The textile sector represents around 25% of LDCs' total exports.
Bangladesh alone accounts for more than 75% of textile exports, to
the value of US$ 4 billion.
LDC products: low-price garments in a higher-quality
In clothing as in cotton fabrics, the LDCs tend to focus on
exporting standard products such as T-shirts, men's shirts, and
woven and printed fabrics, for which price is the main determinant
of success and in-depth knowledge of fashion and design trends is
not essential. However, in recent years a change has been taking
place in the developed markets, away from cheap imports towards
better-finished, higher-quality casual fashion and more individual
clothing, the opposite of LDC garment exports.
Success: up the value chain
Nevertheless, Bangladesh has a number of 'champion' export
products (i.e., achieving high growth in a dynamically expanding
market), particularly women's knitwear. Haiti, another example of a
textile-exporting LDC, has been doing very well with exports of
cotton T-shirts and women's clothing. Its garment exporters are
increasingly exporting sophisticated items like high-quality suits,
jackets and branded items. This has helped them to penetrate
Japan's extremely quality-conscious market.
Bangladesh has shown that it is possible to move successfully up
the value chain by exporting finished products. In 1999, it was by
far the largest single LDC exporter of finished, woven fabrics with
85% cotton or more, weighing up to 200 g/m².
Production moving to lower-cost countries
Labour shortages and rising costs of labour have forced even the
leading Asian producing and exporting countries, such as India and
the Republic of Korea, to move their production facilities to
lower-cost countries (Bangladesh, Cambodia, Lesotho, Madagascar or
Nepal), as well as to offshore processing zones in China.
The result is that the major world exporters are also becoming
major importers, buying intermediate inputs to produce the products
in which they specialize.
A new structure of the world textile trade is taking place,
based on specialization. As different products are moved backwards
and forwards across the value chain, competition between exporters
is becoming increasingly fierce.
Now: privileged market access
In countries like Bangladesh, which make full use of their quota
allowances, exports of garments have grown rapidly due to
privileged market access in the European Union (EU) and liberal
quota allowances in the United States. The impact of the Agreement
on Textiles and Clothing to liberalize trade by 2005 will be
critical for textile exporters in these countries with the removal
of the quotas associated with the Multi-Fibre Arrangements
Preferences for LDCs
The EU has recently taken steps to further enhance market access
for least developed countries. The European Council has also
decided that rules of origin would be simplified by promoting
regional cumulation. In this regard, the EU granted a derogation
from normal rules of origin and encouraged Bangladesh, Cambodia,
Laos and Nepal to use neighbouring countries' raw materials to
produce garments that could then be exported to the EU duty-free
under the Generalized System of Preferences (GSP) scheme.
For the future
Preference erosion is certain to increase competition, for
example by allowing new players into the market. China's accession
to the WTO, which is expected to take place by 2002, should result
in new competition for Asian LDCs such as Bangladesh, Cambodia,
Laos, Myanmar and Nepal.
Opportunities and constraints
Depending on their actions now, these countries could face a
restriction or an expansion in their textile trade following the
removal of quotas by 2005. In a competitive global market, and with
the phasing out of the MFA, export-oriented textile production has
to be supported by vigorous marketing strategies that include a
search for niche markets, strict quality control, and frequent and
timely design innovations. Future comparative advantages for LDCs
will increasingly depend not just on cheap labour but on a
workforce that is both relatively cheap and technologically
skilled. This calls for increased investment in workforce training
and skill development for the future, and drawing on the latest in
information technologies and marketing systems.
For more information, see ITC's technical papers, Fibres and
Textile Industries at the Turn of the Century: Some Observations
and Major Markets for Cotton T-Shirts (abstracts are available on
page 38). For technical assistance from ITC, contact Antero
Hyvarinen, ITC Senior Market Development Officer, at firstname.lastname@example.org