The Role of Price and Cost Competitiveness in Apparel Exports, Post-MFA: A Review

Global outsourcing, technical change, and falling barriers to trade worldwide have transformed the structure of production and global competition in the textile and apparel industry. This sector has experienced intense fragmentation in the last two decades. Much of this global dispersal was driven by the Multifibre Arrangement (MFA). The elimination of quotas on January 1, 2005 has triggered a restructuring of existing patterns of sourcing and supply. As buyers consolidate their sourcing strategies, and as smaller countries experience an erosion of apparel FDI post-MFA, many policy makers and companies are pointing to China’s tremendous surge in apparel exports in the first months of quota removal to argue that price, unit costs, and volumes appear to be crucial determinants of export competitiveness in the world without quotas. This has led many firms to try to increase their scale of production in the hope of maintaining their place in the global division of labor in textiles and apparel.