Agreement on Textiles and Clothing
Hello everyone, welcome to the class of International Business.
(Refer Slide Time: 00:46)
So, in the last lecture, we had discussed about the General Agreement on Trade in
Services – GATS; then we talked about the trade-related investment measures which is
largely called TRIMs. And then we had talk, then we discussed about the trade-related
aspects of intellectual property rights. We just in short called the TRIPS right.
So, there we talked about when we talking about discussing about the TRIPS, we
discussed about the various firms; for example, the logos, the trademarks, the patents,
you know all these that had that needs to be protected and it is because it is an
intellectual property of somebody, so that needs to be protected and that has been largely
discussed in the WTO.
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So, one of the very popular case when you know today I would start with this lecture is
the turmeric patent case which had happened. So, this was an interesting case in 1995,
the US patent office granted the University of Mississippi Medical Center a patent for
Use of Turmeric in Wound Healing right, but as in India turmeric has been used for
wound healing since very, very early days.
So, the patent was challenged by Dr. R A Mashelkar the Former Director General of
CSIR in and he an Indian scientist. So, he challenged this patent. And in 1998 CSIR won
this case and the patent was cancelled, then right they realized that yes it was a very old
practice in India, and they got the documentary evidences also for that.
So, and there are several other things which are still in problem. For example, neem has
been a point of concern again, because neem has been widely practiced in India, but now
people have been you know demanding that neem is a new introduction or a new
invention of theirs, so that is what the uses of neem. So that is always such controversies
have remained as a part of the intellectual property. Another important part in the TRIPS
is the undisclosed information of trade secrets.
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Now, trade secrets are also intellectual property rights on confidential information which
may be sold or licensed. Now, what is a trade secret? Trade secrets must be protected
against unauthorized use, including through breach of contract or confidence or other
acts contrary to honest commercial practices.
In general to qualify that, trade secret the information must be commercially valuable,
because it is a secret. To be in for example, you know the formula for making a the
Coca-Cola is a very valuable asset, it is a secret right. We know only to a limited group
of person, and be subject to reasonable steps taken by the rightful holder of the
information to keep it secret; including the use of confidentiality, agreements for
business partners and employees.
(Refer Slide Time: 03:25)
Now, when you look at you know the whole of the intellectual property it can be largely
seen through this diagram. So, trade secrets, trademarks, patents, copyrights; so they
include different things which you can later on see right.
(Refer Slide Time: 03:39)
One way for a right holder to commercially exploit his or her intellectual property right
includes issuing a license to someone right to use the rights. So, when you issue a license
and you get a royalty or some fees for it. Recognizing the possibility the right holders
might include conditions that are anti-competitive. The TRIPS agreement says that under
certain conditions governments have the right to take action prevent anti-competitive
So, I in the last class lecture we discussed if you remember about the case of the
pharmaceutical industry, where certain companies they make a drug and they spend;
obviously, lots of money on that or lots of time and money, but the point is when it is a
important drug for example, the case of AIDS.
So, such drugs cannot be you know they the medicines that these companies were
making are very costly. So, in such conditions they can be challenged, because when it
comes to a poor economy or a country which has lot of poor people; so they cannot
afford it right and you know AIDS spreads mostly in the lower economic zone, it has
So, in such condition it becomes very difficult and so there are exceptions where the
government has the right to take action, ok. The agreement says government have to
ensure the intellectual property rights can be enforced to prevent or deter violations. The
TRIPS agreement aims for the transfer of technology, and requires developed country
members to provide incentives for their companies to promote the transfer of technology
to least developed countries in order to enable them to create a sound and viable
So, this agreement has a kept in mind the all the requirements for the you know
intellectuals ok; who has that means, the intellectuals means I say, the inventors basically
who have given the idea right.
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Access to medicine, this is the TRIPS amendment eases poor countries access to
medicines by allowing generic versions of the patented medicines to be produced under
compulsory licenses without the consent of the patent owner, right. Exclusively for
export to country that cannot manufacture the needed medicine themselves, this is what
the case we are talking about.
The amendment came into force in 2017, January right; 126 WTO members have
accepted this amendment right. And this amendment is entirely driven by public health
concerns, African countries played a major role in bringing about this change; so this we
have been discussing.
