Quota-free Trade in Textiles and Clothing: Policy Issues and Options for ASEAN

Constrained until 2005 by import quotas, the production and trade of textiles and clothing (T&C) has become widely dispersed with substantial losses in global income and welfare. Meanwhile, quota and tariff preferences from major importing countries have enabled a large number of developing economies to embark on this “starter industry†and to gain a larger market share than would have been the case under an open trade regime. The People’s Republic of China (PRC) and India are expected to benefit most from a quota-free T&C trading environment but at the expense of many economies with preferential treatment, including a large number in the Association of Southeast Asian Nations (ASEAN). There is, however, much scope and several options for the regional economies to mitigate some of the adverse repercussions. Suitable procurement and production mixes of imported inputs, including for up-scale applications in T&C, can yield preferential market access, for example, in the European Union and Canada. An integrated supply chain within ASEAN or linking ASEAN with South and/or East Asia can help global buyers, including those from the United States, to reduce their overdependence on and to offset supply problems from the PRC. Joint ventures with T&C firms in the PRC are an appealing option for the more developed ASEAN economies.