The Agreement on Textile and Clothing (ATC) was signed on January 1, 1995, as part of the Uruguay Round Agreements of the General Agreement on Tariffs and Trade (GATT). This agreement aimed to phase out the quota system that had been in place since 1974, which restricted the amount of textile and clothing imports that developing countries could export to developed countries.
Under the ATC, quotas were gradually phased out over a ten-year period, leading to the liberalization of the textile and clothing trade. This allowed developing countries, particularly those with a competitive advantage in textile and clothing production, to increase their exports to developed countries. As a result, the global textile and clothing trade grew significantly, with developing countries accounting for a larger share of the market.
The ATC also helped to create a more level playing field for textile and clothing manufacturers worldwide. By removing the quota system, it eliminated the non-tariff barriers that had previously hindered the development of the textile and clothing industry in developing countries. This created an opportunity for developing countries to compete based on their comparative advantage in labor-intensive production, rather than being limited by quotas.
However, the elimination of quotas also had some negative effects. It caused job losses and factory closures in some developed countries, particularly in the United States and Europe, where the textile and clothing industry was an important part of the economy. Some critics argue that the liberalization of the textile and clothing trade led to a race to the bottom, with developing countries competing to offer the lowest wages and the worst working conditions to attract investment.
Overall, the ATC was a significant milestone in the history of international trade. It helped to create a more open and competitive global market for textile and clothing manufacturers, while also highlighting some of the challenges and trade-offs associated with liberalization. Today, the textile and clothing industry remains an important part of the global economy, and the lessons learned from the ATC continue to inform debates about the role of trade in promoting economic development and reducing poverty.