Not Totally Naked: Textiles and Clothing Trade in a Quota-free Environment

Termination of the Agreement on Textiles and Clothing (ATC) at the end of 2004 will mark a move of great importance towards strengthening the core principles of the multilateral trading system. While global welfare will rise, the benefits of quota removal will be distributed unequally across individual countries. This will trigger adjustment pressure for producers in the main quota-imposing importing developed countries and for exporters from developing countries that have enjoyed quota-restricted access to these markets. Simulation results of computable general equilibrium models often point to a very rapid and sizeable rise in the share of mainland China in the global textile and clothing market, as well as to a substantial increase in the share of India. Evidence on the trade impact of quota removal for the third stage of ATC integration by the EU and the US indicates that a rapid rise of India's market share is unlikely to occur but also that the market share of mainland China is indeed set to rise substantially in a post-quota trading environment.