MODEl.!,rNG THE EFFECTS OF THE MFA LIBERALITATION ON PHILIPPINE CLOTHING TRADE

Opinions about the Multi-Fiber Arrangement (MFA) vary not only between exporters and importers but also within these groups depending on the benefits and costs accorded to each. Governments in large and populous low-income countries with further export potential such as China and Pakistan believe they would be better offwithout the MFA. They have been the leading proponents of the MFA's abolition (SEIA 1989). On the other hand, major established producers such as Hong Kong, the Republic of Korea and Taiwan benefit from quota rents resulting from the MFA despite their reduced market access. They are willing to renegotiate rather than oppose the MFA. These three coul, tries are high-cost producers compared to new entrants such as Thailand and Bangladesh, and stand to lose market shares if the quota system is terminated (Trela and Whalley 1988). For some ASEAN exporters like the Philippines, the MFA is perceived as "not so bad. " They see it as a guarantee of market share in indusu'ial countries which they fear losing to more competitive suppliers in the absence of regulated markets (Tecson and Medalla 1988). In the Philippines, the small and newly formed textile and clothing firms also favor termination of the system, while long-established, larger, and often politically powerful, companies prefer to keep the MFA. This paper attempts to quantify the effects of the MFA liberalization on developing countries in general, and on the Philippines in particular. A model of global clothing trade i