Agreement on Clothing and Textiles: What You Need to Know

The Agreement on Textiles and Clothing (ATC) was a deal signed by members of the World Trade Organization (WTO) on January 1, 1995. The agreement aimed to phase out the Multi-Fibre Arrangement (MFA), which had been in place since 1974. The MFA established quotas on the amount of textile and clothing exports that developing countries could send to developed countries, giving an advantage to developed countries’ producers. With the expiration of the MFA, the ATC was introduced to regulate international trade in textiles and clothing.

The ATC sought to liberalize and open up the textiles and clothing sector to free competition by gradually eliminating quotas and other trade barriers. The agreement created a 10-year implementation period that started on January 1, 1995, and ended on January 1, 2005. Over the implementation period, developed countries were to gradually phase out quotas on the import of textile and clothing products, while developing countries were given time to increase their production capacity and become more competitive.

The ATC had some significant impacts on the global textile and clothing industry. First, the agreement facilitated trade among countries, making it easier and more cost-effective for businesses to source materials and finished products from abroad. Second, it created new opportunities for developing countries to expand their exports and establish themselves as key players in the global market. Third, it had significant implications for employment and wages in the textiles and clothing sector, particularly in developing countries.

While the ATC was intended to promote free competition and open up the market, it has faced criticism for the negative impacts it has had on certain segments of the industry. Some argue that the removal of quotas disproportionately impacted certain countries and regions, leading to job losses, wage stagnation, and a race to the bottom in terms of labor standards. Others contend that the ATC led to the concentration of production in a few countries, limiting the diversification of the industry and leading to vulnerability in the face of economic shocks.

Despite these criticisms, the ATC remains a significant international agreement that has helped shape the global textile and clothing industry over the past few decades. As the industry continues to evolve and face new challenges, it is important to understand the history and context of agreements like the ATC in order to navigate the complex landscape of international trade.