Distortions of Sino-US and Sino-EU Safeguard Agreements : Effects on World Textile Markets

The effects of Sino-US and Sino-EU safeguard agreements on US, Chinese and world cotton and textile sectors are investigated using a partial equilibrium model. The effects are compared to a free trade scenario under the provisions of the Agreement on Textiles and Clothing. The two safeguard agreements capping Chinese textile exports would decrease China's textile and apparel exports, production, and domestic consumption by an average 1.57, 0.63 and 0.32 percent, respectively. The safeguard agreements cause an increase in the US cotton textile price index and a slight decrease in US net textile imports and textile consumption. The agreements cause a decrease in the world cotton price and the quantity of cotton traded, but these trends reverse at safeguard expiration. The results generally support the view that the safeguard agreements forestall the effects of free trade in textiles and apparel rather than creating long lasting shifts in the textile trade