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Abstract

Accounting for about 20% of U.S. total cotton exports in recent years, the Mexican market has become a key destination for U.S. cotton production. Simultaneously, the U.S. market is critical for the Mexican textile/clothing sector absorbing almost 50% of its total output. This strong North American integration process, in part a result of NAFTA, might be jeopardized by the approaching implementation of the Agreement on Textiles and Clothing (ATC) in 2005. This paper presents the results of an econometric and simulation model that allows for the assessment of potential implications of the ATC's quota elimination on Mexico's cotton consumption and U.S. cotton exports to Mexico. It incorporates the growing interdependence between the U.S. and Mexico's cotton and textile industries and summarizes some plausible scenarios for the impact of the 2005 textile and clothing final quota elimination on U.S. markets.

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