Committee Reports > List of Committees > Joint > 1985 > Committee on the Secondary Legislation of the European Communities (4th Committee) > Report No. 17 - Multi-Fibre Arrangement

MULTI-FIBRE ARRANGEMENT

A. INTRODUCTION

1.The Joint Committee has examined Council Regulation (EEC) No. 3589/82 of 23 December 1982 which lays down the common rules for the current Multi-Fibre Arrangement (MFA 111) and wishes to report to the Dail and Seanad on the outcome of its deliberations. The Joint Committee received a written submission from the Apparel Industry Federation (AIF) and also received a deputation from the Federation. A memorandum on the operation of the MFA was received from the Department of Industry, Trade, Commerce and Tourism. The Joint Committee wishes to thank the AIF and the Department for their assistance.

2.The Joint Committee, following its discussions with the AIF, invited the Minister for Industry, Trade, Commerce and Tourism to participate in its further consideration of the MFA. The Joint Committee is pleased to report that the Minister was able to accept its invitation and participated in the meeting of the Joint Committee on 3 July 1985.

B. Consideration of MFA

3.The MFA is a multilateral international agreement concerning trade in clothing and textiles. At present there are about 50 adherents to the MFA including the 10 EEC Member States. The basic objective of the Arrangement is to:

“achieve the expansion of trade, the reduction of barriers to such trade and the progressive liberalisation of world trade in textile products, while at the same time ensuring the orderly and equitable development of this trade and avoidance of disruptive effects in individual markets”.⁽¹⁾

The EEC places considerable emphasis on controlling the pace of development in textile and clothing imports in order to avoid excessive disruption of its domestic industry. Within the framework of the MFA the Community has bilateral agreements with about 25 low cost supplier countries, restricting the level and rate of growth of clothing and textile products on the Community market from these sources.

4.The origins of the MFA can be traced back to the 1950s when the United States and European countries applied import controls on cotton textiles from low cost countries. These national measures were placed within the GATT framework in 1961 and the MFA took on its basic shape in 1974. The MFA covers both natural and synthetic products. It was initially agreed for a 4 year period but has twice been extended and the third extension (MFA III) is due to expire on 31 July, 1986: the EEC bilateral agreements run to the end of 1986. While the basic text of the MFA has not changed the Protocols of Extension have clarified or made explicit certain provisions. In particular, the Protocol of Extension of December, 1981 reflected the depressed state of demand in the market of importing developed countries and permitted the negotiation of bilateral agreements with stricter provisions than previously, e.g. cutbacks in some EEC quotas for dominant suppliers such as Hong Kong.

5.Following is a brief outline of the MFA:

(i)a Textiles Committee comprising all members of the MFA, under the chairmanship of the GATT Director General, was established to deal with differences between the parties on interpretation of the Arrangement and to monitor the overall operation of the Arrangement, with the assistance of the Textile Surveillance Body;

(ii)a nine member Textile Surveillance Body was established to review all restrictions introduced or new bilateral agreements entered into concerning trade in textile and clothing products, to make recommendations to the parties in bilateral negotiations where mutually agreed solutions are not found, and to report to the Textiles Committee;

(iii)all quantitative restrictions on trade in clothing and textiles must be notified to the Textile Surveillance Body;

(iv)new restrictions cannot be imposed unless market disruption (as defined in the MFA) or a serious danger of market disruption exists;

(v)bilateral agreements on mutually acceptable terms are permissible, but subject to review by the Textile Surveillance Body.

6.The principal division of opinion on, and interst in, the MFA is between the developed importing countries (USA, Japan and the Community, being the most important) on the one hand, and the low cost developing exporters (Hong Kong, India etc) on the other. The Peoples Republic of China has recently joined the MFA and should be an influential voice in the latter group. However, within these broad divisions there are differences in emphasis. Among the developed importers there can be some tension arising from the fear that, for example, the Community might obtain bilateral agreements on more favourable terms than the USA. Among exporting countries there can be tension, which rarely surfaces publicly, between those countries, e.g. Hong Kong, who have a dominant position on world markets and those who are seeking to break into them, e.g. Sri Lanka. Although all developing countries express themselves as opposed to restrictions, a comprehensive system of quotas by importing countries can assist some exporters in holding on to their share of markets.

Within the Community, although there is a consensus in favour of restricting low cost imports, the degree of commitment to protective measures varies.

7.During 1982 the Community renegotiated bilateral agreements with about 25 low cost suppliers which were due to expire at the end of that year. These new agreements will run to the end of 1986. The main provisions of these agreements are:

8.The extent of coverage of bilateral agreements varies with the importance of the supplier country. In the case of dominant suppliers, such as Hong Kong and South Korea, quotas at Community level cover, in each case, in excess of 40 product categories. Less important suppliers, such as Peru, would have a handful only of quotas. Unimportant suppliers have no quotas but do include the possibility of agreeing quotas in the course of the Agreement under the Basket Extractor Mechanism.

Such bilateral agreements do not exist between developed countries because market disruption, in MFA terms, cannot exist unless:

“products are offered at prices which are substantially below those prevailing for similar goods of comparable quality in the market of the importing country”.⁽¹⁾

9.In their submission to the Joint Committee the Apparel Industry Federation (AIF) acknowledges the contribution of the MFAs to the expansion of trade since their introduction in 1974 but states that they largely favour the developing countries to the detriment of the clothing and textile industries in the EEC. Within the past decade or so, according to the Federation, these industries have suffered massive job losses and employment has shrunk by over one million within the EEC. At present in this country there is some 17,000 people employed full time in the clothing industry as against 27,000 in 1973. The textile industry has reduced from around 14,000 in 1973 to 11,000 in 1984. This decline in employment, the Federation contends, can be largely explained by the massive increase in imports to the EEC from low cost countries.

