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Rent sharing in the multi-fibre arrangement : theory and evidence from US apparel imports from Hong Kong

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  • Erzan, Refik*Krishna, Kala*Ling Hui Tan

Abstract

Available estimates of tariff equivalents of quotas and welfare calculations on the costs of multi-fibre arrangements (MFA) for developing countries are based on the premise of perfect competition in both product and license markets. It is also assumed that the exporting countries that administer the MFA quotas receive all the scarcity rents. The authors argue that, in the presence of market power on the buyers'side in the product markets combined with concentration in the license markets, the importing countries might retain part of this rent. Although the impact of imperfect competition on rent appropriation has been analyzed in literature, rent sharing has so far been ignored in both analytical and empirical work. This paper makes a theoretical case for rent sharing, and then analyzes U.S. imports of apparel products from Hong Kong. The authors find that rent sharing substantially affects the estimated magnitude of welfare losses that exporting developing countries suffer because of MFA quotas.

Suggested Citation

  • 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.
  • Handle: RePEc:wbk:wbrwps:597
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    References listed on IDEAS

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    Cited by:

    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Hervé Guyomard & Catherine Laroche & Chantal Le Mouel, 1998. "Marché contingenté à l'importation et marché des droits à importer en concurrence imparfaite [Le cas de la banane dans l'Union européenne ]," Économie rurale, Programme National Persée, vol. 243(1), pages 47-55.
    3. Hervé Guyomard & Chantal Le Mouël, 1998. "Contingent à l'importation et formation du prix des droits à importer en concurrence imparfaite : le cas de l'Organisation Commune de Marché de la banane dans l'Union européenne," Post-Print hal-01594045, HAL.
    4. Anderson, James E., 1997. "Revenue Neutral Trade Reform with Many Households, Quotas and Tariffs," Seminar Papers 626, Stockholm University, Institute for International Economic Studies.
    5. Walmsley, Terrie L. & Hertel, Thomas W. & Ianchovichina, Elena, 2001. "Assessing the Impact of China’s WTO Accession on Foreign Ownership," Conference papers 330941, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. James E. Anderson, 2002. "Trade Reform Diagnostics with Many Households, Quotas, and Tariffs," Review of International Economics, Wiley Blackwell, vol. 10(2), pages 215-236, May.
    7. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, January.
    8. Riccardo Faini & Jaime Melo & Wendy Takacs, 1995. "A Primer on the MFA Maze," The World Economy, Wiley Blackwell, vol. 18(1), pages 113-135, January.
    9. Erzan, Refik & Holmes, Christopher, 1992. "The restrictiveness of the multi-fibre arrangement on Eastern European trade," Policy Research Working Paper Series 860, The World Bank.
    10. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank.
    11. Silva, Peri, 2011. "The role of importers and exporters in the determination of the U.S. tariff preferences granted to Latin America," Journal of Development Economics, Elsevier, vol. 94(2), pages 207-219, March.
    12. Kenneth A. Reinert, 1993. "Textile and Apparel Protection in the United States: A General Equilibrium Analysis," The World Economy, Wiley Blackwell, vol. 16(3), pages 359-376, May.
    13. Meenu Tewari, 2005. "The Role of Price and Cost Competitiveness in Apparel Exports, Post-MFA: A Review," Indian Council for Research on International Economic Relations, New Delhi Working Papers 173, Indian Council for Research on International Economic Relations, New Delhi, India.
    14. Lahiri, Sajal & Raimondos, Pascalis, 1995. "Welfare effects of aid under quantitative trade restrictions," Journal of International Economics, Elsevier, vol. 39(3-4), pages 297-315, November.
    15. Michael J. Ferrantino, 2006. "Quantifying the Trade and Economic Effects of Non-Tariff Measures," OECD Trade Policy Papers 28, OECD Publishing.
    16. Krishna, Kala & Martin, Will & Tan, Ling Hui, 1997. "Imputing license prices: limitations of a cost-based approach," Journal of Development Economics, Elsevier, vol. 52(2), pages 355-374, April.
    17. Jarvis, Lovell S., 2003. "How Brazil Transferred Billions To Foreign Coffee Importers: The International Coffee Agreement, Rent Seeking And Export Tax Rebates," Working Papers 11967, University of California, Davis, Department of Agricultural and Resource Economics.
    18. Kenneth Hanson & Kenneth Reinert, 1997. "The Distributional Effects of U.S. Textile and Apparel Protection," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 1-12.
    19. Meenu Tiwari, 2006. "The Role of Price and cost Competitiveness in Apparel Exports, post MFA: A Review," Working Papers id:485, eSocialSciences.
    20. Hertel, Thomas W. & Bach, Christian F. & Dimaranan, Betina & Martin, Will, 1996. "Growth, globalization, and gains from the Uruguay Round," Policy Research Working Paper Series 1614, The World Bank.
    21. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(4), pages 800-827, December.
    22. Mr. Montfort Mlachila & Yongzheng Yang, 2004. "The End of Textiles Quotas: A Case Study of the Impacton Bangladesh," IMF Working Papers 2004/108, International Monetary Fund.

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