Working Paper: NBER ID: w10250
Authors: Carolyn L. Evans; James Harrigan
Abstract: International trade in apparel and textiles is regulated by a system of bilateral tariffs and quotas known as the Multifiber Arrangement or MFA. Using a time series of detailed product-level data from the United States on the quotas and tariffs that comprise the MFA, we analyze how the MFA affects the sources and prices of US apparel imports, with a particular focus on the effects on East Asian exporters during the 1990s. We show that while a large fraction of US apparel is imported under binding quotas, there are many quotas that remain unfilled. We also show that binding quotas substantially raise import prices, suggesting both quality upgrading and rent capture by exporters. In contrast, tariffs reduce import prices. Lastly, we argue that the substantial shift of US apparel imports away from Asia in favor of Mexico and the Caribbean during the 1990s is only partly due to discriminatory trade policy: the other reason is an increasing demand for timely delivery that gives a competitive advantage to nearby exporters.
Keywords: No keywords provided
JEL Codes: F1; F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| binding quotas (D45) | higher import prices (F14) |
| tariffs (F13) | lower import prices (F14) |
| MFA (C38) | shift in US apparel imports away from Asia towards Mexico and the Caribbean (F69) |
| geographical proximity (R12) | faster growth of high-replenishment products from nearby countries (O57) |
| binding quotas (D45) | increased costs for US consumers (F69) |
| binding quotas (D45) | enhanced profits for quota holders (Q02) |