Thai textile export quota allocation system
Date
1990-01
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Abstract
The Thai textile industry has developed from import substitution to export expansion through government promoting investment and foreign investment since the late of 1980s. It has played an important role in Thai economy as the leader in export earnings, value-added, and a major source of high employment.
In view of major export earnings, Thai textile exports have faced protectionism in the developed importing countries, particularly the United States and Europe, in t he form of quota restriction. This thesis attempts to investigate the effect of quota restriction under the MFA on total factor productivity, diversification of Thai textile exports, and quota utilization rates in Thai textile industry.
In order to study those effects, the Multi-Fiber Arrangement (MFA) and bilateral agreements Thailand made with the US, EC, Sweden, Norway, Canada, Finland, and Austria markets are reviewed. In addition, quota restriction had caused exporting countries to establish quota allocation distribution systems. Therefore, the study was also made on Thai textile quota distribution rules and examine the allocation systems in Hong Kong, Korea and other ASEAN countries. The terms of quota restriction under the MFA have allowed textile exports from developing countries, including Thailand, to penetrate through restrained markets under particular growth rate. Therefore, it is supposed that quota restriction might affect total factor productivity (TFP) of Thai textile exports after being restricted by that export constraint, when comparing to the TFP before the implementation of the quota restriction. Also, the quota may encourage the restricted exporting countries like Thailand, to move into less or non restrained categories and to tap new non-restrained market. In other words, it may induced diversification effect.
With the trend of more difficulties in the expansion of Thai textile exports to foreign markets (especially the US and EC) due to high quota utilization rates; increased protectionism, particularly in the US market, high competition from other exporting countries, both dominant and lower-cost ones; there should be more emphasis on diversification of Thai textile exports to non-quota markets and products, and to higher value-added products through upgrading, so that those problems can be overcome and Thai textile export earnings can be increased. Also, more efforts should be made in using the quota which is still underutilized. Finally, an improvement in technical progress, advanced knowledge and investment in human capital are required in order to increase productivity and export earnings of Thai textile industry.