multi fiber arrangement expiration implications for south asia
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Multi-Fiber Arrangement Expiration: Implications for South Asia. Ashe Hate Shisir Khanal John Larsen Paul Smart Romina Soria David Zanni. Background. Effective 1974–2005 Set limits on textile imports Limits applied to 47 developing countries Agreement on Textiles and Clothing, 1994

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multi fiber arrangement expiration implications for south asia

Multi-Fiber Arrangement Expiration: Implications for South Asia

Ashe Hate

Shisir Khanal

John Larsen

Paul Smart

Romina Soria

David Zanni

background
Background
  • Effective 1974–2005
  • Set limits on textile imports
  • Limits applied to 47 developing countries
  • Agreement on Textiles and Clothing, 1994
  • U.S. also reduces tariffs
predictions from economic theory
Predictions from Economic Theory
  • For exporting countries
    • Loss of quota rents
    • Reduction of trade inefficiencies
  • For developed countries
    • Decrease in prices
    • Increase in imports
    • Transfer of income from producers to consumers
expert opinion and predictions
India, Pakistan, Bangladesh, and Sri Lanka held back by quotas

Nepal benefited from high quotas

Some benefit from preferential access to U.S. and EU markets

Loss of output and employment in Bangladesh

Significant job loss in Sri Lanka

36 percent export increase for South and Southeast Asia

87 percent export increase for China

Expert Opinion and Predictions
predictions from the press
Predictions from the Press
  • Gains for India and Pakistan
  • Mixed predictions for Sri Lanka and Bangladesh
    • Asian press more optimistic than European press
  • Significant losses for Nepal
winner india
Winner: India
  • Leading cotton producer
  • Backward linkages
  • Substantial FDI
  • Outsourcing opportunities
  • Government under reform pressure
  • Lower labor costs than China
winner pakistan
Winner: Pakistan
  • Leading cotton producer
  • Backward linkages
  • Substantial FDI
  • Low labor costs
  • Government involvement
  • Product specialization
  • Access to U.S. and EU markets
loser nepal
Loser: Nepal
  • Political instability
  • Small firms
  • Low labor productivity
  • Low product diversity
  • High transportation costs
  • High dependence on U.S. market
  • Lack of government support
unclear bangladesh
Advantages

Niche market

Low labor costs

Proactive government and trade associations

Recent growth trends

Challenges

Falling prices

Dependence on raw material imports

Dependence on FDI

Limited access to U.S. market

Unclear: Bangladesh
unclear sri lanka
Advantages

Niche market

Potential trade arrangements

Regional

U.S. and EU

Tsunami relief

Challenges

High wages

Low productivity

Dependence on raw material imports

Small firms

Lack of peak organizations

Unclear: Sri Lanka
implications for u s
Implications for U.S.
  • Restructuring of U.S. retailers
  • Loss of U.S. production and employment
  • Benefit to U.S. consumers
conclusions
Conclusions
  • Winners: India and Pakistan
  • Loser: Nepal
  • Unclear: Sri Lanka and Bangladesh
  • U.S. benefits overall with some job loss
  • Geo-political considerations?
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