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Trade Restrictions And Hong Kong's Textile And Clothing Industry

3324 words - 13 pages

Most textiles and clothing worldwide were exported from China or Japan, above all Hong Kong is one of the most important centres. Quota restrictions regulated the international trade since decades. In January 2005, after the complete phase-out of the old quota restriction, price dumping was expected.1.1 Long-Term Arrangement Regarding International Trade in Cot-ton Textiles LTAIn 1962, the Long-Term Arrangement Regarding International Trade in Cotton Textiles was signed by the US, after one year having a short-term market sharing arrangement. The LTA followed the Voluntary Export Restrained (VER), which restricted the export of cotton tex-tiles from Japan to the US for five years. Consequently, other Asian countries exported cotton textiles to the US. As LTA defined cotton as a material with 50% or more cotton by weight, exporters started to mix cotton with other fibres and consequently increased their exports. As a result, the textile industry of the US demanded stricter arrangements to protect their indus-tries.1.2 The Multifibre Arrangement (MFA)Bilateral agreements were signed, mainly between the US and Japan, Hong Kong or Korea, concluded by negotiating the Multifibre Arrangement in 1974 concerning the export of tex-tiles made of cotton, wool and man-made fibre. The MFA was quantity oriented, it required a quota growth rate of 6% per year. In many cases, the expectations were not fulfilled. 20 years after the introduction, MFA was accepted by 44 members, most of them were GATT mem-bers. The General Agreement on Tariffs and Trade helps to equalize the trade all over the world, but since the beginning of MFA it was in conflict with the GATT rules concerning tariffs and multilateral equalization.1.3 WTO Agreement on Textiles and Clothing ATCAfter the last year of MFA in 1994, the WTO Agreement on Textiles and Clothing was signed and contained decisions of all various agreements from the last years. The main objective was the integration and liberalisation processes as well as a safeguard mechanism to protect WTO members.2 WHY DOES THE US IMPOSE VER INSTEAD OF AN IMPORT QUOTA OR TARIFF? WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF DIFFERENT TRADE BARRIERS?VER was a voluntary arrangement between the US and Japan to restrict the import of cotton textiles to the US to protect the American textile industry. The problem was that Japanese imports shared nearly 2% of the total US consumption. The arrangement was voluntary and every party accepted the restrictions. The reason for not imposing an import quota was that they cause higher prices for the consumers in the US which was not the aim of the US gov-ernment. Just like quotas, tariffs are also responsible to make goods more expensive and the US did not want to pay duties to import goods. Therefore, the voluntary export restraint was the only possibility to avoid additional costs.2.1 Import quotasImport quotas are restrictions of trade that allow the country to import only a certain percent-age of...

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