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Limits to Universal Trade Liberalisation:
The Post-ATC Scenario of Textiles & Clothing Sector in South Asia

By P. L. Beena | Centre for Development Studies, Trivandrum | October 25, 2005

Abstract

The relevance of outward looking/export-oriented strategies over the inward looking/import-substitution (I-S) strategies is highly debated in policy-making circles. This paper tries to locate the Textiles and Clothing (T&C) sector in South Asia in the light of these theoretical debates. The main focus of the paper is to analyse the sustainability of export performance of T&C in South Asian countries, with particular focus on the post-ATC period. We also try to explore the various factors determining a particular pattern of export growth registered by the countries of South Asia during the post-ATC period. The demand factors such as the question of market access, some competitors turning immensely powerful and shrinkage in the growth of demand on the world-scale, and supply factors including the nature of industrial structure in each of these countries are dealt with in this paper. From our analysis it is evident that the overall exports of T&C in all South Asian countries grew faster than the world exports in this sector during 1985-2003. However, the growth in the post-ATC period is lower than the growth in the pre-ATC period, which coincides with the world trend. China has emerged as a major competitor to South Asian countries in the EU and the US markets. Our case study of T&C sector shows that the proposed export-led industrialisation has not yielded the expected returns to the South Asian countries. Thus the developed countries are not only "Kicking away the ladder" of protecting domestic industries in the developing countries but also designing a protective shell around themselves preventing market access to the latter. Further the paper argues that labour cost alone cannot explain the relative export performance of South Asia. Rather, it is determined by other factors such as the industrial structure, suppliers' service capabilities, preferential agreements etc. The need is emphasised of drawing up country-specific trade and industrial policies with a view to build sustainable industrial structures. ...

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