35th AmualCoore~ of ' the Austtaliln .AgrlcuflUrat ,Eeonomics ;SOciet1

University of New El1aland, Almi 11-14 Febma., 1001

Apparel · :ade PI the Multi

Pllasing:Out 6'11M.Dftt

Implications for Demand for Austral,ian 'Wool

Owo-Jlu M. Leu

AustnWanBureau ofA~ andResomce ~

OPO BOI 1S63Canbeml2601

The market for textiles and opparflelis protected by tariffs and bilateral quantitative restrictions und~rtht Mulli1fbre Arrattgnnent (.\IFAJ. Since the phasing our ()Ilhgs~ ftsrricnonsls bei1fgpropomJ J"ntheUl1IguayRl1llnd '(Jj" GATt trade MgotlatloM, it Is important to undtntalldthelmpllcatlonsthat the elimiMlion of these restrictlonr would lun·, fortht Australian lfI¥)(J1 industry.

Tlfe apparel trade flow tIIectl of two dtrestriclionoptiolU - removingU5 and EC quotas and removing quotas lJnd tarl/ls ill all countries - wtf(! examined using (lit augmented A.rmlngton type model, In which st'Ven cottntritsand country groups M!Te distinguished. Apparel was difftrtndattd by fibre type olld country 0/ origin so that the impact on: rhl!M!tooi apparel markel, and hence on Australian wool producers. could be studied while also considering lhe ~tclS on Othef, competing appartl.

The results Show that phosingoutthe MFA 'tflould incrt.ostw'fJrld apparel Imports and demand. Among apparel of dijferenl types, the increase in demand for WtKl/ apparel would be strt..aller than for conon and man-made apparel. Nt"~trtheless:, the consequent increase in demandjiJrwool would substantially benefit Australian l\ool producers ..

This research VIeS supported by a grant from the Wool Research and DeveJopmenr Council.

Introduction

ThoughtbcID$'ketforDwwoollJ"reladvelyftecfrom "t.l'JdO~~Ol1!."·tbe.nuutet::lot'~dle$ andappvel isscronglyproteded both by tariffs andb,vaset of bilatel"atquantitative:Jt$ttk:tiotl$ on imports ofpanicularproducts to specific countries. termed tbeMUJti .. Fi~ ,Antnptnent'

(MFA)" The MFA rcMctions are De&otiated:underthc auspices oftheGATrCom.miuee on, Tcxtitcsandare administered by tbeexportin, countries. Thotnain ,features "of.the ,MF'Aarc,u follows:

• The bilateta1agreements are "between developed ,countriesanddcwelopi~IC()U'nuiel. aUowinS tbefonnertoresttict textile and apparel imports from the latter.

• Thus trIdc between developed coumriesha$ continua! WldernonnalGA1T'ndes..11tls has resulted in diversion of trade from 'poor to nchCOWlttid .•

• Sucbagrecmentsarecontrary to thcnon-disaiminatoryandmuldlateral principles of OATr.

The MFA hlts been rent'wed three times since 1974.E&ch 'time, lhenuml:ers of countrien involved Indof textile products restrictedwereincrease4. At the same timc~however, the expansion oft4ltile prodUl*:lion in JOm\' develaping countrie$ootsubjcctiOMPAquota, and the growth of some uneonwUed 5ubstitu~s,bavct dedcfOmake the},tFAJeu dfec:tive.

Two essential eifects" ofirl\'KK1 restric'dons sucb IS the·MPA areproductsubaitution and country substitution. The first (see F. Y"'"/ .1979) is 'substitution into hi,her quality products within the quota-con.strlined import eatclory" 1be$CCond is diversion ofimporufrom Jow cost controlled countries towam,bigbu cost· non-comroUedcountties.

The,pbasins out of these re5tticUons (possibly \'la. 4wifficatioo* Stile) is beinlProposed in the current Uruguay Round of GA1T 'trade negotiations. Their' e.limination WOt4dbe likely to baveimportant effects for Australilll ~nsumers of appueland.for wool .suppUcm .. The prinwypurpot.e in dtisstudy,tb=cxe,ii to tun_the ttadc floweffeccs ofthcMFAon the, Ipparell111rkct. withputicuLv attc'ntion to etTect$ Oft.,·dIe· wool·app&rd. n)ltket relative tomafor

apparel containin, other fibre!. Prom tbe ttadenow ebanl" meuu.red in value terms. inferences ·canbcdmwnabcut the welfare eff'ecuin lapparel tnldingcountties, and from the cffeas mcuum.t. in "lennSofquantity inf~ an be madcconcemingefredS M.che. demand f«wool.. For comparison,a similar cuminationis made of.the effects of all appI\!Cl quotas and tariffs·takenlO,cmer ..

1

.After.descripdonorthc~l~,i4 die:neu~.·thc~I~Js~ted. ~rollowin:, seed.OJl.Mth ,~theote:.I1,*~tiOI.Q(.·tbe,·efl~U!~:~I·"'·_ restrietil>ns.~~It$.,;tbcn:~ted.Mm,~~iOftof~:rotA~ wool 'producers anda.ppuelccf1$WllCtS .ofpbuil, .outthcMFAaDd, Otbcr'4J1PIte1 "hdo restricticmL

Growth andChallge ;nthe Apparel Trade

lnQissection tbeovendl cbangesin expom and .. imporI$. 'byCOQntqtovetthc'pai04ofJ I984-87 arercvicwcd .. Dltlon thevalue$\l)f apptrd tntdoflows, byfibrc; type$. !arldleb;ted

countries, werc.b&kenfromUnitedNltions(l987).ThecWall'C~tomeUnited.N~ by srrc (Stand.IJd IntemationalTradcClusirlCation -revWon2) codc;; :t1nll,mter"counby comparison and apparel classifDtionby fibtetypa :arepos$ibic" ;lnthis,.tUd,'0I111~i fibres - wool,couoo,andlJ'Llll-made fibi'C(inclUdiDI.syntbetic and,ceUwo$icfif;Rs)-arc considered. and the countries are partly agrepted:. United ,Swa, EumpeanCommwlity. Japan. Other Developed countriesl t China.Honl ;Konl •. andOtherDcvelopin,cOUDtriea.:~: This is done toemphuizc the relauonsbetweenlhe two ·most importlntappuclimporters (United States and BuropeanCommunity) and, the threcappareldtpodcr$(Japan •. Hon,:Kon, and Chlna). ItsbouJd be noted.tMt, because Eascem.Bu.rope. Qdnaa:MI. someotherdevelopillJ counuies have not reponed their tradc·datato the Unit«l Nauoll$, Ihcdlll'sbown beEowfor C'nina.the other DeveJoped. and ·me Other Developingcounmes &re;ineompJete.For example, Chinese exports arecakulatedfrom the import data ofthose.countries<tbatba\-e~

Imports Data on total apparel importS by the above countries for tbeyws 1984 and 1987 aresft..own in Table 1. Of those rcponedto the United Nations, about chree..qUlftersof lotalworld apparel imponsare imported by the United Sta1eS and the European Community .. The Uni&edStileSbas been the most important apparel lmponiog country. However. its share of tot.l impon$ decreased from 48 per cent in 1984 to 40.6 per cent in 1981. nleEuropean Community is the second ·most impotUmt impaner of apparel. increasing its shate of world importS by 4.5 per cent overthc same period. Japan also increased its share of world importS byUpereenL

1 Other Devdoped c:otmtric$includclsrael. Canada. Austria. Finland. Iceland. Norway. Sweden. Swiltt.'rbmd. Autnlia.New :7£:11_. Eastan.liuropc. am the Soviet. U-.ioa. 2 Other .Developing countries include Es)'Pf. Reunion. O~ GadeIOQpte. .M:miaique.FmtCh GuiAna. Cypm$ .. J(JCdaa.s.di .Arabta..Bblladesh.l~ SootbKorea. Malaysia .•. Phuippiftes. SinppotC. Thailand _MjL

2

TABLEt

S"lIn.J II/ I.,.m: TtltIIl AHud, Sd,cl,II ell"","S

Impcx1er

0d1er Od.\et Ewtlpeao Developed .~

Expu1er UniledS~ Community Japm counttie:s HonaKonI ~.,

USSm USSm USSm USSm uSSm USS .. V.lled Stales 1984 19.0 (1.2) 23.4 11.7) 53.9 (2.1) 8.9 (0.8) 10.6 (.5) 1987 111.2 (0.8) 73.0 (2.1) 68.6 (1.4) 19.8 (0.8) 5 •• (3.9) E.rapaa Coa_.lllt, 1984 816.4 (7.7) 1S1.S (11.3) 1 353.2 (5104) 68.0 (5.9) 19.4 (33S) 1987 1 378.5 (8.0) 361.6 (10.5) 2908.1 (57 .. 7) 133.0 (5.5) 21.6 OS.$) Japu

w 1984 436.7 (3.8) 31.7 (0.5) 16.1 (0.6) 49.4 (4.3) 32.2 (13.6) 1987 289.8 (1.7) 73.1 ( 0.5) 15.8 (O.3) S7 .. 8 (2.4) 21~4 (15A) Odler Developfd eouDtries 1984 3343 (2.9) 2 061.8 (3O.2) 10.2 (0.7) 4.5 (0.4) 5.1 (2.2) 1981 4893 (2.8) 2538.6 (I7.9) 23.3 (0.7) 7.0 (Ool) 6.6 (4.8) Hoal KOle 1984 2359.1 (20.7) 1 505.6 (22.0) 77.6 (5.6) 451.5 (17 .. 4) 64.6 (27.3) 1987 3 J 18.4 (18.1) 2419.1 (17.1) 149.1 (4A) 653.2 (13.0) 42.7 (30.7) CIlia. 1984 832.2 (1.3) 281.2 (4.1) 330.1 (23.1) 152.0 (5.8) 939.3 (81.4) 45.0 (19.0) 1987 1 533.6 ( 8 .. 9) 880.9 (6.2) 119.1 (W.9) 357.6 (7.1) 2 0793 (85.3) 41.5 (29.8) Olller Dev,lop!al (Hatrles 1984 6514.3 (51.6) 2876.1 (42.1) 1923 (57.0) 591.9 (22.1) 83.4 (7.2) 1987 10 430.9 (60.5) 8 142.4 (57.5) 2 116.0 (61.5) 1 033.3 (20.5) 142.1 (5.8) Total i_poru 1984 11 412.8 (100) 6836.0 (100) 1 391.1 (100) 2 630.6 (100) I 153.6 (100) 236~8 (100) 1987 17 UO.6 (100) 14 165.4 (100) 3442.8 (tOO) S 036.6 (100) 2 439.1 (tOO) 139..2 (100)

(a) 1986 data in placed 1987. NOIt: Fig&D'e$ in ~ an: the percentage of total imports of each country. Sawee: lmpOOelst reports in United Nations (1987).

