Multi-Fibre Agreement (MFA) – Textile Trade Impact

The Multi‑Fibre Agreement (MFA) was an important arrangement governing international trade in textiles and clothing before full WTO rules applied.

1. Meaning / Background

The MFA (1974–1994) was a set of agreements that allowed developed importing countries to impose quantitative restrictions (quotas) on textile and clothing imports from developing countries.

• Intended to protect textile industries in developed countries from sudden import surges.
• Replaced earlier Short‑Term and Long‑Term Arrangements on textiles.

2. Integration into WTO – Agreement on Textiles and Clothing (ATC)

• Under WTO, the Agreement on Textiles and Clothing (ATC) replaced MFA.
• Provided for gradual phase‑out of quotas over a 10‑year period (1995–2005).
• After 2005, textiles and clothing brought fully under normal WTO rules (GATT).

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3. Impact on Developing Countries & India

Under MFA

• Export growth from developing countries like India was limited by quotas, even when they were competitive.

After MFA Phase‑out

Positive:

• Greater opportunity for competitive exporters (India, China, Bangladesh) to expand.
• Large, modern units benefited by accessing bigger markets.

Challenges:

• Intense competition; countries with cost or quality advantage gained more.
• Smaller, less efficient units faced difficulties.

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4. Quick Revision Points

• MFA allowed rich countries to restrict textile imports via quotas (1974–1994).
• ATC under WTO phased out quotas by 2005; textiles now under normal GATT rules.
• For India: more export opportunities, but also strong competition in global market.

5. Quiz Time 🎯

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