Guidelines Drawn Up to Govern the Trade - Essay Example

MFA worked by creating quotas that restricted the competition posed by imports irrespective of the benefits of price considerations (Isenheim, 2007 p6). Quotas helped remove some part of the incentives offered to foreign suppliers, unlike quantitative restrictions that eliminate prices and costs from the transaction. In essence, the MFA set up quotas that restricted the amount of textile products that each country could export to another per year; when this threshold was reached, they had to wait for another calendar year to resume exporting to those countries under the MFA (Isenheim, 2007 p7). The MFA agreement covered specific products, not only those made from cotton but also from wool and chemical fiber (Isenheim, 2007 p7).

            The quotas were provided or created through bilateral trade agreements and their implementation through unilateral measures in the event of “severe market disruptions or proof of an existing threat thereof” (Isenheim, 2007 p7). Poor developing countries were put in an advantageous position by the MFA since it allowed their products to compete on level ground with cheap imports from developed countries. Developing countries like Bangladesh, which had readily available cheap labor, were as able to expand their textile industry to a stage where even after the abolishment of MFA, they were hardly affected, and it saw their revenues from the textile industry increase. This was because even after the MFA was done away with, they still had the largest pool of cheap labor compared to developed countries. This applies to all developing countries because they are characterized by the same conditions present in Bangladesh.

            The economic impact of MFA on developing countries was greater than its effect, in developed countries. The MFA helped developing countries attract substantial foreign investors, in the textile industry, and create millions of job opportunities, which worked towards alleviating poverty and improving the living standards in those countries. It also enabled countries to enter the garment market which they could not have been able to if it were not for the MFA. The agreement was, however, in contravention of earlier set laws that prevented favoritism or discrimination of trade partners that were set as the basic rules in the General Agreements on Tariffs and Trade (GATT) (Isenheim, 2007 p8). The MFA was set up to protect the interest of the US and European Union countries’ textile industries, but it ended up benefitting developing countries more.

            Multi Fibre Agreement (MFA) was drawn up to regulate the number of exports a country could export in a given year which gave both developing and developed countries a level ground to trade their wares. The quotas helped developing countries to create favourable conditions for foreign investors, especially in the textile industry; it helped create a lot of job opportunities and opened up markets for developing countries’ products. The setting up of MFA was meant to be a short-term solution, but it was extended several times because of its benefits economically, and it worked towards alleviating poverty and improving living standards.