.:..

TABLE 2

S •• n., II/ I.,.rtf: WOO, A,,.,..,, S.'etUtl C"liJlll1W,

~

Valled Stam 1984 1981 E...... CCIIl ••• U, 1984 1m Japa. 1984 1987 Oditr Dtyeloped to •• tria 1984 1981 Hoal KOJ 1984 1987 Clt"a. 1984 1981 Otller ne.,.., •• , ~ctrm 1984 1987 Total I_ports 1984 1981

UnitedS~

uSSm

485.6 (37A) 592.4 (36.9)

36.8 (1.1) 30.3 (1.9)

US", (9.0) 124.3 (7.7)

318.5 (24J1) 4OS.1 (2S.2)

58.$ (4.6) 98.0 (6.1)

270.6 (21 .. 9) 3SO .. ' (22.2)

1 285.$ (100) • 6G6Jl (100)

~ Communit), Japal

USSm USSm

3.3 (M) 3.6 ( 1.2) 4.8 (OA) 4~9 (0.6)

97.1 (31 • .1) 221.0 (27.9)

3.3 (0.6) 3.4 (0.3)

3393 (58.2) 4.8 (1.5) 478.0 (39.0> 10.0 (13)

88.5 (15.2) 52.4 (16.9) J50.o (12.2) 98.3 (1~4)

13.1 (12.3) 38.0 (12.3) 3S~6 (2.9) lSI,,' (19.2)

135.8 (23.3) U4.0 (36.8) 554.6 (4S~ 306.0 (3t6)

5833 (lfl)) 310.0 (1(10) 1 226.6 (100) m..2 (100)

(a) 1986datAinpbceof 1981. Note:Fi'Ulaia~.-e·lhe.~.or.lCUlwoot~limpmsofea~. SQwtt!JmJUtCnt.tepom in UWkd·Nations (1987).

1mporter

oa. ~ countries

US$m

S.2 (1.4) 3.1 (0.6)

2J2. 7 (.58.0) 418.9 (70.5)

13 (0.4) 0.6 (O~1)

78.8 (21~ 83.4 (14.0)

12.0 (3.3) 333 (5.6)

56.1 .(15.5) M.! (9.1)

366.8 (100) 593.9 (100)

Hong Kong

USSm

0.6 (0.2) 1.1 (0.3)

30.0(12.6) S8.s (17.4)

9.5 (4.0) 10.0 (3.0)

1.1 (0.5) 1.9 (0 .. 6)

192.7 (81.1) 2$5.1(76.1)

3.7 (1.5) ~J.4 (2.5)

237.5 (100) g3S2 (jOO)

()tber

Dcvdoping ~a)

US$m

0.1 ( 1.6) 0.0 (2.5)

4.0 (43.0) 3.6 (54.4)

0.4 (3.8) 0.3 (U)

0.1 (1.4) 0.3 (3.1)

4,4 (46.7) 0.1 (30.2)

0.4 (4.1) O~l (3.0)

9 .. 4 (100) 5.0 (Ito)

Va

TABLE 3

SoanfS _/ I_JHl"': COIUl!JA,,.rd, Sdee,g c ••• trin

Expooer

Vaned States 1984 1987 Ellropeaa Co •••• it' 1984 1987 lap •• 1984 1987 Oilier Developed e-outries 1984 1987 HOB, Koa. 1984 1987 Cilia. 1984 1981 Oilier De,eJopml cOIIetries 1984 1987 Total i_ports 1984 1987

<al 1986 in place of 1987.

United States

uSSm

m.9 (5.9) 5963 (7.8)

296.9 (6.4) 171.2 (2.2)

120.8 (U) 203.1 (2.6)

1366.5 (29.2) t 844.0 (23.2)

401..4 (8.6) 180.9 (9.8)

2211 .. 9 (473) .. 343.2 (54.1)

4 615.5 (100) 7944.7 (100)

Europeao Community

uSSm

45..4 (13) 15.8 (1.0)

21..0 (0.6) 54.5 (0.1)

901.0 (2S02) 1 070.S (13.9)

876.2 (245) 1 455.0 (18.9)

190.7 (53) 583.2 (7.6)

1 $tO.S (43.1) 4475.5 (58.0)

3 515.1 (tOO) 1114.4 (100)

Japan

uSSm

13.1 (28) 41.0 (2.8)

433 (9.0) 100.7 (6.8)

3.4 (0.1) 10.6 (0.7)

15.4 (3.2) 31.6 (2.i)

213.5 (44.3) 448.5 (30..1)

192.9 (40.0) 656.8 (51$)

482.1 (tOO) 14893(100}

NOIe: Piptts iaparent.'!eses are lhe~of~ tcUon appatelimjlOlUofcacb c:ountJy. OoW'ct! Imported teportSin UnitcdNatiDtu (1987).

lmporta'

Odu Devdoped axanrrics

USSm

3J.l (2.2) 44..3 (1.1)

710.8 (51.3) 14~O (452)

9.7 (0.1) 9.3 (0.3)

269~8 (19.5) 402.;4 (15.2)

89,4 (6.5) 216.0 (8.2)

275.9 (J9.9) MO.O (2004)

I 386.6 (tOO) 2644.0 (100)

HonsKoD,

uSSm

4.8 (1.2) 10.6 (1.0)

22.0 (53) 49..4 (4.5)

20.9 (5.6) 26.4 (2.4)

23 (0.6) 3.4 (0.3)

331.5 (793) 944.6 (86.2)

36.4 (&7) 61.1 (5.6)

4179 (100) 1096.1 (t(KJ)

Odler ~ ~a)

USSm

7.4 ( 4.') 4.4 (4.3)

49.6 (303) 14 .. 3 (13.9)

22.8 (13.9) 14.8 (14.3)

3.6 (2.2) 3.8 (3.7)

43.0 (263) 28.4 (275)

37.5 (22.9) 31~6 (36A)

163.9 (lCO) 103.3 (100)

0\

TABLB4

S".rC6' til I.",m: JlIUI-MUe P",. A,,.,el, Sd.ttttl COlJlllltU'

Exponer

Ihlited States 1984 1987 Eu~ea. Com ••• it, 1984 1981 Jap6 1984 1981 Odtu Developed co •• tries 1984 1981 ROlli KOBS 1984 1987 Cllb.8 1984 1981 OUter Developia, eo •• arla 1984 1987 Total I.ports 1984 1981

(a) 1986in piaceof 1987.

Uni1edStaes

uSSm

112.9 (2.1) 189 .. 7 (2.5)

102.9 (1.9) 82.4 (1 .. 1)

98.0 (1.$) 161.9 (2.1)

674JJ (12.4) 869.4 (113)

3n.3 (6.8) 654.7 (8.5)

4 09J.8 (75.1) 5 731.1 (74.5)

S 451.9 (100) 7 689.1(100)

~ Community

uSSm

30.4 (1.1) 30.6 (0.6)

1.4 (0..3) 153 (03)

821.5 (30.7) 990.0 (l9.0)

$40.9 (20.2) 814.0(15.6)

17A (2.9) 262.1 (5.0)

1 200.1 (44~8) 3 1i2.3 (59.6)

Z 671~1 (100) 52243 (100)

Japan

USSm

6.1 (1.0) 27 .. 1 (2.3)

17.1 (2.9) 39.8 (3.4)

2.1 (0.3) 2.7 (02)

9Jl (1.6) 19}7 (1.7)

78.6 (13.1) US.6 (10.2)

485.2 (81.0) 953..2 (82.1)

S9U (100) 1161,. (100)

Nott: Flgures in parenlhese:J arethepetml. or toIII ~Ji1riimpm.soreacb~. SoW(e:Importets'tepQrtS in United Nations (1981).

ImjQ1er

Other I>eYekpd c:oumries

USSm

11.6 (2.0) 2().6 (1.2)

429.6 (491) 1 OS3.0 (58..7)

S.l{O.6) 6.0 (.03)

108,9 02.4) 1'7.4 (9.3)

50.5 (';8) 1083 (tiO)

265.4 (lOj) 439.4 (245)

~877.2 (l00) 1194.1 (100)

HoogKoag

ussm 3.5 (0.7) 8,1 (0.1)

15.0 (3.0) 25.1 (2.5)

19 .. 1 (3.8) 21.5 (2.1)

t.l (O~) 1.7 (02)

415.2 (83.3) 379.4 (813)

43.4 (~8.7) 72.0 (1.0)

498.1 (l(0) 1001.8(100)

ou.er. ~I comtiics(a>

USSm

3.1 (S.O) 0.8 (2..8)

25.1 (40.4) 5.1 (l4.1)

9.0 (14-2) 4.8 (202)

1.4 (2.2) 1.8 (8t7>

l1.I(27J» 9.6 (41.5)

1 . .1 (112) 4.3(1~O)

63.4 (100) 27,0 (100)

In overall temlS,thevalueof imports increased nearly 80 per cent from· 19.84 to 1987despite.of the imposition ofMFA .. IV in, 1986. Howevet. !be growth oftllcapparelinlpOlUW8.Sonly51 percent in the United States, whUe they more tban doubled in other areas including the EW'Ope8ll Community. This may have been a result of more restrictive trade barriersL~ the United States. Uamilton (1985) estimated that, during 1981-84, the tariff equivalent l1J.teof apparel quota protection was 25 per cent in the United Statestnal'ket and 13-15 per ~nt in the Buropean Community.

Japan's apparel impons grew faster, in percentage tenns, than those of any other country. Between 1984 and 1987, apparel imports increased by 147 per cent. At the same time, its

apparel exports decreased by 27 per cent (see below): Japan was in transition from an established traditional apparel exporting country to an increasingly prominent apparel importing country.

