THE MULTIFIBRE ARRANGEMENT AND ITS EFFECTS ON DEVELOPING COUNTRIES

The MFA provides for bilateral quotas against textile and clothingexports from developing countries. Thus, although it is administeredunder the auspices of GATT, the MFA derogates two GATT principles:nondiscrimination and the avoidance of quantitative restrictions.The impact of the MFA on developing countries is examined inthe article. Four important short-term effects of the MFA onexporting developing countries are (a) the forgoing of exports,(b) the transfer of quota rents, (c) the shift to unrestrictedexporters, and (d) the upgrading of products. In the long termthe MFA discourages newcomers from becoming successful exportersof textile and clothing products. Although it also encouragesforeign investment in unrestricted developing countries, ingeneral the MFA is harmful to current and potential exportersof textiles and clothing in developing countries, and it benefitsdomestic producers of textiles and clothing in the importingindustrial countries.