Asian Textile and Apparel Trade: Moving forward with Regional Integration

Fears that the end of quotas would lead to contraction in exports of garments from several low-income Asian suppliers such as Bangladesh, Cambodia, and Indonesia chiefly as a result of competition from the People's Republic of China (PRC) have proven to be unfounded. On the other hand, competitive Asian suppliers of apparel have had resilient results in the largest import market for clothing, the United States (US). Suppliers from both the Association of Southeast Asian Nations (ASEAN) and South Asia have steadily improved their market shares in the US market. The imposition of safeguard quotas on the PRC's shipments in 2006 has provided competitive Asian suppliers opportunity to increase their shipments to the US. While the relaxation of safeguard restrictions in 2007 has enabled the PRC to claw back market share, this was not at the expense of competitive suppliers in the ASEAN and South Asia. Rather it is uncompetitive former large quota holders and preferential suppliers that have seen their shares of the US market retreat. Price dynamics of clothing shipments in restricted items, however, indicate that competition will become more severe once the safeguards end in 2009. Hence, Asian suppliers will have to improve efficiency and reduce costs. Eliminating high tariff and nontariff barriers to intraregional trade in intermediate textile products, coupled with efforts to facilitate outward processing arrangements, will help integrate the Asian industry and enhance competitiveness of Asian clothing suppliers.