WTO and Indian Fashion Scene

On January 1, 2005, the quota regime in the textiles and apparel industry ended and has created brighter prospects for the Indian fashion industry. In 1962, a Long Term Agreement (LTA) regarding international trade in cotton textiles was signed. This Agreement placed restrictive blocks on the exports of textiles and clothing from developing countries to developed countries. These blocks were called quotas. They were placed to bring about a relief in favor of the domestic textile manufacturers in the developed countries. In 1974, LTA was replaced by the Multi Fibre Agreement (MFA) which was expanded to cover exports of synthetic fibers and woolen products also.

The main reason for MFA was to prevent the closure of textile manufacturing units in developed countries because they were facing the threat of low priced imports from developing countries. It limited the amount of imports to the developed countries, expanded trade and liberalise world trade for the developed countries.

The quota regime gave undue advantage to developed nations like USA, etc. It resulted in unfair trade practices like hoarding of quota licenses and then selling them in the black market and shipping low quality goods to meet contract demands. There was no incentive for textile manufacturers to upgrade or improve either their products or manufacturing capabilities.

The WTO Agreement on Textiles and Clothing (ATC) ended the quota regime on January 1, 2005. The main aim of the ATC is to bring the textile sector into the mainstream. The end of the quota regime signifies a potential for growth of the fashion industries of countries that had faced the quota regime earlier.

The Indian textile industry has many advantages. India is one of the biggest cotton producers in the world, has a huge market, easily available cheap skilled labor and design skills. The WTO Agreement has opened up the world of fashion industry for India to capture and conquer.