Policy Brief
GEMPB-2007-02
March2007

Introduction

On 1st January 2005, the Agreement on Textile and Clothing (ATC) expired and all the quotas on the textile sector should have been removed. Such liberalization was subject to an investigation as to its likely effects. According to a survey based on over 43,000 Google hits related to “textile apparel quota” by researchers of the Harvard Center for Textile and Apparel Research (Abernathy et al., 2005), a prevailing view has emerged among scholars: textile exports from low-wage countries that faced restrictions under the ATC, and from China in particular, should have increased massively and rapidly.

Since textile production is one of the main components of cotton demand, and since Chinese cotton production capacities are already largely being used, a major side effect of this liberalization should have been to foster a significant expansion of Chinese cotton imports and a subsequent rise of cotton’s world price. According to Fang and Babcock (2003), the liberalization of the textile sector could have boosted the growth of China’s imports of cotton by about 70 to 100% yearly until 2010. Such an increase would have led cotton prices to climb annually between 7.3 and 11% on the world market 2.

However, new safeguards against textile imports from China have been implemented by the European Union (EU) and by the United States (US) to protect their domestic textile industries. These agreements attenuate the expected effects of the ending of the ATC: by limiting the potential growth of Chinese textile exports, they limit the expansion of Chinese cotton imports.

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1 Claire Delpeuch is a research assistant in international economics at GEM. Comments are most welcome: Claire.delpeuch@sciences-po.fr

2 These figures are extra increases over a baseline forecast assuming the continuity of prevailing trade policy and Food and Agricultural Policy Research Institute (FAPRI) macroeconomic forecasts.




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23 This chronology was established on the basis of a report for the US Congress (Gelb, 2007).

24 See Buelens (2005), table 12, p. 16 for the formulae determining consultation levels and the levels below which the TSSC should not be invoked.

25 EU textile categories have been created in the Council regulation (EEC) n�3030/93 of 12 October 2005 on common rules for imports of certain textile products from third countries. They regroup 8-digit references of the Combinated Nomenclature.