The End of the Multifibre Arrangement (MFA) and the Heterogeneous Performance of Quota-Constrained Countries

On 1 January 2005, the international trade in textile and clothing was freed from the quota restrictions that had persisted for more than four decades. This study tests one of the predictions that countries effectively constrained by quotas in the major world markets will increase their exports at the expense of non-quota-constrained suppliers. The focus is on clothing imports of the two major markets, the US and EU-15. These markets are separately analysed as they constitute different lists of quota-constrained countries, QCCs. Unlike others, this study uses a relatively longer data set of post-quota years, which allows us to understand the medium-term
adjustment process of exporters following quota removal. We find a large amount of
heterogeneity among the QCCs in their post-quota export performance. Only a few QCCs have benefited at the expense of not only the non-quota countries but also fellow QCCs. The estimates show that almost half of the QCCs were better off under the quota regime at least in terms of exports. The factors most likely to have influenced their heterogeneous performance are also examined.