China's role in world cotton and textile markets: a joint computable general equilibrium/partial equilibrium approach1

Abstract

Under the Uruguay Round's Agreement on Textiles and Clothing (ATC), the quotas inherited from the Multifibre Arrangement were gradually phased-out between January 1995 and 31 December 2004. This study estimates the impact of the ATC's implementation on China's textile industry and China's cotton sector. The study finds that, assuming equilibrium levels of income and exchange rates, the adoption of ATC are expected to increase China's net apparel exports, textile production, cotton consumption, cotton production and cotton imports. However, this study fails to support the hypothesis that the adoption of the ATC results in China supplanting the textile industries of the rest of the developing world. The impacts on cotton are also smaller than indicated by previous studies. These outcomes are somewhat sensitive to estimates of expected efficiency gains around the world.