Mar 7, 1990

TEXTILES: MFA EXPORTERS WANT BLUEPRINT FOR PHASE-OUT BY JULY.

GENEVA, MARCH 5 (BY CHAKRAVARTHI RAGHAVAN) -- Third World exporting countries in the Multifibre Arrangement (MFA) have called for issue oriented, definite time-table of negotiations in the Uruguay Round so that a blue-print for phasing out of MFA restrictions could be ready by July of this year.

The demand of the Third World exporting countries grouped in the International Textiles and Clothing Bureau (ITCB) was presented Monday at the negotiating group on Textiles and Clothing by the ITCB Chairman, Amb. Hassan Kartadjoemena of Indonesia.

The ITCB statement gave detailed reasons for rejecting the "global quota" approach as a modality for integrating the Textiles and Clothing trade, now governed by the MFA as a derogation from GATT, into the GATT.

The U.S. had put forward its ideas for a "global quota" approach, with current country and product-specific quotas being subsumed gradually into global product-specific quotas that would shield U.S. domestic producers from competition while the exporters would be competing with each other. The U.S. proposal said the global quota system would prevail till 31 December 1991, and from 1 January the GATT disciplines would prevail.

Canada which had made similar proposals orally last time, put forward this time a written paper which said that for the administration of the global quota system, the textile importing countries should be given a waiver from the application of Art. XIX of the General Agreement, the general provision for application of safeguards.

In rejecting the U.S. and Canadian proposals, Kartadjoemena said the "global quota" proposal would conflict with the mid-term agreement which clearly called for phasing out of the MFA restrictions.

The sole merit of the "global quota" system would be non-discrimination in regard to import restrictions, which would however increase for all groups of suppliers, with the Third World countries affected in products now unrestrained.

The Third World countries would be deprived of their ability to diversify and their trade expansion would be curtailed.

Even as it was, under MFA-4, the U.S. had been using concepts of "aggregate" and "group" limits on imports, and the global quota would put a further "cap" on growth prospects and lead to restrictions. This would conflict with the Uruguay Round commitments for further liberalisation through the Round.

In the past, the ITCB spokesman pointed out liberalisation of import quotas had not been achieved by raising levels of restrictions in the beginning. The OECD code of liberalisation, for example, took existing restrictions as the point of departure for progressive elimination. The same thing was done by the EEC in its successive stages of enlargement.

The "global quota" system had an inherent contradiction with the stated aim of the U.S. and Canada to introduce market forces into the trade as quickly as possible.

For, under the global quota the domestic industry would continue to be isolated from market forces and get greater protection by the global type quotas on the totality of imports.

The opening of markets to competitive forces should ensure increased competition between domestic producers and foreign suppliers. But the US idea of gradually increasing the size of "global quota basket" by cutting the individual country quotas would merely increase competition among foreign suppliers whereas in many product categories the U.S. domestic suppliers were far more important.

There were many product categories now under restraints where the Third World countries were principal suppliers. What would be the benefit that would accrue to these countries through expansion of global quotas, particularly when members of the (U.S.-Canada) Free Trade Agreement would be excluded.

The proposed system would also disrupt existing commercial relations between exporters and importers and dislocate trade until new relations were established.

It would provide certainty and predictability in the protection of the domestic industry but not to foreign suppliers.

The U.S. had not spelt out the nature of the legal cover it envisaged for the global quota system. But Canada had indicated it would be through a derogation from Article XIX obligations and its requirements for demonstration of "serious injury" to domestic producers before restricting imports. But it would still violate Article XIII and its requirements about non-discriminatory administration of quotas, since this Article did not provide for progressive reduction of country allocations of quotas.

The U.S. had also envisaged a ten-year transition period for the global quotas but had not spelt out how it envisaged the quotas to be dismantled overnight at the end of that period.

Would there be another transition period or would they be continued in perpetuity under Article XIX, the ITCB Chairman asked.

The purpose of integration of the trade into GATT was to liberalise the trade, not to restrict it more. The aim should be that during the transition the domestic industry in the restraining countries should face competition through market forces.

The U.S. and Canada, the ITCB Chairman pointed out, already had very high tariffs on imports of textiles and clothing, higher than for most other manufactured products. There was hence no justification for more protection.

The negotiating group should start serious negotiations with the current restrictions as the point of departure. There were a number of proposals on the table for phasing out of the MFA restrictions, and some of them had provided specific approaches. The time had also come for the EEC to spell out its ideas for phase-out.

The negotiating group had a very limited time at its disposal. It must hence decide on a programme of work to discuss and take decisions on particular issues from now till July.

"We strongly believe", Kartadjoemena added, "that issue oriented negotiations with a definite timetable is essential to reach the target and achieve the mandate by July. We should be ready with a blue print for phase-out of MFA restrictions by July".