Textile Industry Trends in the Global Economy
I. Executive Summary
The objective of this paper is to examine how the development of a textile industry contributes to economic growth in the global economy. Because textile manufacturing is a labor-intensive industry, developing countries are able to utilize their labor surplus to enter the market and begin the process of building an industrial economy. Emerging economies then look outward to develop an export strategy based on their comparative advantage in labor costs.
Textile production and consumption is an increasingly global affair as production continues to shift to developing countries. Developing countries have seen an explosion in the growth of their textile exports, and for many countries textiles are a significant portion of their total exports. In response to increasing competition from low-value imports from developing countries, industry leaders in developed countries have made significant capital investments in order to increase productivity and move into advanced market sectors.
There are several trade agreements in place that impact world textile trade. The African Growth and Opportunities Act, Andean Trade Preference Act, and Trade Promotion Act are each designed to liberalize textile trade and provide equal market access to both developing and developed countries. Despite the potential economic and social benefits, the effectiveness of these trade policies is limited by special interest politics in the developed world. The presence of a political economy in developed countries can affect both the formation of and the adherence to international trade agreements; industry leaders can still appeal to the World Trade Organization or their Trade Representative to protect domestic industry.
II. Textile Industry Development in the Global Market
In order to achieve economic growth and development, policy makers first encourage the formation and growth of domestic industry. Through labor force mobilization and capital development, a country shifts its basic factors of production from primary products, such as localized agricultural goods, to industry. In recent years, the World Trade Organization and other multilateral institutions have emphasized the importance of allowing developing nations to enter the world market in order to achieve economic growth and development. Recognizing the power of international markets, policy makers develop an export strategy based on their comparative advantages in order to compete in an increasingly global economy.
Textile manufacturing is primarily a labor-intensive industry; because emerging economies have a surplus of unskilled labor, the creation of a textile industry in a developing country is both feasible and attractive from an economic growth perspective. Many countries view the creation of a domestic textile industry as “an initial rung on the ladder of industrialization”(U.S. Congress Office of...