An evaluation of the main elements in the leading proposals to phase out the Multi-Fibre Arrangement

Abstract

Two approaches took the lead in the negotiations to dismantle the Multi-Fibre Arrangement (MFA): (a) a phaseout with the framework of the MFA, proposed by developing countries, the European Community, Japan, and the Nordic countries; and (b) a new transitional structure relying on global quotas with country allotments for current quota holders, suggested by the United States and Canada. Under both scenarios, accelerated quota growth is the main device for phaseout. Country quotas, in the first approach, and global quotas in the second, will have to expand in such a way to avoid a"shock"when they are abolished at the end of the phaseout. The second most important element in the phaseout proposals, besides expanding quotas and abolishing them at the end of the phaseout period, is scrapping them along the way according to some predetermined criteria and scheme. In the proposals, this is defined in terms of country characteristics, specific products, product characteristics, or some criterion pertaining to the historical record, such a quota use. The historical record reveals that growth in highly utilized quotas was significantly lower compared with unfilled quotas. There is one important virtue in a phaseout based on the current structure of the MFA. Not only are the mechanisms in place familiar to the negotiating parties, but so are the magnitudes of most of the parameters: current quota levels, quota growth rates over the last few years, and their use ratios.Achieving Shared Growth,Economic Conditions and Volatility,Economic Theory&Research,Governance Indicators,Environmental Economics&Policies