IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Export quotas and policy constraints in the Indian textile and garment industries

Listed author(s):
  • Kathuria, Sanjay
  • Bhardwaj, Anjali
Registered author(s):

    The Agreement on Textiles and Clothing will abolish all quota restrictions in trade in textiles and clothing by the year 2005. Dismantling the quota regime represents both an opportunity (for developing countries to expand exports) and a threat (because quotas will no longer guarantee markets and even the domestic market will be open to competition). Data about the real burden imposed by distorting but nontransparent policies under the quota regime are inadequate, so the authors interviewed traders in Delhi and Bombay about quota rents. They provide comprehensive estimates of the magnitude of the implicit export taxes resulting from the labyrinth of quotas imposed under the WTO Agreement on Textiles and Clothing. Using the concept of an export tax equivalent (or ETE), they assess how much exports are restricted. The international trade regime in textiles and clothing imposes a substantial tax equivalent on Indian exports. Between 1993 and 1997, ETEs for garment exports to the United States were roughly double those for the European Union. The ETEs for the United States declined 1996, which could be a warning signal that India faces increasing competition from NAFTA-empowered Mexico. From India's viewpoint, the European Union is ahead of the United States in dismantling the quota regime - and in not restricting India cotton (garment) exports (where India has a comparative advantage) more than synthetics. India's strengths in this sector lie in natural resources and factor endowments - raw cotton and cheap labor. The Indian garment industry's decentralized production structure - subcontracting, which is low risk and low capital - has served the industry well but has executed Indian products from the mass market for clothing which demands consistent quality for large volumes of a single item. Growth in Indian exports may require a shift to an assembly-line, factory-type system. This would probably require: a) No longer restricting garment production to the small-scale sector (and ending other anachronistic policies). b) Making labor policy more flexible. c) Ending the policy bias against synthetic fibers. d) Reducing transaction costs for exports.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2012.

    in new window

    Date of creation: 30 Nov 1998
    Handle: RePEc:wbk:wbrwps:2012
    Contact details of provider: Postal:
    1818 H Street, N.W., Washington, DC 20433

    Phone: (202) 477-1234
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Trela, I. & Whalley, J., 1989. "Unravelling The Threads Of The Mfa," Papers 448, Stockholm - International Economic Studies.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2012. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.