Textiles trade under GATT and WTO, covering protectionist pressures, STA, LTA, Multi-Fibre Agreement, and Uruguay Round Agreement on Textiles and Clothing. Important for economics and BOP studies.

The textile trade sector faced decades of protectionist measures as major developed countries suspended the normal rules of free trade. From the early years of GATT, the textile industry struggled to compete with imports from Japan and developing nations. The sector witnessed a series of special agreements like MFA (1973-1994) and ATC (1995-2004), highlighting the challenges of trade liberalisation and the evolving WTO policies—a crucial topic for students preparing for exams.

Textile Protectionism under GATT and WTO Policies (1973-2004)

• The textile sector provides a vivid example of how protectionist pressures overshadowed free trade principles for decades.

  The sector remained under special trade restrictions for over three decades, reflecting the struggle between open market policies and protectionist pressures in the developed world.

  • (i) Normal market forces were largely ignored by major developed countries, as they sought to shield their domestic industries from competition.
  • (ii) The GATT principle of Most-Favoured Nation (MFN) complicated safeguard measures, since restricting imports required treating all countries equally, which was undesirable for developed nations.
  • (iii) Instead of following GATT rules, developed countries bypassed obligations and created a special textile trade regime with predetermined export limits from developing nations.

• Special Trade Agreements in the Textile Sector

  The textile trade was governed by a series of agreements that gradually expanded coverage and restrictions, illustrating the complex evolution of protectionist trade policies.

  • Short-Term and Long-Term Agreements (STA & LTA)

    The STA and LTA established early frameworks to limit textile exports, initially focusing on cotton products. They represented the first step in creating a structured yet restrictive trade environment.

    • (i) STA was designed as a temporary measure to curb rapid import growth from developing nations.
    • (ii) LTA extended the framework for a longer period while maintaining strict export limits.
    • (iii) Both agreements set the stage for the later Multi-Fibre Agreement (MFA) by establishing precedent for regulated textile trade.

  • Multi-Fibre Agreement (MFA, 1973-1994)

    The MFA significantly expanded restrictions beyond cotton to include wool and man-made fibres, reflecting the increasing complexity of protectionist strategies. Initially intended for four years, its continual extensions illustrated the reluctance of developed nations to liberalise trade.

    • (a) Expanded product coverage to wool and man-made fibres.
    • (b) Introduced stricter quotas to limit imports from developing countries.
    • (c) Set a precedent for subsequent agreements, emphasizing a controlled approach to textile trade rather than free market principles.

  • Agreement on Textiles and Clothing (ATC, 1995-2004)

    The ATC marked the final phase of this restrictive textile regime, gradually incorporating additional fibres such as jute, silk blends, and eventually pure silk. Despite its introduction, the agreement maintained export limits and delayed the full transition to trade liberalisation.

    • (i) Expanded product coverage to include jute and silk blends.
    • (ii) Gradually added pure silk to the restricted export list.
    • (iii) Maintained quotas and restrictions while setting a framework for eventual WTO integration.

• Summary: Textile Trade Protectionism and WTO Role

  The evolution of the textile trade regime from STA and LTA to MFA (1973-1994) and ATC (1995-2004) illustrates how protectionist pressures influenced global trade. It shows the challenges of reconciling free trade principles with domestic interests and the role of WTO policies in guiding gradual liberalisation—an important insight for students preparing for exams.