(Refer Slide Time: 06:12)
Some of the intellectual property legislations in India has been for example, the Patents
Act 1970; the Copyright Act, 1957; Trademarks Act, 1999; Designs Act, 2000; the
Semiconductor Integrated Circuits and Layout Designs Act, 2000; the Geographical
Indications of Goods Act, 1999; the Protection of Plant Varieties and Farmers Right,
2001. So, these are some of the once which the Indian government has taken steps, right.
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(Refer Slide Time: 06:44)
Now, today will also talk about the agreement on textiles and clothing. Now, we will
start with the multi fiber agreement, so this is a very old case. The multi fiber agreement
governed the world trade in textiles and garments from 74 through 1994, and then it got
obsolete right. Imposing quotas on the amount developing countries could export to the
developed countries. So, there was quotas; how much one developing country could
export to the developed countries right.
The MFA or the Multi Fiber Agreement provided a framework under which developed
country such has the United States, the European, Union and Canada imposed quotas on
exports of yarn textiles and apparel from the developing countries. Individual quotas
were negotiated which set precise limits on the quantity of the textiles, so how much you
can export; and apparel which could be exported. It was designed to be a short-term
measure, primarily to give in the industrialized countries time to adjust to competition
from imports from the developing countries.
The threat to developed markets from cheap clothing and textile imports in terms of
market disruption; and the impact on their own producers and the importance of this
exports to developing countries in terms of the own economic development and as a
means to diversify export earnings. So, this was the two points that there was one threat
to the developed countries that cheap clothing and textile would come into the market
and disruption, but on the other side the developing countries would have their own
economic development, so it was a looked at that perspective ok.
(Refer Slide Time: 08:21)
But then after in 1994, it was abolished; and 1995, it was the it was replaced the multi
fiber agreement was replaced by the agreement on textiles and clothing. So, which took
care of the problems which was existing with the multi fiber agreement, so this was the
time when the WTO came into place. So, the negotiators agreed that the MFA would be
eliminated and full liberalization would be implemented, so no more protection, no more
quotas were there right.
The multi fiber agreement governed the world trade in textiles and garments from 74 to
94, imposing quotas. Its successor, expired you know the agreement on textile and
clothing now this also has expired on January, 2005.
The expiry of the ten-year transition period of the ATC implementation means that trade
in textile and clothing products is no longer subject to quotas this is very important.
Under a special regime outside normal WTO or GATT rules, but is now governed by the
general rules and disciplines embodied in the multilateral trading system.
So, first you had this 74 to 1994 you had multi fiber agreement which was replaced by
the ATC – Agreement Textiles and Clothing. And 2005 that was also been now, it has
(Refer Slide Time: 09:43)
The ATC is a transitional instrument right, it is a transitional instrument as it says which
was built on the following elements. First one was the product coverage, so the product
coverage now this list you can find it at this you know, when you Google it on the about
the ATC you will find the list which is there. Now, the product coverage basically
encompassing you know yarns, fabrics, made-up textiles products and clothing; so the
entire list can be checked, you can Google it out right.
Second, a program for the progressive integration which is again laid down in ATC
article 2 that you can check it of because it becomes very lengthy, so we have avoided;
you can check it through the website Google website of their or their own website right;
of this textile and clothing products into GATT 1994 rules. The third element was the
liberalization process to progressively enlarge the existing quotas until they are removed,
by increasing annual growth rates at each stage.
The fourth one was to safe guard mechanism to deal with new cases of serious damage
on threat to the domestic produce producers during the transition period. So, when it
would be stopped or something, so the domestic producers would be you know in a
trouble, so to how to safe guard this producers. Establishment of a textile monitoring
body to supervise the implementation of the agreement and ensure, that the rules are
faithfully followed. So, these are the five elements the ATCs on which the ATC was
built right. The ATC forces the step-by-step integration with an increasing percentage of
products brought under the layer of the GATT at each step. And this transition from the
multi fiber agreement to GATT via the ATC has four milestones.
(Refer Slide Time: 11:32)
So, what are these four milestones; the first milestone was in 1995, 16 percent of the
products to be brought under the WTO rules. So, first milestone said that was in first
January 1995, at least 16 percent of the products would be brought under the WTO rules.
