Where Trade and Industrial Policy Converge: How Developing Countries Can Utilize Trade Preferences to Generate Sustainable, Local Growth in the Garment Sector

Abstract

The rise of the textile and apparel global value chains and trade preferences has created unprecedented opportunities for developing countries to participate in trade in textiles and apparel. Yet, while some countries have managed to build backward linkages and engage in industrial upgrad­ing, others remain locked in the lower echelons of the textile and apparel value chain. This Article demonstrates that trade preferences and rules of origin alone do not explain coun­tries' diverging experiences in the apparel value chain. Rather, a country's industrial policy is crucial in determining sustainable growth: is it solely export-oriented, or does it balance promoting growth of Foreign Direct Investment with encouraging the development of a parallel domestic industry? This Article demonstrates the key role of industrial policy by engaging in a qualitative analysis of the experiences of six developing countries in integrating into the textile and apparel global value chain: Lesotho, Kenya, Madagascar, Sri Lanka, Bangladesh, and Cambodia. Based on the successes and the failures of the countries studied, this Article ends by providing specific policy options for a balanced industrial policy, at a national, regional and international level.

Keywords: garment industry, rules of origin, industrial policy, sustainable development