Feb 12, 1988
FOUR-PAINT PAKISTAN PLAN FOR PHASING OUT MFA
GENEVA FEBRUARY 10 (IFDA/CHAKRAVARTHI RAGHAVAN)— A four-phased plan for orderly elimination of current discriminatory restrictions on third world exports of textiles and clothing has reportedly been put forward by Pakistan in the Uruguay round Negotiating Group on Textiles and Clothing.Described as ideas and elements to promote a "structured discussion" within the group, the Pakistan proposals were formulated at this week's meeting of the negotiating group. Earlier Indonesia’s Daris Salim, the chairman of the International Textiles and Clothing Bureau (ITCB), the alliance of third world exporting-members of the MIA, said the negotiating group should now focus attention on examination of techniques and modalities for integrating the trade into GATT, and thus contributing to further liberalisation of the trade. The ITCB, Salim added was preparing proposals to facilitate this process and would submit them for the next meeting. The next meeting is scheduled for the week of May 2. In other remarks at the meeting India reportedly underscored the "political necessity" of progress in the negotiations in this area, while Switzerland supported the idea of agreement during the round on a time-table for dismantling the MFA regime. International trade in textiles and clothing is governed by the Multifibre Arrangement (MFA), which is derogation from the GATT rules and principles. The MFA and its predecessors have institutionalised discriminatory restrictions on imports of textiles and clothing products from the third world countries. Extended every three or four years by protocols, the current MFA-4 is due to run till July 31, 1991. The Punta del Este declaration mandates negotiators in this area "to formulate modalities that would permit the eventual integration of this sector into GATT on the basis of strengthened GATT rules and disciplines, and thereby also contribute to the objectives of further liberalisation of trade". Salim said the integration of the trade into GATT under strengthened rules and disciplines was of great importance to third world countries, and the Uruguay round objectives of halting and reversing protectionism and liberalising world trade. The ITCB’s studies on the state of the textiles and clothing industries in industrial countries during the period of the MFA regime clearly showed "improved performance" according to all relevant indicators - turnover, production, value-added, productivity, profits and investment. The decline in employment had also slowed dawn in most of the industrial countries, and throughout the period the decline was primarily due to sharp gains in productivity through investment in labour-saving equipment. For industrial countries as a whole, the preponderant part of consumption in textiles and largest part in clothing, in value terms, was by domestic production. In the U.S., EEC (as a whole) and Japan, greatest part of consumption was met by domestic suppliers, while in other industrialised countries it was accounted for by imports from other industrialised countries together with domestic supplies. Imports from third world MFA supplies, while increasing more rapidly than production in some periods and some markets, had through the period remained significantly below value of domestic supplies in each of the large markets and of imports from other industrial countries and domestic supplies in each of the smaller industrial country markets. Taking all factors into account, the situation in industrial countries at the end of the 1980’s was very different from that in the 1970’s. The industries in industrial countries had benefited increasingly from the proximity of huge domestic markets (U.S. and Japan) or markets where they faced no trade barriers (EEC and EFTA). Imports from third world countries had not impeded improvement in the situation of the industry in the industrial countries. The changed situation, Salim contended, should help facilitate the task of integrating the trade into GATT. Negotiations should focus now on techniques and modalities to achieve this. Supporting Salim's statement, India argued those negotiations for strengthened GATT rules and disciplines would continue in the relevant negotiating bodies. The textiles negotiating group should concentrate on the modalities for integration into GATT. The Uruguay round, it was hoped, would result in a strengthened general agreement and a viable and durable multilateral trading system so that all sectors such as textiles and agriculture (both now outside GATT) could be effectively brought under GATT disciplines. Any efforts to liberalise world trade could not ignore this important sector, and the group must work to evolve modalities for removal of the longstanding derogation of this trade from GATT rules. The MFA had provided the means to industrial countries to discriminate against third world and East European exporters for their ability to produce efficiently and at competitive prices, and without any compensation (for such restrictions) under article XIX of GATT. The MFA had not achieved its objectives of progressive liberalisation of trade and the social and economic development of third world exporting countries. It had not also facilitated structural adjustment in industrial countries, but rather had tended to impede this process. MFA concepts like "low cost suppliers" or determination of "a situation of market disruption" on basis of selective criteria could no longer be justified. In its statement, Pakistan argued that the goal of integration of the trade into GATT had been already approved by the Punta del Este declaration. The negotiating group had only to agree on modalities to