Analysis of the global textile and clothing trade : an empirical approach

Abstract

This dissertation employs the gravity trade model to analyze the development of textile & clothing (T & C) trade patterns among countries. Until recently, most studies reported in literature have applied the gravity trade model to aggregated data, particularly with cross-sectional or time-series data estimation techniques for analyzing trading statistics. However, in this dissertation, the conventional gravity trade model is revised for analyzing T & C products separately. Also, the panel data estimation approach is utilized to determine the factors affecting global T & C trade flows. Results of regression analysis show that the modified gravity trade model can be adopted to identify the markets for T & C products. More importantly, this modified gravity model supports the attributes of the conventional one. Based on this standpoint, the study first analyses and characterizes the development of global T & C trade flows since the 1950s. The illustrated scenario is a 'shift of gravity' for T & C exporters to divert from North America and Western Europe to Japan in the 1950s and early 1960s. The second shift is from Japan to the Asian Big Three, namely Hong Kong, Taiwan and South Korea, which dominated global T & C exports in the 1970s and early 1980s. In the late 1980s and entering the 1990s, there was a third migration from the Asian Big Three to other Asian developing economies. In the 1980s, production was not only relocated predominantly to mainland China, but also to several other Southeast Asian countries, including Indonesia, Thailand, Malaysia, the Philippines and Sri Lanka. In the 1990s, new suppliers included South Asian and Latin American countries. Secondly, the impacts of country-specific, social and political determinants as well as economic indicators and cultural factors that related to T & C trade flows are investigated from 3 stepwise levels. These 3 include: (1) national level; Hong Kong T & C exports and her top ten trading partners from 1990 to 2008 (2) regional level; Asian exporters and the EU-15, US and Japan T & C markets from 2000-2008, and (3) global level; top fifteen T & C exporters/importers and their top 10 trading partners from 1980 to 2008. The gravity trade model is applied to explain the variations in the T & C trade flows with the three levels. The results reveal that the impacts of ascribed factors on T & C trade have the expected signs and are statistically significant. Since past gravity model studies were only centered on regional investigations and general commodities but were not T & C specific. It is hoped that the present research has made a significant contribution in filling this knowledge gap and offered a valuable insight into the principal determinants that have stimulated the national, regional and global level on T & C trade flow. The model is then subject to panel data analysis to investigate the fixed effects over time for each scenario in order to provide an exhaustive analysis and obtain a conscientious study of T & C trade. It can delineate explores the dynamics of change over time and enlarges the quality and quantity of data manipulation in techniques that would be impossible simply by cross sectional or time series estimation alone. Moreover, a panel data approach makes it possible to capture the relevant relationships among variables over a longer time and enable monitoring of the possible unobservable trading-partner-pair individual effects. The study reveals that the fixed effect model is more plausible and provides more robust results than the random effects based on the Hausman test. Finally, the endogeneity of Chinese T & C exports are explained by applying instrumental variables with country fixed effects in the gravity trade model in order to examine the possibilities and ways that the performance and growth of China's T & C exports had displaced that of the other selected Asian economies over the period of 1990 to 2008. It is identified that the negative impact of China's emergence in T & C trade on other selected Asian countries is significant. Furthermore, the result shows that the displacement effect varies across Asian countries and is more pronounced in the low-income compared with the high-income Asian countries. Therefore, it can be concluded that the export performances of China's neighboring Asian countries are basically affected by the surge of China's T & C exports.