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Chinese Competition and Skill-Upgrading in European Textiles: Firm-level Evidence

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  • Ph. Monfort
  • Hylke Vandenbussche
  • E. Forlani

Abstract

In this paper we study the effect of import competition from China on the Belgian textiles sector. Our analysis comprises both trade data and firm-level data. We study the evolution of the unit values in textiles exported from China into the EU versus textiles exported from Belgium to the rest of the EU over the past ten years. We clearly find evidence of a widening price gap between Chinese and Belgian textiles export prices. Chinese textiles seem to become relatively cheaper over time. These findings are in line with Schott (2004; 2007) who argues that capital abundant countries in the US and Europe use their endowment advantage to produce product varieties that are superior in quality compared to labour intensive countries like China. Next we use firm-level data on Belgian textiles firms in search of evidence of quality and skill upgrading in Belgian textiles exports. We study the evolution of firm-level variables such as R&D outlays, the proportion of skilled and unskilled labour used in production and capital intensity. Both China's entry into the WTO and the end of the Multi- Fibre Agreement significantly seem to cause important shifts in firm level production processes. A very robust result that emerges from the analysis is the one of skill upgrading. While over the past ten years total employment in the Belgian textiles sector has substantially decreased, the ratio of skilled versus unskilled workers has gone up significantly. The evidence is indicative that the Belgian textile sector has been undergoing substantial changes. It is becoming smaller but at the same time seems to be responding to the competition from a low-wage country like China by increasing the skill-content of its products and moving up the quality ladder.

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Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 19808.

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Date of creation: 2008
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Handle: RePEc:lic:licosd:19808

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References

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  1. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2006. "Multi-Product Firms and Product Switching," CEP Discussion Papers dp0736, Centre for Economic Performance, LSE.
  2. Cheptea, Angela & Gaulier, Guillaume & Sondjo, Dieudonné & Zignago, Soledad, 2008. "Sectoral and geographical positioning of the EU in the international division of labour," MPRA Paper 42660, University Library of Munich, Germany.
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Cited by:
  1. Iraj Hashi & Nebojša Stojčić, 2013. "Knowledge Spillovers, Innovation Activities, And Competitiveness Of Industries In Eu Member And Candidate Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(198), pages 7-34, July - Se.
  2. João Amador & Luca David Opromolla, 2009. "Textiles and Clothing Exporting Sectors in Portugal - Recent Trends," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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