Second in 1998, it said at least of further 17 percent of the products would be brought
under the 17 WTO rules; then on 2002, another 18 percent was added. And finally, so
this was 16 + 17 = 33; 41, 51 right up to this much it was 51. And in 2005, all remaining
products up to 49 the remaining 49 percent would be brought under the WTO rules.
So, this is how they go went on adding, so that the sudden disruption would have created
a disequilibrium in the market. So, did it through a slowly an incremental approach. So,
this is how it looks like. So, date of implementation, percentage of the products to be
integrated on GATT rules, and increase in post MFA quote quota growth right.
(Refer Slide Time: 12:38)
So, you can look at this. The article 3, deals with a quantitative restrictions or measures
with similar effect other than those under the MFA. Now, the article 3, I think is not
mentioned here; so as this is the article 2, the progressive integration. So, you have the
article 3; now this article 3, it deals with the quantitative restrictions other than those
under the multi fiber agreement. And you have different articles, so I have just written
down these articles you can check those.
A key aspect of the ATC is the provision in article 6, for a special transitional save guard
mechanism. So, as you have seen as to be a transitional approach otherwise sudden
change would disrupt the market, and the developing economies would suffer a lot right.
Intended to protect members against damaging surges in imports during the transition
period from products which have not yet been integrated into the GATT, and which are
not already under the quota.
Now, this agreement article 6 of the agreement lays down the procedures and the
conditions under which an importing member can introduce new restrictions on imports
of particular products. And there is the article 9, which says that there will no there shall
be no extension of this agreement. So, with trade and textile and clothing will be was
completely free after 2004, this was this was the whole idea, this is how it this ATC
started; and after 2004, it has achieved the 100 percent transition.
So, no trade in you know textile and clothing will not be completely free by the end of a
transition period of ten years, quota arrangements will end. And thereafter, restrictions
will normally be limited to tariffs which will be kept in line with the WTO discipline. So,
this movement was a very important movement, because many developing economies
which like Bangladesh right for example, it was largely dependent on the textile industry.
So, there was a lot of fear that if immediately it would have been done instead of a
transitional mechanism, if it would have been done sudden, it would have dented their
Bangladeshi economy very largely, but slowly that is why to understand to you know to
adjust the equilibrium or to create an equilibrium in the market, it was done in a very
slow incremental process right. So, let us talk about one of the cases.
(Refer Slide Time: 15:05)
Now, this is a case which I have brought the cost of protectionism on northern you know
consumers, so this was a case of protectionism right. So, the MFA is one of the best
documented examples of how consumers loose out, when producers are excessively
protected right. So, the producer who is producing when is protected right by the
government or the you know, so how it could lose out. The price of textiles and clothing
continues to be maintained at artificially high levels in Europe and North America.
In 1993, the GATT secretariat estimated that price protection from for textiles and
clothing cost each household 200 to 420 US dollars per annum in the US, and 130 US
dollar in the UK, so that is a very high protection right. When Sweden dismantled its
MFA quotas, so this quotas was done, so that you know they would buy it from the
developing economy or some of the countries which were good at textiles. Swedish
consumers where able to buy it double the quantity of goods for the same money, so this
was a big change.
A US study calculated, the cost of MFA at 40 billion US dollars or 500 US dollars per
household in 1986; so you can imagine if you extrapolate the time value of money, and it
would be much larger figured as of today. A UK study published in 89, estimated the
cost of MFA the multi fiber agreement to be 1600 million US dollars a year or around 5
percent of the retail prices.
So, it can be roughly assumed the extra cost to consumers due to protectionism in the
developed nations was per se more than the actual traded volume. So, this was why the
multi fiber agreement and then the textile and other agreements were slowly faced out.
