Do Vertical Linkages Limit Protectionism? Switzerland in the Multifibre Arrangement

The multifibre arrangement (MFA) heavily restricted the world trade in textiles and clothing (T&C) from 1974 to 1994. Switzerland joined the MFA as one of 44 signatory economies in 1974, but never applied its discriminatory instruments. To explain this peculiar behaviour, we apply international trade theory as well as files gathered from the Swiss Federal Archives. Our analysis suggests that Switzerland used the MFA, first, as an instrument to seek better market access, and second, as an option to protect its T&C industry if required. Switzerland refrained, however, from exercising the option mainly because of the existence of an important vertically related export industry, that is the Swiss textile machinery industry.