## Chapter 3

# TRADE AND INDUSTRIAL INTERDEPENDENCE IN THE PACIFIC REGION : TEXTILE AND CLOTHING

## I ntroduction

The development of textile and clothing industry (for simplicity T&C) is of major importance in order to analyze the mechanism of economic interdependence among the Asia Pacific economies. Since T&C industry is labor-intensive and does not require huge capital, if compared to other industries, this industry is strategic for the developing countries with low wage level and little capital fund to start their industrialization. As a matter of fact, in the past, T&C industry has been actively promoted in the Asian countries, such as Japan, the Asian NIEs and ASEAN. This chapter analyzes the economic interdependence of the industry in the Asian Pacific area during the last thirty years.

## The Determinants of the Production and Trade Structure

The structure of the T&C production and trade in this region is determined by the telling four factors.

First, the economic policies followed by each Asian countries in the last thirty years have played a central role in a development pattern of the T&C catching-up product cycle. Each government has continued to protect the domestic industry by means of import restrictions until the levels of competitiveness of the imported goods were attained. After succeeding in the internal production, the policies were changed in order to promote export destined to serve the developed country's market. The T&C industry in the Asian Pacific region has experienced a catching-up product cycle developing pattern according to the sequence of Japan, the Asian NIEs and ASEAN countries.

The second factor is a major shift of export markets. From the end of the second World War to the early 1970's, during the period of huge economic power of the United States, the developed countries have adopted relative free trade policies in several industries. The Asian NIEs promoted an export oriented industrialization in T&C towards big markets such as the United States and EC. However, since the end of the 1970's, with the decline of the relative economic level of the United States, Protectionism has erated to become a common practice in developed countries. As a consequence, the relative importance of the United States and EC markets for Asian exports declined, while that of Japan rose, which was completing the process of trade liberalization.

The third factor is a shift of production and trade structure whitin T&C industry. The composition of the world export in textile from 1955 to 1987 is showed in table 1. During the 1950's, textile trade was mainly occupied by natural fiber and yarn. Afterwards, the share of clothing industry have risen up rapidly. The share of fiber in textile trade declined from 49% in 1955 to 11% in 1987. Whereas the share of clothing rose from 7% to 43%. As clothing industry is labor-intensive and its technology is relatively easy to be mastered, developing countries which are endowed with abundant low wage labor force hold comparative advantage in this production. On the total of textile industry, the share of synthetic fiber is rising. Table 3 shows that, through 1970's and 1980's, the share of synthetic fiber increased steadily.

Lastly, managed trade system, including the MFA (Multi Fiber Arrangement), has been