Jun 6, 1991

TEXTILES: TESTING EACH OTHERS NERVES OVER MFA EXTENSION?

GENEVA, 4 JUNE (CHAKRAVARTHI RAGHAVAN) – The major importing countries of textiles and clothing have turned down the proposals and conditions of the Third World exporting countries, members of the International Textiles and Clothing Bureau (ITCB), for an extension of the current Multifibre Agreement (MFA-4) which expires July 31.

Participants at an informal consultations at the GATT Tuesday on the MFA-4 extension in reporting this said that the four majors, U.S., EC, Canada and Japan have said that they would not negotiate any conditions for an extension and called for a simple roll-over of the MFA-4 and the bilaterals under it.

The consultations, chaired by the GATT Deputy Director-General Madan Mathur, did not produce any meeting ground between the exporters and importers, but would be resumed next week.

Informal bilateral and plurilateral consultations are expected to continue in the meanwhile.

GATT sources suggested that the deadlock was merely the opening gambit with each side hoping the other would chicken out at the prospect of an end to the GATT-sanctioned departure from its normal rules and disciplines, and application of the GATT rules for non-discriminatory measures for protection of domestic industry.

At Bali, Indonesia, the exporting countries had proposed a 17 month extension of the MFA-4 till end 1992, but subject to three conditions to ensure that the current access is not further restricted during the tendency of the Uruguay Round negotiations for liberalising this trade and integrating it into GATT.

Towards this end, the ITCB had put forward three proposals or conditions to be incorporated into any extension protocol:

First, importing countries should refrain from introducing any new restrictions under the MFA during the extended period.

This in effect would be an extension of the Uruguay Round standstill commitments to the trade in this sector. The Industrialised countries while committing themselves to the standstill at Punta del Este in terms of the GATT regulated trades, had claimed afterwards that this would not apply to the MFA-regulated trade and that as per provisions of Articles 3 and 4 of the MFA, they could impose restraints or negotiate bilaterals for restraints.

Second, when existing bilateral agreements are extended or renegotiated or new agreements are entered into, the ITCB said that any agreement should not result in any deterioration of the terms now in place in terms of restraint levels, growth rates and flexibility.

Third, the importing countries shall not apply aggregate or group limits (as U.S. does to restrict imports) and regional quotas (as the EC does by setting overall limits and then allocating them among its member-States) during the extended period of the MFA, and where existing bilateral agreements provided for them these should be eliminated.

In the informal consultations, the four majors would appear to have said that they would not "negotiate" these conditions since this would complicate the Uruguay Round negotiations.

The extension, they said, should be a simple bridging device for the period between the expiry of MFA-4 and the coming into force of any Uruguay Round agreements on Textiles and Clothing, and provide only for rollover of the MFA-4 and bilaterals under it.

Among the other importing countries, the Nordics also opposed any "conditions" arguing though that while they did not now have any restraints, accepting the conditions would deny them the right to impose restrictions if the conditions so warranted and thus place them at a disadvantage vis-a-vis the other importing countries.

Among the exporting countries, Malaysia, speaking for the Asian group of countries, who are not members of the ITCB, would appear to have said that while the Asian preferred a 12-month extension, they would be willing to go along with a 17-month one if there was an emerging consensus. Malaysia also expressed "sympathy" for the Bali communique conditions.

India and Pakistan, ITCB members, would appear to have pointed out that the points mentioned in the Bali communique were not really "conditions" but stipulations to ensure that the current market access conditions would not worsen. The very purpose of the Uruguay Round negotiations in this sector was liberalisation of trade and it was not too much to ask that pending completion the situation should not worsen.

The majors would also appear to have suggested that if there would be no simple rollover of the MFA-4 and the bilaterals, they would be quite sanguine about the expiry of the MFA on July 31.

The thinking behind this stand would appear to be that their current import regimes are already governed by bilateral agreements and that, in effect, they would convert them into "grey area" voluntary restraint agreements with exporting countries - similar to those they have in a wide variety of other sectors which are strictly governed by GATT rules.

Since under the GATT rules and dispute settlement procedures, mainly the party aggrieved by a restraint could take raise a dispute and seek redress, the majors expect that none of the countries agreeing to VERs would challenge the restraints but would acquiesce in a virtual de facto MFA situation. Others who might challenge such "grey area" measures would not find it useful or worthwhile.

In such a situation or prospect of such a situation, the negotiators for the major importing countries apparently feel, the export trade in the exporting countries, faced with "uncertainty", would bring pressure on the exporting countries to reach some compromise and agree to whatever terms are available. They also feel that the ITCB itself would be divided, because of the anxiety of the current dominant Far East Asian exporters to preserve their market shares without disruption.

However, the negotiators of some exporting countries like Pakistan and India reportedly seem quite ready for the disappearance of the MFA-4 on August 1 which in effect would mean full application of GATT rules and disciplines to this trade.