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.

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2 April 2026     Paper Number CEPDP2170

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This CEP discussion paper is published under the centre's Trade programme.