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Available estimates of tariff equivalents and welfare costs of MFA quotas are based on the premise of perfect competition in both product and license markets, and the assumption that exporting countries receive all the scarcity rent. We test if US apparel imports from Hong Kong conform with this competitive model by looking at whether the license-price-inclusive Hong Kong price, adjusted for tariffs and transport costs, is equal to the US price. We deal with the homogeneous product case and correct for both aggregation and quality differences. We find that US importers seem to retain a substantial portion of the quota rents. 'We are grateful to the World Bank for research support. We would also like to thank Ronald Chan, Paula Holmes. Tom Prusa. and Yun-Wing Sung for providing us with data; Phillip Swage1 for helpful comments; and Monique Skruzny and Christopher Holmes for excellent research assistance. 0 Bawl Blrckwcll Lid 1993. IOR Cowlcy Road. Oxford OX4 IJF. U K m d 238 Mdin Strrci. CJmbndgc. .MA 02142. USA 336

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