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New Challenges For The South African Textile And Apparel Industries In The Global Economy

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  • Lila J. Truett

    ()
    (Department of Economics, The University of Texas at San Antonio)

  • Dale B. Truett

    ()
    (Department of Economics, The University of Texas at San Antonio)

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    Abstract

    The full integration of the textile industry into GATT, which with some exceptions occurred on January 1, 2005, is likely to greatly impact the global textile and apparel industries. In particular, one prediction is that the South African industries are likely to be ¡°decimated.¡± The actual effect on these industries will depend at least partly on the ability to take advantage of economies of scale and to be internationally competitive. In an endeavor to gain more insights into the future of these industries in South Africa, this study uses a cost function to investigate the presence of scale economies and the nature of input interrelationships. The findings include statistically significant economies of scale present in both industries and cross price elasticity estimates indicating that most inputs are substitutes for one another. The first result offers an opportunity to reduce unit costs if these industries can grow their markets. However, lower prices on imported intermediate goods will likely decrease the demand for domestic inputs. The cross price elasticities of demand are relatively low in some cases, consistent with domestic input market rigidities and international trade restrictions.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 35 (2010)
    Issue (Month): 4 (December)
    Pages: 73-91

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    Handle: RePEc:jed:journl:v:35:y:2010:i:4:p:73-91

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    Related research

    Keywords: South Africa; Textile Industry; Apparel Industry;

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    1. Simon Roberts & John Thoburn, 2003. "Adjusting to Trade Liberalisation: The Case of Firms in the South African Textile Sector," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(1), pages 74-103, March.
    2. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August.
    3. Naudé, Wim & Rossouw, Riaan, 2008. "South African quotas on textile imports from China: A policy error?," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 737-750.
    4. Denis Audet, 2007. "Smooth as Silk? A First Look at the Post MFA Textiles and Clothing Landscape," Journal of International Economic Law, Oxford University Press, vol. 10(2), pages 267-284, June.
    5. Wales, Terence J., 1977. "On the flexibility of flexible functional forms : An empirical approach," Journal of Econometrics, Elsevier, vol. 5(2), pages 183-193, March.
    6. Lennart Petersson, 2003. "Production Fragmentation And Specialisation, With Special Reference To The Sadc Textile And Clothing Industry," South African Journal of Economics, Economic Society of South Africa, vol. 71(4), pages 762-791, December.
    7. Simon Roberts & John T. Thoburn, 2004. "Globalization and the South African textiles industry: impacts on firms and workers," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(1), pages 125-139.
    8. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
    9. David Kaplan, 2004. "Manufacturing in South Africa over the last decade: a review of industrial performance and policy," Development Southern Africa, Taylor & Francis Journals, vol. 21(4), pages 623-644.
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