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Moving up the Quality ladder? EU-China Trade Dynamics in Clothing

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  • Hylke VANDENBUSSCHE

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES )and Center for Operations Research and Econometrics (CORE), CEPR &KULeuven, LICOS)

  • Francesco DI COMITE

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and EU Commission)

  • Laura ROVEGNO

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Christian VIEGELAHN

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and International Labour Organization-Geneva)

Abstract

This paper compares European and Chinese exports in the clothing sector since the end of the Multi-Fiber Arrangement in 2005. Using detailed product-level data from UN Comtrade, we document the pattern of export prices and quantities observed for both countries, considering both exports to the rest of the world and to a particular destination market. We find that within narrowly defined product categories, European varieties typically sell for a higher price than Chinese varieties. But this price gap is narrowing. Despite rising prices, Chinese varieties are increasingly selling more than European varieties, suggesting that quality differences are narrowing. 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 a perfect product overlap with no products being exported by only one of the two. To make sure that our findings are not driven by a different product mix or a different destination country mix of EU versus Chinese exports, we compare EU and Chinese exports of clothing to the US and limit the comparison to HS6 product categories that are exported by both countries to the US. Again we obtain similar results as those obtained by comparing EU and Chinese exports to the rest of the world. Also, our evidence is suggestive of China exporting its high quality goods, while the EU exporting its most efficiently produced goods.

Suggested Citation

  • Hylke VANDENBUSSCHE & Francesco DI COMITE & Laura ROVEGNO & Christian VIEGELAHN, 2011. "Moving up the Quality ladder? EU-China Trade Dynamics in Clothing," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011047, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2011047
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    References listed on IDEAS

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    1. Francesco Di Comite & Jacques-François Thisse & Hylke Vandenbussche, 2011. "Verti-zontal Differentiation in Monopolistic Competition," Development Working Papers 322, Centro Studi Luca d'Agliano, University of Milano, revised 17 Oct 2011.
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    3. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    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. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR;CES;MSH, vol. 23, pages 5-49, January.
    6. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
    7. 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 905-912, December.
    8. Pablo D. Fajgelbaum, 2011. "Income Distribution, Product Quality and International Trade," 2011 Meeting Papers 415, Society for Economic Dynamics.
    9. 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.
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    Cited by:

    1. Sandrina Moreira & Nádia Simões & Nuno Crespo, 2015. "A contribution to a multidimensional analysis of trade competition," Working Papers Series 2 15-01, ISCTE-IUL, Business Research Unit (BRU-IUL).
    2. Giorgia Giovannetti & Marco Sanfilippo, 2016. "China’s competition and the export price strategies of developed countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 238-254, March.

    More about this item

    JEL classification:

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

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