TEXTILE TRADE REFORM: EFFECTS OF THE MFA PHASE-OUT

• Sponsoring Institution: Economic Research Service/USDA
• Project Status: ACTIVE
• Funding Source: USDA INHOUSE
• Reporting Frequency: Annual
• Accession No.: 0406134
• Project Start Date: Oct 1, 1999
• Project End Date: Dec 1, 2004
• Program Code: [(N/A)]- (N/A)

Recipient Organization
USDA/ERS
1800 M STREET NW
WASHINGTON,DC 20036

Performing Department
ECONOMIC RESEARCH SERVICE

Non Technical Summary
Textile trade liberalization will increase developing country exports and affect the long run growth of countries like India and China. The industrial and agricultural policies of these and other countries will be affected by these developments. This study will try to point out the winners and losers under liberalization and indicate the likely impact on rural America.

Animal Health Component

100%

Research Effort Categories

Basic

(N/A)

Applied

100%

Developmental

(N/A)

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
606	6120	3010	100%

Knowledge Area
606 - International Trade and Development;

Subject Of Investigation
6120 - International economy and sectors thereof;

Field Of Science
3010 - Economics;

Keywords

cotton

developing countries

trade

economic development

quotas

textiles

trade policies

clothing

trade agreements

agricultural economics

world trade

sectors (economics)

policy analysis

exports

united states

european economic community

economic impact

macroeconomics

imports

economic policies

agricultural policies

methodology

literature

reviews

Goals / Objectives
Textiles and apparel are the leading source of foreign exchange and industrial employment in many developing countries. In 2005, the Multifibre Arrangements (MFA) phaseout will be complete, and MFA quotas will no longer constrain developing country exports to the United States and European Union. There is great uncertainty concerning which developing countries will benefit the most from trade liberalization, but the resulting effects are likely to be profound. This project will study the likely impact of the end of the MFA quotas on the redistribution of textile and apparel production and consumption among developed and developing countries. The impacts of these shifts on developing countries macro-economic, agricultural, and trade policies and development will also be examined. The impact on the United States will also be significant, given its role as the worlds largest textile and apparel importer and the worlds largest cotton exporter.

Project Methods
A variety of methodologies will be used, including both general and partial equilibrium modeling. Literature on trade policy and development will be reviewed in the course of analyzing the likely responses of key countries to textile trade liberalization.

Progress 10/01/05 to 09/30/06

Outputs
During fiscal 2006, a number of ERS publications and papers resulted from this project. February 2006 saw a summary of the end of the Multifibre Arrangement published in Amber Waves, and September 2006 saw the publication of an Amber Waves finding on the impact of textile trade liberalization on rural communities. A chapter on this topic was also added to the ERS cotton briefing room in September. These publications indicated that textile trade refrom was associated with an expansion of cotton use in China, India, and Pakistan. Also, that U.S. cotton use declined as textile trade reform deepened, but that was a long run process that was not simply a result of policy changes.

Impacts
Understanding of of the impact of textile trade liberalization by the public and policy-makers was enhanced. The project's methodology for estimating cotton content in China's textile exports was also incorporated by USDA's Cotton Interagency Commodity Estimates Committee into its short run and long run projections of China's cotton consumption.

Publications

• MacDonald, S., 2006, "The World Bids Farewell to the Multifiber Arrangement", Amber Waves, Vol. 4, Issue 1, U.S. Department of Agriculture, February, pp. 20-25
• Stephen MacDonald, Karen Hamrick, Leslie Meyer, Thomas Vollrath, Tim Wojan, Rechard Reeder, 2006, "U.S. Textile and Apparel Industries and Rural America", Cotton Briefing Room, U.S. Department of Agriculture, August.
• MacDonald, S., Hamrick, K., 2006, "Textile Trade Liberalization Brings Difficulties to Some Rural Communities", Amber Waves, Vol. 4, Issue 4, U.S. Department of Agriculture, September, pp. 3

Progress 10/01/04 to 09/30/05

Outputs
During 2005 an E-Outlook, "The Forces Shaping World Cotton Consumption After the Multifiber Arrangement," was published in April, summarizing the impact of the end of the MFA on world cotton consumption. An E-outlook on India's textile and cotton industries was also released. ERS staff made several presentations on textiles at a Farm Foundation/ERS Conference on Globalization and U.S. Rural Development. An Amber Waves article was prepared, but due to policy sensitivity, publication was delayed until February 2006. A web chapter on textiles, rural development, and changes in employment is currently under MTED division office review.

Impacts
ERS publications were cited in farm and financial press to give context to stories about the end of the MFA.

Publications

• MacDonald, S., Vollrath, T., 2005, The Forces Shaping World Cotton Consumption After the Multifiber Arrangement, CWS-05c-01, Economic Research Service, U.S. Department of Agriculture, April. 5 pp.
• MacDonald, S., "The Issue and Its Rural Context: Globalization and Restructuring in Rural America", speech to ERS, Farm Foundation conference, Washington, DC, July 6, 2005. pp.

Progress 10/01/03 to 09/30/04

Outputs
During FY2004, the project generated a large number of outputs and work was undertaken for forthcoming outputs in FY2005. A total of 7 conference papers at 5 different conferences were presented. A textile trade database was added to the ERS website. Two articles appeared in Amber Waves, one introducing ERS's database, and the other on rural employment. The database article was later recognized as the magazine's "Best Data Feature." A section of ERS's annual "Rural America at a Glance" was devoted to the impact of MFA reform, and ERS's Cotton and Wool Outlook carried two highlights summarizing findings of the project. Journalists around the world either incorporated these publications into their own articles or contacted the authors for further analysis. Project findings were incorporated into USDA's inter-agency estimates of the short term outlook for cotton supply and demand and into the baseline projections. FRED developed a proposal for an ERS-Farm Foundation conference on "Globalization and Restructuring in Rural America", scheduled for June 2005. MTED carried out research for two e-Outlooks scheduled for publication in 2005.

Impacts
(N/A)

Publications

• Vollrath, T., Gehlhar, M., Hackett, J., MacDonald, S., 2004, International Bilateral Fiber and Textile Trade Database, U.S. Department of Agriculture, December.
• Vollrath, T., Gehlhar, M., MacDonald, S., 2004, "The Changing World Network of Trade in Textiles and Apparel", Amber Waves, Vol. 2, Issue 4, Economic Research Service, U.S. Department of Agriculture, September, pp. 12-13
• MacDonald, S., Trends in World Fiber Consumption, CWS-04g, August. 1 pp.
• MacDonald, S., Estimating Chinaas Cotton Textile Exports in Volume Terms, CWS-04i, October. 2 pp.