20

# V. A CASE STUDY: TEXTILES, CLOTHING<sup>AND THE MFA.</sup>

32. The Multi-fiber Agreement (MFA) is probably the<sup>best known set of restrictions targeting</sup> developing countries. Various studies have pointed at its<sup>cost, both for consumers in industrial</sup> countries and for exporters. Yet trade throws another<sup>light on these estimates.</sup> 33. "Though being a member of the MPA, Switzerland<sup>has not resorted to quantitative import</sup> restrictions"'<sup>9</sup> on textiles and clothing. Yet "the vast<sup>majority of Switzerland's imports in textiles</sup> and clothing are registered as being from EFTA<sup>countries or the EC.. "20. Even after correction</sup> for indirect imports, the GATT Secretariat estimates<sup>that 30 percent of Switzerland's textiles and</sup> clothing imports come from developing countries, including<sup>East Europe. Japan is another industrial</sup> country that does not apply quantitative restrictions to<sup>textiles and clothing imports. The 1990 share</sup> of developing countries amounted to 81 percent in its imports<sup>of clothing, and to 58 percent in its</sup> textiles imports. Both shares have been falling in the 1980s.

34. By contrast with these countries, the US does<sup>apply MFA restraints on imports from developing</sup> countries. Yet 89% of US clothing imports and<sup>54 percent of US textiles imports came from</sup> developing countries in 1990, a larger overall shares of developing countries<sup>in textiles and clothing</sup> imports that are larger, per capita, than those of either<sup>of the two unrestricted importers. The</sup> proportion for the EC was 75 percent for clothing<sup>and 45 percent for textiles, much higher than in</sup> unrestricted Switzerland and only marginally lower<sup>than in Japan, a difference surely easily</sup> explicable in terms of Japan's (and to some extent even the<sup>US's) greater proximity to dynamic East</sup> Asian exporters. The actual import picture is fully<sup>consistent with the hypothesis that the MFA does</sup> not actually significantly restrict textiles and clothing<sup>imports from developing countries. However,</sup> the MFA may well accelerate the re-orientation<sup>of industrial country textiles and clothing imports</sup> towards nascent exporters, and, in the EC, towards<sup>exporters that benefit from special preferences.</sup> Thus Morocco, Tunisia and Turkey, and also Bangladesh<sup>and Mauritius have higher shares even</sup> of developing country exports in the EC than<sup>in Switzerland or Japan.</sup> 35. Estimates of the costs of protection to developing<sup>countries greatly rely on auctions of export</sup> licenses in Hong-Kong markets. Hong-Kong remains the<sup>world's largest clothing exporter, but it has</sup> lost market shares, both worldwide and in industrial<sup>country markets. Its clothing exports to the EC,</sup> for instance, rose by 130 percent in value in<sup>the 1980s, to $4.3 billion, while EC clothing imports</sup> from all sources rose by 183 percent, to $27 billions.

36. Yet this loss of market shares need not have been<sup>caused by MFA restrictions. Hong-Kong, now</sup> a high income country with a fully employed<sup>labor force would in any case surely have moved</sup>

**_"9 Tro4 Poicy_** _nn4ew,_ **_SW7ZERL4N,_ General Ageement on** Tariffs and Trade,<sup>**GENEVA**December</sup> 1991, Vol I p. 165.

°' Ibidem.