What was the Multifiber Arrangement - MFA
The Multifiber Arrangement (MFA) was an international trade agreement on textiles and clothing in place from 1974 till 2004. It imposed quotas on the amount of clothing and textile exports from developing countries to developed countries.
BREAKING DOWN Multifiber Arrangement - MFA
Under the Multifiber Arrangement (MFA), the United States and the European Union (EU) restricted imports from developing countries in an effort to protect their domestic textile industries. Under the agreement, each developing country signatory was assigned quotas (numerically limited quantities) of specified items which could be exported to the U.S. and EU. (Note that at the start of the agreement the EU did not exist in its current form; the agreement included what was then the European Community (EC) and the European Free Trade Association (EFTA).)
History of the Multifiber Arrangement
The agreement was first established under the auspices of the then-existing General Agreement on Tariffs and Trade (GATT). The origins acknowledged both (1) the threat to developed markets from cheap clothing and textile imports in terms of market disruption and the impact on their own producers, and (2) the importance of these exports to developing countries in terms of their own economic development and as a means to diversify export earnings. At that stage, developing countries were often still heavily reliant on primary commodity exports. The agreement attempted to mitigate this potential conflict to ensure continued cooperation in international trade. In this context, the quotas were described as an orderly means in which to manage the global clothing and textiles trade in the shorter term to prevent market disruptions. The ultimate aim remained one of reduction of barriers and liberalization of trade, with developing countries expected to take an increasing role over time in this trade.
The number of signatories to the agreement changed slightly over time but was generally in excess of 40, with the EC counting as one signatory. Trade between these countries dominated the global clothing and textile trade, accounting for as much as 80%.
GATT has since been supplanted by the World Trade Organization (WTO), and at the Uruguay Round of GATT the decision was taken to transfer oversight of the global textile trade to the WTO. Also as a result of that round of negotiations, dismantling of quotas on the global clothing and textile trade began. The process was completed on 1 January 2005, effectively marking the end of the MFA. The agreement had helped protect industries of the developed economies as it was designed to, but also helped spur textile production in certain countries where the quotas actually gave them access they had not previously had.