The examples of the surge in the import of socks and sweaters from Indonesia show up the weakness of the basket extractor system, which exists to introduce new quotas when imports rise and become disruptive.
The developed countries succeeded in imposing further restraints on textile imports from the developing countries because of quota frauds by exporters of LDCs during the period MFA II was in force. The quota frauds involved rerouting textile goods of exhausted categories through third countries under different categories. The restrictions permitted in MFA III to safeguard the interest of the developed countries were:
Basket Extractor Mechanism under which EC would seek consultations and apply restraints if unrestricted exports from an exporting country exceeded a certain threshold level of EC imports e.g. 1%.
The MFA (Multi Fibre Agreement) scheme used by the EU has a simpler set of categories than in the U.S., but contains a complex mechanism (called the "basket extractor") that is used to trigger consultations and the application of quotas. This system has been superseded by quotas that are applicable to the entirety of the EU, rather than to individual countries. Theoretically, at least, imports can now enter at any EU port and be counted toward the EU quota.
The EU has negotiated bilateral textile agreements with a considerable number of third countries which are – not yet – members to the WTO. Those countries are subject to quantitative restrictions and/or a surveillance regime: The so-called "double checking" system is based on the following principles ...
In principle, those double-checking agreements do not provide for any quantitative restrictions. However, the EU has the right to request the opening of consultations with a view to agreeing on an appropriate quota level, if the level of imports of the product in question exceeds a certain threshold of total extra-Community imports of that product. (This is the so-called ‘basket-exit’ mechanism).
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