Feb 6, 1990

TEXTILES: JAPAN FOR ENDING MFA, BUT WITH TRANSITION TILL END 1999.

GENEVA, FEBRUARY 5 (BY CHAKRAVARTHI RAGHAVAN)— Japan has suggested end to the special multifibre regime governing international trade in textiles and clothing at expiry of the present MFA-4 an July 31, 1991, but with special transitionary provisions for MFA-type restrictions till end 1999 when the trade would be brought under full GATT disciplines and rules.

In effect this means that while Third World countries would be expected to undertake new obligations and observer standstill in new areas like services, intellectual property and investments, etc., their textiles and clothing exports which have been subject to restraints for nearly three decades would continue to face some restrictions till end of the century.

The Japanese proposals have been put forward in a paper due to be tabled at the Uruguay Round Negotiating Group on Textiles, which begins two-day meeting monday.

Special arrangements enabling discriminatory import restrictions on this sector of trade have been in force in one form or another from 1961-62. Even earlier, Japan as a price for entry into GATT agreed to such voluntary exports restraints to the U.S.

In 1988, Japan exported 5.5 billion dollars of Textiles but imported 6.7 billion of clothing, the third largest importer in the world after the U.S. and the FRG.

In supporting further liberalisation of trade in textiles and clothing and for its integration into GATT, Japan has called for a "progressive and pragmatic" approach.

Since restrictions on this trade, not consistent with GATT, were being tackler in other negotiating groups, the negotiations in the group on textiles and clothing should give priority to integration of the MFA restrictions into GATT, Japan argues.

The U.S. and some other ICs have been trying to focus the discussions in the group to cover not only he MFA restrictions, but other restrictions, such as those maintained by Third World countries under balance-of-payments provisions, etc.

Japan suggests that MFA-4 should not be extended on its expiry on July 31, 1991, but bilateral agreements concluded under it could remain in force until the end of 1991, if both importing and exporting countries agree.

But since world trade had been governed by the MFA for a long it would be "unrealistic" to expect that adverse effects of sharp increases in imports could be dealt solely through the general safeguard provisions of GATT, Japan argues.

Hence there should be special transitionary provisions for introducing MFA-type restrictions, but with "higher level of objectivity, strict procedures, limited application, limited duration, equity, as well as with automatic mechanisms for phase-out", the Japanese paper suggests.

While several of these elements are to be negotiated during the round, and there is to be provision for multilateral surveillance, the Japanese proposal would still enable unilateral imposition of discriminatory restrictions by imparting countries.

The transitionary provisions are to be governed by the principles of objectivity and strict procedures, limited application, limited duration, automatic phase-out mechanism and equity.

For determining the situation of "market disruption" (which would justify imposition of discriminatory restrictions), criteria which could quantitatively measured - market penetration of imports, growth rate of total imports, growth rate of imports from a particular country and its share in total imports - should be set as universal and quantitative standards.

Objective criteria should also be set for other factors, which could not be quantitatively established.

Unless both these quantitative and objective criteria are satisfied the transitionary provisions should not be invoked.

An imparting country proposing to take measures should submit necessary data to the multilateral surveillance body (to be established on the lines of the Textiles Surveillance Body, TSB, under the MFA) for examination of the conformity of the data with the criteria, with results to be notified to the countries concerned.

But the transitional provisions are not to be invoked against least developed countries, new entrants and small suppliers. Also any measures taken should be limited only to "necessary" products and no "aggregate" or "group" limits should be introduced, nor any restrictions applied to products with no domestic production or under utilised quotas.

The duration of the transitional measures should be limited and as short as possible, and there should be a mechanism for automatic phase-out of the transitional measures.

For this purpose, specific quantitative criteria (growth rates, market penetration of imports, etc.) should be established, which should be increasingly strict every year - such as increasingly higher thresholds to be negotiated in the round.

To ensure equity between exporting countries, no country should be subject to restraints if another exporting country with larger market share, higher import growth and lower import prices, is not under restraint in the particular imparting country, Japan has suggested.