1. Multi-Fiber Arrangement Expiration: Implications for South Asia
Ashe Hate
Shisir Khanal
John Larsen
Paul Smart
Romina Soria
David Zanni

2. Background Effective 1974–2005 Set limits on textile imports
Limits applied to 47 developing countries
Agreement on Textiles and Clothing, 1994
U.S. also reduces tariffs
--Founded as a way to protect domestic producers from competition. Expired in 2005 as a result of WTO agreements.
-- Example: only 5000 boys shorts from Honduras. 20,000 yards of fine woven bla blah from pakistan. --

3. Importance of Textile and Apparel Industry
India
Pakistan
Bangladesh
Sri Lanka
Nepal
GDP (PPP) 2003
$3 trillion
$311 billion
$259 billion
$74 billion
$38 billion
Industry/GDP 4% 9%
N/A 7%
Industry/Exports
30%
72%
75%
44%
40%
Industry/ Labor Force 6% 3% 8% 1%
--Here are the important numbers.
--Now john will talk, giving something of an literature review on pre-expiration opinion on the effects of expiration for South Asia.
-- Paul will give a synthesized view of how things are likely to turn out for the varous countries,
-- I will return for Impact on the U.S. and conclusions.

4. Predictions from Economic Theory
For exporting countries
Loss of quota rents
Reduction of trade inefficiencies
For developed countries
Decrease in prices
Increase in imports
Transfer of income from producers to consumers

5. Expert Opinion and Predictions
India, Pakistan, Bangladesh, and Sri Lanka held back by quotas
Nepal benefited from high quotas
Some benefit from preferential access to U.S. and EU markets
Loss of output and employment in Bangladesh
Significant job loss in Sri Lanka
36 percent export increase for South and Southeast Asia
87 percent export increase for China

6. Predictions from the Press
Gains for India and Pakistan
Mixed predictions for Sri Lanka and Bangladesh
Asian press more optimistic than European press
Significant losses for Nepal

7. Summary of Predictions
COUNTRY
THEORY
EXPERTS
PRESS
India
Win
Pakistan
Sri Lanka
Mixed
Ambiguous
Bangladesh
Nepal
Lose

8. Winner: India Leading cotton producer Backward linkages
Substantial FDI
Outsourcing opportunities
Government under reform pressure
Lower labor costs than China

9. Winner: Pakistan Leading cotton producer Backward linkages
Substantial FDI
Low labor costs
Government involvement
Product specialization
Access to U.S. and EU markets

10. Loser: Nepal Political instability Small firms Low labor productivity
Low product diversity
High transportation costs
High dependence on U.S. market
Lack of government support

11. Unclear: Bangladesh Advantages Niche market Low labor costs
Proactive government and trade associations
Recent growth trends
Challenges
Falling prices
Dependence on raw material imports
Dependence on FDI
Limited access to U.S. market

12. Unclear: Sri Lanka Advantages Niche market
Potential trade arrangements
Regional
U.S. and EU
Tsunami relief
Challenges
High wages
Low productivity
Dependence on raw material imports
Small firms
Lack of peak organizations

13. Implications for U.S. Restructuring of U.S. retailers
Loss of U.S. production and employment
Benefit to U.S. consumers

14. Conclusions Winners: India and Pakistan Loser: Nepal
Unclear: Sri Lanka and Bangladesh
U.S. benefits overall with some job loss
Geo-political considerations?