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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10250.
Length: Date of creation: Jan 2004 Date of revision: Publication status: published as Carolyn Evans, James Harrigan. "Tight Clothing. How the MFA Affects Asian Apparel Exports," in Takatoshi Ito and Andrew K. Rose, editors, "International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14" University of Chicago Press (2005) Handle: RePEc:nbr:nberwo:10250
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Find related papers by JEL classification: F1 - International Economics - - Trade F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
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