DP716 A Primer on the MFA Maze

Author(s): Jaime de Melo, Riccardo Faini
Publication Date: September 1992
Keyword(s): Allocative Efficiency, Multi-Fiber Agreements, Quotas
JEL(s): F13
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=716

The paper identifies the potential sources of allocative inefficiency generated by the Multi-Fiber Agreements (MFA) and examines the evidence for such inefficiencies. Five sources of inefficiency are identified relating to inefficient allocations across countries, across consumers, and among firms within constrained countries. Evidence is first provided from trends in import shares for aggregate categories of textiles and clothing before and during the MFA. Second, evidence is provided from a detailed examination of quota utilization rates and price differentials among EC importing countries.