Problem Based Learning

The Problem: Will the dismantling of the Mutli-Fibre Agreement bring the economic benefits that are expected of it?

The start of 2005 saw the ending of a system of quotas in the textile industry referred to as the Multi-Fibre Agreement (MFA). The agreement officially ended in 1994 but its quotas have remained in place until January of 2005. Kaushik Basu, Professor of Economics at Cornell University, points out that the global value of the textile industry is around $500 billion. The dismantling of the agreement therefore is a significant move.

The MFA was an example of a global agreement that, in effect, restricted trade. Its removal has been seen by some as the opportunity for all countries to compete more fairly and as a platform for economic development in some of the poorest countries on earth.

There are those, however, who believe that the benefits that are expected may not materialise. Job losses may be significant in some countries formerly protected by the quotas and some of these countries certainly come under the 'less developed' category. The principle of comparative advantage might sound wonderful in theory; the practicalities of freeing up trade are more complex with the most severe impact often on the most vulnerable.

Image: A local textile market in Guatemala - what might be the impact of the dismantling of the MFA for these people? Will they be swamped by the advantages that countries like China and India will gain from the removal of the MFA? Copyright: Tim & Annette, stock.xchng