Assessing the displacement effect of exports with gravity trade model: China’s textile and clothing case and OBOR implications

Abstract

This paper employs the gravity model to investigate how the growth of China's textile and clothing (T&C) exports is displacing the exports of other Asian developing countries over the 1990-2015 period. Aggregate analyses were undertaken, and the endogeneity of Chinese exports were accounted by applying instrumental variables with country fixed effects. It was found that there was a negative impact of China's emergence on T&C exports on other Asian developing countries. We further explored whether such displacement effect varies across Asian countries and the results showed that a more pronounced effect was found in low-income countries than high-income ones. Our findings suggest that the export competitiveness of China's neighbors, i.e. both more and less developed Asian countries, are affected by the emergence of China in T&C Trade. The implications of China's One Belt, One Road initiative are also discussed.

The United States’ Clothing Imports from Asian Countries along the Belt and Road: An Extended Gravity Trade Model with Application of Artificial Neural Network

“…Among Asian countries, China has been a leading clothing manufacturer and exporter since the nineties [10]. However, rising production costs and labor shortages in China have led many clothing manufacturers to relocate their labor-intensive production facilities from China to other, lower-cost, countries in the region such as Vietnam [11], Bangladesh [12], Cambodia [13], and the Philippines [14].…”

Looking Back to Look Forward: Setting Future Research Agenda for International Business in Textiles and Clothing Industry

“…Of those studies included in Table 1, thirteen studies (e.g. Chan and Au 2007;Au and Chan 2008;Chan et al 2008;Tsang and Au 2008;Au and Chan 2010;Chi and Kilduff 2010;Dijankov et al 2010;Lau and Bilgin 2010;Lau et al 2017) were found to focus on bilateral trade for the textiles and/or clothing sector.…”

“…Variables used in T&C studies Chan and Au (2007) GDP, PCGDP, distance, population growth, exchange rate, ASEAN Au an GDP, PDGDP. distance, population growth, exchange rate, labour costs, female, value added, EU, NAFTA Chan et al (2008) GDP, PCGDP, distance, population growth, exchange rate, euro currency, WTO member Tsang and Au (2008) Total production, total consumption, labour cost, distance, NAFTA Au and Chan (2010) GDP, PCGDP, exchange rate, population growth, distance, labour costs, female, EU, NAFTA, Chi and Kilduff (2010) GDP, PCGDP, distance, population, population growth, infrastructure degree, country adjacency, common language, literacy, tariffs, APEC, CBI, NAFTA, WTO Djankov et al (2010) Time, export time, GDP, PCGDP, distance, contiguity, language, colony, landlocked Lau and Bilgin (2010) Import quantity, import price, GDP Lee et al (2014) Apparel supply, apparel demand, apparel import, distance, fashion capital Orkan Özer (2014) GNP, Population, distance, exchange rate, EU, Muslim country Macanas (2015) GDP, population, distance, PCGDP, contiguity, landlocked, island, common language, coloniser, time difference, colony, common religion, AFTA Lau et al (2017) GDP, PCGDP, distance, population, exchange rate, labour costs, female, value added, EU, USA, Chan et al (2018) GDP, PCGDP, distance, population, exchange rate, value added, labour costs, female, LPI…”

“…While existing studies have covered the effect of extensive economic factors, they tend to overlook the social and environmental aspects of T&C manufacturing and trade. Chan and Au (2007), and Lau et al (2017) used a dummy variable for the number of women in the workforce of foreign manufacturing firms. Although labour cost can apply to all industry-sector analysis, it was not a variable considered in any of the other studies reviewed.…”

“…This study presents a review of the literature on the trade gravity model and factors influential to bilateral trade at both macro (aggregate) and micro (sectoral) levels. The latter is illustrated using a case study of China's textiles and clothing (T&C) manufacturing and trade, given China's role as the world's largest T&C exporter since 1995 (Lau et al 2017). Global T&C trade in 2017 was valued at US$ 692 billion and US570 billion respectively (Comtrade 2019).…”