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

  • Hylke Vandenbussche
  • Francesco Di Comite
  • Laura Rovegno
  • Christian Viegelahn

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 LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 30111.

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Date of creation: 2011
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Handle: RePEc:lic:licosd:30111
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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.
  2. Fajgelbaum, Pablo & Grossman, Gene & Helpman, Elhanan, 2011. "Income Distribution, Product Quality, and International Trade," Scholarly Articles 25586659, Harvard University Department of Economics.
  3. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  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. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  7. Pablo D. Fajgelbaum, 2011. "Income Distribution, Product Quality and International Trade," 2011 Meeting Papers 415, Society for Economic Dynamics.
  8. 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.
  9. 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.
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