Tables 2-4 contain data on imports by fibre types. In 1984, wool apparel accounted for 12 per cent by value of world apparel imports (excluding those not reported totbe United Nations), while cotton and man-made apparel constituted 45 per cent and 43 per cent, respectively. By 1987, the value share of wool and man-made fibre apparel had decreased by 1 per cent and 3 per cent respectively, while the share of cotton apparel increased by 4 per cent. In particular, the value share of wool in US apparel imports decreased by 2 per cent

Overall, the Other Developing countries as a group were the most important source of apparel imports, followed by Hong Kong, China, the European Community and the Other Developed country group. The reliance on the Other Developing countries and China for import requirenlents has increased over time. In 1987, the Other Developing countries provided around 60 per cent of US, Japan and EC apparel imports while China's share was relatively small due to its small quota allocations.

Exports The values of overall apparel exports by the selected countries are shovm in Table 5. (Note that tbese figures are primarily derived from countries t reports of their own exports, by destination, whereas those in the previous tables are from counuies' reports of their imports, by source. There are inevitably discrepancies between the two sets of data.) While other countries increased their exports. Japan's exports of apparel declined. The disaggregated data (not shown) reveal that exports of wool apparel from Japan decreased by 11 per cent while exports of cotton and man-made fibre apparel declined by 29 p~ cent Besides being affected by export restraints. Japan has lost its comparative advantage in labour-intensive apparel making to later developing countries (park and Anderson 1988). The growth of exports from the European

7

TABLES

Destiallliolis 0/ Exports: Totlll Apparel, Seltcttd C.""trits

Importer

Otb::r Odrr European Deve!oped Rr.g Developing 'fotal

Expxter(a) United States Community Japan countries Kong China ccuntries exports

USSm USSm USSm US$m ~S$m USSm USSm US$m UBited States 1984 49.9 (11.1) 19.1 (4.3) 48.8 (10.8) 4.4 (10.8) 0.0 (0.0) 321.3 (72.8) 449.5 (100) 1987 68.8 (11.0) 51.1 (8.2) 41.1 (6.6) 4.6 (0.7) 0.3 (0.1) 457.6 (73.4) 623.5 (100) EaropeaD Community 1984 668.6 (17.1) 109.2 (2.8) 2 442.3 (62.3) 45.0 (1.2) 1.1 (0.0) 652.7 (16.7) 39189 (100)

00 1987 1 000.3 (15.4) 220.0 (3.4) 4 491_1 (69.0) 71.3 (1.1) 2.4 (O.O) 721.1 (11.1) 6 506.2 (100) Japan 1984 411.2 (72.6) 28.1 (5.0) 32.5 (5.7) 30.5 (5.4) 0.5 (0.1) 64.0 (11.3) 566.8 (100) 1987 256.1 (61.8) 59.5 (14.4) 25.5 (6.1) 34.9 (8.4) 0.7 (0.2) 3.7.6 (9.1) 414.3 (100) Odler Developed

cOWltdes 1984 34.7 (8.6) 356.4 (88.1) 2.0 (05) 1.0 (0.3) 0.0 (O.O) 1.9 (2.0) 402.0 (100) 1987 46.9 (7.6) 551.4 (89.6) 6.5 (1.1) 1.2 (0.2) 0.1 (0.0) 8.9 (1.5) 615.1 (100) HOBI KOIII 1984 2 lSO.s (48.0) 1 321.6 (29.5) 65.8 (1.5) 679.3 (15.2) 30.2 (0.7) 228.7 (S.l) 4 476.0 (100) 1987 2 889.5 (46.7) 2042.0 (33.0) 127.2 (2.1) 902.7 (14.6) 70.8 (1.1) 160.5 (2.6) 6192.7 (100) Otller Developing

COUDtries 1984 2411.9 (57.8) 839.0 (20.1) 469.7(113) 435.3 (10.4) 15.6 (0.4) 0.0 (0.0) 4171.5 (tOO) 1986 2 750.9 (51.3) 1 19S~ (22.3) 823.3 (15.4) 535.4 (10.0) 58.7 (1.1) 0.1 (0.0) S 364.1(100)

(a) Olina did ootreport its apparel ~ and is therefore DOt included among expOOers here. NOIe! Figures in parentheses are the percentage of total exports ofeacb country. Source:Ex~' reports in United Nations (1987).

f") r··

Commwdtyi th~ United States and OtherdevelQped countries was no doubt due in pCU1tQ ~e

protection afforded to eJeveloped countries under tbcMFA.

Apparel exports from the United States, Japan and otberDeveloped countries (Qdt~tbanth~ European Community) are relatively small. In 1984. almost twotbird$ of European' Community apparel exports went to' the Other Developed countriest and 17 per cent each to the United States and Other Developing countries. A still heav.ier reliance ontbc Other Developed countries as outlets for Ee apparel expc "1S was apparent in 1987. Both Hong Kong and Other Developing countries distribute more than three quarters of their apparel exports to the United S ....... .; and European Commwdty markets. Over time. they have increased their dependence on tile European Community and Japanese markets.

Among total apparel exports. the share held by wool is relatively small. Wool apP1U:'el accounted for 22, 12 and 6 per cent of Be, Hong Kong and Othe1 Developing countries total apparel exports, respectively, in 1984. Its share has fanen slightly since 1984. A feature ofEC apparel exports is that the Community exports a much higher proportion of its wool apparel than cotton and man-made fibre apparel to the United States and J~pan. This may have to do with the high quality of Be wool apparel.

Method

Model selection Since the majority of the MFA trade restrictions are imposed on textile and apparel products rather than on fibres, it is necessary to examine trade policy effects at the textile and clothing levels first and then to derive their effects on demand for fibres. Also, it is important to emphasise that commodities or goods produced iu different locations are different frorrj the buyer's standpoint.3 That is, the model must represent a number of goods, each differentiated by its origin.

Most trade models are unsuitable for this purpose because the products being traded are treZlted

as homogeneous. The market share approach to modelling trade allows the investigation of market share of differentiated products in an import market. However. most market share models are not appropriate for dealing with trade restriction problems (Sarris 1981).

3 Product differentiation may take two fonns. Fust, what purchasers desire are particular product characteristics. As nominally similar p~ucts from different sourees often combine ~ characteristics in varying proportions, products. supplied by different countries may be differentiated in the eyes of importers. Serood. products may also be differentiated acconUng to supplier characteristics. For example. suppliers may offer different contracts in tenns of credit. service and delivery dates.

9

.';;iI., r: ; .. : ..

•

Armington's demand theory, presented in a series of articl~s (Annington 1969a.b, 1970), diffet'entiates commodities by kind and by origin and allows the prediction of ' the tntdeflQw pattern. Since dus mod~l was presented, ahnost20 years ago, it bas be~n used ina 13tg~ number of trade studies (Orennes, lohnsonand Thursby 1977; Jobo$()n, Grcnnes and

Thursby 1979; Babula 1987). though it does not appear to have been applied empirically in textile and clothing trade research. Although it involves some strong assumptions to. simplify its applir :ttion, it is considered a th,eotetically powerful approach with substantial ec(:momic content (Babula 1987) and must be seen as a promising approacbfor modeling aspects of the textile and clothing trade. However. the original Armington model deals with demandtbeory only t with no attention to the important role of supply.

In this study. supply is incotporated into the Anningtonmodel so as to determine equilibrium prices. Supply from an ex.porting country is treated as upward-sloping. The supply curve facing an importing country is made either upward-sloping or completely elastic, depending on whether the country is classed as a large or small importer.

The Armington Type Model

Demand equations Consider a world economy of m (in this case, 7) countries and n (in this case, 3) types of apparel goods based on different fibres, where each good is differentiated according to where it is produced. Demand in country k for apparel of fibre type i produced by country j is a nmction of country kls total expenditure and of the consumer prices for all the apparel goods in country k. Following Annington, apparel of fibre type i produced in country j is called product Qij.

Thus, a product demand function in country k is represented as

(1) k 1c.-1r k k k k k k QDij =Jij (En,Ptt t ••• , P1m, P21• ···t Pij, .. ·, P nl , .•• , P"m)

where QDt is quantity demanded in country k for product Q ij' Ek is country k's total

expenm,ture, and the ~ are the consumer prices (in the local currency) for all the products Qij

in that country.

This demand system requires estimation of m2n(1 +mn) (in this case, 3234) elasticities, a fonnidable task and one very likely to encounter multicoUineri~' problems. To make it tractable, Annington flfSt assumed that importer preferences are homogeneously separable: that is, that marginal rates of substitution between any two products of the same type are

10

"p". t • ) . '.','!

o(vf;uflt independent of the quantities purchased of the products of all other types; i.e., ·k :; 0

oQDg

for aU g;ti. where uk is a utility function of country k. vZ = au" k and ~ = a~ . aQDij aQD;h

This assumption allows a two-stage optimisation process. The impotU;r fll'Sl max,imises utility

constrained by real national income; this stage detennines a Marshallian total demand for apparel of each fibre type i. The importer then minimises expenditures on products of type i subject to the fll'St-stage demand or utility level. Thus. the total demand fOl' apparel of fibre type i and demand for product QU can be represented in the following Conns (the Pi being weighted

average prices for apparel types):

(2)

(3) k k k k k k

QDij=Jij(QDj.Pj1t .•. , Pij, •.. , Pim)

In order to use the model in econometric applications, a particular and simple functional form

of the aggregate quantity index. QDf = ~f(QDfl' ... , QDt, ... , QD:m)t needs to be specified.

To that end, Armington made two strong assumptions. First, an importer's substitution

elasticities between pai.1"8 of products are constant - that is, unaffected by their market shares. Second, the substitution elasticities for all pairs of products of anyone type are the same. These two assumptions imply a constant elasticity of substitution (CBS) functional fonn for the aggregate quantity index.4

The product demand function is further simplified as

(4)

4 These two strong assumptions can be relaxed by adopting a constant-raHo elactticity of substitution homothelic (CRESH) function as the aggregate quantity index (Artus and Rhombcrg 1973). Because the elasticities of substitution derived from the CRESH function ate neither constant nor unique. the flexibility is increased. However, this relaxation requires m2n instead of mn parameters for the model to predict m2n trade flows. This ill not a desirable characteristic. in view of the complexity of even the above constrained model and difficulty of obtaining estimates of these parameters.

