Rent Sharing In the Multi-Fibre Arrangement: Theory and Evidence From Us Apparel Imports From Hong Kong

Available estimates of tariff equivalents and welfare costs of MFA quotas are based on the premise of perfect competition in both product and license markets, and the assumption that exporting countries receive all the scarcity rent. We test if US apparel imports from Hong Kong conform with this competitive model by looking at whether the license‐price‐inclusive Hong Kong price, adjusted for tariffs and transport costs, is equal to the US price. We deal with the homogeneous product case and correct for both aggregation and quality differences. We find that US importers seem to retain a substantial portion of the quota rents.