exports were they not constrained by their quota allocations. There is concern among many developing countries that the elimination of quotas will result in a loss of apparel and textile exports to a relative handful of countries that will have a competitive advantage. This research addresses these questions, in an effort to better understand the dynamics of global sourcing in the textile and apparel industries. It is based primarily on a review of existing research, both macro-level research that simulates world trade patterns, and case studies of individual countries. It also examines World Bank data on textile and apparel exports. The study shows that large retailers play an increasingly important role in determining the nature apparel production, including a preference for “lean retailing” that favors Hong Kong, Taiwanese, Korean, and Chinese suppliers. The changing nature of production is discussed, including the importance of well-established relationships between Asian suppliers and U.S. and EU buyers – relationships that enable the Asian suppliers to operate effectively across many different countries. The impact of MFA phase-out is discussed, with special emphasis on several sub-Sahara African countries, for which some information is available concerning the role of foreign suppliers. The paper concludes with a number of policies that might mitigate the anticipated effects of MFA phase-out.