11

wkte of il·tMtt.,tkif1 of $ttbmMiM,RfWtfD .""ttl,offille.yJO' !ffimt;:., _··of (~

Thb*~~red,uce!.tbcft..,.cf~ •• tlcl.~IO(.'.,.J·G~ thbQ,.~ •• (92) .. ~ft.rl.m~tt.,(huct 1029)etuUdda~·~ftCl·~.~·~of tbt·lIm$bd·e.be~·fmm2WM.·~42).t~ity~, __ ~:.~ Tluttis.

(5)

(6)

for al) with respect to eblnp inpf,,;lnd 11~ iJcounuy klft pmill oWft~pticecfjJtk:ityor

demand, forlppm'C1 of fitntypc 1m F'«at

The amre appmaeb is now cxttnda!·fO the widet 'mdet:Ut wMdtappftl e~J"t.b:odWt goods., Auuming (by auaJ.QUwith lQ.carlictauuntpdoa) that in ~~ I tMc.llItieitkl of

substitution betwcenlll :pairs of apparel ·typS(foreQmpl~iPPlftI of&"C type!"" "',)lte conShmtlnd the5ImC~ the demand fUDCtionsror towappucl (QJ aOO :; -natelof fibre·type I ue simpUfi«1 to

(7)

(8)

all-at (ai. pt. Opt)

arf • (-Il ar/o1lpk,.tI

12

wbcteQDk.ll.tbe ··total •• ~l demlndedin cmmu:t :i, pk'iJ ·dlowei"~ly~.ptice,ol' apparel: lneounuy i.oil is theprite of.otbet"~oct$,tll tountryk,.:r} il tbc; :'. ·O.f substitudonbetween any'ptifof~ .. typellOdof iSlcomunt.

(9)

Expressions for tbepcrcentlle lites of chln,e 'in demind· tor a.a.,.-I aU (~mi~It()O· 1969aluc~$edin Appendix A"

Supply equal.ions The supply of productQq from country j canbe;~ B

(10)

wbere PI) is the supply price of apparel of fibre type i produced bycowttry J in counuy's currency and 'Z.Jis a vector ofexo~ ,5upplyshifteB"

Adopting • similar two-slip oplimi.Ationproceuforproducm totbat used _hoverer ccmsurnetS, and assuming constant elasticities of tnnsfonnation(and hence I CST funcdonIJ form) between a~,1 and Olbet products and between apparel of different fibre, types. (Trela

and WbI.llcy 1988). the .. mpplyoftotallppartJand apparel of fibre type ifmmcountry J am be simplif"Jed IS

(11)

(12)

where,. in country j. QS} is suppJyof total appartl. G,DPj Is grossdome'sticproducl. PJ is weiptedlVaapprice at tOla! apparel. flD) is average price or all producrs. ~is elutieity or

UlDSr~betwecoapptrtlandother~QSUI$:$Jppb<ofapptttl oflibrt ~'IP't.PIJ lIPfOdueerpriccofl~loffibrotypCl.t(liJet.1kityottnnsf~on~ ~_of/

diff~, fibrc~, 'and eland dlJlteconstant.S.

MlrkddeariDI •• dpricetrusmlstion

TocornpJete. the model,muketcJearingand priceeqUltkmsaro sped&cd:

(13) aSiJ-QDiJ

(14) Pf.,-1 Pi} + rat,

where 1 lIthe exchange me between countriesk and} and T~,arc exolenons ,shilterJthl1

lLWunt'fordiff~between the origin prices and ultimate consumer prices.

Equations (4), (12). (13) and (14) give 2m2,1f '+2mn(hem 336)equatiollS, whicb yieldmn

(21) supply prices. mit (21) supply quantities.m2,,(47)U'Ide flows mdm2" (147) consumer prices.

For very shan run policy forecaung. supply can be; taken asexogenoaJ.sothatthe mnsupply equations (QSliare jusl,marketcleuingconditions. The number of equat!ons then drops to

2nJ2n + 1M (here. 31S).

Tbeoretlcal anllysiJ or phulUI out of restridlons The trade flow effects of phasing'out US and Ee quota restrictions on apparel imponiogand exporting countries can be demonsttated by ewnining the effects on the US and Hong Kong markets.. Consider US demand for. say. wool apparel from a restricted source. such :as Hong Kong, and from an unrestricted source. such as US domesticproducticm. In Figure I (a). Hong Kong apparclsupply is S I. In the absence of US impon. restrictions-US and total demand for

Hong .Kong apparel arc DUs'! and Dfrespectivety. For simplicity of presenWion.letthe Rest

r us· of tbcWorld's demand for Hong Kong apparel .. D I' be the salnC as Dl . Total demand for

Hong Kong apparel is the horizontal summation of Drs' and D~. The demand for and the

14

{b) AppIrtltrom Untied $tates.

o

FIGURE 1 - BUlel. 0/ ,ial", out tic, INDt. Olf US 4, ••• " lor .,JM"'o/ dij/,n,.' sourc"

supply of US apparel are represented by 0'15' and S2 in Figure 1(b). The equilibrium prlceand

quantity pun:hased of US apparel arep~ and ~ tesped'.ively.

Under ,CWTeDt US resuicdons.. the US demand for Hong ,Kong ~areli5l'Cstrictedto qy. The

total demand is kinked (,p>~) and results in a USpriccof p1 and. HonsKoD, picco! p1. The price differential causedbythc trP::!e restrictiooslCsults in a quota rentJiven by ·the 'area

p~abpi. A similar effect cou,ld be produced by 1\ tariff in place ofaquota.ln wlticbcuethis

area rcprcstnt." wiffrevenue. The quota rent is obtained by Mona ,Kong exporters, wbile the wiffrevenue would be collected by the US govmmtenL The biSher'US price (arHong Kong, apparel causcsthe US demand for USappareltoincrew.to D~$.resultillg ina hi,ber

equUibdum price ofUSapparcl,P~, and equilibrium quantity, ag.

Suppose now tbifthercstrictions on HORI Kong appmlmremovcd. The US and total

demand for HonJ.Kon& woolappuel wUl shift to DaUS' andDf. ,respectively. and result ioan

IS

equUUJrium pdeeofpl •. ikmlKort, :wiU incrase:.itJ.".y ftom.q'ftoq1· ;wflUc;:o.UnI$e4

States'WiU.inereacit$pmc~ of,Hon,XQl$, 1PJ*d .. b""~'ll. ~ 'VI1_·of··~.tr1dci

·between. tbcUni1edS .. tesudfJopI')CoQJ(lttbci.",ortaipicelwiU'~:rtQn1lMpjbqyO

to pia'qlO" while thevatue,of Bon, ~KOD'" J:ppa:cl ··tradewifh ·tbe.ratof·thowodd, 'win t. ... _ 4:-..- L ... sO 0 .•• 'llt ...... -. .2 .. 20 , .",,1 t,lOi\Ao .... a. ...... ···.:_ .... a~ .... C"~IP ,"'"II area ""'ttl! ,to acQlf11 ""ot ....... ,.p,!",q, . 'tJYP"t«91 ./:* ",",·~~·.JamCm""t ."'~)

US. ·demand.f«USlppIlClwiU decreaefrom DrlO'D~S·. 'l'eIu16.,:iraaIowctUS,applreI

price :and qwuuity demt.oded. The value ·of US appuel,$OId" W:in~'ftom~~~Q.*>

picrq}o.

Dat. tutdEltJ.Jtleltit, 1987 extcmaltnde data {United NldoR$19S1)wcrc usedu.· .... ·,for'a·tlUUM·of ~1 trade· by fibre types. The value or us intenwtradc'wuderivedfromimport~dOQrMios (Pc1mwl1989). Since appud import.penelt'Ition J'ltiO$by.fibre typCSforodl:rcoumrylroupl me not available. tbc·Vltues ofintemaltrade,·fOr otbetcountries wetei C$d~,fmmbuema1

apparel trade voll.U'nt$ (FAOl989) byusin,tbe UniledStUcsJ$ areferencecuc.·

1bepanuneters. valucsof exogenous variables. andtadff and, qt.lota"""used to ~'tbc

percentage rates ofciwlse of the endoBcnousvariabtcs mprovidcdin Tlbta6.1 and :8. exccptror the share parameteI'I.. Of thae. tbcSlIJ .. ··~ and s.tQ wac~·Uomthe 1981

apparel trade matrix by fibre types (5eeAppendix B) while the s~wercapproXiml"by corresponding value shares. USweigbted Iverqetariff and qoota rates for fibre types wac calculated from apparel rates given by Pelzman(1989l. Tariff and quotlratcs for other countries were taken fromprevioUi research (Hamilton 1985; ainc 1987;.IDd,SupbKiWuai 1989).

On the builofprcvious taearth (Table 6).thcincome e.tutkity in each country wu assumed to be 0.5 andtbc,pricc eluticity of dcmznd for appttel incaeb cotmUy was.UR1'l1Cd to be .Q.9. The bomolerteity condition WISlp.pUed to derive the cross-elasticity wiwn:spectto non­I.ppUCJ ·,price.On the buisof estimates of demand. elasticities for apparelbyfibrc type reponed

in Sbonand Beare (1990). and assuming that elasticities ·of substitution arcCODitlnt ,.nd ·the same for aU pairs of apparel of different fi.brcs, dtiseJuticity of substitution wu assumed to be 1.5. Following SupbacbalLui (1989). the elasticify of substittltion between apparels from

16

Pa!ameter

ek

11K

cilt.

fie

Ok I

t· J

tij

Variables (1'\)

CPl(b)

E GOP pjDj

TABLB6

P4RMetm /,r A,,.,l Sim8'.60" Mol"

Value

0.5

.. 0.9

0.4

1.5

2.S

2.0

2.0

United States

%

3.8

3.5

4.2

3.8

IncomeellSticityofdemand(Cllnel987)

Price elasticity of dcmandforappatd (Cline 1987)

Cros~priccelasticityofapparcldemandrelativeto non .. apparel products (derived by ,bomog~tyconcJition)

Elasticity of substitution bctween apparellYPCs (based on Short and Beare 1990 andassump'tion)

E~ity of substitution between sourcecounuies (Supbachalasai 1989)

Elasticity of ttansfonnation between apparel andotberproducts in country j (assumed)

Elasticity of transfonnation between diffenmtapparels in country j (assumed)

TABLE 7

Valu,s oj ,Exogenous Variables

European Other Hong Other Community Japan Developed Kong China Developing

% % % % % %

5.2 1.9 6.1 5.5 6.S 6.6

4.0 3.7 3.0 5.0 10.9 S.3

2.5 4.0 3.2 S.O 10.9 S.3 S.2 3.5 6.1 4.0 4.5 4.6

(a) ,See Ap~ndix A. (b) Used as proxy for Opt. Source! Iritemational Monetary Fund (1989).

