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Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China

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  • Jamil, Nida
  • Chaudhry, Theresa Thompson
  • Chaudhry, Azam

Abstract

In this study, we analyze the impact of the lower Chinese tariffs on Pakistani textile manufacturers that resulted from the Pakistan-China Free Trade Agreement (FTA). As a result of lower Chinese tariffs, Pakistani textile manufacturers increased exports though the number of firms exporting to China changed marginally and only in the spinning sector did exports substantially rise. Using a variety of recently developed methodologies, our results indicate that the productivity of textile manufacturers rose 3-8 percent and product quality rose 1-2 percent. Firms reduced product offerings in response to tariff drops. In contrast to a number of previous studies where exporting was accompanied by investment or R&D, exporters to China increased material and labor inputs but not capital. Non-exporters' productivity and quality also rose, indicating the presence of spillovers. Testing this, we find that these spillovers occurred for non-exporters downstream from higher productivity exporters in close geographic proximity.

Suggested Citation

  • Jamil, Nida & Chaudhry, Theresa Thompson & Chaudhry, Azam, 2022. "Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China," Journal of Development Economics, Elsevier, vol. 158(C).
    • Handle: RePEc:eee:deveco:v:158:y:2022:i:c:s0304387822000888
    DOI: 10.1016/j.jdeveco.2022.102935
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    More about this item

    Keywords

    Trade liberalization; Export tariffs; Free trade agreements; Productivity; Production function estimation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment

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