TURKISH ENTERPRISE-LEVEL RESPONSE TO FOREIGN TRADE LIBERALIZATION: The Removal of Agreements on Textiles and Clothing Quotas

Trade in textiles and apparel is of special interest among international trade transactions. Removal of the final Agreement on Textiles and Clothing (ATC) quotas in 2005 brought about a division of textile- and apparel-exporting countries into groups of winners and losers. Turkey appeared as a successful country from the former category. Based firm-level data our empirical results suggest that while Turkish enterprises were more successful than most in adapting to the post-quota market in textiles and apparel, their performance paled relative to the performance of enterprises in areas not covered by the ATC. Producers that specialized in textiles and apparel during the ATC quotas removal period had ceteris paribus lower sales revenue and employment growth and a lower profit rate on average than those selling other products. The latter category of producers was also significantly more likely to fail during this period.