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Textile and Apparel Barriers and Rules of Origin: What’s Left to Gain after the Agreement on Textiles and Clothing?

Author

Listed:
  • K. Fox, Alan

    () (U.S. International Trade Commission)

  • Powers, William

    () (U.S. International Trade Commission)

Abstract

Although textile and apparel imports from most countries entered the United States quota-free after the expiration of the Agreement on Textiles and Clothing on January 1, 2005, substantial restraints remain on U.S. trade in these sectors, including high tariffs, quantitative restraints on China and Vietnam, and preferential rules of origin. While there is a substantial literature on liberalization of quotas and tariffs in these sectors, this paper provides a new and detailed examination of the effects of rule-based foreign demand for U.S. textile and apparel inputs. This paper uses the USAGE–ITC general equilibrium model to estimate the effects of removing textile and apparel restraints in 2005. Full liberalization is estimated to increase U.S. welfare by $2.0 billion (net) while decreasing U.S. textile and apparel output by 9.0 percent. Quantitative restraints continue to have considerable effects on U.S. welfare: their elimination provides over half of the welfare gain. However, rules of origin have by far the largest effect on production and employment. Elimination of preferential rules of origin accounts for 82 percent of the overall output reduction, because these rules currently generate nearly half of the foreign demand for U.S. textile and apparel exports. A similarly large output loss would also be part of any tariff liberalization that encouraged preferential trade partners to reduce purchases of U.S. inputs as their preference margins eroded. This is the first study in the literature to quantify this effect, which is sufficient to eliminate four-fifths of the welfare gains from tariff liberalization in these sectors.

Suggested Citation

  • K. Fox, Alan & Powers, William, 2008. "Textile and Apparel Barriers and Rules of Origin: What’s Left to Gain after the Agreement on Textiles and Clothing?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 656-684.
  • Handle: RePEc:ris:integr:0449
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    Citations

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    Cited by:

    1. Peter B. Dixon & Maureen T. Rimmer & Robert G. Waschik, 2017. "Macro, industry and regional effects of eliminating Buy America(n) programs: USAGE simulations," Centre of Policy Studies/IMPACT Centre Working Papers g-271, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Dixon, Peter B. & Koopman, Robert B. & Rimmer, Maureen T., 2013. "The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis," Handbook of Computable General Equilibrium Modeling, Elsevier.
    3. Peter B. Dixon & Michael Jerie & Maureen T. Rimmer & Glyn Wittwer, 2017. "Using a regional CGE model for rapid assessments of the economic implications of terrorism events: creating GRAD-ECAT (Generalized, Regional And Dynamic Economic Consequence Analysis Tool)," Centre of Policy Studies/IMPACT Centre Working Papers g-280, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. repec:eee:ecmode:v:68:y:2018:i:c:p:155-166 is not listed on IDEAS

    More about this item

    Keywords

    international trade; U.S. textiles and apparel trade; rules of origin; computable general equilibrium models; forecasting and policy analysis;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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