17

TABLE 8

7'lJri/I, mnfTtrtiJl·B"ivGI"ICt,o! MFA QUt1ttfS ,oIJAPP4rttl, 1'81

Insuurnent Ad valorem SOUlte

IJnitedStates T.rufOilUncon~lledwool~limpc>rts Tariff on contt.QUedWQOla~ .imports Quota.oncon1l'OUed wool ap~lUnports Tariff:onuncontroUed cotton apparel imports Tariff on conuolled.eouonapparelknports Quota on comrcnedcottonap~ ,~rtS Tariff onuncontrolledman~mIde filriapp&relimports TariffOD conttolledmm-made title appjrel.~ ~otaon controUed man-made fibre apParel imports

Europeu Community Tariff on apparel Quota on apparel

Jlpan Tariff on apparel

Other Developed countries Tariff on appmel

Hong Kong Tariff·onapparel

China and Other Developing countlier; Tariffon ap~l

value

19~14 Pelzrnzm(1989) 18.8S 29.25 16.29 16.08 25.16 24.19 .28.47 40.28

l.t.<:' Cline (1987) 1, : .. d Hamilton (1985)

14~0 Cline (1987)

~O.S Supbacbalasai (1989)

47.0 Supbacba1asai(1989)

85.0 S'~bacha1asai (1989)

competing countries, in all countries. was assumed to be 2.5. Since no comparable information is available on some country groups, the same elasticities were assurnedforallthe country groups.

Results

The model descri.bed above was used to analyse two possible changes in quota and tariff restrictions on imports of apparel as in 1987 - namely, eliminating the apparel quotas imposed by the United States and the European Community. and removing quotas and ·tariffs altogether mall thecounuies. The focus is on the effects va apparel tradtflows, which are reported both in millions of 1987 US dollars and as percentage cbanges from 1987 trade flows. Changes in imports, exports. demand and supply for each country are also reported, to give some

18

indication of welfare effects on consumers and suppliers in each country. EinaIly, implications for wool demand can be drawn from the total changes in world apparel imPQrtsand. ~

With the elasticity assumptions given above, the basic trade 'flow effects of phasingQut the ~tFA restrictions on apparel were simulated and are presented below. The basic result$ are reported in Tables 9-12. The sensitivity of thescresults to changes in elasticities is tepOrtedin AppendixC.

Removal 0/ US and Ee apparel quotss The trade flow effects of removing the current quota restrictions in the United Statcsand the European Community on total apparel are presented in Table 9. Overall, world apparel imports

increase by $8183 million (19.2 per cent) while the world demand for apparel increases by $5583 million (3.9 per cent). The US and BC apparel imports increase by $6197 miUion(36 per ce:nt) and $2109 million (15 per cent) respectively. However, one"(third of these import increases substitute for the reduction in demand for domestic apparel, resulting ina net increase in the demand for total apparel of $4050 I~llion (11.3 per cent) in the United States and $1468 million (5 per cent) in the European Community.

The phasing out of quotas prompts growth in trade of all apparel. but the growth opportunity for each apparel by fibre type varies. The breakdown of trade flow changes by fibre types is shown in Table 10. V/orld trade in wool, cotton and man·made fibre apparel incxeases by 9.6, 16.3 and 25.5 per cent, respectively. Taking domestic consumption adj!istment into consideration. world demand for woolt cotton and man-made fibre apparel are estimated to

increase by 1.2, 3.5 and 5.S per cent, respectively.

The differences in growth rates for the different fibre types occur for two reasons. One is that

US quotas on man-made fibre apparel are more restrictive than those for the other two fibre

types. The other is that the United States and the European Community depend heavily on the European Community for their wool apparel supplies. but import the majority of their cotton and man-made fibre apparel from developing countries. While the removal of their quotas would increase US and Be apparel imports of all types from developing counbies, the magnitudes of their increases in import demand for wool apparel would be affected by a significant reduction in purchases of Ee produced wool apparel.

UbJer the elasticity assumptions of Table 6, the average import prices of wool apparel in the United States and the European Community decrease by 11.7 per cent and 5.9 per cent, respectively resulting in 15 per cent and 10 per cent increases in the volumes of wool apparel they import. Globally, the volume of wool apparel imports increases by 7.6 per cent. Taking into account domestic consumption, the removal of the US and Be quotas reduces average

19

TABLE 9

BI/telS Oil Total ApplU'tl TrtZde Flows 0/ Removing US muI EC Import auoms, 1981

• Changes in sales to

0Ibel Other Cbange European Developed Hoog Developing Total Total

United SlateS Community J'PUl countries Kong China countriesa exports supply

Sales by USSm USSm USSm USSm US$m USSm US$m USSm USSm

United States -2147.0 -2.5 5.0 3.0 1.3 0.0 0.5 7.3 -2139.8 (-U.5> (-2.3) (6.9) (4.3) (6.6) (0.0) (9.2) (2.6) (-11.3)

European Community -196.1 -64.14 12.5 48.8 5.9 0.1 1.9 -127.0 -768.7 (-14.2) (-4.1) (3.4) (1.7) (4.4) (2.7) (7.9) (-26) (-O~4)

N J3jm1 117.9 16.8 93.8 -0.2 1.3 0.0 1.2 137.1 230.9 0 (40.7) (23.0) (1.0) (-1.0) (2.3) (1.4) (6.3) (30.0) (2.3)

OCher Developed -81.3 -152.0 0.5 71.4 0.2 0.0 0.4 -232.0 -160.0 countries (-16.6) (-6.0) (2.3) (0.5) (3.4) (0.0) (7A) (-7,,6) (-0.9)

Hong Kong 1180.1 420.7 -11.6 -61.0 -44.3 -2.9 0.6 1526.0 1481.7 (37.8) (17.4 (-7.7) (-9.3) (-8.7) (-4.0) (1.4) (23.7) (21.3)

China 653.4 201.3 4.9 -4.9 38.2 34.2 2.4 895.3 929.5 (42.6) (22.9) (0.7) (-1.4) (l.8) (0.2) (5.7) (16.0) (3.3)

Other Developing 4522.7 1 625.1 -lOlA -67.0 -3.4 0.0 33.6 5976.1 6009.6 countries (43.4) (20.0) (-4.8) (-6.5) (-2.4) (0.0) (0.2) (27.3) (14.5)

Total imports 6196.8 2109.5 -90.0 -81.2 43.5 -2.8 1.0 8182.1 (35.9) (14.9) (-26) (-l.6) (1..8) (-3.8) (5.2) (192)

Total demaad 4049.1 1467.8 3.8 -9.8 -0.8 31.4 40-' S 582.6 (11.3) (5.0) (O.O) (-0.1) (-0.0) (0.1) (0.2) (3.9)

Nott: Figures in parentbesesare the percentage changes.

TABLE to Clumges Us Trtule Flows Prodllced by Remo,in, US au Ee a"oms, 1987

Woot~ Cotton apparel Man-madefibre~

Country Imp(xt Export Demand Supply Import Export ~ Supply Import Export Demand Supply

USSm US$il1 US$m USSm ~S$m US$m US$m USSm USSm USSm USSm US$m

United States 284.8 0.4 173.3 -111.0 2241.6 3.0 1403.2 -835.4 3670.4 3.8 2473.2 -1193.3 (17.7) (3.1) (6.3) (-9.4) (28.2) (1.7) (8.8) (-10.3) (47.7> (4.4) (14.4) (-12A)

European Community 154.0 -63.2 34.7 -182.5 1211.3 -49.9 928.5 -332.7 744.2 -13.9 504.5 -253.5 (12.6) (-4.9) (0.7) (-3.4) (15.7) (-2.3) (7.2) (-4.5) (14.3) (-l.l) (4.4) (-3.4)

Japan -6.3 14.6 15.0 35.8 -18.3 74.9 8.7 101.9 -65.5 47.7 -19.9 93.2 (-0.8) (32.6) (0.4) (1.3) (-1.2) (26.5) 90.2) (2.5) (-5.6) (36.5) (-0.5) (2.8;-

l-.) - Other Developed -3.8 -38.8 4.0 -30.9 -33.7 -109.9 -1.0 -77.2 -43.1 -83.4 -12.8 -52.5 countries (-0.6) (-6.3) (0.1) (-0.7) (-1.3) (-8.5) (-0.0) (-1.1) (-2.4) (-7.2) (-Ool) (-0.8)

Hong Kong 10.0 184.4 -1.2 173.2 17.8 786.8 4.7 -773.7 15.7 554.7 -4.3 534.7 (3.0) (24.2) (-0.2) (18.6) (1.6) (20.9) (0.4) (19.7) (1.6) (29.0) (-0.4) (25.5)

China -0.9 59.5 8.S 68.9 -0.4 420.0 36.3 456.7 -1.5 415.8 -13.4 403.9 (0.3) (10.4) (0.3) (2.1) (-2.9) (14.0) (0.3) (2.6) (4.3) (20.5) (0.3) (5.6)

Ocher Developing 0.3 281..1 32.5 313.3 4.8 2298.2 85.1 2378.0 1.9 3396.8 -77.1 3317~8 countries (5.7) (22.0) (1.3) (8.1) (4.7) (22.4) (0.7) (10.9) (7.0) (33.0) (-1.4) (2().8)

Total 438.1 438.1 266.8 266.8 3423.2 3423.2 2465.4 2465.4 4321<5 4321.5 28SOA 2850.4 (9.6) (9.6) (1.2) (1.2) (16.3) (16.3) {3.~} (3.5) (25.5) (25.5) (5.5) (5~

NOIe: Figures in parentheses are the percentage changes.

