**16 |** P a g e

against 2005. So was in Sri Lanka’s exports to the US, although at the expense of a significant contraction of 36 percent in Sir Lanka’s total T&C exports in terms of value.

**Table 4: Value of imports in 2010 and weighted average unit values (UV) of clothing imports by EU and US from Sri Lanka, Bangladesh, and China in 2001, 2005, and 2010**

||2001|2005|2010|Change in|percent|Value and index o|f imports,2010|
|---|---|---|---|---|---|---|---|
||EU2|7 Marke|ts:|2001-05|2005-10|(billions of US$)|2005=100|
|Sri Lanka|8.8|10.8|14.3|23%|33%|1.8|153|
|Bangladesh|5.2|5.2|6.3|-1%|22%|8.2|162|
|China|11.8|9.2|11.7|-22%|28%|39.9|151|
|World(external EU)|9.6|9.4|11.6|-2%|23%|110.6|145|
||US|A Marke|ts:|2001-05|2005-10|||
|Sri Lanka|12.9|12.8|15.5|-1%|33%|1.3|74|
|Bangladesh|6.5|5.6|5.8|-15%|22%|4.2|168|
|China|14.2|10.3|9.5|-28%|8%|36.4|165|
|World|10.3|9.4|8.9|-9%|-5%|87.5|104|
|||||||Index 2005,|Index 2010,|
|Memorandum: Sri Lanka weight|ed average UV|inperce|nt of|2001-05|2005-10|2001=100|2005=100|
|average for EU imports|92|115|123|25%|7%|125|107|
|average for US imports|125|136|174|9%|28%|109|108|

Note: Clothing includes all HS 61, 62, and 63 products at 6-digit level. Source: Based on data reported by EU and USA to UN COMTRADE Statistics.

Third, in both markets, the increases in unit values were the largest for Sri Lankan producers and the contractions the lowest: the weighted average unit value fell one percent in exports to the US in 2005 over 2001. The average weighted unit values of both US and EU imports from Bangladesh and China were 56 percent and 18 percent (both in EU markets) and 62 percent and 39 percent (both in US markets), respectively, lower than the unit value of these imports from Sri Lanka in 2010. There was a dramatic progress: in 2001 the unit values of Chinese imports into both the EU and US were 34 percent and 10 percent higher than the unit values for imports from Bangladesh; and Sri Lanka’s edge over both China and Bangladesh increased in 2010 in comparison to 2001.

Thus, T&C producers appear to have withstood competition from developing countries with lower labor costs thanks to their success in repositioning themselves into a higher value added segment of the industry, albeit dynamic has suffered. This improvement has come at the expense of lower growth of aggregate exports to the EU and US than those recorded by Bangladesh and China: the latter, however, solely to US markets. While Sri Lanka’s EU/US-destined exports stood at 66 percent of Bangladesh’s and 15 percent of China’s exports in 2001, they fell to 39 percent and 6 percent in 2005 and further to 25 percent of Bangladesh’s and 4 percent of China’s exports in 2010.

Sri Lankan producers have been particularly successful in EU markets: they increased sales there 53 percent in 2010 over 2005: one percentage point more than China and 9 percentage points less than Bangladesh. But not so in the US markets: the value of exports—as reported in US imports statistics— was 26 percent lower in 2010 than it was in 2005. In consequence, the value of total EU/US-destined exports was only 8 percent higher in 2010 over 2005 as compared to China’s 58 percent and Bangladesh’s 64 percent increase in these exports.

It is not clear why exports to the EU grew while those to the US were falling in 2006-10. One possible explanation relates to conditions in market access and another to specific features of EU clothing markets. As for the latter, their sourcing policies are more based on established relations than amongst their US counterparts (Gibbon 2008). Preferential access to EU markets under GSP (Generalized System