(Refer Slide Time: 16:56)
The textile industry in India is one of the largest in the world with a large unmatched raw
material base and manufacturing strength, it is the second largest manufacturing exporter
in the world after China right. The share of textile and clothing India’s total export stands
this much and is a 5 percent of the global trade in textiles and apparel. This industry
contributes 7 percent of industry output in value, 2 percent of the GDP and 15 percent of
the exported earning, export earnings. Now, it is one of the largest sources of
employment generation ok, with 45 million people annually you know people employed;
and another 6 crore through allied sectors, including large number of women and rural
Now, overall India’s overall textile exports stood at 39.2 billion financial 18 and was
expected to increase to 82 billion by 2020 2021. The industry FDI is worth 3.19 billion
US dollars during April 2000 to June 19; and it has allowed 100 percent FDI in the
Indian textile sector under the automatic route, so this is the case of the Indian textile
So, during the you know the multi fiber agreement this time, 74 to 94 and from 94 to
2005; there was lot of protection given to those economies which were good in textile
development, so these developing economies were largely dependent on the textile
exports. So, all this was slowly faced out, so that the developing economies would come
a be more competitive and can stand in the competition with the other countries.
(Refer Slide Time: 18:42)
So, after this today we will discuss about one more point which is the United Nations
conference on trade and development. So, as we know all the whole purpose of this you
know, whatever exercise like there GATT, the WTO, the you know and the different
functions for example, the TRIMs, TRIPS whatever.
Has been two things, one has been the growth of the economy and you know
transparency in the economy; and then also to you know the to uplift the people in the
social position, in the social you know condition right. So, the United Nations conference
as we say UNCTAD right also has a similar kind of approach.
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In the 60s, there were growing concerns about the place of developing countries in
international trade. Led many of these countries to call for conveying of a full-fledged
conference devoted to tackle the problems and identify appropriate international actions,
so the developing economies were mostly worried. So, UNCTAD was held in Geneva in
1964 for the same purpose, and its work can be some in three words; what are they think,
debate and deliver.
So, the main aim of the UNCTAD was to help the developing economies to take
informed decisions and promote the macroeconomic policies best suited to end the
global economic inequalities. So, there was a fear by the developing economies that there
would be inequality, so to reduce its inequality the united came into place; so this is the
details about the UNCTAD, right.
(Refer Slide Time: 20:15)
So, as it says the main functions to promote international trade all over the world
between developed and developing countries with different socio-economic system. To
formulate principles and policies on international trade and related problems of economic
development. To make proposal for putting the set principles and policies into affect. To
review and facilitate the co-ordination of activities of other institutions within the UN
system, in the field of international trade.
It includes research and support negotiations for commodity agreements, technical
elaboration of new trade activities as designed to assist developing countries. So, the
whole idea this UNCTAD was to take care of the developing economies, so that they
would not be exploited or they would not suffer due to any new policies. So, thus
UNCTAD organizations acts like a bridge between the developing and the developed
countries to increase the economy for the country.
(Refer Slide Time: 21:12)
So, it has it carries out five divisions under the leadership of the secretariat- general; so I
will just talk about it the highlights. So, the first one is the division for Africa, least
developed countries and special programs. So, this was done in order to you know
develop the poorest and the most vulnerable countries, right.
The second is the developed division on globalization and development strategies. So,
this was again to promote policies at the national, regional and international level to
make economic development and sustainable development. The third one is a division on
investment and enterprise, so this is recognized as a global center of excellence on issues
related to investment and enterprise for sustainable development; so the key thing is now
(Refer Slide Time: 22:05)
The fourth point was the division on international trade and commodities, and the last
one is division on technology and logistics. So, there are few cases I have brought for
you; one is the case 1 regard to this point, and the case 2 in this year which is regarding
The UNCTAD technical cooperation activities are financed from 3 main sources, what
are they; Trust funds which are voluntary contribution from donors, then second is the
United Nations Development Programme – UNDP, and third is the United Nations
(Refer Slide Time: 22:38)
The let us look at the first case, the case 1. This case 1 was related to this point; where
we talked about how division for Africa, the division for Africa least developed country
and special programmes. Now, in May 2018 South Africa approved the first face of a
new intellectual property policy that paves the way for better access to high quality
affordable and medicines in a country plagued with high infection rates for HIV AIDS
So, these are some of the biggest problems right to the world. So, the government asked
UNCTAD to develop the policy because of its long standing experience in technical
cooperation, in intellectual property, access to medicine and local pharmaceutical
production. UNCTAD organization two stake holder, consultations in cooperation with
the Department of Trade and Industry for South Africa and the UNDP.
The WHO, the world intellectual property organization and the world trade organization
also took part. Together with all of this the UNCTAD analyzed, how the proposed
intellectual property policy could help the government with international and domestic
human rights obligations, right. Related to the right of health and sought technical inputs
from the United Nations high commissioner for human rights.
