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Assignment on
Submitted by
Vipin Suresh T
EPGP-07-096
Q 1. Why was the shift to a free trade regime in the textile industry good for
Bangladesh?
Economic growth of the country and employment in Bangladesh depended upon textile products
exports which were allowed through a preferential quota system for textile market export from
poor markets to rich markets. When free trade regime appeared , competition with countries such
as China and Indonesia also started and many predicted a quick collapse of Bangladeshs textile
industry. However, the opposite occurred. There are three major reasons to explain this:
* Low Labor costs compared to even China and Indonesia. This was possible through
investments by textile manufacturers in productivity-boosting technology. Indeed, this was an
advantage during the recession because big importers increased their purchases at low prices.
* Network of supporting industries was very strong. Due to this, garments manufacturers saved
transport and storage costs, import duties which boosted their productivity.
* Fear of importers to become too dependent on China. Because of this, many Western importers
started looking to diversify their supply sources which proved beneficial for bangladesh.
Q 3. What international trade theory (or theories) best explain the rise of
Bangladesh as a textile-exporting powerhouse?
1) Theory of comparative advantage - It is the ability of a country to produce a particular
good or service at a lower marginal and opportunity cost. It refers to the specialization for
a country in producing a certain kind of product because it can produce those more
efficiently. In the case of Bangladesh, it is textile industry production at low labor costs.