Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
Updated August 17, 2023 Reviewed by Reviewed by Michelle P. ScottMichelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.
The Multifiber Arrangement (MFA) was an international trade agreement involving clothing and textiles. The MFA was established in 1974 and imposed quotas on the amount of clothing and textiles that developing countries could export to developed nations. The agreement was managed under the General Agreement of Tariffs and Trade (GATT), created in Switzerland in 1947.
Meant as a temporary agreement, the MFA ended on Jan. 1, 1995, and was replaced by the Agreement on Textiles and Clothing. The World Trade Organization (WTO) assumed responsibility for textile trade oversight in 2005.
The Multifiber Arrangement was first established as a short-term measure under the General Agreement on Tariffs and Trade in 1974. It was meant to acknowledge how cheap clothing and textile imports (namely yarns, fabrics, made-up textile products, and clothing) threatened and disrupted markets in developed nations. It also recognized how exports helped diversify the earnings and economic growth of developing nations, such as Bangladesh and China.
Developing countries often relied on primary commodity exports. The MFA attempted to mitigate the potential for conflict to ensure international trade cooperation. The quotas established were meant to manage the global clothing and textiles trade in the shorter term to prevent market disruptions. The ultimate aim remained to reduce the barriers and further liberalize trade, with developing countries expected to take an increasing role over time.
The European Union didn't exist in its current form when the MFA was ratified. At the time, it was called the European Community (EC) and the European Free Trade Association (EFTA).
The United States and the European Union (EU) restricted imports from developing countries to protect their own textile industries. Each developing country signatory (notably those in Asia) was assigned product quotas that could be exported to the U.S. and EU. The number of signatories changed over time, ranging from 30 countries in 1972 to 40 countries in 1994. Trade between these countries dominated the global clothing and textile trade, accounting for as much as 80%.
As noted above, the MFA was terminated on Jan. 1, 1995, and was replaced by the WTO's Agreement on Textiles and Clothing. This new arrangement worked as a transitional agreement to remove the quotas put into place and bring international trade back into GATT rules. The Agreement on Textiles and Clothing was phased out on Jan. 1, 2005.
The MFA and Agreement on Textiles and Clothing were designed under GATT to help protect the industries of developed economies and to spur textile production in developing countries that needed help gaining a foothold in the international market.
GATT was ratified in October 1947 and went into effect the following year. One of its main features was to treat each signatory equally without discrimination. A total of 22 countries signed the agreement, which shaped rules to end or restrict trade controls and quotas that shaped the protectionist period set into place before World War II. Under the agreement, nations could arbitrate commercial disputes and go through multilateral talks to reduce tariffs.
The dismantling of quotas on the global clothing and textile trade began as a result of negotiations at the Uruguay Round of GATT. On Jan. 1, 2005, the WTO assumed responsibility for overseeing the global textile trade to the WTO, which effectively marked the end of the Agreement on Textiles and Clothing and its predecessor, the Multifiber Arrangement.
The MFA created import quotas from certain countries, which had rapidly increased exports to countries with high demand. This had created trade barriers for developing countries and threatened U.S. and European domestic markets, so the MFA restricted sales of textile products over specific amounts to boost these markets.
January 2005 marked the end of the Agreement on Textiles and Clothing, which had replaced the Multifiber Arrangement. The World Trade Organization assumed responsibility for regulating textile trade in 2005.
The Multifiber Arrangement was an international trade agreement about textile trade. It was designed to remove textile trade barriers and prevent disruption of developed countries' markets.
In the mid-twentieth century, some countries had established themselves as textile powerhouses, crowding developing countries out of the international textiles market and threatening the domestic markets of developed countries. The Multifiber Arrangement was an international trade agreement that attempted to open trading opportunities for developing economies and protect the markets of developed ones. The agreement was passed in 1974 and lasted until 2004.