Apparel April 2019 Apparel May 2019 issue | Page 65

INDUSTRY INSIGHTS
have traditionally affected the industry in India.
Parts of each sector were reserved for small-
scale industry and maintaining employment even
at the expense of sharp decline in productivity.
Cotton spinning and weaving activities have been
traditionally protected against competition from
man-made fibres through restrictions against
their imports.
The low efficiency of the processing sectors
motivated the Government to fix quotas on export
of cotton, leading to lower returns to cotton
farmers. This led to the loss of competitiveness of
the clothing industry.
The MFA has turned out to be an instrument
of forced consensus designed to manage textile
and apparel trade to the advantage of countries
that were fast losing international competitiveness
in these lines of production. The developing
countries are supposed to have a quota
administration mechanism, which would regulate
the exports of yarn, textiles and apparel to the
MFA listed developed countries.
PHASEOUT OF THE MFA AND ITS
IMPACT ON INDIAN TEXTILE TRADE
At the Uruguay Round of the General Agreement
on Tariffs and Trade (GATT), it was decided
to bring the textile trade under the jurisdiction
of the World Trade Organization. For gradual
dismantling of quotas, the Agreement on Textiles
and Clothing (ATC) was brought into effect. The
ATC was a transitory regime between the MFA
and full integration of textiles and clothing into the
multilateral trading system. The integration was
to take place in four steps over a 10-year
period (1995–2005).
One of the major accomplishments of the
Uruguay Round Agreement was the ATC, which
stipulated that the MFA needed to be gradually
phased out over a 10-year period commencing
THE MFA HAS TURNED OUT TO
BE AN INSTRUMENT OF FORCED
CONSENSUS DESIGNED TO MANAGE
TEXTILE AND APPAREL TRADE TO THE
ADVANTAGE OF COUNTRIES THAT
WERE FAST LOSING INTERNATIONAL
COMPETITIVENESS.
from 1995. The World Trade Organization (WTO)
stipulated that the MFA shall be phased out by
the end of 2004, thus integrating trade in textiles
and clothing into the GATT rules. The MFA was
successfully dismantled completely in 2005 and
India was supposed to surge ahead.
DID INDIA GAIN OR LOSE FROM THE
DEATH OF THE MFA?
Dismantling of quota regime would ideally provide
a great opportunity for India to exploit the vast
unutilised potential of its textile and clothing
sectors; instead, India lost steam. During the
same time, Bangladesh’s garment exports
exceeded India’s in absolute terms back in 2003.
Today, Bangladesh’s exports are double India’s—
with many Indians setting up their operations in
Bangladesh because of conditions they find more
conducive to textile growth than those in India.
Vietnam took over India next in 2011 and exports
garments worth US$32 billion. As of 2017,
India has a share of merely five per cent against
China’s 39 per cent in global textile trade. In the
subsegment of synthetic fibres, India’s share is
just two per cent against China’s 66 per cent.
The rise in labour cost in China would have
been the perfect opportunity for India to increase
its share in the global textile industry. India,
however, failed to gain momentum despite this
environment conducive to growth post the MFA
APPAREL
I
May 2019
I
59