Trade Liberalization and Third-Market Effects

Fabrice Defever and Emanuel Ornelas

No 21231, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how the end of the quota system for textiles and clothing products in the American and European markets on January 1, 2005, affected China’s exports to third countries, where policy was unchanged. Using a difference-in-differences approach, we find that the number of Chinese firms exporting previously restricted products to third countries increased sharply after quota removal. The expansion involved many private firms that exported to neither US-EU markets before nor after 2005. This indicates that the policy shock enhanced China’s role as an export base. Conversely, protectionist shifts in large economies would likely generate sizeable negative third-market effects.

Keywords: Import quotas; China (search for similar items in EconPapers)
JEL-codes: D22 F13 F14 (search for similar items in EconPapers)
Date: 2026-02
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