The effects of the US MFA on small exporters

Abstract

This paper tests two hypotheses regarding the impact of the US Multifiber Arrangement (MFA) restrictions on developing countries' exports of textiles and clothing to the US: that the MFA is a binding constraint on exporters; and that the MFA encourages the growth of smaller exporters, by restricting exports from major sellers. Pooled data on eight small Asian exporters over the period 1975-1984 is used. Results strongly support the hypothesis that the MFA has been a binding constraint. Although the MFA appears to have diverted demand toward these smaller sellers, this effect is counteracted by slow growth in their own restraints. -Author