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# **Box 5** Implications of the Removal of the **MFA** for **African Countries**

For over 30 years international trade in textiles and clothing was restricted by the Multifiber Arrangement and its predecessor the Short-Term Textile Arrangement. These 'agreements" established quotas on developing countries' exports to the OECD based on pre-existing market shares. This had positive implications for some developing countries and negative effects on others. For example, developing countries that lost their cost competitiveness were still able to export textiles and clothing because of the MFA quotas' 'market reservation" effects. Countries which were new producers, or were becoming increasingly cost competitive, found their market shares frozen. With few exceptions (Mauritius and Nigeria) Africa does not face MFA restrictions. However, the MFA probably had positive implications for African exporters in that they were shielded from direct competition with countries that may be more competitive producers (i.e., China, Thailand, Sri Lanka, etc.) due to MFA constraints on the latter.

This situation will be altered dramatically due to the Uruguay Round. MFA quotas will be phased out over 10 years. At this point textile trade will become subject to _aggressive international comnetition._ Whether Africa can maintain viable textile and clothing exports will depend on its ability to compete with other producers.

Very limited information is available on relative costs in Africa vis-a-vis other textile producing countries, yet the data that exists indicates Africa may have problems. For example, the following shows estimates of the direct costs (in US dollars) for the production of a man's casual long sleeved shirt in India, the United Arab Emirates, and four African countries. In each case, Africa's production costs are above those for India. Costs in Senegal are actually about 50 percent higher. Ghana comes closest to matching the Indian cost structure, but still are 3 percent higher. It should be noted that the above do not incorporate any adverse marketing and distribution costs that may also affect Africa.

|Item|Zimbabwe|Kenya|Senegal|Ghana|India|UAE|
|---|---|---|---|---|---|---|
|Fabric|3.28|3.00|4.31|3.18|2.90|2.95|
|Misc. Materials|0.31|0.40|0.55|0.42|0.39|0.37|
|Washing|0.10|0.12||0.11|0.12|0.12|
|Labels/Packaging|0.16|0.31|0.36|0.36|0.40|0.42|
|Direct & Indirect Labor|1.72|1.34|2.36|1.22|1.22|1.60|
|Transport to Port|0.18|0.20|0.15|0.05|0.15|0.17|
|TOTAL OF ABOVE ITEMS|5.75|5.37|7.73|5.34|5.18|5.63|

Source: Biggs _et. al._ (1994). The authors report (p. 37) that no data could be collected for Cote d'Ivoire because the only remaining garment exporter was unable to compete for standard shht export orders. Also, the authors include a MFA quota cost in India's total production costs. These charges are excluded from the above totals due to the Round's agreed phase-out of MFA restrictions. It should be noted that the above cost comparisons were made for a period prior to the CFA devaluation. As a result of this exchange rate adjustment Senegal's cost structure is now probably closer to that of the other countries.

To compete effectively in the post-Uruguay environment Africa will need to adopt reforms that will allow domestic producers to be cost competitive. These reforms must address a broad range of measures, from the impact of government imposed trade barriers that raise the costs of imported production inputs, to measures that limit access to the most efficient international sources of finance, technology, transport and communications. Indeed, the Uruguay Round appears to have shifted the focus for further reforms to the African countries themselves to ensure that they can react to the new export opportunities and competitive challenges resulting from the multilateral trade negotiations.