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Impacts of Multi-Fiber Arrangement Removal on Global Textile and Cotton Trade

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  • Xia, Doris Yan

Abstract

Textiles and apparel trade has been governed by the Multi-Fiber Arrangement (MFA) for three decades. Trade restrictions have generated substantial welfare losses and price wedges in exporting and importing countries through trade distortions. Beginning in 1995, textiles and apparel trade underwent fundamental changes. MFA quota will be removed by Jan 2005 according to World Trade Organization's Agreement on Textiles and Clothing (ATC). This study established an equilibrium displacement model to investigate the impact on textile and cotton sectors of different countries and country-groups of removing the MFA quota. The model specifies the basic linkages of textile and cotton markets in the United States, China and three other country-groups. With different parameter values for U.S. textile supply elasticity, assumptions about foreign cotton exporters' reaction and changes in the U.S. loan deficiency payment, alternative scenarios in the short run and long run are computed to predict changes in domestic and import demand for textiles and apparel, import demand for U.S. cotton, domestic and import price of textiles and apparel, U.S. cotton price and adjusted world cotton price. Generally, results indicated increased import demand for U.S. cotton, higher textiles/apparel export supply from China, decreased domestic demand for U.S. cotton, and lower U.S. domestic demand for textiles and apparel. However, both textile prices and cotton prices had positive or negative changes depending on different scenarios.

Suggested Citation

  • Xia, Doris Yan, 2005. "Impacts of Multi-Fiber Arrangement Removal on Global Textile and Cotton Trade," 2005 Annual meeting, July 24-27, Providence, RI 19453, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19453
    DOI: 10.22004/ag.econ.19453
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    References listed on IDEAS

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    1. Cheng Fang & Bruce A. Babcock, 2003. "China's Cotton Policy and the Impact of China's WTO Accession and Bt Cotton Adoption on the Chinese and U.S. Cotton Sectors," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 03-wp322, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Westcott, Paul C. & Young, C. Edwin & Price, J. Michael, 2002. "The 2002 Farm Act: Provisions And Implications For Commodity Markets," Agricultural Information Bulletins 33745, United States Department of Agriculture, Economic Research Service.
    3. MacDonald, Stephen & Pan, Suwen & Somwaru, Agapi & Tuan, Francis, 2004. "China’s Role in World Cotton and Textile Markets," Conference papers 331298, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Wright, Gavin, 1971. "An Econometric Study of Cotton Production and Trade, 1830-1860," The Review of Economics and Statistics, MIT Press, vol. 53(2), pages 111-120, May.
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