Multifiber Agreement: What it Was and Special Considerations

What Was the Multifiber Arrangement (MFA)?

The term Multifiber Arrangement (MFA) referred to an international trade agreement involving clothing and textiles. The MFA was established in 1974 and imposed quotas on the amount of clothing and textile that developing countries could export to developed nations. The agreement was managed under the General Agreement of Tariffs and Trade (GATT) in Switzerland. Meant as a temporary agreement, the MFA ended on Jan. 1, 1995, and was replaced by the Agreement on Textiles and Clothing under the World Trade Organization (WTO).

Understanding the Multifiber Arrangement (MFA)

The Multifiber Arrangement was first established as a short-term measure under the General Agreement on Tariffs and Trade in 1974. It was meant to acknowledge how cheap clothing and textile import (namely yarns, fabrics, made-up textile products, and clothing) threatened and disrupted markets in developed nations as well as how exports helped diversify their earnings of shape the economic growth of developing nations, such as Bangladesh and China.

Developing countries often relied on primary commodity exports. The MFA attempted to mitigate the potential for conflict to ensure international trade cooperation. The quotas established were meant to manage the global clothing and textiles trade in the shorter term to prevent market disruptions. The ultimate aim remained to reduce the barriers and liberalization of trade, with developing countries expected to take an increasing role over time.

The United States and the European Union (EU) restricted imports from developing countries in an effort to protect their own textile industries. Each developing country signatory (notably those in Asia) was assigned product quotas that could be exported to the U.S. and EU. The number of signatories changed over time, ranging from 30 countries in 1972 to 40 countries in 1994. Trade between these countries dominated the global clothing and textile trade, accounting for as much as 80%.

As noted above, the MFA was terminated on Jan. 1, 1995, and was replaced by the WTO's Agreement on Textiles and Clothing. This new arrangement worked as a transitional agreement in order to remove the quotas put into place and bring international trade back into GATT rules. The Agreement on Textiles and Clothing was phased out on Jan. 1, 2005.

Special Considerations

The MFA and Agreement on Textiles and Clothing were designed under GATT to help protect the industries of the developed economies and to spur textile production in certain countries where quotas gave them access they didn't have previously.

GATT was ratified in October 1947 and went into effect the following year. One of its main features was to treat each signatory equally without discrimination. A total of 23 countries signed the agreement, which shaped rules to end or restrict trade controls and quotas that shaped the protectionist period set into place before the war. Under the agreement, nations were able to arbitrate commercial disputes and go through multilateral talks to reduce tariffs.

The dismantling of quotas on the global clothing and textile trade began as a result of negotiations at the Uruguay Round of GATT. On Jan. 1, 2005, the WTO assumed responsibility for oversight of the global textile trade to the WTO, which effectively marked the end of the Agreement on Textiles and Clothing as well as its predecessor, the Multifiber Arrangement.