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Preferential Trade Arrangements In Apparel Exports From The Caribbean To The U.S.: A Dynamic Investment Approach

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  • Skripnitchenko, Anatoliy
  • Abbott, Philip C.

Abstract

A dynamic profit maximization model with adjustment costs of capital is implemented to study US outward processing trade in apparel and to examine the effects of preferential trade policies in the long and short runs. The model is used to determine the role of foreign investment and to simulate outcomes due to the introduction of the Trade and Development Act of 2000 and the elimination of Multi-Fiber Agreement quotas in selected Caribbean countries. The transitional dynamics as well as long-run costs and benefits of these trade policy changes are evaluated. While outward processing trade expands with preferences under the Caribbean Basin Initiative, policies typically require five years to be fully effective, and competition in freer markets could reverse the benefits realized under preferential trade.

Suggested Citation

  • Skripnitchenko, Anatoliy & Abbott, Philip C., 2003. "Preferential Trade Arrangements In Apparel Exports From The Caribbean To The U.S.: A Dynamic Investment Approach," 2003 Annual meeting, July 27-30, Montreal, Canada 21977, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea03:21977
    DOI: 10.22004/ag.econ.21977
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