Liberalising Trade in Textiles and Clothing: A Survey of Quantitative Studies

There is a considerable body of analysis available that aims to quantify the economic and trade effects of textile and clothing market liberalisation. A number of analysts at national and international institutions have provided their assessments. Different tools and approaches have thereby been used to evaluate the impacts of textile trade reform at the regional or global level. Given the economic importance of the textile and clothing sector in some OECD and non-OECD countries and the resulting economy-wide repercussions that changes in the scale and pattern of textile production will tend to trigger, analysis using general equilibrium models has been dominant. The modelling results consistently indicate considerable shifts in textiles and clothing production and trade as the Agreement on Textiles and Clothing (ATC) is implemented. There is pressure for a large-scale reallocation of resources, with production of textiles and clothing expanding in Asian and other developing countries. In parallel, textiles and clothing production in industrialised countries is expected to contract significantly, while imports of textiles and clothing from developing countries increase. Concerning further regional integration, which has played a major role in textiles and clothing trade during the 1990s, the modelling results predict welfare benefits for the participating countries, while trade diversion is expected to adversely affect outsiders. All the reviewed studies foresee increases in global welfare as a result of ATC reform. But the estimates of welfare gains show considerable variation, with expected annual global benefits ranging from $6.5 billion to $324 billion. Some studies predict ATC reform to account for up to two-thirds of all gains from the Uruguay Round, while others put the contribution of textile and clothing liberalisation at merely 5 per cent. There is similar discrepancy with respect to the distribution of welfare gains. A number of analysts see developing countries as the main beneficiaries of ATC reform, while others expect them in the aggregate to lose from the policy changes. There is also variation in the direction and magnitude of expected welfare impacts at the level of many individual developing countries.