'It could drive down prices and lead to dumping. US and European department stores tell me they are worried about this because it will affect prices, quality and logistics. Bottlenecks may develop, as it may not be possible to deliver all orders on time.' Willy Lin Sun-mo Hong Kong Textile Council AND HE MAY be speaking the truth about what will happen immediately after the Multifibre Arrangement (MFA) is finally dissolved next year. There certainly will be some dislocation in the garment industry. I am cheering for it, however, and there are good reasons why you should too. The background here is that the rag trade has always been one of the most resistant around the world to the lowering of import barriers. Producers in developed countries have long shuddered at the prospect of seeing their domestic markets undercut by low-priced foreign competition. The MFA was therefore introduced in 1974 by international agreement to give them time to adjust to changed circumstances. It is a cumbersome bureaucratic structure that works by having every importing country assign quotas for specific garment categories to every exporting country. For consumers it amounts to a double cheat. Not only do its restrictions cause them to pay much more for clothing than they really need to pay, but the difference from the true cost of this clothing goes to foreign quota holders rather than to their home governments in the form of tariffs. It would not have mattered so much if the MFA had been only a short-term measure, as it was originally proclaimed to be, but it has hardly proved short-term after 30 years. As of January next year, however, it is to be dissolved at last, no more extensions. This time it appears the deadline will hold and most importing countries have prepared themselves for it by granting early exemptions to underdeveloped countries or by removing selected quotas in advance. One clear trend has emerged from this. China is taking over. You may have noted the howls of rage in the United States over the past two years when quotas for brassieres and gloves were removed. China moved in with unbeatable prices and there has been little option for others but to move out. You can see an indication of the trend from the first chart and you can be confident that the upward slope of that line will grow even steeper next year. China already exports more textiles and garments than the rest of Asia combined. For a clue as to who will suffer a pinch within Asia, try the second chart. We had a big rag-trade industry when the MFA was adopted and we were consequently given and kept big quotas. You can be confident that the line in the second chart will continue to go down with dissolution of the MFA. It is unlikely to do our economy great damage. Garments and textiles may still account for 56 per cent of our domestic exports but this translates to only 5.6 per cent of gross domestic product and it is somewhat of a fiction anyway to say that these are real domestic exports. They now mostly constitute quota dodging using a Hong Kong certificate of origin. But are things likely to be as dire as Mr Lin foresees? I doubt it. The rag trade is a flexible one and there are hundreds of thousands of rag traders around the world to take quick advantage of any bottleneck or other short-term opening. It is in any case likely that the US in particular will use anti-dumping and other anti-free trade legislation next year to ameliorate the impact if it proves to be a significant one. But think rather of yourself. What dissolution of the MFA is most likely to do is bring about a significant reduction in garment prices right around the world. It will prove one of the best examples we have ever had of how free trade can reduce everyday living costs for you and me. I recognise that it may bring some troubles to Mr Lin and his colleagues, but I am cheering.