10.The Federation are strongly of the opinion that a return to GATT General Rules would not lead to anything other than total chaos in the market for textiles and clothing. It is in favour of renewal of an effective Multifibre Arrangement beyond 1986 and believes that the clothing and textile industries still represents “a special case in world trade”.

In support of their argument that the market share of the low cost developing countries and the state trading countries is far greater in the clothing and textile sector than in other sectors of trade the Federation submitted statistics which are reproduced in Appendix I to this Report.

11.In its memorandum to the Joint Committee, the Department of Industry, Trade, Commerce and Tourism stated that the Sectoral Development Committee (SDC) recommended that Ireland should be in favour of renewal of the MFA and that this decision was endorsed by the Government (Cabinet Task Force) in its acceptance of the SDC Report on Clothing/Textiles in November, 1983. Ireland’s stance on the necessity of renewing the MFA (with satisfactory bilateral agreements), according to the Department, is dictated by:

-the continuing importance of our textile and clothing industries which employ about 25,000, ie approximately one in seven of the jobs in the manufacturing sector. An MFA type framework will facilitate industry restructuring to improve its competitiveness;

-the dangers for international trade/co-operation generally in the absence of an MFA type arrangement to ensure orderly and equitable expansion of trade between the developing and developed countries.

12.According to the Department, it is now reasonably clear that all EEC Member States favour renewal of the MFA but divergencies will arise on the shape of the new MFA, including the pace and extent of liberalisation and the question of whether a new MFA should be the final one or not.

Trade Statistics between this country and MFA countries supplied by the Department of Industry, Trade, Commerce and Tourism are reproduced in Appendix II.

C. VIEWS OF THE JOINT COMMITTEE

13.The Joint Committee acknowledges the significant role of the clothing and textile industries in the Community and, in particular, in the Irish economy. It can understand the apprehensions of the AIF should there be a return to GATT General Rules and strongly advocates the renewal of the MFA. However, it is important to keep this matter in proportion having regard to trade and technological developments in the clothing and textile sectors.

The Joint Committee is aware that pressures are building up among Member States such as Denmark, Germany and the Netherlands for an extensive range of liberalisation measures in any new Arrangement. Indeed the UK, which with Ireland, France, Italy and Greece has in the past adopted a restrictive attitude, will be pursuing a more liberal stance in renewal negotiations than heretofore, according to a recent announcement by the UK Minister for Trade, Mr. Channon. This approach is influenced by the findings of the Silberston Report, which advocated a gradual phasing out of import restrictions under a new MFA, and also by the proposed new GATT round of multilateral trade negotiations.

While the Joint Committee accepts that the clothing and textile industries represent a special case in world trade and would face a serious threat from generous liberalisation, nevertheless, it feels it would be less than realistic not to countenance the fact that some liberalisation may be difficult to resist as renewal of the MFA would, of course, also require the approval of the developing (exporting) countries which have been pressing for a return to normal GATT rules.

The Joint Committee, in the interest of economy generally, must urge an extension of trade and express the wish for the success of the new GATT round. The Agreement and co-operation of developing countries will, of course, be necessary for this purpose.

D. CONCLUSION

14.When the Minister for Industry, Trade, Commerce and Tourism participated in the Committee’s proceedings he outlined the complexities of forging a new Agreement, which includes a large number of bilateral agreements to be entered into by the EEC with low cost countries within the general framework of the MFA, and stressed that he expected negotiations leading up to a new Agreement to be long and complex.

However, the Minister reiterated the assurance given by the Minister of State at his Department in reply to Parliamentary Questions⁽¹⁾ on 13 June 1985 that the Government are in favour of a new MFA and that all steps necessary to protect Ireland’s clothing and textile interests within the confines of the MFA will be taken. The Joint Committee welcomes this assurance because without the MFA this country would face a difficult situation in the market place as substantial imports of textiles and clothing from low cost countries would distort the market in Europe.

15.The Joint Committee does not underestimate the difficulties associated with putting another Agreement in place along the lines of MFA 111. The changing attitude of the US on international trade which has led it to an increasing protectionist stance will have to be considered in this context. Account must also be taken of the fact that any new GATT round of multilateral trade talks may also have implications for the long term future of the MFA.

However, the objective in negotiations should be, in the the Joint Committee’s view, to accommodate any approach to liberalisation only insofar as it is consistent with the retention of needed protection.

16.The EEC Commission has recently sent a communication to the Council of Ministers seeking approval for general guidelines in favour of the renewal of the MFA. The Joint Committee urges that our negotiators take a strong line in favour of renewal and bear in mind that the benefits of liberalisation which would accrue to other Member States would be very unlikely to apply to this country. This country, mainly because of its geographical location does not have a facility for outward processing which other Member States have. Other Member States also stand to benefit from the export of capital equipment to MFA countries and accordingly stand to gain from liberalisation. The Joint Committee hopes that these arguments will be borne in mind in the course of negotiations.

Joe Walsh T.D.

Acting Chairman of the Joint Committee

31 July, 1985.

(1)

(1) MFA I

(1) Official Report Vol. 359, No. 8 Cols. 1515-18