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纺织品行业及贸易外文文献翻译资料

纺织品行业及贸易外文文献翻译资料
纺织品行业及贸易外文文献翻译资料

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标题: Revealed Comparative Advantage of Carpets and Textile Floor Covering Industry in Pakistan, India and China

作者: Altaf, Saba

期刊名称: Journal of Economic Cooperation & Development;卷: 35;期: 4;页: 113-133;年份: 2014 Revealed Comparative Advantage of Carpets and Textile Floor Covering Industry in Pakistan, India

and China

1. Introduction

The global trade pattern has been changed in the pursuance of trade liberalization policies in the form of removal of tariff and non-tariff barriers, reduction in quotas and technological advancement on the part of world economies. South Asian economies such as China and India are seeking a favorable position from the trade composition perspective in the international markets. These countries possess comparative advantage in textile sector and show a noteworthy growth in changing trade patterns across the world. Pakistan has a great potential to stand out in this sector in the region as a prospective and overwhelming proportion of labor force is engaged in this sector. It is expected that export-led growth strategy cause a significant boost in production, employment and the productivity of labor along with the improvements in overall economic status but the political and socio-economic conditions in addition to primitive types of technology use may hinder the way to rapid progress.

Pakistan's current export structure requires structural transformation and changes in its export diversification and prototype specialization. The industrial sector in Pakistan has been playing a pivotal role in the national economy in terms of its share in GDP, exports, employment, foreign exchange earnings, investment and its contribution to the value added industry. China is one of the world's largest textiles exporters, accounting for one third of the global textile trade volume. Although the prolonged anti-dumping investigations hit the country's textile export, still textile industry in China has remained a key pillar of development in the country. It has played a vital role in proliferation of various sectors of the economy. Due to its large contribution in the economic growth, Chinese government has remained very much focused to upgrade this sector. India, another major exporter of textile goods is self-reliant and independent with lots of versatility and diversification in textile sector. Apart from providing one of the basic necessities of life i.e. cloth, the textile industry contributes about 14 % to the country's industrial output and about 17 % to export earnings. This sector stands at second in the provision of jobs to people after agricultural sector.

There is continuing debate and emerging concern about the position of these countries in the world market and the resulting edge of China for intensified competition in the labor-intensive manufactured goods. This signifies the importance of the structure of comparative advantage in selected countries; China, India and Pakistan and to find out the extent of competition among these countries in the market of selected subsector i.e., textile.

This study focuses on one of the important sub-sector of textile industry i.e. Carpets and other textile floor Coverings (under the category of code 57 as per Harmonized System of classification, HS). The carpet industry plays a fundamental role in determining the export bearing of Pakistan. There has been an ever increasing demand for carpets and floor coverings both in Pakistan and around the globe. Carpets have always been a valuable asset since ages and therefore remained in vogue. This was

gradually commercialized in Pakistan because of the development of export market. Commercialization gave new dimensions to this industry and it started expanding in rural areas due to the availability of cheap labor. This is one of the sectors that grew tremendously during 1970s and 80s. Among the value added goods it remained on the top of the list (Awan and Khan, 1992).

This sector started getting a set back after the issue of child labor raised by international organizations. As majority of the carpet weavers in Pakistan were estimated to be children less than 15 years of age. Although, data on the Pakistan labor force and child labor is vulnerable. Nevertheless, there is little doubt that child labor has assumed massive proportions in Pakistan. The actual total number of working children in Pakistan is probably somewhere between 2 and 19 million.2

Primarily, the promotion of carpet industry depends upon availability of raw material, presence of skilled weavers and the tradition of weaving art, etc. The skill and productivity of workers in carpet industry along with the availability of socio-economic infrastructure affects the competitiveness of this sector. Despite the presence of weaknesses in few areas, the carpet industry serves as a backbone for the economy of Pakistan. It has been a major source of foreign exchange earnings and contributes a lot in relief of poverty, especially in rural areas. Presently this industry is not revealing a significant export growth and there is a dire need to focus on the provision of infrastructure to support the growth of this industry.

A UNICEF-Punjab report (1992) asserted that "according to conservative estimates, one million out of

1.5 million workers in the carpet industry in Pakistan were children. A separate 1992 UNICEF/Govemment of Pakistan study reported that 90 percent of the one million workers in the carpet industry are children, many of whom began working in the industry before 10 years of age. The Human Rights Commission of Pakistan found that weaving thrives in self-contained homesteads, where labor is cheap and readily available".

Different techniques have been used in literature to determine country's competitiveness in selected industry. One of the most widely used methods involves the concept of Revealed Comparative Advantage (RCA) developed by Balassa (1965). Revealed comparative advantage (RCA), a measure of international competitiveness specifies that a country is defined as being specialized in exports of a certain product if its market share in that product is higher than the average.

A number of studies are available on measuring competitiveness in various sectors of Pakistan, but there is no empirical work done on RCA of Pakistan in carpet and other textile floor coverings industry till the year of this study conducted. For small as well as growing economies, competitiveness is essential for promoting economic development and to survive in the globalized world where carpet industry holds its own worth.

