In a recent book, Cline estimated that current trade restrictions on textiles generate a net efficiency loss of $811 million annually, while those on apparel involve a loss of $7.3 billion. This paper, within the framework of Cline's analysis of textile and apparel trade restriction, develops a more theoretically sound methodology of welfare analysis of social surplus. Specifically, it focuses on three methodological issues: the measurement of changes in consumer surplus when two or more prices change simultaneously, the appropriate characterization of policy-induced changes in social welfare, and the inter-relationship of the economic surplus' of two vertically related industries. Second, upon modifying the analysis so as to address two of these methodological issues, this paper recalculates Cline's estimates of the gains to trade liberalization in the U.S. textile and apparel industries. This recalculation strengthens Cline's depiction of the relatively high cost of protection.
Working Paper
174