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The MFA Paradox: More Protection and More Trade?

In: The Political Economy of American Trade Policy

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  • J. Michael Finger
  • Ann Harrison

Abstract

The textile industry's political power stemmed from its importance in southern states plus the power of the Southern delegation in the U.S. Congress in the 1960s. The strongest resistance to the industry's pressure for protection came from the foreign policy interests of the Executive branch. A constellation of influences explains why negotiated, or voluntary export restraints (VERs), sanctioned by international agreements (the Multi-Fiber Arrangement) was the form protection took. First, the Japanese industry, at the time the world's leading textile exporter, already in the 1930s had exhibited a willingness to accept negotiated agreements to trade disputes. Second, the U.S. Executive, having been a leader in establishing the GATT system to control the sort of unilateral restrictive actions that contributed to the 1930s depression, was reluctant to take unilateral action. Third, the arrangement was acceptable to the U.S. industry because, through their particular power over agricultural legislation, the Southern delegation won passage, as amendments to agriculture bills, of legislation to enforce these 'voluntary' restraints at the U.S. border. But because enforcement remained with the Executive branch, it tended to follow the letter of the agreements, hence exports could continue to expand by shifting to new product varieties and to new supplier countries.
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Suggested Citation

  • J. Michael Finger & Ann Harrison, 1996. "The MFA Paradox: More Protection and More Trade?," NBER Chapters, in: The Political Economy of American Trade Policy, pages 197-260, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:8706
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    References listed on IDEAS

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    Cited by:

    1. Feizabadi, Yaser, 2007. "Political Tariff Protection in Iran`s agriculture sector," 106th Seminar, October 25-27, 2007, Montpellier, France 7922, European Association of Agricultural Economists.
    2. Theo S Eicher & Thomas Osang, 2000. "Politics and Trade Policy: An Empirical Investigation"," Working Papers 0004, University of Washington, Department of Economics.
    3. Grether, Jean-Marie & de Melo, Jaime & Olarreaga, Marcelo, 2001. "Who determines Mexican trade policy?," Journal of Development Economics, Elsevier, vol. 64(2), pages 343-370, April.
    4. Jianxing Lyu & Sören Prehn & Yanjie Zhang & Thomas Glauben & Yinchu Zeng, 2021. "Trade creation, political sensitivity and product exclusions: the political economy of agriculture protection in China’s FTAs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 627-657, July.
    5. Arnaud Costinot, 2009. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1011-1041, September.
    6. Scott Bradford, 2000. "Rents, Votes, and Protection: Explaining the Structure of Trade Barriers Across Industries," Econometric Society World Congress 2000 Contributed Papers 1717, Econometric Society.
    7. Finger, J. Michael & Schuknecht, Ludger, 1999. "Market access advances and retreats : the Uruguay Round and beyond," Policy Research Working Paper Series 2232, The World Bank.
    8. Hudson, Darren & Ethridge, Don E. & Mutuc, Maria Erlinda M., 2011. "Lessons Learned from the Phase-out of the MFA: Moving from Managed Distortion to Managed Distortion," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 12(1), pages 1-15, May.
    9. Costenot, Arnaud, 2006. "Jobs, Jobs, Jobs: A New Perspective on Protectionism," University of California at San Diego, Economics Working Paper Series qt1bt8n04n, Department of Economics, UC San Diego.
    10. Theo Eicher & Thomas Osang, 2002. "Protection for Sale: An Empirical Investigation: Comment," American Economic Review, American Economic Association, vol. 92(5), pages 1702-1710, December.
    11. Maggi, Giovanni & Rodriguez-Clare, Andres, 2000. "Import penetration and the politics of trade protection," Journal of International Economics, Elsevier, vol. 51(2), pages 287-304, August.
    12. Feizabadi, 2014. "The Theory of Political Tariff Protection for Agricultural Sector in Developing Countries," International Journal of Agricultural Management and Development (IJAMAD), Iranian Association of Agricultural Economics, vol. 4(1), pages 1-5, March.
    13. Madani, Dorsati & Olarreaga, Marcelo, 2002. "Politically optimal tariffs : an application to Egypt," Policy Research Working Paper Series 2882, The World Bank.

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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