Limits to universal trade liberalisation: The Contemporary scenario for textiles and clothing sector in South Asia

The relevance of outward looking/export-oriented strategies over the inward looking/import-substitution (I-S) strategies is highly debated in policy circles. This paper tries to locate the Textiles and Clothing (T&C) sector in five major countries of South Asia in the light of these theoretical debates. The main focus of the paper is to analyse the sustainability of export performance of T&C in South Asian countries, particularly in the context of universal trade liberalisation. We also try to explore the various factors determining the particular pattern of export growth registered by the countries of South Asia. The demand factors such as the question of market access, some competitors turning immensely powerful and shrinkage in the growth of demand on the worldscale, and supply factors including the nature of industrial structure in each of these countries are dealt with in this paper. From our analysis it is evident that the overall exports of T&C in all South Asian countries grew faster than the world exports in this sector during 1985-2003. However, the growth in the post-1995 period is lower than the growth in the pre-1995 period, which coincides with the world trend. China has emerged as a major competitor to South Asian countries in the EU and the US markets. Our case study of T&C sector shows that the proposed export-led industrialisation has not yielded the expected returns to the South Asian countries. Thus the developed countries are not only "Kicking away the ladder" of protecting domestic industries in the developing countries but also designing a protective shell around themselves preventing market access to the latter. Further the paper argues that labour cost alone cannot explain the relative export performance of South Asia. Rather, it is determined by other factors such as the industrial structure, suppliers' service capabilities, preferential agreements, etc. The need is emphasised of drawing up country-specific trade and industrial policies rather than adopting a universal trade liberalisation policy or proposals for SAARC integration with a view to build sustainable industrial structures.