Protectionism in the textile and apparel industries

The textile and apparel sectors are the most protected sectors in the world. Unlike the protection afforded other manufactured products, the textiles and apparel sectors in the developed countries appear to be the recipients of permanent protection.

Textile and apparel exports have been essential in the development of many countries, from the UK in the 19th century to Japan in the early 20th, to Korea in the 1960's and 1970's. By the early 1960s, the protection for cotton textiles was accepted on a multilateral basis. This programme, initially envisaged as temporary and declining protection, eventually was expanded into the GATT Multifibre Arrangement (MFA) in 1974, renewed again in 1977, 1981 and again in 1986. Under the MFA, exports from developing countries are limited by export quotas resulting from bilateral arrangements negotiated with importing developed countries. MFA was initially intended to provide for an orderly but controlled liberalization of international trade in textiles and apparel. The restraint mechanism was to be bilateral export restraint arrangements negotiated between an importing developed country and an exporting developing country. In the beginning, bilateral export restraint arrangements were limited to the major supplying countries. Over time, however, as emerging developing country supplier became more competitive, export restraint arrangement were negotiated with more and more developing countries. Today, more than 50 countries are signatories to the MFA; the USA has bilateral agreements with more than 30 countries covering more than 80% of the USA imported of textiles and apparel from developing countries, and the EEC/EU has bilateral agreements with more than 25 countries. The only significant block of trade in textiles and apparel that is not subject to restraint is trade among the developed countries themselves, excluding Japan.

Academic studies conclude that, for many developing country exporters, prices are roughly 25% higher as a result of trade restrictions, including tariffs and MFA quotas. The rents associated with these higher prices are split in almost equal proportions between developing country exporters (who received the quota rents) and developed country Governments (who collect tariff revenues). The quota rents are small compensation for the very large sacrifice in export volumes that the developing countries must make due to MFA. This is heavily concentrated in the labour-intensive apparel trade, in which developing countries have a natural advantage, rather than the capital-intensive textile trade, in which developed countries are more competitive.