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GTAP Resource #1247

"Textile and Clothing Sector Liberalization - Consequences for the Bangladesh Economy"
by Lips, Markus, Andrzej Tabeau, Frank van Tongeren, Nazneen Ahmed and Claudia Herok


Abstract
Since the 1980s the export oriented readymade garment (RMG) industry of Bangladesh has experienced an extraordinary evolution: having started with 9 enterprises in the late seventies, the number has now grown to over 3000. This trend was accompanied by a tremendous rise in the export share from 0.2% in 1980 to nearly 75% in 1997-98. High concentration on low value-added products, strong dependence on imported textiles and high regional concentration of exports characterize Bangladesh’s RMG sector.
The main policy framework is given by the WTO’s Agreement on Textiles and Clothing (ATC), which follows the former Multifibre Arrangement (MFA). By 2005, the sector is to be fully integrated into GATT rules and existing quotas currently hampering trade will come to an end. Also the European Union enlargement, the China accession to WTO and the further liberalization of textile sector announced by the WTO Doha Round will influence greatly the development of clothing and textile sector. Thus, it can be expected that worldwide trade in textile and clothing will expand and that production in now discriminated regions will increase. However, existing import tariffs for textiles, strongly supported by local textile producers, hinder the current RMG production in Bangladesh. The similar effects are generated by export subsides introduced by Bangladeshi trade partners for clothing and textile products exported to Bangladesh. In this paper we will discuss how the expected clothing and textile trade liberalization may influence the development of the Bangladeshi economy and as well as how future policy measures may affect this development.
The experiments simulate a full phase-out of the MFA quotas, WTO accession of China as well as WTO Doha Round effects on the Bangladeshi economy. The preliminary results indicate that ATC implementation will lead to an increase in production in Bangladesh, but compared to China and particularly India growth rates will be quite modest since Bangladesh looses in competitiveness against China and India (Herok and van Tongeren, 2002). Therefore, we also simulate how the available policy instruments can be used to improve the Bangladeshi position on the world market. In particular, we will simulate the reduction of import tariffs in the textile and clothing sector and the elimination of clothing and textile export subsidies between Bangladesh and India. Modeling the import tariff reduction will take into consideration that the Bangladeshi exporters already enjoy duty free import facilities.

Reference
Herok, C. A., and van Tongeren, F. (2002). Bangladesh: Textiles versus Clothing, Paper presented ETSG conference, Kiel, 13- 15 September.



Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2003 Conference Paper
Status: Published
By/In: Presented at the 6th Annual Conference on Global Economic Analysis, The Hague, The Netherlands
Date: 2003
Version:
Created: Lips, M. (4/29/2003)
Updated: Bacou, M. (9/27/2003)
Visits: 4,162
- Trade in textiles and wearing apparel


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