| Implications for South Asian Countries (2007) | |||||||||||||||
Abstract | |||||||||||||||
| A review of the basic economics of the MFA highlights the importance of the discriminatory character of the arrangements. While exporting countries can gain from some quota rents, these gains have to be offset against losses in exports to unrestricted markets, and the likely losses arising from rent-seeking behavior, or rent-sharing with industrial country importers. Further, the restrictions curtail the ability of countries to generate sorely needed employment opportunities in these labor-intensive sectors. Recent estimates for India of the export tax equivalents of the quotas suggest that they have increased in 1999, after a couple of years around lower levels. Modeling results suggest that South Asia as a whole would gain from the abolition of the quotas, although there may be different experiences in different countries. Unambiguously, however, the gains from domestic reform will increase after abolition of the MFA. | |||||||||||||||
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