TABLE 11

Effects OIS Total Appard TriUle Flows oj Removillg Qaotas "ISd TlUiJls in all Countries, 1981

Changes in sales to

Other Other Olange European Developed Hong Developing Total Total

United StaleS Community Japan countries Kong China coontriesa exports supply

Sales by USSm US$m USSm USSm USSm USSm USSm USSm USSm

United States -3397.5 27.1 24.1 27.6 9.1 0.1 6.S 94.4 -3303.0 (-18.2) (24.4) (33.0) (40.2) (45.8) (117.7) (124.5) (34.0) (-17.4)

European Community 195.1 -1 783.7 103.2 1117.7 64.6 3.0 3l.4 151S.0 -268.7 (14.2) (-11.9) (28.6) (38.4) (48.6) (125.5) (132.9) (31.5) {..{).1}

N Japan 183.6 32.9 -273.6 S.8 26.3 0.9 26.0 275.4 1.8 to.) (63.3) (44.9) (-2.8) (36.7) (45.5) (123.9) (l3O.5) (60.2) (0.0)

Other Developed 74.4 558.9 6.8 -866.0 3.3 0.0 7~9 651.6 -214.4 countries (15.2) (22.0) (29.0) (-5.9) (47.8) (0.0) (134. I} (21.3) (-1.2)

Hong Kong 1926.8 894.9 22.0 167.5 -319.1 94.5 54.6 31603 2841.2 (61.8) (37.0) (14.7) (25.6) (-62.4) (133.5) (141.1) (49.0) (40.8)

China 1031.6 383.5 179.2 123.2 917.2 24.4 55.4 2690.1 2714.5 (67.3) (43.5) (24.9) (34.4) (44.1) (O.!) (131.8) (47.9) (9--6)

Other Developing 7486.3 3317.4 387.6 304.S 59.2 0.0 -92.9 11 554.9 11462.0 countries (71.8) (40.7) (18.3) (29.5) (41.6) (0.0) (-0.5) (52.9) (j.7f»

Total imports 10898.2 5214.6 722.9 1 746.3 1091.7 98.5 181.7 19914.8 (63.2) (36.8) (21.0) (34.7) (44.3) (133.1) (134.3) (46.9)

Total demand 7500.1 3430.9 449.9 880.3 760.5 112.9 88.8 13233.4 (20.9) (11.6) (3.4) (4.4) (2.-;.8) (05) (0.5) (9.2)

Note: FigIRS in parentheses are the percentage changes.

TABLE 12

Clulnges ill rrtule Flows Produced by RemoFmg Qlloms aM TlII'U1s in all Countries, 1981

Wool apparel Cotton apparel Man-made fibre apparel

Country Import Export Demand Supply Import Export Demand Supply Import Export Demmd Supply

USSm USSm USSm USSm USSm USSm USSm USSm US$m USSm USSm US$m

United States 66" ~ 5.1 465.6 -196.7 3830.4 58.3 2502.4 -I 269.6 6400.3 31.0 4532.7 -1836.7 (41.5) (35.4) (16.8) (-16.7) (48.2) (33.1) (15.8) {-15.6} (83.2) (35.S) (26.3) (--19.1)

European Community 479.9 354.5 122.2 -3.2 2831.5 679.2 2058.2 -94.2 1903.2 481.4 1250.5 -171.3 (39.1) (27.4) (2.3) (-O.t) (36.7) (30.9) (15.9) (-1.3) (36.4) {36.6) (11.0) (-2.3)

Japan 187.1 26.6 114.9 -45.9 339.8 154.2 204.6 19.0 196.0 94.6 129.8 28.4 tv (23.6) (59.1) (3.3) (-1.7) (22.8) (54.6) (3.8) (0.5) (16.9) 02.5) (3.0) (0.9) loU

Other De\'eloped 226.0 146.5 58.6 -20.9 905.3 242.8 517.4 -145.0 615.0 262.3 304.2 -48.5 countries (38.1) (23.9) (1.4) (05) (34.2) (18.8) (6.1) (-2.0) (343) (22.7) (4.3) (-0.8)

Hong Kong 170.1 393.8 82.7 306.4 462.3 1609.0 359.5 1 SOO.5 447.3 1157.2 318.4 1028.3 (5.7) (51.6) (16.5) (32.9) (42.2) (42.7) (28.7) (38.3) (44.4) (60.5) (26.6) (49.0)

China 34.1 257.9 36.6 260.4 16.9 1300.9 88.3 1372.3 47.S 1161.3 -2.1 1081.7 (130.6) (44.9) (1.3) (7.9) (131.0) (43.2) (0.6) 0.7) (135.8) (55.8) (-0.0) (14.9)

Other De,.. -.,ing 6.6 586.8 51.\. 631.2 131.21 4478.7 191.2 4532.7 37.9 6489.5 -153.5 6298.1 countties (l31.7) (45.9) (2.0) (16.3) (132.8) (43.6) (1.7) (20.8) (140.4) (63.0) (-2.7) (39.6)

Total 17il.2 1 771.2 931.7 931.7 8523.4 8523.4 S 921.7 S 921.7 9647.2 9647.2 6 380~0 6380:0 (38.6) (38.6) (4.3) (4.3) (40.6) (40.6) (8.4) (8.4) (57.0) (57.0) (12.2) (12.2)

Note: Figures in parentheses are the percentage changes.

>'2.~i

1",'",.. 16'",,",',;.,.> t.,,' ,1',.,',,·,.1( ,'" .".'. ".1 • ; ~ ,

I.> !,: i·.l~ [ Ii ... > J8, I ; I _l·c.l; i,.ti,.ii &11=·1 !ilfl I i I. !; >ltftln ~5tI~ D #I ,', .' .' ".,"~'. Ja,-". I,'.', I.,', ',',',', i,i 1a Iii rt 1." al.,.'. J,".. 1-.. ,' ~', '.' .. A ;. ~ a. '.,,' , . ~

.,'~:,~ , .. , .... 1,,:, ,~: .... , ".,ft"., •.•. '. ~li"~i

t r IlJ .'-. I,' I, 1,"',"· ·I'c ~~el~, ' . ~ 0 fj

I.·.... ;.'. t, .'§ .• i I."'.' ','.1-> ~ p .. I~l .. i· .... f.'" ~ t ~", L " .' ~ ..

