Market Disruption and the Incidence of VERs Under the MFA

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Abstract
Market disruption or the threat thereof constitutes grounds for restraining countries under the U.S. MFA. Since 1980, however, countries accounting for very small shares of U.S. imports have been restrained. This study estimates the determinants of U.S. VERs under MFA I and MFA II-III, using a bivariate probit model with sample selection. Results show a shift from targeting large developing country exporters to targeting those that are small, but have rapidly growing sales. This raises the cost of the MFA to the United States. It also suggests that expansion of exports by developing countries will be met by restrictions on market access.

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