From the above given perspective, the objective of this study is to analyze the comparative advantage of the carpet industry in Pakistan and compare it with selected South Asian countries .i.e. China and India. These countries were selected for measuring and comparing RCA with Pakistan's because they are similar in size and factor endowments and core competitor of Pakistan in the world market. The study enables us to find out the competitiveness of this sector in the world market and can probe at the future potential of growth in the carpet industry of Pakistan. The Balassa Index (1965) is used to find out the comparative advantage at 2-digit and 4-digit level of Harmonized System of Classification. The rest of the paper is organized as follows. Next section provides the literature survey followed by the methodology and data description. The empirical results of the study are reported and discussed in section 4. Last section concludes the study with some policy recommendations.

2. Review of Literature

A number of studies have been conducted to find out Revealed Comparative Advantage (RCA) using Balassa Index (1965). This section provides a brief literature review that can give a better knowledge and understanding of the pattern of RCA in different countries for different sectors.

Balassa (1977) has undertaken an analysis of the pattern of comparative advantage of industrial countries for the period 1953 to 1971. The empirical findings of this study suggest a renewal of the product cycle for US that possess an ever increasing technical lead. Based on the standard deviation of the RCA indices for different countries an association is also seen to hold between size and diversification of exports. Furthermore, Balassa's results show that the extent of export diversification tends to increase with the degree of technological development and a reversal takes place at higher levels in the trade patterns.

Leishman et al. (1999) empirically analyzed the international competitiveness for agricultural commodities by applying Revealed Comparative Advantage (RCA) for wool- exporting countries. A number of six wool producing countries are selected for measuring RCA over the time period of 37 years. RCA index for Australia, Argentina, Newzeland, South Africa, United Kingdom and Uruguay indicates that GATT Uruguay Round has changed the RCA's of countries significantly.

Mehmood (2005) analyzed the export specialization and comparative advantage/disadvantage of Pakistan's non agriculture production sectors in the context of on-going multilateral trade negotiations. The study uses RCA approach at HS-4 digit level for the period 1990-2000. The data set has been drawn from International Trade Statistics compiled by the Australian National University (AND). The data set comprises 16 product categories made up of 978 product lines. Findings show that Pakistan's top-ranking exports belong to textiles and clothing sector, consistent with the natural and human factor endowments however Pakistan has failed to move from low value added to technically intensive high value added manufacturing. Pakistan's economic well-being depends on the extent to which the non-agricultural sector remains competitive and contributes to economic growth, exports, investment and employment.

Batra and Khan (2005) examined the structure of comparative advantage enjoyed by India and China in the global market keeping in view their similar resource endowment and size. The study estimates Balassa index of RCA for India and China at sector and product level of the Harmonized Classification System (HS-1996) both at 2 and 6-digit level for the year 2000 and 2003 using data on exports from UN Comtrade.3 The year 2000 is taken as reference, as this is the year immediately preceding China's accession to WTO. The main objective of the study is to figure out the leading manufacturing industries in India and China in terms of their revealed comparative advantage. The study reveals that the maximum number of commodities with comparative advantage in the world market is concentrated in sectors like organic chemicals. There are also some sectors where India is comparatively disadvantageous positioned at the aggregate level but reveal significant comparative advantage at the constituent commodity level (HS-six digit).

In addition, China enjoys comparative advantage in the world market in 47 sectors and 1828 commodities out of 97 sectors and 4923 exported commodities, respectively by China to the world. The sectors of comparative advantage in China belong to the electrical and electronic equipment, manufacture of leather, toys, organic chemicals, articles of apparel and cotton. The number of sectors for which India and China enjoy comparative advantage remains roughly the same between 2000 and 2003. An important finding of the study is that some sectors are at disadvantageous at the aggregate level but may enjoy comparative advantage at the constituent commodity level.

Hanif and Sabina (2006) constructed Balassa's Revealed Comparative Advantage (RCA) index for the textile sector of Pakistan to analyze the relationship between the financial development and international trade competitiveness. Pakistan's focus of trade policy shifted from import substitution to export promotion in the seventies and turned its resources to the products showing comparative advantage. The results show that greater access to external finance has a strong positive impact on the country's textile sector competitiveness over the time period 1974 to 2004. The study concluded that if the economies of scale, technology and endowments are identical between countries, still a country with relatively developed financial institutions will have comparative advantage in the production of processed goods requiring more external finance.

Welch and Conrad (2007) evaluated the US competitive position in the cotton yam segment using RCA index based on Balassa (1965) among the set of countries including China, India, Pakistan, and Turkey. The results disclose that United States fails to make the competitive grade in several categories and if it happens to make it, that is by narrowing margins. While the Revealed Comparative Advantage index indicates that the United States is lagging behind China, India, Turkey, and Pakistan in terms of market share in exports of yam, fabric, etc.

