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Tight Clothing. How the MFA Affects Asian Apparel Exports

In: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14

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  • Carolyn Evans
  • James Harrigan

Abstract

International trade in apparel and textiles is regulated by a system of bilateral tariffs and quotas known as the Multifiber Arrangement or MFA. Using a time series of detailed product-level data from the United States on the quotas and tariffs that comprise the MFA, we analyze how the MFA affects the sources and prices of US apparel imports, with a particular focus on the effects on East Asian exporters during the 1990s. We show that while a large fraction of US apparel is imported under binding quotas, there are many quotas that remain unfilled. We also show that binding quotas substantially raise import prices, suggesting both quality upgrading and rent capture by exporters. In contrast, tariffs reduce import prices. Lastly, we argue that the substantial shift of US apparel imports away from Asia in favor of Mexico and the Caribbean during the 1990s is only partly due to discriminatory trade policy: the other reason is an increasing demand for timely delivery that gives a competitive advantage to nearby exporters.

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This chapter was published in:

  • Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1, May.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0199.

    Handle: RePEc:nbr:nberch:0199

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    References

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    1. Carolyn Evans & James Harrigan, 2003. "Distance, time, and specialization," International Finance Discussion Papers 766, Board of Governors of the Federal Reserve System (U.S.).
    2. J. Michael Finger & Ann Harrison, 1996. "Import Protection for U.S. Textiles and Apparel: Viewed from the Domestic Perspective," NBER Chapters, in: The Political Economy of Trade Protection, pages 43-50 National Bureau of Economic Research, Inc.
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    Cited by:
    1. Amiti, Mary & Romalis, John, 2007. "Will the Doha Round Lead to Preference Erosion?," CEPR Discussion Papers 6372, C.E.P.R. Discussion Papers.
    2. Irene Brambilla & Amit Khandelwal & Peter Schott, 2007. "China's Experience Under the Multifiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Working Papers 13346, National Bureau of Economic Research, Inc.
    3. Fabrice Defever & Benedikt Heid & Mario Larch, 2011. "Spatial Exporters," CEP Discussion Papers dp1100, Centre for Economic Performance, LSE.
    4. Francois, Joseph & Woerz, Julia, 2009. "Non-linear panel estimation of import quotas: The evolution of quota premiums under the ATC," Journal of International Economics, Elsevier, vol. 78(2), pages 181-191, July.
    5. John Romalis, 2007. "NAFTA's and CUSFTA's Impact on International Trade," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 416-435, August.
    6. Hylke Vandenbussche & Francesco Di Comite & Laura Rovegno & Christian Viegelahn, 2011. "Moving up the Quality ladder? EU-China Trade Dynamics in Clothing," LICOS Discussion Papers 30111, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    7. Joseph Francois & Julia Woerz, 0000. "Rags in the High Rent District: the Evolution of Quota Rents in Textiles and Clothing," Tinbergen Institute Discussion Papers 06-007/2, Tinbergen Institute.
    8. James Harrigan & Geoffrey Barrows, 2006. "Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifibre Arrangement," NBER Working Papers 12579, National Bureau of Economic Research, Inc.
    9. Bala Ramasamy & Matthew Yeung, 2008. "Does China have a competitive advantage in the low-end garment industry? A case study approach," STUDIES IN TRADE AND INVESTMENT, in: Unveiling Protectionism: Regional Responses to Remaining Barriers in the Textiles and Clothing Trade United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    10. Irene Brambilla & Amit K. Khandelwal & Peter K. Schott, 2010. "China's Experience under the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Chapters, in: China's Growing Role in World Trade, pages 345-387 National Bureau of Economic Research, Inc.
    11. Kyvik Nord°as, Hildegunn, 2005. "Labour implications of the textiles and clothing quota phase-out," ILO Working Papers 374452, International Labour Organization.
    12. Wojan, Timothy R., 2004. "Concentration, Vulnerability And Adjustment: Rural Textile And Apparel Employment And The Expiration Of Import Quotas," 2004 Annual meeting, August 1-4, Denver, CO 19922, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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