South African quotas on textile imports from China: a policy error?
Abstract
In August 2006 the South African government announced quotas on the imports of clothing and textile products from China. Three questions arise. What are these expected benefits? What will be the most likely impact of the import quotas on the South African economy? And what are the policy implications? In this paper we answer these questions by using a computable general equilibrium (CGE) model. We find that, contrary to the motivations apparently underlying the quota implementation, the macro-economic, sector and household effects are negative and result in greater inequality between poorer and richer households. We refer to modeling results elsewhere in the literature which report results consistent to ours. The policy implications are that the imposition of these quotas could come to be seen as a policy mistake, and that South Africa may benefit more from considering a free trade agreement with China.
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