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Provides an overview of balance of payments accounting and analytical presentation of balance of payments data. Includes sample transactions to illustrate the application of the basic accounting principles and definitions of the standard balances.

Supplements the case.

What happens to an industry with millions of employees that loses its comparative advantage? This note examines this question by looking at the global textile and apparel industry. With the Multi-Fiber Arrangement coming up for renewal in December 1981, the United States, Europe, and the developing world must decide how to divide the international textile market in the 1980s. The debate focuses on who wins and who loses from protectionism, and the advantages and disadvantages of free trade.

In 1960, the United States was facing a balance of payments problem. Gold reserves were being drained, American products were losing competitiveness, and the dollar was under attack. This case analyzes the roots of this problem, provides an opportunity to discuss in depth balance of payments accounting, and allows students to explore various solutions to balance of payments difficulties.