Textiles - negotiations on textile trade in the Uruguay Round of the GATT

U.S. Objectives

The negotiating mandate for textiles and clothing was to formulate modalities that would permit the eventual integration of the textile and clothing sector into the GATT on the basis of strengthened rules and disciplines. The United States sought to negotiate an integrated package that would be implemented gradually, provide protection in the event of damaging surges during the transition period, provide stability for trade in the sector, and open foreign markets to textile and clothing trade for the benefit of U.S. producers and workers.

Results of the Agreement

The Uruguay Round Agreement on Textiles and Clothing contains an agreed schedule for the gradual phase-out of quotas established pursuant to the Multifiber Arrangement (MFA) over a ten-year transition period, after which textile and clothing trade will be fully integrated into the GATT and subject to the same disciplines as other sectors. The agreement provides for expanded trade, improved market access, and improved safeguard mechanisms.

Safeguards: During the transition period, the agreement provides an improved safeguards mechanism (compared to safeguards in the MFA) for setting quotas on uncontrolled trade and to protect the market against damaging surges in imports. In the safeguards text, the agreement firmly embeds the concept of cumulative damage to domestic industry and permits an importing country to set quotas on countries that are contributing to that damage. In addition, the agreement contains stronger terms than the MFA for dealing with quota circumvention, such as illegal transshipments through countries not subject to quotas. Product Integration: The agreement also provides for expanding trade during the transition, in that products adding up to a certain percentage of a country's imports must be integrated into the GATT. Product integration and an increase of current quota growth rates will both occur in three stages. Each importing country can choose the products at each stage, and therefore can consider the particular sensitivity of each product proposed. The transitional textile safeguard mechanism will not apply to products that are integrated, and any quotas on such products will be eliminated.

Improved Market Access: The agreement sets out that all countries, developed and developing alike, must achieve improved market access in textiles and clothing "through such measures as tariff reductions and bindings, and reduction or elimination of non-tariff barriers." Substantial gains have been achieved in the market access negotiations relating to textiles and clothing. Specifically, many countries have agreed to comprehensive bindings in the sector at reasonable tariff rates. This means no tariff can be increased beyond the bound level, without compensation. Substantial results have been achieved in obtaining the elimination or disciplining of non-tariff measures, such as discretionary licensing systems or import bans, affecting trade in the sector. Remedies: The agreement has provisions for remedies against violations of market access commitments. First, tariff concessions on textile and clothing products may be withdrawn on items of specific interest to a given country. Second, the agreement provides a process to deny quota growth rate increases to countries that have not fulfilled their commitments on market access. Either of these provisions could be invoked if, during the period leading up to final signature, key countries such as India fail to improve the terms of the agreement for the United States.

Tariffs: United States tariff cuts on textile and clothing products have been of concern to the U.S. industry. Tariff concessions in this negotiation have been kept to a minimum, and particular product sensitivities have received consideration. As compared to the U.S. offer on all industrial products to reduce tariffs by 34 percent, the U.S. offer proposes to reduce textile and clothing tariffs by approximately 12 percent overall.

Disciplines: All GATT contracting parties will be subject to the disciplines of the Agreement on Textiles and Clothing, whether or not they were signatories to the MFA. China, although a member of the MFA, will not be permitted to sign this agreement until it becomes a member of the GATT, and, until then, will not be the beneficiary of any quota liberalization by the United States. Finally, the agreement establishes the Textile Monitoring Body (TMB) to supervise implementation of the agreement. This replaces the Textile Surveillance Body (TSB). Any disputes related to implementation will be heard by the TMB.

Benefits for U.S. Interests

The Uruguay Round will open up major new market opportunities for U.S. textile and apparel exporters.

The more open trading system promised under the Uruguay Round will ensure continued economic growth by opening markets worldwide, and by establishing multilateral rules in areas vital to U.S. competitiveness. Benefits include phase-out of tariffs and non-tariff barriers facing U.S. textile and apparel exporters in international markets. U.S. companies will also benefit from elimination of restrictive investment rules.

Our large, developed trading partners such as the European Union and Japan will significantly reduce their tariffs over a phase-out period. This will further open the largest export markets for U.S. textiles and apparel. The EU and Japan are the United States' leading export markets for textiles and apparel outside of North America. For example, the value of total U.S. exports of textile mill products (yam, fabric, and made-up articles including bed and bath linen, and specialty and industrial fabrics), to the EU in 1992 was over $1 billion. U.S. apparel exports to the EU during the same period were over $430 million. At the same time, U.S. exports of textile mill products to Japan for 1992 equalled nearly $240 million, while U.S. apparel exports to Japan were over $450 million. In 1992 more than one in every 10 textile and apparel export dollars was earned on U.S. sales to the EU. Further, the market in certain product categories in the EU and Japan are expected to increase by as much as 10 percent over the next several years. Therefore, given already large and growing export opportunities in the EU and Japan, the effect of the reduction of tariffs will mean even greater sales and improved U.S. price competitiveness in these critical markets for U.S. exporters.

Other key European countries were also called upon to lower their tariffs. Imports of U.S. textiles and apparel by the European Free Trade Association countries (Austria, Finland, Iceland, Norway, Sweden, Switzerland), for example, were over $100 million in 1992. However, developed countries are not the only countries which are being called upon to lessen restrictions under the Uruguay Round. A key component of the U.S. position on textiles in the Uruguay Round is the reduction and removal of tariff and non-tariff barriers by countries benefiting from the phased elimination of the Multifiber Arrangement. The implementation of the Uruguay Round Agreement will result in a cutback in tariffs and non-tariff barriers in key developing regions such as Latin America, Southeast Asia, Eastern Europe, and the Near East.

Reductions in barriers in these countries, and others, will significantly open these markets to U.S. exports. To draw a parallel, recent reduction of tariff and non-tariff barriers in Chile and Argentina have caused U.S. exports to these markets to skyrocket. For example, total U.S. textile and apparel exports to Chile jumped from $42 million in 1990 to $97 million in 1992.

U.S. exports of textiles and apparel to Argentina grew as dramatically during the same period. Argentina imported 18 times more U.S. textiles and apparel in 1992 than it did in 1989, with U.S. sales valued at $5 million in 1989 and reaching $88 million in 1992. U.S. apparel exports to Argentina jumped 31 times, from $0.5 million in 1989 to over $15 million in 1992. Similar results can be expected in at least some of the Less Developed Countries where imports from the U.S. are currently severely constrained.

The implementation of the proposed Uruguay Round Agreement on textiles will significantly improve market access, including reductions of tariff and non-tariff barriers; encourage a more efficient allocation of resources by providing U.S. companies with more transparent laws and rules for competing in world markets; and, provide more leverage for weighing in against countries who trade unfairly. The ultimate benefits of more open world markets will be greater exports, and more jobs as a result of the increase in exports.

COPYRIGHT 1994 U.S. Government Printing Office
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