AbstractWe show that the US in-bond system of imports may be used by firms to illegally avoid trade barriers, a practice known as in-bond diversion.� Digging into official Chinese and Mexican trade statistics, we uncover traces of US quota-hopping in-bond diversion by Chinese exports of textiles and apparel.� This is because the illicit scheme involves declaring Chinese exports bound for Mexico but diverting them to the US market while in transit, thus creating a gap between Chinese and Mexican reports.� Using the phaseout and removal of US quotas at the end of the Multifibre Agreement as a policy experiment, as well as variation in quota bindingness across products, we show that quota-bound products were associated with larger trade gaps which shrunk following the quota removals.� We also find that quotas were associated with larger shares of US imports aimed for transit warehouses, confirming the use of the in-bond system for illegal quota hopping.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 664.
Date of creation: 05 Jul 2013
Date of revision:
Textile and apparel; illegal trade; trade barriers;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
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