permit such integration and thus contribute to further liberalisation of trade. Pakistan’s had expressed understanding at Punta del Este that the modalities to be formulated should be pursued independently of negotiations or agreements on other subjects, and not contingent on them, had not been disputed by any Contracting Party. The purpose of the negotiations in the group was not "to replace the present derogatory restrictive regime by another one which may be consistent with the GATT", nor seek integration for the sake of integration. The objective was integration and liberalisation of trade, and these two could not be seen as mutually exclusive, but complementary aspects. The entire Uruguay round exercise was for strengthening the framework for international trade in all products, and it was a response to the universal concern over the steady deterioration of GATT disciplines and proliferation of trade measures outside the GATT. Hence the focus of attention on sectors like agriculture and textiles, and efforts to integrate them into the GATT framework. At the same time, other efforts were under way to strengthen the GATT rules and disciplines. Many negotiating groups were engaged in this task - the group on functioning of the GATT system, group on GATT articles, group on safeguards, group on subsidies, the group on dispute settlement, etc. Pakistan hoped that results of these efforts would bring about a "desired level of strengthening" of GATT rules and disciplines, and the results of such negotiations would be equally applicable to sectors now governed by GATT as well as those like textiles and agriculture outside it. If the present rules were adequate for sectors of trade within GATT, there was no reason why they should not be satisfactory for the textile trade as well. The idea of GATT being "a moving target" for the negotiating group on textiles and clothing (and integration on eventual objective; at on unspecified future) was "inappropriate and misplaced", and would be tantamount to removing textiles from the Uruguay round agenda. And given the long history of the MFA and MFA-type restrictions, modalities for integrating the trade into GATT should be both effective and operational. The modalities should facilitate a "phased, orderly elimination of restrictions and transition to the GATT system while, at the same time, taking into account the process of strengthening of GATT rules and disciplines". One of the main elements for the erosion of the basic GATT principle of non-discrimination in the MFA had been the concept of "low prices" as a factor of market disruption. With violent fluctuations in exchange rates, the price element was liable to serious distortions, and the concept had been misused to introduce restraints on products priced higher than those of domestic industry. The elimination of this element would be an important first step towards integration of this trade into GATT. As a second step in phase one, restrictions on imports of non-textile products should be removed, Pakistan suggested. The world trade in this sector continued to be dominated by domestic industries in the imparting industrialised countries or by imports from other industrialised countries. The recent technological developments had also reinforced the competitive advantage. The textile producing industries of many third world countries were based on indigenous raw materials, and were an important source of foreign exchange earnings and thus of import capacity. The current restrictions thus hindered not only development of the manufacturing sector but spilled over into the agricultural area with significant repercussions on employment and investment. In the second phase, restrictions on apparel products should be applied only in situations of "actual or threatened market disruption causing serious damage to domestic producers". The provision of comprehensive bilateral agreements (for voluntary restraints) should become inoperative, in view of the increasing evidence of the arbitrary character of comprehensive restrictions under bilateral agreements. In the third phase, any restrictions on apparel products should be applied only if there was a positive determination by the Textile Surveillance Body (TSB) as to the existence or threat of market disruption causing serious damage to domestic producers. At the end of the fourth phase, all MFA-type restrictions on clothing should be eliminated to enable complete integration of textiles and clothing into GATT. While such a phased programme would eliminate MFA restrictions and integrate the trade into GATT, the further liberalisation of the trade would need substantial reduction in the high level of tariffs on textiles and clothing relative to tariffs on manufactured products. This should be negotiated in the context of the work in the negotiating group on tariffs'. Yugoslavia, Mexico, Turkey, Brazil and China were among those who spoke supporting the Indian and Pakistani arguments. The European Communities, in what was interpreted as a conciliatory statement, noted that in July 1985 it had accepted the objective of progressive liberalisation of trade in this sector, and in February 1986 had also accepted the final goal (of MFA) as return to GATT. The EEC would hence be ready to undertake an in depth examination of the issues and the modalities to achieve the objective. In other comments, Switzerland supported the idea of a time-table for dismantling the MFA regime, and said this must done in the Uruguay round. The Nordics and the U.S. indicated their willingness to examine the modalities in the months ahead. The negotiating group is to meet again in the week May 2, and perhaps another meeting in the week of June 13.