IMPACT OF THE MFA PHASE-OUT ON THE WORLD ECONOMY AN INTERTEMPORAL, GLOBALGENERAL EQUILIBRIUM ANALYSIS

This study focuses on the possible impact of the MFA phase-out on the world economy.Starting from analyzing trends in world textile and apparel trade (T&A), the study foundthat the developing countries were a growing factor in world T&A trade in recentdecades. Moreover, using trade data from 91 countries over 37 years, the empiricallyinvestigate of the study indicates a strong positive relationship between trade in textileand apparel and the standard of living. However, about 50 percent of industrialcountries’ markets are not available for developing countries and intra-EU trade stillaccounts for half of total EU imports of T&A products. A more open and freer market inthe industrial countries is an important condition for developing countries to maintaintheir growth momentum. The study further focuses on the possible impacts of the MFAphase-out on the world T&A trade using an intertemporal, global general equilibriummodel. The study found that the MFA phase-out would enlarge world trade of T&A anddeveloping countries will further gain market share in world total exports. Almost allcountries, including both the developing countries restrained by the MFA quotas and freefrom the MFA quotas, and the industrial countries, gain in term of social welfare post-MFA in the model. Even though the developing countries currently free from the MFAquota restrains may lose their market shares, as world T&A prices are lowered byimproving the efficiency of world T&A trade post-MFA, consumers are better off byconsuming cheap commodities.