Expiring temporary safeguards on apparel trade: implications for U.S. cotton

In 1995, the Agreement on Textiles and Clothing (ATC) provided for the calculated liberalization of the textiles and apparel sectors over a 10-year period ending in 2005, except for some safeguard measures ending on December 31, 2008. These safeguard measures allowed for import restrictions by the U.S. on certain categories of cotton apparel from China.

 Using a 57-equation, annual econometric, price equilibrium simulation model of the U.S. cotton and cotton apparel markets, results point to lower cotton apparel prices in the U.S. by as much as $ 0.25 per kilogram while cotton prices decline by less than $ 0.01 per kilogram once these safeguards expire.  In the baseline scenario, quotas are removed in 2009-2015 except for the safeguards. In the simulation, the safeguards are taken out beginning 2009.