The effects of the removal of US safeguards on imports from China

Abstract

The expiration of temporary safeguard measures against Chinese exports of certain cotton apparel to the US beginning 2009 is estimated to result in lower apparel prices in the US by $0.02/kg, on average, whereas cotton prices in the US remain unaltered in the medium term (2009–2015). A price equilibrium simulation model (of both the cotton apparel and cotton sectors) was used to estimate the trade effects of China's increased access into the US import market on other Asian and Latin American exporters to the US, and ultimately in these exporters' demand for US cotton.

Notes

¹Quotas were eliminated in four phases as percentages of the 1990 import volume base: 16% in January 1995, 17% in January 1998, 18% in January 2002 and 49% in January 2005. Products not yet liberalized had their quota growth rates increase by 16%, 25% and 27% in each phase, respectively. Although the ATC required importing countries to integrate articles from each of four categories: tops/yarns, fabrics, made-ups and clothing, they were free to select which articles to integrate. Also, the set of product lines included non-MFA articles. This flexibility allowed for developed importing countries to defer integration (backload) until January 2005; 89% of apparel imports (high value-added) and 47% of textile imports were left to be integrated in 2005 (USITC, 2004b).

²A comprehensive conceptual framework of the model is provided in Mutuc (2008) for disciplinary readers.

³Misspecification tests included Shapiro–Wilk normality test, Ramsey's respecification error test (RESET) for both linearity and homoskedasticity and the F-statistic to test the significance of parameters associated with lagged dependent and independent variables in an auxiliary regression to detect temporal dependence.

⁴183.5 million equivalent quota level after cotton apparel items (baby socks, M&B/W&G knit shirts, M&B trousers, breeches and shorts/W&G trousers, breeches and shorts, underwear and M&B shirts, not knit) were taken into account.

⁵Equations are specified for a convergent system of equations such that parameter estimates with p-values below 0.2 are retained and have the expected sign.