So, all this you know taken together the ideas the inputs they came out with the better
policy right, not only is this an essential step towards improved access to medicines in
South Africa, but also towards a stronger domestic pharmaceutical sector. The policies
now in line with the international practices and strikes a fair balance between incentives
for innovation and the need to promote competition and access to medicine.
So, this was a very important you know event right and a important function or a job that
the UNCTAD played right, role that it played.
(Refer Slide Time: 24:33)
This is the second case which you can go through right; so because of paucity of time, I
am skipping this.
(Refer Slide Time: 24:35)
Then the UNCTAD conferences, the highest decision-making body of UNCTAD is the
quadrennial conference. Now, this conference is where the member states make
assessments of current trade and development issues; discuss policy options and
formulate global policy responses.
So, this conference is a subsidiary organ of the United Nations general assembly right.
And it serves an important political function, they allow inter governmental consensus
building regarding the state of the world economy and development policies.
And play key role in identifying the role of the United Nations and the UNCTAD in
addressing economic developmental problems right. So, this is how it has gone through;
so 2020, 2012, 2016, 2020; the three you know last three, so in Doha in Qatar, then
Nairobi in Kenya, and Bridgetown Barbados it has been held, this is going to be held
(Refer Slide Time: 25:38)
These are some of the UNCTAD flagship publications. So, the Trade and Development
Report, World Investment Report, Least Developed Countries Report, Information
Economy Report, Economic Development and Africa report, and Review of Maritime
Report. So, these are some of the publications which is does which is the research output
of the UNCTAD or U N C T A D you can say right. So, you can see these right which
gives us different kind of ideas or inputs, ok.
(Refer Slide Time: 26:05)
Then we talk about the GSP, now what is this GSP; GSP is the generalized system of
preferences. It is a non-contractual instrument by which the industrialized or the
developed countries unilaterally, and on the basis of non-reciprocity extend tariff
concessions right. So, GSP was formally accepted in 1968 by the UN members; the main
objective was to increase the export earnings to promote industrialization and to
accelerate the rate of economic growth.
The idea of granting developing countries preferential tariff rates in the markets of
industrialized countries were originally presented by Raul, the first Secretary-General of
UNCTAD at the first conference in 64.
There are currently 13 national GSP schemes, and the following countries grant GSP
preferences; Australia, Belarus, Canada, European Union, up to the United States of
America right. So, the whole idea is to give a extend the tariff concessions to the
developing countries, so this was the whole idea right GSP.
(Refer Slide Time: 27:16)
And there is one more, this is the last we will discuss today is the GSTP; this is the
agreement on the global system of trade preferences among developing countries which
was established in 88, right. So, now what does it say; it is the framework for the
exchange of trade preferences among developing countries in order to promote an intradeveloping-
country trade by 48 developed developing countries which are a member of
the group of out of a member of 77.
Now, it lays down the principles rules and procedures for the conduct of negotiations and
for implementation of results of the negotiations. So, to date 43 countries, so what it
says; the coverage of the GSTP extends to arrangements in the area of tariff, non-tariff,
direct trade measures including medium and long-term contracts and sectoral
So, there are 43 countries have acceded to the agreement, so there are some and the
objectives of the rules of origin in this which is very important is to determine the origin
of products eligible for the preferential concessions under GSTP. For example, products
which have achieved the status originating in India; for example, are eligible for
preferential tariff treatment upon imports into participant countries.
So, these are some of the things which we have discussed for example, today we talked
about the turmeric case we discussed, then we talked about the UNCTAD right; and
how, what is its role right. Then we talked about the multi fiber agreement which came
then changed way, then give way to the next agreement the clothing agreement. And
then that was phased out entirely by 94 and then 2004, and then it became completely
open to the market mechanism, so there was no protection anymore.
So, it was done in a transitional phase, so that every country would not get into a shock
and they could adjust themselves right. Then we talked about the GSP and the GSTP,
which are some tariff concessions given to the countries for improvement of their to
create to reduce the inequality and to bring this countries more into the global you know,
scenario and to help in the in their development right. So, this all we had for discussion
So, thank you very much.
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