Removal of a quota system in exported garments and textiles is very much on the minds of many workers and trade unionists at present; the subject is even aired on mainstream news channels. This is because under World Trade Organisation (WTO) rules, quotas are planned to disappear at midnight on 31 December 2004.

The plan, called the Multifibre Arrangement (MFA), devised in 1974 under the General Agreement on Tariffs and Trade was absorbed into its successor, the World Trade Organisation, in 1995 under a plan, the Agreement on Textiles and Clothing (ATC), to phase out the quotas by 1 January 2005.

Removal of a quota system in exported garments and textiles is very much on the minds of many workers and trade unionists at present; the subject is even aired on mainstream news channels. This is because under World Trade Organisation (WTO) rules, quotas are planned to disappear at midnight on 31 December 2004.

The plan, called the Multifibre Arrangement (MFA), devised in 1974 under the General Agreement on Tariffs and Trade was absorbed into its successor, the World Trade Organisation, in 1995 under a plan, the Agreement on Textiles and Clothing (ATC), to phase out the quotas by 1 January 2005.

Not much phasing out has actually occurred, most quotas will simply disappear at midnight 31 December 2004. Any quotas that have been lifted demonstrate how influential the MFA has been over world trade. For example before quotas on 29 categories of clothing were removed in 2002, China supplied nine percent of garments sold in the US; China increased its share of the US market in these categories to 65 percent by March 2004. It is not yet clear which producing countries lost the contracts to China.

The MFA was devised primarily as a protectionist measure for the textiles and clothing industries in the US and the European Union, and though jobs in the sector have been lost to Asia, the industries have managed to survive so far thanks to this protectionism.

The other major effect of the MFA was to provide an opportunity for countries to enter the textile and clothing industry by preventing one or two large producers like China and India from gobbling up all the export contracts. Countries such as Sri Lanka and Bangladesh certainly benefited from the MFA, but are now worried that without the protection lent them by the MFA, and because their governments have done nothing in anticipation of the removal of quotas, the sectors will suddenly fall flat on their faces, closing down factories and throwing millions out of work.

As the time for quota elimination draws nearer there is much speculation about which countries will benefit, and which will lose out. Two years ago, many observers, particularly in countries that felt they would definitely lose contracts, like Sri Lanka and Bangladesh, were touting sub-Saharan African countries as the main beneficiaries, but most watchers now agree that China and India will be the main beneficiaries.

Much of what will happen depends on how importing countries react to the new conditions in 2005. A rather vague condition in China’s WTO accession, enforceable until 2013, gives importing countries the right to limit China’s imports if they can show that their industry is damaged by them. In a proposal reminiscent of US foreign policy that allows pre-emptive military intervention in other countries, US clothing producers are complicating the situation further by anticipating the damage and calling for pre-emptive controls on China even before the ATC is cold in its grave.

Although much of the trade will go to China when quotas are removed, Chinese workers will not necessarily reap the benefits. One of the reasons retailers want to get rid of quotas is that they are expensive to administer and thus push up prices; when quotas go and prices come down, because of high unemployment in China, workers will be forced to compete more fiercely for work, more than likely driving down their wages.

The countries that stand to lose the most want to extend the quota system. There is an argument to back up the demand: because western/northern countries industrialised their economies under highly protectionist conditions (for example for decades in the nineteenth century, colonialists proudly flaunted Britain’s “Splendid Isolation” in trade and commerce), today’s developing countries should be allowed the same protectionist conditions to develop their own economies.