Akhtar et al. (2008) analyzed the competitiveness of footwear industry of Pakistan in the global perspective using revealed comparative advantage at 2-digit and 4-digit level of HS classification for the period of 1996 to 2006. RCA indices have been calculated for Pakistan and other Asian countries i.e. China and India, since both countries are similar in size and factor endowments and greatest competitor of Pakistan. Calculations show that Pakistan's footwear industry has shifted from a situation of comparative disadvantage to competitive advantage especially since after 2003 due to increase in volume as well as in the value of footwear exports and thus there is an upward movement in comparative advantage.

At disaggregate level, Pakistan has been enjoying comparative advantage since after 2005. This study also highlights the problems faced by footwear industry and explains the role of entrepreneurs in this regard. The rising trend of RCA reveals that there is a potential for higher growth of this industry which requires strengthening of competitiveness of the footwear industry.

According to Jayawickrama and Shandre (2010), given the abundant resources, China and India have comparative advantage in a broad range of manufactured goods as compared to Singapore. From the disaggregated analysis at 2-digit level, the paper finds that the Singapore and China exports are complements, although the degree of complementarity has being declining over time. Meanwhile, Singapore and India exports are found to be stronger complements and stable over time. The results also show that China and India exports are strong substitutes. This makes the comparative advantage position of both countries more competitive. The study reported that the exports diversifications have broadened the exports net by China and India, as well.

Wei and Zhao (2012) found that the comparative advantage of Chinese manufactured products in both world and US markets are gradually increasing. This is pertinent to mention that most of the products with comparative advantage are low-technology products. While, the comparative advantage of Chinese medium-technology products in the world market has largely improved, but their RCA indexes are low and their kinds of products with very high comparative advantage are small. Finally, they concluded that the Chinese manufactured exports are of greater comparative advantage in the world market than in the US market.

Focusing on the clothing export sector, Kathuria (2013) demonstrated that the comparative advantage of India has increased from 23 products to 25 products between 1995 and 2003 and for Bangladesh,

this number increased from 21 products to 29 products between 1995 and 2003. Moreover, the comparative position on the basis of a measure of structural change in exports of India and Bangladesh also pointed out towards a better standings of these countries.

This completes the review of relevant literature. Now we turn to the trends of carpet and weaving sector in selected countries.

3. Trend and Pattern of Carpet and Floor Coverings Industry: Pakistan, India and China's Perspective

A brief picture of the trends in exports of carpet and floor covering industry is provided in this section. Overall, exports of the carpet industry in Pakistan mounted and reached up to Rs. 109 million earnings in 1971-72. By 1975-76, the income from carpet export gone up to Rs. 719 million and it further increased to Rs. 1,180 million in 1977-78 and then to Rs. 2,198 million in 1979-80. In 1980-81 carpet exports touched the highest ever figure of Rs. 2,243 million. There was a slight decline after that because of recession in the world market. With the export income coming down to Rs. 1,676 million and Rs. 1,913 million in 1981-82 and 1982-83, respectively. In 1985-86 the income rose to Rs. 2,693 million. The income from carpet exports further increased to Rs. 3,419 million in 1986-87. Table 1 depicts the trend of export value for three countries over the years 1996 to 2009 at 2-digit level of HS classification.

China and India exhibit an increasing trend in exports while the figures for Pakistan showed first declining trend up to year 2002 and then a sharp rise that followed by a gradual rise in the export value. Pakistan's export values remained high than China and India from 2004 to 2007. The reason for lower export values afterward are less competitiveness, high interest rates and cost of inputs, non-conducive government policies and non-guaranteed energy supplies that hinders the competitiveness of Pakistani exports over other countries. Moreover, the bans on child labor, in the backdrop of ILO recommendations also hampered the growth of this sector in Pakistan, as an overwhelming proportion of labor force working in this sector is child labor. Furthermore, the enactment of Employment of Children Act of 1991 that banned the child labor put the sector's status in more vulnerable condition than ever before. China presented the highest export value among three countries with few exceptional years.

4. Methodology and Data

Measuring comparative advantages may create certain difficulties since relative prices under autarky are not directly observable. Thus comparative advantage is calculated by calculating Revealed Comparative Advantage (RCA) for specific sector. There are different indices applied for this purpose, most common of which is Balassa Index (1965) of RCA. The concept of revealed comparative advantage (Balassa, 1965) pertains to the relative trade performance of individual countries in particular commodities. The advantage of using comparative advantage index is that it considers the intrinsic advantage of a particular export commodity and is consistent with changes in an economy's relative factor endowment and productivity. Demerit of using comparative advantage index is that it is a partial equilibrium framework and provides general direction of movement and do not predict the potential future comparative advantage in particular sector of the country.4

This study used Balassa Index to calculate the RCA for Pakistan in rapidly growing Carpets and other textile floor coverings industry and is based on export data as per the (HS 2007) classification and is given the code 57. RCA is calculated at 2-digit and 4-digit level at aggregated and disaggregated classification.5 Data has been sourced from UNCOMTRADE and World Development Indicators (WDI) covering a period of 14 years i.e. froml996 to 2009. RCA at 4 digit disaggregated level has been estimated for the years 2004-2009. (完整内容请到百度文库)The study calculates RCA indices

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