Determinants of U.S. Textile and Apparel Import Trade

both variables are smaller than 1.0 in both models, potentially indicating that the values of
textiles and apparel traded are insensitive to the countries’ production capacity or individual
productivity of labor. This insensitivity in exporting countries may be attributed to either their
excess production capacity or government domestic support of the industry.

The parameter on per capita income of the U.S. was of the right sign and significant for
the textiles model, although it was less than 1.0. The GDP parameter for apparel was consistent
and significant, and its magnitude is less than 1.0. However, the per capita income parameter for
apparel was significant and greater in magnitude than 1.0. The insensitivity in the U.S. of per
capita income for textiles imports may be mainly because textiles are a necessity or that because
of some other reason (perhaps because of the relative price differences) U.S. firms are willing to
import foreign-produced textiles. Indeed, the estimated coefficients on the price deflators in the
U.S. and exporting countries were all of consistent signs as hypothesized, and were all
significant. Although relative prices were generally highly sensitive to trade (exports and
imports) in textiles and apparel, the rates of responsiveness were larger for textiles than for
apparel. Therefore, it appears that increasing GDP deflator (signaling potential inflationary
trend) in the U.S. caused it to increase imports of textiles and apparel from its trading partners.
Likewise, decreasing prices in the exporting countries caused them to export more textiles and
apparel to the U.S. These results reflect significant import substitution of textiles and apparel
during periods of rising prices for textiles and apparel in the U.S., especially since lower prices
in exporting countries made their textiles and apparel more competitive in the U.S. market and
increased the values traded. Nevertheless, the significant (at the 1% level) but negative
parameters on the dummy variable for MFA in both the textiles and apparel models indicate that

generally imports of textiles and apparel were expected to have been constrained by restrictions
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