THE UNCERTAIN FUTURE OF THE MEXICAN MARKET FOR U.S. COTTON: IMPACT OF THE ELIMINATION OF TEXTILE AND CLOTHING QUOTAS

Western Economics Forum, April 2004

Table 1. Relevant supply and demand elasticity estimates at , mean level derived from the model.

Table 2. Baseline model forecast for the variables of interest for the years 2003 to 2005.
___________________________Baseline Quantities in Million Pounds_______

Furthermore, two plausible scenarios were simulated and compared to the baseline projections. The
simulated scenarios assume 20% and 25% decline on U.S. prices for textile and apparel as a
consequence of the elimination of the U.S. quotas in 2005 (Malaga and Mohanty, 2003). Given that
U.S. textile and apparel prices were found to indirectly induce the amount of total fiber consumed in
Mexico, the 2005 forecasted amounts of cotton consumption, and net cotton imports changed
according to the two alternative scenarios as illustrated in Table 3.

Table 3. Simulation results for the impacted variables by the 2005 ATC
quota elimination.

Quantities for the Year 2005 in Million Pounds

Note: The percentage decrease is with respect to the 2005 baseline level.

Simulation outcomes show that a 20% decrease in textile and apparel prices in the United States result
in an 8% reduction in Mexican total fiber and cotton consumption, leading to a 9% reduction on net
imports of cotton . Similarly, the simulation of a 25% decrease in textile and apparel prices is estimated
to cause an 11% reduction in total fiber and cotton consumption, respectively and a 12% reduction in
net cotton imports from the United States with respect to the projected baseline. Using the 1999-2003
average Mexican share of U.S. cotton exports the magnitude of the simulated Mexican import decline
would represent no more than a 3% of total U.S cotton exports.

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