Working Paper: NBER ID: w2618
Authors: Irene Trela; John Whalley
Abstract: 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.
Keywords: Multifibre Arrangement; MFA; developing countries; bilateral quotas; welfare costs
JEL Codes: F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MFA restrictions (F38) | Welfare of developing countries (I30) |
| Higher income developing countries (O10) | Market share in textiles and apparel (L67) |
| Global trade dynamics under the MFA (F13) | Global welfare (I31) |