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Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifiber Arrangement


  • James Harrigan

    (Department of Economics, University of Virginia)

  • Geoffrey Barrows

    (University of California Berkeley ARE)


Quota restrictions on United States imports of apparel and textiles under the multifiber arrangement (MFA) ended abruptly in January 2005. This change in policy was large, predetermined, and fully anticipated, making it an ideal natural experiment for testing the theory of trade policy. Prices of quota-constrained categories from China fell by 38% in 2005, with smaller declines from other exporters. Prices in unconstrained categories from all countries changed little. We also find substantial quality downgrading in imports from China in previously constrained categories. The annual cost of the MFAto U.S. consumers was $63 per household. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • James Harrigan & Geoffrey Barrows, 2009. "Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifiber Arrangement," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 282-294, May.
  • Handle: RePEc:tpr:restat:v:91:y:2009:i:2:p:282-294

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    References listed on IDEAS

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    Cited by:

    1. Pinelopi K. Goldberg & Nina Pavcnik, 2016. "The Effects of Trade Policy," NBER Working Papers 21957, National Bureau of Economic Research, Inc.
    2. Asuyama, Yoko & Chhun, Dalin & Fukunishi, Takahiro & Neou, Seiha & Yamagata, Tatsufumi, 2010. "Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization," IDE Discussion Papers 268, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Defever, Fabrice & Heid, Benedikt & Larch, Mario, 2015. "Spatial exporters," Journal of International Economics, Elsevier, vol. 95(1), pages 145-156.
    4. Shubham Chaudhuri & John McLaren, 2007. "Some Simple Analytics of Trade and Labor Mobility," NBER Working Papers 13464, National Bureau of Economic Research, Inc.
    5. Irene Brambilla & Amit K. Khandelwal & Peter K. Schott, 2010. "China's Experience under the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Chapters,in: China's Growing Role in World Trade, pages 345-387 National Bureau of Economic Research, Inc.
    6. Robert Z. Lawrence & Lawrence Edward, 2010. "Do Developed and Developing Countries Compete Head to Head in High Tech?," Working Paper Series WP10-8, Peterson Institute for International Economics.
    7. Bown, Chad P. & Crowley, Meredith A, 2016. "The Empirical Landscape of Trade Policy," CEPR Discussion Papers 11216, C.E.P.R. Discussion Papers.
    8. Lawrence Edwards & Robert Z. Lawrence, 2014. "AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions," NBER Chapters,in: African Successes, Volume III: Modernization and Development, pages 343-393 National Bureau of Economic Research, Inc.
    9. Thomas Brasch, 2017. "The import price index with trade barriers: theory and evidence," Empirical Economics, Springer, vol. 52(1), pages 123-141, February.
    10. Prema-chandra Athukorala & Raveen Ekanayake, 2014. "Repositioning in the Global Apparel Value Chain in the Post-MFA Era: Strategic Issues and Evidence from Sri Lanka," Departmental Working Papers 2014-17, The Australian National University, Arndt-Corden Department of Economics.
    11. Defever, Fabrice & Reyes, Jose-Daniel & Riaño, Alejandro & Sánchez-Martín, Miguel Eduardo, 2017. "Special economic zones and WTO compliance: evidence from the Dominican Republic," LSE Research Online Documents on Economics 86614, London School of Economics and Political Science, LSE Library.
    12. Julien Martin & Isabelle Méjean, 2011. "Low-wage countries' competition, reallocation across firms and the quality content of exports," PSE - G-MOND WORKING PAPERS halshs-00962485, HAL.
    13. Rotunno, Lorenzo & Vézina, Pierre-Louis & Wang, Zheng, 2013. "The rise and fall of (Chinese) African apparel exports," Journal of Development Economics, Elsevier, vol. 105(C), pages 152-163.
    14. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
    15. Brown, Drusilla & Dehejia, Rajeev & Robertson, Raymond, 2016. "Laws, Costs, Norms, and Learning: Improving Working Conditions in Developing Countries," IZA Discussion Papers 10025, Institute for the Study of Labor (IZA).
    16. Patrick Conway & Marco Fugazza & M. Kerem Yuksel, 2013. "TURKISH ENTERPRISE-LEVEL RESPONSE TO FOREIGN TRADE LIBERALIZATION: The Removal of Agreements on Textiles and Clothing Quotas," UNCTAD Blue Series Papers 59, United Nations Conference on Trade and Development.
    17. Gebreeyesus M., 2013. "The End of the Multifibre Arrangement (MFA) and the Heterogeneous Performance of Quota-Constrained Countries," MERIT Working Papers 035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Kristian Behrens & Brahim Boualam & Julien Martin, 2016. "The resilience of the Canadian textile industries and clusters to shocks, 2001-2013," CIRANO Project Reports 2016rp-05, CIRANO.
    19. Bown, Chad P. & McCulloch, Rachel, 2009. "U.S.-Japan and U.S.-China trade conflict: Export growth, reciprocity, and the international trading system," Journal of Asian Economics, Elsevier, vol. 20(6), pages 669-687, November.
    20. Porto, Guido, 2012. "The cost of adjustment to green growth policies : lessons from trade adjustment costs," Policy Research Working Paper Series 6237, The World Bank.
    21. Fukunishi, Takahiro & Yamagata, Tatsufumi, 2013. "Slow and steady wins the race : how the garment industry leads industrialization in low-income countries," IDE Discussion Papers 412, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    22. Thomas von Brasch, 2015. "On measuring the contribution from firm turnover to aggregate productivity growth. Selection on profitability and not productivity," Discussion Papers 819, Statistics Norway, Research Department.
    23. repec:bla:reviec:v:25:y:2017:i:3:p:677-693 is not listed on IDEAS
    24. Pierre-Louis Vezina & Lorenzo Rotunno, 2013. "In-bond Diversion," Economics Series Working Papers 664, University of Oxford, Department of Economics.
    25. Upward, Richard & Wang, Zheng, 2016. "Quota restrictions and intra-firm reallocations: Evidence from Chinese exports to the US," Economics Letters, Elsevier, vol. 144(C), pages 71-74.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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