It’s time to move away from textile-centric trade

This picture shows women working in a textile factory. — Reuters/File
This picture shows women working in a textile factory. — Reuters/File

“Trade, not aid” is a cliché that has frequently been used in Third World Countries. Assuming that the entire world was open for our exports without any barriers, how much more could we export? Does anyone know our supply capacity? Where else could we export? Did we explore non-traditional markets? Did we strengthen any sector, except textiles? The list of questions goes on.

However, the most important and basic question is: what do we understand by the term ‘trade’? First, we need to understand that trade includes both exports and imports. When we want to trade with a country, it wants to access our market through imports into country. Second, textile is not the only thing that we (can) export. Third, we don’t realize the potential of services for exports as this is the least understood sector.

This warrants a fresh mindset for trade policy. To start with, we must recognize that trade, trade policy and trading system are three distinct areas to be dealt with in designing any relevant national policy. As a second step, there ought to be complementation within trade, industrial, fiscal, competition and monetary policies to enable the tradability of various sectors beyond textiles. Thirdly, there should be a realistic assessment of sectoral efficiency for the optimal allocation of resources, incentive schemes and efforts for export promotion.

In traditional trade policies, incentives are extended to large enterprises. But micro, small and medium enterprises carry a bigger export potential with lower incentive requirements

In practical terms, a fresh mindset is needed for the services sector. It has shown a consistent growth and increase of exports in recent years. Information technology (IT) and related services, particularly business process outsourcing, construction and engineering, transport and transit logistics, niche financial services (Islamic finance) and professional services (medical, engineering, accounting/auditing) carry a huge export growth potential. If properly accounted, exports of IT coupled with the rapidly emerging field of freelancing may exceed those of the textiles.

In order to create an inclusive export culture, a mechanism should be developed to foster public-private partnership for global marketing efforts. The existing Export Development Fund (EDF) maintained by the Ministry of Commerce is meant for that. But it may not have been utilised properly due to a lack of active involvement from the private sector.

Efforts should be made to create national value chains and integrate them into regional and global value chains for both goods and services. Third World Countries also needs to develop and promote national brands, including collective brands, appellation of origin and geographical indications.

At a macro level, Countries should use the World Trade Organisation (WTO) and multilateral trading system to promote exports and manage imports rather than focusing only on negotiations. This is particularly true for addressing the barriers that exporters face in the international marketplace. The WTO provides for the redress of such concerns.

 

The writer is an international economic and trade policy practitioner

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