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Do Developing Countries Lose From the MFA?

  • Irene Trela
  • John Whalley

This paper provides estimates of both national and global welfare costs of bilateral quotas on textiles and apparel using an applied general equilibrium model which covers bilateral quotas on exports of textiles and apparel negotiated between three major developed importing countries (the US, Canada and the EEC) and 34 supplying developing countries under the provisions of the Multifibre Arrangement applying in mid-1980s (MFA 111). Results using 1986 data clearly show that the vast majority of developing countries gain from MFA removal, with some gaining proportionately more than others. This suggests that despite foregone rent transfers, developing countries would receive gains by eliminating the MFA. In the central variant analysis, all developing countries gain by eliminating tariff and MFA restrictions because, contrary to popular belief, the developing countries (including Hong Kong, South Korea and Taiwan) are relatively small compared to developed countries even in apparel production. Rather than losing share to other developing countries under an MFA elimination, higher Income developing countries (like other developing countries) gain market share at the expense of reduced developed country production.

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File URL: http://www.nber.org/papers/w2618.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2618.

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Date of creation: Jun 1988
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Publication status: published as "Global Effects of Developed Country Trade Restrictions on Textiles and Apparel", Economic Journal, vol. 100, December 1990, pp. 1190-1205
Handle: RePEc:nbr:nberwo:2618
Note: ITI IFM
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  1. Falvey, Rodney E, 1979. "The Composition of Trade within Import-restricted Product Categories," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1105-14, October.
  2. Hamilton, Carl, 1986. "An Assessment of Voluntary Restraints on Hong Kong Exports to Europe and the USA," Economica, London School of Economics and Political Science, vol. 53(211), pages 339-50, August.
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