\Ill ~ ,'. ~, I ; l~a!~IIJ ~., m.:.. ~ f 1.11'.. ~ -WS,"','

~~~~t, . ~,' ',"'".-t: ~ £I. I ii, tI I·

t t...... !. : .. ~ I·.~.· .• · ~ ..••.• :.' 1.'~ .•.•••• 1.· .,'. i.e ...•. ' Ile>l,i I ... ~ " !r .. '.-.,·.I.·, I H.' I, llt!.~>~i·1 _11.>t1t.a~ • HI f» 'W. '1'. ' ~.".' g' >: 11 " ~ ,~ I "w' it ~ 0.' I".' m. a,'.' "",.' .'/ ,.Vt,.' ~ ". ~ ,".' 1 fll. II·tl§~ 5 i, '. !,':,",' ~,.,,".'. ';,";",1.""", 1··.: e ~ ~ .. f'l ~oi\&ft >>t:1, .. 9 fl" IIS-QI

I.',' .. ', !!,',,~. '",",:"'. ~~,~'.~'''. " .. ,'.,".... I.",:." I,'.' •. ' fi.SI~.: S I ~ i .~~'" ~,'.~,'.'., ... ,,-.•• ;, .... , .... 'f,. 'I'.· .. , .• · 1':".,',',-,," t,' .• ' i.' 11"""'1;' i J~ ",' J.', • . " I ! >-!. IS 11-' ~

11' .. '."." i r. , .• , ...• ' ,., & 51 I···· ..... I! i iQ.~:ir

it t· le = ~- 1:.' \l ... _., ~ ','. ..

~ i ~l' .. fl' & & ,,' >. ~~ .. r. =;_ ,','.' ;t

I ~tl'l~ . '~ ... --'.', <. ~, ~ •. ~ -' tin .. I .! I.:~ ,

l:",.", .•. :,., ... i,·,.'"··,,., •• , -(, •. · .•.. · •••.•.•. 1, .. ·.·.:,: ...•.• ,. I ; .-! g' I i ~·~ r:~ \l • m! I lIlt! '"......1· .• ····. r., •.•.. , D:.,.·.·.~. ~.'~' .', .. i I":' Q .. ' s' i ~ I. ....•. II,..... t·~.".· .. ~.: • 'li 1~'1

III~ !la'tll=iI!

filt ,11'lllt '.' f i.'. I.~. , .. , I.' t·.· ...•.. ~ .•... ' t. i ...•. ' .. > 1 .•.. ' , ... ' ...• , •.. I . ;- '.' I fi' . ' .. ' ..

.

W.' ., .. ' .. ' ...•. ,. . •.... :... l,f .......... ,' .. ~. f... . •... ,.: .• ,... ..1.· ••.... :,.I: .. ~-.···..·.·.rt".,.', .... :,· .. t.·..... ' .•. : .. ' I.' .•.... '. .. ,.:. S I m fl.··. i\ : ~ ~ ~. I t i. ~, .. ~ .. , .'......... ".< i .. ·., ~ ".~ 1. .. a ~ , II a .' ' .

t.',.,· .• ··I·.··.· ~.-.' .. , .•.... , i .. ·.··, i.-,'.:;. a, ..•. '., •. ' !.,'.,··· •. ·.I.,·,····· •. '." ••.•• I~·.·· •. • SC.,; ~'. I ~ ~." is I'" ", ' .. -C " • '-.. ~'.-. ff • J. ';, '.. :.

~ .• ': .•. :'" .~.:.. •.•. ~ ...•..•. :. &, •.. ~ .• ,. ~'."', -.•.. " .. :. -".'.' -." ..•.. , .•.•....• I"'" i Ies: 11'1 • e i 1. f ~ t I:: I. i: II~ .• · .. ·• i i .••• ••· f I 1.1 i.n i I.·.·· •••. ! 1- ~ i ·1'" I' 1"'11 t·­I ~ ~ I. ~ \ r 'IR.: lEl', ~_r,

'-I . ..• I:

·~I.······.·· It I ~". t) .• : .. Iit ... '" ~"ii!!\ ~

ill Ptt

411 il II ,. I'

II i~ "I

~~··IWlIIe;,,·b1a9.lU·~GmI;"~:_·c~'r1:"")'."·,~ of<4l\9.,AI.WII"COI~WOIU~).:,t~'IAI$ld~'Il __ "" __ m,plkaiol~~·(I''''II)jo

TAltBI3

SHItII ./,,..,_. tk "FA ,.A.,"" .B~,.''','41'

-Wool ClpJ'tftUl;

AppIfti·~pa

Wool~pift

'NdS«kW pie

4),.7

-15~6

12SJ)

IO~t4

i44~O

"~9 4,11A)

:411 .. 9

Ho"'eYer~ in·tbe 1imu1llc:d atdl~of bothquotU,·aad·Q'dWiiD ID'~ ,udf&

ill Augfllial. ·the ."odd·dtmad for ~l~! iu:#flRlbJ' 4~' .·per·fat .• 'vduo'" by! 1~3 per eeltt in vohlmc. AD iGtfate ioAUJ.ttile '~a;pomclcM ··AfftJ~:.'OUJd

~to 23,,4tt~YOlGi'.ftO orSAl41'mitb.I9r7~II·prkG.\"i~_

thedutkity of Auma!ill1' wooilupply .0clS. die battfib,1O A,u~" W\1IOI ~ wooldt. SA4,11 million in 1911 .. 18 valua.. AuIUlU. impln·~oI. :.".lwOQl4·te ~. by 11 peraeft.tudAusnl_IPf.WR!:~1t~,_~SA6Jmill_

CDncl",ions

Thil ~ 1_ tqQwd .lhcm1Utb, ()I uJtQ'. i.JmC'4wd AlmfftP.ll\' Q'Pe mudd IO·~ the trJdo·now caecu of ,hum" oat. Mu,lti·rdveArrD~toa ~_ ilppal i~1 udexportm,countries .and· COUftU7 ~ Applftl lIMU diffc,ft'DUltai f';y flbN .type and ewnU'y of oriJiD 10 lbit tbf:~fftuJ'Ott ecmp:ti",~,b~· ·l1so·.·~ ....... in ~1Ir~t.bose'mlbcwool ~I mvk:ttlOd~m~t,wcoI;~

Them.lts iOOicllCthu ill I .• '. with the :~.I or US .mJECq~ p~, v.'\idd "pittl impom would btve mere .. " by USSJ200miWoa IDd -ufd 'W18cl dfmaDd by US$5600million~ThciM,"mlWiD.maud for .1)O1~,1 wocU hI'~bradilUt Awanlt.

25

wool'pcodUCtrJby i.~·SAl2S 'miltiOa -Idle., wouk'uve~~'upluby$AtUnj~

It both'qUOtllud wiffs: ,hId:beeR~cd i.IU~S._'·~. \\vdd:.,..el imports·and coummpdM WOGId,havc··~".,~ ~JI;'dU·QM.A"iM,~ con~IftdAUSUjUtn wooI.~fI;··WOIId1x'ad1ted··bt.·~·.SAAmuIieJ_

$1\420 miUion,n:spet1ivdy.

Ontbcblnisoftbac.rcmlu. iteppeatl tbalkto.~.~ .. brarafor·A~ ittheratrict1oMoo·U1dciD~INmtdy.~.'tMMt1d.Ebro~ .. , removed Wbile itisckarthattbe,~bmef.~·reMt.tfom;.~!~of" quoasand tariffs .f(¢edna t:radciD .". .. tbae.we·alto mbUadll bold" . .,. rnen:lyfrom thcremoval of cp.;a. nemiedoM· ... '.~,Gltlritrl.~:~

26

APPENDIX A

ApptlNl 1"f4. MtHI" ,B#p",:s,tll. p,I't',.,." R.,,'.I eM." 1)Demaad 511lem

l .. lTot.I·~forlppftl· i11a1Ufttl1t,

".Ii! "lltpk +crldpk I ,,2 TotII,~,.tor~,~l oft)'ptliDtoUDlJk

a>r. wpl)

1.3 'Demand.foraptelofO"PCl.fromCOUl!lr!lJiD,~t

~ .:00: .. O:d1J .;: ) ,1.4 PtkcliDbgc

2) s.,,., I,ll •• 2 .. 1 TOtI!:sopplyof'lppi«lin,cououy J

OBJwaDPJ +'C}PJ .. PIDJl

2.,2 Sup,plyofapplrCloftypc 1m counuy J Z1

dS,t*QsJ + . I) .p} )

2..3 PricoUnbSC

!f1;/~ where $10 • PJ

.... J ..

3) Mlrkttdetdq

3 .. 1FOripplld oftypCl f'ronl~ttyJ

QSIJ-(jDU

Qol} "cbange. in 1Igre:pte·danand f«apparel, of type I from country J

pt " changcin price of appmd in country k

i1 'I> change in price of appuel of type i in country k

i1, t.lt change in price of a.pprR1 of type i fromcountty jin country t

aSj " change in supply oflotal.apparct in country J

28

QSIj "'change in supply of apparel of type i in country J

PJ % ciwlge inpmdocetsprice of appareJ.in COUDU')' j

P,} 9D crumgc in producer's price of nppartloftypc.lin COWtU'yj

(j,pk % change. in average·pricc. of non-apparelproducts:incountty;1; :.k 1$- % change in expenditure .in COWltlyk

piDj % cbangcin average priec or all productsincountryJ

Gbp) % change of gross domestic productln country)

~ 90 change of wiffon appml of·typc I from country J in country k

t~ ~ change of tariff equivalent of quota 011 appuet of type' fromCOWlUy Jin COUDtty'k

tt"et4 ~. change in product of tariff and tariffequiva1entquota onapparei of type I from countryjin

country I:

e" Income elasticity of demand for apparel in country k T)k Price elasticity of demand for appmcl in country k CTI;' Cross"price elasticity of demand for apparel relative to DOn-apparel products in country k

at. Elasticity of substitution berweenapparel incounny k 0: Elasticity of substitution between ~. countries.in country k SII) Value share ofappareJ of type IsuppJy iotbetotal appa.rel supply in counuy J s{ Va1u~ share ofptllChase from country J in the market of apparel of ~lin country k

SK~ Quantity share of supply to country k in the total supply of apparel of type i from country)

S~ Value share of apparel of type i demandJn themarkcloflOtlJappareldemand in country k

't} .Elasticity of transfonnation between apparel and other products ineounuy j 'tiJ Elasticity oftnmsfonnation between different apparels incounuy J 1 Exchange rate between country k and)

29

TABLED.l

Tru, Flow. atul MllI'ul Su,,, ill Wool A'JlGrd, Set,tI,d COllatrill, 1981(6)

Sales ao

OCher Other Uniled European Developed Hong ~ Stmes Community Japan coontries Kong China(b) ~c)

Sales by USSm USSm US$m USSm USSm USSm USSm ~ 1

United Stales 1163.5 4.8 4.9 3.1 1.1 0.0 OJ) ;: ... (42.0) (0.1) ( 0.1) ( 0.1) (02) (0.0) (O.())

~ European Community 592.4 4083.9 221.0 418.9 SS.5 0.6 3.6 a

(21.4) (76.9) (6.4) ( 9.9) (11.6) (0.0) (0.1) ~

i Japan 30.3 3.4 2687.1 0.6 10.0 0.0 O~3 .~ ~

(1.1) (0.1) 01.2) ( 0.0) ( 2.0) (0.0) (0.0)

~ Other Dc\'CIoped 124.3 478.0 10.0 3630.1 1.9 0.0 03 ~ countries ( 4.5) (9.0) (0.3) (85.9) (0.4) (0.0) (0.0) ~ to

Hong Kong 40S.1 150.0 98.3 83.4 161.3 2S.5 0.7 ~ (14.6) ( 2.8) (2.8) (ZOO) (33.3) (0.9) (O.O) ;: China 98.0 35.6 151.9 33.3 2SS.2 2134.2 0.1 ~

( 3.5) (0.1) (4.4) (0.8) (SO.8) (99.1) (0.0) t:} Other Developing 355.1 554.6 306.0 54.1 8.4 0.0 2594.6 J!Q

countries (I29) (lO.4) (8.8) ( 1.3) ( 1.7) (0.0) (99.8) = Total imports 1606.8 1226.6 192.2 593.9 335.2 26.1 5.0

(S8.0)(cf) (23.1) (22.8) (14.1) (66.1) (0.9) (0.2)

Total demand 2110.3 5310.5 3 ~79.9 4224.0 S02..S 2160.3 2599.6 (100) (100) (100) (100) (100) (100) (100)

(a) 1nttJna1 trade figures am derived from FAO publialtioo cited. (b) From exponas. da;a. (e) 1986 data. (d) Import penetradon moo is deri\'e4 from Pelzman (1989). Nole: Figures in parentheses are the percentage or total demand of each country. Sources: United Nations (1987); Food and Agriculture Orga.nlzation (t989).

TABLEB.2

Trtul. Flows tiM MaruI Sluue, ill CDtto,. Alp:l"", S,leeutl CD"RtrleS, 1981{a)

