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Do Developing Countries Lose From the MFA?

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  • Irene Trela
  • John Whalley

Abstract

This paper provides estimates of both national and global welfare costs of bilateral quotas on textiles and apparel using an applied general equilibrium model which covers bilateral quotas on exports of textiles and apparel negotiated between three major developed importing countries (the US, Canada and the EEC) and 34 supplying developing countries under the provisions of the Multifibre Arrangement applying in mid-1980s (MFA 111). Results using 1986 data clearly show that the vast majority of developing countries gain from MFA removal, with some gaining proportionately more than others. This suggests that despite foregone rent transfers, developing countries would receive gains by eliminating the MFA. In the central variant analysis, all developing countries gain by eliminating tariff and MFA restrictions because, contrary to popular belief, the developing countries (including Hong Kong, South Korea and Taiwan) are relatively small compared to developed countries even in apparel production. Rather than losing share to other developing countries under an MFA elimination, higher Income developing countries (like other developing countries) gain market share at the expense of reduced developed country production.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2618.

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Date of creation: Jun 1988
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Publication status: published as "Global Effects of Developed Country Trade Restrictions on Textiles and Apparel", Economic Journal, vol. 100, December 1990, pp. 1190-1205
Handle: RePEc:nbr:nberwo:2618

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  1. Hamilton, Carl, 1986. "An Assessment of Voluntary Restraints on Hong Kong Exports to Europe and the USA," Economica, London School of Economics and Political Science, vol. 53(211), pages 339-50, August.
  2. Falvey, Rodney E, 1979. "The Composition of Trade within Import-restricted Product Categories," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1105-14, October.
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Cited by:
  1. Krishna, Kala & Ling Hui Tan, 1992. "Rent-sharing in the multi-fibre arrangement : evidence from U.S. - Hong Kong trade in apparel," Policy Research Working Paper Series 1003, The World Bank.
  2. Kala Krishna & Ling Hui Tan, 1992. "License Price Paths: I. Theory II. Evidence from Hong Kong," NBER Working Papers 4237, National Bureau of Economic Research, Inc.
  3. de Melo, Jaime & Winters, L Alan, 1990. "Voluntary Export Restraints and Resource Allocation in Exporting Countries," World Bank Economic Review, World Bank Group, vol. 4(2), pages 209-33, May.
  4. Erzan, Refik & Krishna, Kala & Ling Hui Tan, 1991. "Rent sharing in the multi-fibre arrangement : theory and evidence from US apparel imports from Hong Kong," Policy Research Working Paper Series 597, The World Bank.
  5. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
  6. Erzan, Refik & Goto, Junichi & Holmes, Paula, 1989. "Effects of the multifibre arrangement on developing countries'trade : an empirical investigation," Policy Research Working Paper Series 297, The World Bank.
  7. Robert C. Feenstra, 1989. "Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies," NBER Working Papers 2839, National Bureau of Economic Research, Inc.
  8. Stéphane BECUWE (GREThA UMR CNRS 5113) & Radhouane HASNI (GREThA UMR CNRS 5113), 2010. "Green protectionism: the case of textile-clothing sector (In French)," Cahiers du GREThA 2010-10, Groupe de Recherche en Economie Théorique et Appliquée.
  9. Peter Walkenhorst, 2004. "Liberalising Trade in Textiles and Clothing: A Survey of Quantitative Studies," International Trade 0401007, EconWPA.
  10. Carl Hamilton, 1989. "The political economy of transient “New” protectionism," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(3), pages 522-546, September.
  11. Goto, Junichi, 1990. "A formal estimation of the effect of the MFA on clothing exports from LDCs," Policy Research Working Paper Series 455, The World Bank.

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