THE EFFECTS OF THE EXPIRATION OF THE WORLD TRADE ORGANIZATION’S MULTI FIBER AGREEMENT ON NIGERIA’S TEXTILE INDUSTRY

ABSTRACT

This research work examines the effects of the expiration of WTO’s Multi-Fibre Agreement (MFA) on Nigeria Textile Industries. The aim of this study was to examine the effects of the expiration of WTO’s Multi-Fibre Agreement (MFA) on Nichemtex Limited Ikorodu, Lagos; 2001 to 2010. However, the specific objectives of the study are: To ascertain the nature of
WTO’s Multi-Fibre Agreement; to examine the extent to which the expiration of WTO’s
Multi-Fibre Agreement (MFA) has affected the Nichemtex Nigeria Limited between 2001-2010; to identify the extent to which the accession of China into World Trade Organization (WTO) arising from the expiration of the Multi-Fibre Agreement (MFA) has affected the Nichemtex Nigeria Limited between 2001-2010. The study reviewed relevant literature on the problem under investigation. The study relied on both primary and secondary data which was generated through In-depth interview, questionnaire for the primary sources and secondary sources which comprised of the use of books, journals, articles, internet materials, etc for the purpose of complementarity. From the analysis of the data, the study found out the followings: First, the expiration of Multi Fiber Agreements impacted negatively on Nigeria’s textile industries; Second, contrary to the popular and general perception of the people, the study has shown that the collapse of textile industries in Nigeria was as a result of the trade liberalization policies of the WTO; in addition to both external and internal factors responsible for the collapse of these industries and internal factors played major roles. The study has also shown that the trade liberalization policies of the WTO favours Advanced Countries over the developing countries. Finally, trade liberalization policies of the WTO has reduced effects of textile industries’ contributions to national development in terms of its
Gross Domestic Product, employment generation and flow of Foreign Direct Investment (FDI).The study however made the following recommendations: There is the need for a rethink on the ideological and uncritical commitment to wholesale acceptance of trade liberalization policies without considering the peculiarities of our environment; Government should ensure that taxes payable by these industries should be fewer in number, broad based and high revenue yielding with positive impacts on industry’s production; this can be done by improving infrastructure, skills and institutions required by modern production and distribution; Government can take advantage and invoke WTO safeguards on textiles which allows countries to temporarily protect industries that is considered a threat to foreign competitors; Government should support textile industries to combat smuggling and lower import taxes on mechanical equipment and other inputs; Nigeria must build the environment for conducive competitiveness by developing all the physical and human infrastructure for the fierce competition.

CHAPTER ONE

INTRODUCTION

1.1. Background to the study

What is today known as Multi Fiber Agreement under World Trade Organization (WTO) had its root from General Agreement on Tariffs and Trade (GATT) as the only multilateral instrument governing international trade on textile and clothing. Multi Fiber Agreement was established in 1974 as a short term measure to allow developed countries to adjust to imports from developing world. It is an international agreement under which two countries may negotiate quota restrictions on textile and apparel imports from each other. The Multi Fiber Agreement was therefore set up as a set of formal quota agreements and restrictions governing textiles and clothing trade between developing countries and developed world. The expiration of Multi Fiber Agreement (MFA) in 2005 heralded tremendous opportunities and uncertainties for the textile industries in both developed and developing countries.
Naumann (2006) has argued, no other sector has seen such a rigid institutionalisation of quantitative restrictions, which in turn have had very wide reaching intended and unintended consequences on textile industries in Nigeria. In fact, quotas in this sector have been the common denominator that have shaped the development path of the textile industries and have been the single most important factor contributing to its worldwide diffusion in recent decades.
With the WTO Agreement on Textiles and Clothing providing a scheduled removal of MFA quotas over the decade 1995 – 2005, global changes relating to quota phase-out took place during the early stages of the Agreement. It is against this backdrop that this study examined the effects of the expiration of the MFA on Nichemtex Nigeria Limited, Ikorodu, Lagos.
However, it is important to note that from 1974 onwards, world trade in textiles and clothing has been governed by the Multi-Fibre Arrangement (MFA) under which many industrial.