Determinants of U.S. Textile and Apparel Import Trade

__________Variable__________

Expected
Sign

_______________Explanation_______________

GDP of importing country

+

As income increases purchases are likely to
increase. Thus increased income results in
increased imports.

GDP of exporting country

+

Higher GDP indicates potential to export
more textiles.

Per capita income of
importing country

+

A higher per capita income indicates greater
potential to demand higher quality and more
exotic imports.

Per capita income of
exporting country

+

A higher per capita income indicates higher
productivity of labor (skill content) in output
and would potentially lead to greater exports.

Distance

-

Proxy for cost of transportation. The further
the distance, the less imports of goods from a
country.

Exchange rate

-

The lower the exchange rate of the exporting
country to the dollar, the cheaper its goods
will be on the importing country’s market.
This results in an increase in imports.

Price Deflator_us

+

Importing country with high price deflator (a
proxy for inflation rate) would substitute
domestically produced goods with foreign
imports.

Price Deflator_i

-

An Exporting country with a relatively high
price deflator/inflation would be less
competitive in the world market.

Effect of Multifiber
Arrangement (Agreement on
Textiles and Clothing)

-

MFA restricted trade in textiles and clothing
until January 2005 for a majority of the
countries trading with the U.S (but it allowed
bilateral agreement to grant access).
Therefore, MFA would lead to less import
from trading countries to the U.S.