How did the multi-fiber agreement affect the level of specialization in the textile sector of the countries?

Abstract

This paper aims to reveal the effects of the Multi-Fibre Agreement (MFA), which determines the course of the textile trade and the global competition on countries' levels of specialization. In this perspective, we analyze the levels of specialization (competition) of the 10 countries whose exports were the highest in the sector before and after the complete abolition of quotas in a comparatively. In the analyses, we use the Index of Contribution to Trade Balance (ICBT), the Export-Import Ratio Index (EIRI) and the Michaely Index (MI) to measure the progress of countries' level of specialization in the sector by years. All of these indices indicate that the highest levels of specialization in the sector were Pakistan, India and Turkey before the end of the MFA. After 2005, when quotas were completely eliminated, China and Hong Kong increased their level of expertise in the sector and separated positively from other countries. In this context, China achieved a global competitive advantage in the sector, especially with high level of specialization.