Economic Impacts of the Multi Fibre Agreement expiration in the EU Essay

Economic Impacts of the Multi Fibre Agreement expiration in the EU Countries - Essay Example The essay focuses on the economic side of the MFA expiration, while examining the importance of international trade and the use of protectionist policies in a globalized world. The concept of aggregate demand and supply is used to measure the impact of the changes on products and factors in the textile market. The essay also considers European protectionist measures that can be taken in the nearest future. The essay presents different cases, where other forms of protectionism have been created in developed countries especially in the European Union and the gap between beneficiary and non beneficiary developing countries of the opening of the international textile market. The WTO admitted that the MFA was a special regime outside the GATT rules and that WTO members have committed to remove those quotas by 1st January 2005. Nevertheless, the MFA was not negative for all countries. The US, for example, imposed no restrictions on imports from the poorest countries like Bangladesh, benefiting to a massive expansion of the textile industry there. Since the end of the quotas, the gap between developed and developing countries is not very clear. When some could believe that the dismantling of the MFA could have been a relief and a real opportunity for Southern countries, it appears that the situation is much more complex. There is one main reason for the difficulties facing the textile market within developing countries: competition. Each of developing countries wants to be part of this profitable business. ... ist policies and we will use the concept of aggregate demand and supply to measure the impact of the changes on products and factors in the textile market. I. The consequences of the end of the MFA. 1. Among developing countries. Since the end of the quotas, the gap between developed and developing countries is not very clear. When some could believe that the dismantling of the MFA could have been a relief and a real opportunity for Southern countries, it appears that the situation is much more complex. There is one main reason for the difficulties facing the textile market within developing countries: competition. As the international market is now wide open, each developing countries wants to be part of this profitable business. However, not all of them can compete with giants like China. According to apublication from the OECD "A New World Map in Textiles and Clothing" when the MFA was still in place, smaller developing countries took advantage of the quotas because this system penalised the more competitive suppliers. When the quotas from a country like China was reached, importers turned to less competitive suppliers located in countries that had spare export quotas and whose only advantage was low wage. Today, the less competitive developing countries re not called as back up because countries willing to import textile can only be supplied by one and only exporter, the most competitive: China. As we stated before, the main issue here is competition. What separates China from other developing countries id not only the competitive advantages of low wages. In "China Shows the Way in a Quota-Free Market", Linda Lim presents six competitive advantages that China has over the other developing countries: First, Chinese workers are much more productive, probably