Sales to

Other 0Iher United European J.leveloped Hong Deve:oping States Community Japan countries Kong China(b) countries(c)

Sales bl USSm US$m USSm VSSm US$m USSm US$m

Unit.ed States 7944.7 75.8 41.0 44.3 10.6 0.1 4.4 (SOn) (0.6) (0.8) (0.5) (O.s) (0.0) (0.0)

European Community 596.3 S 243.S 100.7 1436.0 49.4 1.4 14.3 (3.8) (40.5) (1.9) (16.8) {3.9} (0.0) (0.1)

Japan 117.l 54.S 3Sn.0 9.3 26.4 0.3 14.8 c"., (1..1) (0.4) Cl.2) (0.1) (2.1) (0.0) (O.l) -

Other Developed countries 203.1 1070.5 10.6 5902.9 3.4 0.0 3.8 (1.3) (8.3) (0.2) (69.0) (0.3) (0.0) (0.0)

Hong Kong 1844.0 1455.0 31.6 402.4 158.0 11.1 28.4 (11.6) (11.2) (0.6) (4.7) (12.6) (0.1) (0.3)

China 780.9 S83.2 448.5 216.0 944.6 14713.6 37.6 (4.9) (4.5) (8.4) (2.S) (15.3) (99.9) (O3)

Other Developing countries 4343.2 447S.5 856.8 450.0 61.7 0.0 11 503.9 (27.3) (34.5) (16.0) (6.3) (4.9) (0.0 (99.1)

Total Imports 7944.7 7714.4 1489.3 2648.0 1096.1 12.9 103.3 (SOn) (d) (59.5) (21.8) (30.9) (87.4) (0.1) (0.9)

Total de .. lld IS 889.4 12957.9 5366.3 8550.9 1254.1 14726.5 11 fI.rI:l (100) (100) (100) (100) (100) (100) (100)

(2) InIemaI tradefiguresae derived from FAa pubJkaIioo cited. (b) Prom exportas· data. (e) 1986 data~ (d) Import pe.~ ratio is deri~ed from Pdzinan (1989). HOle: Figures in parentheses tRibe percentage oftotalcoosumption ofeath cwntty. Sourer. United Nations (1987); Food MdApicuIture ~ (1989).

TABLEB.3

TrtI46 FltJws tuUI MaruI Shares in MOll-lfUIde FIb,.~ Apparel, Select,d COII"".ieS, 1987(aj

Sales to

Other Other United Ewupea1 Developed Hong Developing States Community Japan COWltDes Kong China(b) countrln(c)

Sales by USSm USSm US$m uSSm USSm USSm USSm

United StaleS 9551.0 30.6 27.1 20.6 8.1 0.0 O.S (55.4) (0.3) (0.6) (0.3) (0.7) (0.0) (0.0)

European Community 189.7 6169.9 39.8 1053.0 25.1 0.4 5.7 (1.1) (54.2) (0.9) (14.9) (2.1) (0.0) (0.1)

Japm 82.4 15.3 3151.S 6.0 21.5 0.4 4.8 t.tJ

(0.5) (O.l) (73.1) (0.1) (1.8) (0.0) (0.1) N

Other Developed countries 161.9 990.0 2.7 52S3.1 1.7 0.0 1.8 (0.9) (8.7) (ttO) (89.2) (O.l) (0.0) (0.)

Hong Kong 869.4 S14.0 19 .. 7 167.4 186.3 34.2 9.6 (5.0) (7.1) (0.5) (2.4) (15.6) (0.6) (0.2)

China 654.7 262.1 118.6 108.3 879.4 S 253.1 4.3 (3..8) (2.3) (2.8) OS) (73.6) (99.3) (0.1)

Other Developing countries 5731.1 3 112.3 9S3.2 439.4 72.0 0.0 5616.0 (33.2) (27.3) (22.1) (6.2) (6.0) (0.0) (99.5)

Total imports 7689.1 5224.3 1161.1 1794.7 1007.8 35.0 27~O (44.6) (d) (45.8) (26.9) (25.5) (84.4) (0.7) (0.5)

Total de_.ad 17240.1 11394.2 4312.9 7047.8 1194.1 5288.1 5643.0 (100) (100) (100) (tOO) (100j (100) (100)

(a)lntemal tmde figures are derived from FAO publication cited. (b) From exporteISt data. (e) 1986 data. (d)Import penetration Jaoois derivedfromPelzman (1989). Nott: Figures in parentheses are the percentage of 10tal imports of each country. SourCtS! United Nations (1987); Food and Agricu1t...."t Organization (1989).

APPENDIXC

Sensitivity oj Trade Flow Estimates to Alternative Elasticity Assumptions

Although the effects which the phasing out of the MFA would have on trade flows. imports L"ld demand depend in largemeaswe on trade structure, they might be sensidve to the assumed levels of various elasticities. The sensitivities of the results have been tested by a series of exp~riments reported in Tables C.l and C.2.

For purposes of comparison, the results from the base set of elasticities are reported as assumption I. Under asswnption II, the price elasticity of demand for all apparel in each country is increased to .. 1.1. Under assumptions ill and IV the elasticities of substitution between country pairs and between apparel pairs are increased by half, to 3.75 and 2.25 respectively.

Table C.I reports the import and demand effects of removing quotas in the US and the EC under these alternative assumptions. In general, the results show that the estimates obtained under the three alternative assumptions are higher but still very close to those under tbe base assumptions. The estimates of values of total imports and demand under assumption IV are only about 1 per cent and 3 per cent, respectively, higber than those under the base assumptions. This suggests that increasing the assumed elasticities of substitution between different types of apparel does not make much difference to the simulation results. Although increasing the assumed elasticity of substitution between countries by 50 per cent increases the estimate of total chrutge in imports by around 18 per cent, the increase in change of total consumption is only 4 per cent. A comparison between assumptions I and II reveals that changing the assumed price elasticity of demand for apparel from inelastic (..().9) to elastic (-1.1) increases total purchase of apparel by 13 per cent while increasing world imports by 7 per cent. In table C.2 the pattern of sensitivities is broadly similar to the above.

33

'lVy!' 'III -- ! ;

11

TABLEC.l

Sellsiti!1f.ty to B!aSlidt1 Assumptions: Chllnges ill Trade Plows Prodllced b1 Removillg US Gild EC a"oIU, 1981

Assumption I(a) AssumptimllI(b) Assumption lli(c) Assumption lV(d)

Country lmpm Demand Import Demand Import Demand Import Demand

USSm USSm USSm USSm USSm US$m USSm US$m

United States 6196.7 4049.7 6658.5 4818.6 7470.6 4246.0 6286.2 4223.7 (35.7) (It.3) (38.6) (13.4) (43.3) (U.8) (36.5j (11.8)

European Community 2109.5 1467.8 2243.8 1 710.1 2417.8 1512.2 2134.2 1468.5 (14.9) (S.O) (IS.8) (5.8) (17.1) (5.1) (1S.I) (5.0)

Japan -90.0 3.8 -106.6 -32.9 -173.6 -1.2 915 3.9 w (-2.6) (O.O) (-3.1) (0.3) (-S.O) (-O.O) (-2.7) (0.0) ,J::.

Other Developed -81.2 -9.8 -87.7 -11.9 -170.3 -29.9 -82.8 -10.1 countries (-1.6) (-0.1) (-1.7) (-O.l) (-3A) (-0.2) (-1.6) (O.O)

Hong Kong 43.5 -0.8 36.2 -13.1 82.6 -S.1 43.7 -1.0 (l.8) (-O.o) (1.5) (-0.4) (3.4) (-O.2) (1 .. 8) (-0.0)

China -2.8 31.4 -3.2 -16.8 -S.2 39.9 -2.9 31.6 (-3.8) (0.1) (-4.3) (-0.1) (-7.0) (0.2) (-3.9) (0.1)

Other Developing 7.0 40.5 5.8 -143.5 14.9 38.5 7.3 36.3 countries (~.2) (0.2) (4.3) (-0.7) (11.0) (0.2) (5.4) (0.2)

Total 8182.7 5 S82.6 8746.7 6310.6 9636.9 S 800.5 8294.1 S 752.9 (19.2) (3.9) (20.6) (4.4) (22.7) (4.0) (19.5) (4.0)

(a) Base elasticities (Table 6); results from Table 9. (b) Increased price eJmticity of demand fer apparel (c) Increased eJasticityofsubstitution between countrie$. (d) Ioaeased elasticity of substitution between apparel types. Note; Figures in parentheses are tbepereentage cbanges in trade flows.

TABLEC.2

Sensill)';t, to EmslieU, Assumptions: Changes ;11 Trade Flows Produced b, Removing Quotas lind Tariffs in aU COlllltTieS, 1987

Assumption I(a) Assumption II(b) Assumption m(c) Assumption Wed)

Country Import Danand Import DemaOO Import Demard Import Demand

USSm US$m USSm USSm USSm US$m USSm USSm

Uniled States 10 898.2 7500.7 11 691.1 8769.5 13 155.1 8085.6 11096.4 7847.1 (63.2) (20.9) (67.8) (24.4) (76.3) (22.S) (64.4) (21.9)

European Community 5214.6 3430.9 5508.6 3934.9 6387.1 3591.1 5277.4 3439.5 (36.8) (11.6) (38.9) (13.3) (45.1) (121) (37.3) (IL6)

Japan 722.9 449.3 734.2 495.2 862.9 451.5 720.7 449.4 VoJ (ltO) (3.4) (21.3) (3.8) (25.1) (3.4) (20.9) (3.4) Vt

Other Develope" 1 746.3 880.3 1 800.1 1051.8 2311.3 847.8 1 753.8 880.5 countries (34.7) (4.4) (35.7) (5.3) (45.9) (4.3) (34~8) (4.4)

Hong Kong 1 079.7 760.5 1207.0 ~06.0 1 326.9 747.6 1083.9 159.5 (44.3) (25.8) (49.5) '.30.7) (54.4) (253) (44.4) (25.7)

China 98.5 122.9 98.7 -9.6 146.5 141.0 98.2 122.8 (133.1) (0.5) (133.4) (-(',0) (198.0) (0.6) (132.7) (0.5)

Other Developing 181.7 88.8 180.8 -242.7 279.1 66.3 182.5 77.1 countries (134.3) (0.5) (133.6) (-1.2) (206.3) (0.3) (134.9) (O.4)

Total 19941.8 13233.4 11220.5 14905.1 24469.0 13930.8 20213.1 13 575.9 (46.9) (9.2) (49.9) (10.3) (57.5) (9.7) (41.5) (9.4)

(a) B~ elasticities (Table 6); results from Table 11. (b)lncreased price e1asticit: "f demand for apparel. (c) Increased elasticity of substitution betwee!i" ~~. (d) Increased elasticity of substitution between apparel types. Note: FJgUreS in parentheses are the percentage changes in trade flows.

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