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Multi-Fiber Arrangement Expiration: Implications for South Asia PowerPoint PPT Presentation


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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

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Multi fiber arrangement expiration implications for south asia l.jpg

Multi-Fiber Arrangement Expiration: Implications for South Asia

Ashe Hate

Shisir Khanal

John Larsen

Paul Smart

Romina Soria

David Zanni


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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


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Importance of Textile and Apparel Industry


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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


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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


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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


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Summary of Predictions


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Winner: India

  • Leading cotton producer

  • Backward linkages

  • Substantial FDI

  • Outsourcing opportunities

  • Government under reform pressure

  • Lower labor costs than China


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Winner: Pakistan

  • Leading cotton producer

  • Backward linkages

  • Substantial FDI

  • Low labor costs

  • Government involvement

  • Product specialization

  • Access to U.S. and EU markets


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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


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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


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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


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Implications for U.S.

  • Restructuring of U.S. retailers

  • Loss of U.S. production and employment

  • Benefit to U.S. consumers


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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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