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The MFA Paradox: More Protection and More Trade?

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Author Info
J. Michael Finger
Ann Harrison

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4751.

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Date of creation: May 1994
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Handle: RePEc:nbr:nberwo:4751

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

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  1. Theo S Eicher & Thomas Osang, 2000. "Politics and Trade Policy: An Empirical Investigation"," Discussion Papers in Economics at the University of Washington 0004, Department of Economics at the University of Washington. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
  3. 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. [Downloadable!]
  4. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "Import Peneteration and the Politics of Trade Protection," NBER Working Papers 6711, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Grether, Jean-Marie & de Melo, Jaime & Olarreaga, Marcelo, 1999. "Who determines Mexican trade policy?," Policy Research Working Paper Series 2187, The World Bank. [Downloadable!]
    Other versions:
  6. 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. [Downloadable!]
  7. Arnaud Costenot, 2006. "Jobs, Jobs, Jobs: A New Perspective on Protectionism," University of California at San Diego, Economics Working Paper Series 2006-05, Department of Economics, UC San Diego. [Downloadable!]
  8. Madani, Dorsati & Olarreaga, Marcelo, 2002. "Politically optimal tariffs : an application to Egypt," Policy Research Working Paper Series 2882, The World Bank. [Downloadable!]
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