Rags and Riches: Implementing Apparel Quotas under the Multi-Fibre Arrangements

Krishna, Kala Marathe; Tan,

doi:10.1007/978-1-137-28787-8_38

Cited by 3 publications

(4 citation statements)

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“…Removal of quotas on Phase IV goods-the focus of our empirical work-occurred according to schedule on January 1, 2005. 10 Like other countries under the MFA and ATC, China officially allocated quotas on the basis of past performance, i.e., a firm's ability to export its quota successfully in the previous year (Krishna and Tan 1998). As documented in Moore (2002), however, China's actual allocation of quotas deviated from this principle, at times substantially.…”

Section: A Brief Summary Of the Mfamentioning

confidence: 95%

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Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

Khandelwal¹,

Schott

Wei³

2013

American Economic Review

591

523

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If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the elimination of externally imposed export quotas. Both the surge in export volume and the decline in export prices following quota removal are driven by net entry. This outcome is inconsistent with a model in which quotas are allocated based on firm productivity, implying misallocation of resources. Removing this misallocation accounts for a substantial share of the overall gain in productivity associated with quota removal. (JEL F13, F14, L67, O14, O19, P23, P33)Institutions that distort the efficient allocation of resources across firms can have a sizable effect on economic outcomes. Hsieh and Klenow (2009), for example, estimate that distortions in the Chinese economy reduce manufacturing productivity by 30 to 50 percent relative to an optimal distribution of capital and labor across existing manufacturers. While research in this area often concentrates on misallocation among existing firms, distortions can also favor incumbents at the expense of entrants. Trade barriers such as tariffs and quotas can obviously distort resource allocation along these "intensive" and "extensive" margins, and estimation of the productivity growth associated with their removal is a traditional line of inquiry in international trade. But gains from trade liberalization may be larger than expected if the institutions created to manage the barriers impose their own, additional drag on productivity (e.g., arbitrary enforcement of quotas and tariffs). In that case, trade liberalization induces two gains: the first from the elimination of the embedded institution, and the second from the removal of the trade barrier itself.In this article, we examine productivity growth among Chinese exporters following the removal of externally imposed quotas. Under the global Agreement on Textile and Clothing, previously known (and referred to in this article) as the Multifiber Arrangement (MFA), textile and clothing exports from China and other developing seminar participants for helpful comments and suggestions. Di Fu provided excellent research assistance. We acknowledge funding from the Program for Financial Studies at Columbia Business School and the National Science Foundation (SES-0550190).

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Section: A Brief Summary Of the Mfamentioning

confidence: 95%

“…discusses the many "directly unproductive," profit-seeking activities, such as bribe-taking, that often accompany implementation of trade protection. Harrigan and Barrows (2009); Brambilla, Khandelwal, and Schott (2010);Krishna and Tan (1998); and Bernhofen, Upward, and Wang (2011) offer discussions focused on the MFA.…”

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confidence: 97%

Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

Khandelwal¹,

Schott

Wei³

2013

American Economic Review

591

523

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“…However, many of these countries implemented the quotas in ways that created further distortions instead of just having tradable quota licenses. See Krishna and Tan (1998) for more on this.…”

Section: Introductionmentioning

confidence: 99%

How you export matters: Export mode, learning and productivity in China

Bai

Krishna

2017

Journal of International Economics

134

101

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“…Previous experiences in export quotas under Multi Fibre Arrangements (MFAs) provide lesson learn for governments that such mechanism was ineffective and inefficient(Krishna & Tan 1998). The productivity gains for firms also larger in competitive settings rather than intervened environment (Pane & Patunru 2020)13 There is an article in the three MoTs which gives a discretion to Minister of Trade to make decision on an unclear situation, but the definition of unclear situation is unclear.…”

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confidence: 99%