# **1. Motivation**

The Multi-fibre Arrangement (MFA) was the major policy governing the textile and apparel trade between industrialized and developing countries since 1974. Its goal was to help industrialized countries adjust to the rising production capacity of developing countries. Under this arrangement, textile and clothing quotas were negotiated bilaterally.<sup>4</sup> After the termination of the MFA/ ATC on January 1, 2005, the trade in textile and clothing was no longer subject to quotas, and is governed now by general rules of the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT). The result of the end of the Multi-fibre Arrangement (MFA) was a dramatic redistribution of the allocation of global apparel production (Staritz 2011; Lopez Acevedo and Robertson 2012). For example, in 2000 China contributed to 24.8 percent of world apparel exports, Cambodia’s share was 0.6 percent, and Mexico’s was 4.6 percent. In 2008, the Chinese market shareof world apparel exports increased by 50 percent,as compared to 2004,and it constituted 38.8 percent of the global apparel trade. The Cambodian market share doubled over the same time period and accounted for 1.2 percentof world apparel exports. However, the Mexican share declined threefold in that period, and in 2008 it constituted only 1.4 percent of world apparelexports (Lopez Acevedo and Robertson 2012).

The end of the MFA had significant implications not only for exports, but also for apparel workers, female in particular. Apparel is perhaps the most prominent labor-intensive and female-intensive globalized manufacturing sector in many developing countries. Due to its lowskill labor requirements, the apparel industryis often seen by economists as a “gateway” into manufacturing for workers whose alternative is agriculture or the informal labor market (including domestic service, construction, and child care). The apparel industry is also a major source of formal employment for women who constitute a major share of the apparel employment in many countries.

Apparelis the key manufacturing industry in Cambodia and Sri Lanka. In Cambodia apparel exports accounted for 70 percent of total manufacturing exports, and the sector employed around 325,000 workers in 2008, which represented almost 30 percent of total industrial employment. In Sri Lanka the apparel sector contributed 40 percent of the country’s total exports and employed 270,000 workers, or 13 percent, of its industrial employment in 2008.<sup>5</sup> Female workers dominate the apparel sector employment in both countries, making up83 percent of apparel employment in Cambodia and 73 percent in Sri Lanka.<sup>6</sup> The goal of this paper is to analyze the post-MFA changes in female wages and working conditions, such as the use of child labor and working hours,in the apparel industry in Cambodia and Sri Lanka. The MFA phase-out was a major concern for both Cambodia and Sri Lanka because of the expected competition from cheaper Chinese products. Womenworkers

> 4On January 1, 1995, the MFA was replaced by the Agreement on Textiles and Clothing (ATC), which brought the MFA under the rules of the World Trade Organization (WTO). As a transitional instrument, the ATC established a timeframe to eliminate quotas and integrate clothing and textiles into the 1994 rules of the General Agreement on Tariffs and Trade (GATT).

> 5Authors’ calculations using data from World Development Indicators from 2009.

> 6Data from household surveys.

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