ADJUSTING TO THE MFA PHASE-OUT, The Case of the Turkish Textile and Clothing Industry

Abstract: The end of the Multi-Fiber Agreement in January 2005 meant that quantitative restrictions within the textile and clothing industry were to be abolished. Quantitative restrictions had been used on the export of goods from low-wage countries which threatened producers in developed countries. With the end of the MFA the world market is significantly more accessible for textile and clothing producers and comparative advantages should regain their determinant role for where international production will take place. This study examines what developments that can be observed within the Turkish textile and clothing industry during the MFA phase-out. With two versions of Balassa’s index of revealed comparative advantages it is shown that Turkey shows stronger comparative advantages within the labor-intensive segments of the supply-chain. The adjustment to the MFA phase-out implies an overall decrease in revealed comparative advantages. Since the data has been divided between two different trading partners vis-à-vis Turkey; EU15 and rest of the World, a pattern of a more profitable position towards EU15 than towards rest of the World has been revealed. Turkey shows stronger comparative advantages towards EU15 and the observed decreases in comparative advantages are less significant regarding EU15 than the decreases observed concerning the trade with rest of the World.