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Moving up the quality ladder? EU-China trade dynamics in clothing

  • VANDENBUSSCHE, Hylke

    ()

    (Université catholique de Louvain, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium; LICOS, KULeuven, B-3000 Leuven, Belgium)

  • DI COMITE, Francesco

    ()

    (Université catholique de Louvain, IRES, B-1348 Louvain-la-Neuve, Belgium and European Commission)

  • ROVEGNO, Laura

    ()

    (Université catholique de Louvain, IRES, B-1348 Louvain-la-Neuve, Belgium)

  • VIEGELAHN, Christian

    ()

    (Université catholique de Louvain, IRES, B-1348 Louvain-la-Neuve, Belgium and International Labour Organization)

We apply a simple method to study the relative quality of Chinese versus European products exported in the clothing sector after the end of the Multi-Fiber Arrangement. Based on the model of Foster et al (2008), we interpret the relative change of export prices and quantities sold in narrowly defined product categories as an indicator of quality shifts. Using UN Comtrade data we find that European varieties exported to the US typically sell for a higher price than identical Chinese varieties exported to the US, but this price gap is narrowing. Despite rising prices, Chinese varieties are gaining market share. This opposite movement of relative prices and quantities sold in the same destination market are a strong indication of China moving up the quality ladder in its clothing exports relative to the EU. While European “core” products in clothing are stable over time, Chinese exports show strong product dynamics with exit and entry of new “core” products every year and “core” products changing rapidly. Both China and the EU export in every product category, resulting in an almost perfect product overlap with almost no products being exported by only one of the two.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011067.

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Date of creation: 31 Dec 2011
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Handle: RePEc:cor:louvco:2011067
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  1. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR;CES;MSH, vol. 23, pages 5-49, 01.
  2. Finger, J M & Kreinin, M E, 1979. "A Measure of 'Export Similarity' and Its Possible Uses," Economic Journal, Royal Economic Society, vol. 89(356), pages 905-12, December.
  3. Fajgelbaum, Pablo & Grossman, Gene M. & Helpman, Elhanan, 2011. "Income distribution, product quality, and international trade," Policy Research Working Paper Series 5843, The World Bank.
  4. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
  5. Carolyn Evans & James Harrigan, 2005. "Tight Clothing. How the MFA Affects Asian Apparel Exports," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 367-390 National Bureau of Economic Research, Inc.
  6. Francois, Joseph & Woerz, Julia, 2009. "Non-linear panel estimation of import quotas: The evolution of quota premiums under the ATC," Journal of International Economics, Elsevier, vol. 78(2), pages 181-191, July.
  7. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
  8. Francesco Di Comite & Jean-François Thisse & Hylke Vandenbussche, 2011. "Vert-zonal Differentiation in Monopolistic Competition," LICOS Discussion Papers 30011, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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