The Rise of Bangladesh’s Textile Trade

The Rise of Bangladesh’s Textile Trade

The Rise of Bangladesh’s Textile Trade

1. Why was the shift to a free trade regime in the textile industry good for Bangladesh?

Employment and economic growth in Bangladesh depends upon exports of textile products which were allowed through a preferential quota system for textile market export from poor markets to rich markets. As soon as the shift to a free trade regime appeared along with the competition with countries such as China and Indonesia the quick collapse of Bangladesh’s textile industry has been predicted. However, the opposite occurred. We can highlight three major reasons to explain what happened:

* Labor costs are low, even lower than in China. Obviously low hourly wages rates explain it but not only. Investments by textile manufacturers in productivity-boosting technology lowered the labor costs in Bangladesh making it one of the world’s low-cost producers. Indeed, this was an advantage during the recession because big importers increased their purchases at low prices.

* Strong network of supporting industries. Thus, garments manufacturers save transport and storage costs, import duties which boost their productivity.

* Many Western importers looking to diversify their supply sources. Indeed, importers fear to become too dependent toward China.

As a conclusion, the reasons why Bangladesh took advantage from the shift to a free trade regime in the textile industry are beyond only low wage rates. Moreover, Bangladesh’s textile market may keep growing the next years because the trend to shift textile production away from China may continue as the wage rates are increasing fast.

2. Who benefits when retailers in the US source textiles from low-wage countries such as Bangladesh? Who might lose? Do the gains outweigh the losses?

The low income countries benefit in job creation and in economic growth when retailers in the United States source textiles from low-wage countries such as Bangladesh. Customers also have benefits because prices are more affordable and retailers have benefits too in having better margins.

Highly developed countries such as America may have losses because outsourcing causes job losses, relocations, etc. Customers may also encounter some disadvantages in the quality of the product.

Ultimately, gains do outweigh losses because these low income countries are slowly developing and the standard of living is improving, such as in China where wage rates is growing. Moreover, even if the developed countries have losses it is inevitable if they want to provide product

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