The end of the Multi-Fibre Agreement and its implication for trade and employment
Alfonso Hernández Ferrer
This paper illustrates the global evolution and performance of trade and employment in the textiles and clothing industry until 2005 and tries to forecast, with the help of a gravity model, its evolution after the end of the Agreement on Textiles and Clothing. The phasing out of the quota regime will mean a sharp reduction of distortions to trade in textiles and clothing and more transparency, but it also implies employment shifts. The study shows the already leading and increasing export position of China, including Hong Kong, SAR, and Macao, SAR, in particular in clothing, Pakistan’s dominant position in textiles, and the generally good trade performance of South and South East Asia. Other countries in both regions, smaller and less competitive, could potentially benefit from the new situation applying the right policies. The T&C industry of a number of other countries will suffer from increased competition, but they may have the capacity to survive in niche markets, mainly countries close to the US and EU market. Nevertheless, some countries will have great difficulties to maintain their T&C industry and will have to diversify their industrial production. This is a major concern for small and less developed countries previously benefiting from privileged access to the US and EU market, for example, sub-Saharan African countries. A fast adjustment of production to the new situation should be combined with active and passive labour market policies for workers during the transition period, to reduce the social cost of adjustment. It will be vital to coordinate, macro, trade and industrial policies with labour market policies.
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