Why was the shift to a free trade regime in the textile industry good for Bangladesh?
The free trade regime favors Bangladesh’s textile business as it creates room for competition with other industrial giants. This competition enables the nation to put up its textile production process and seek methods of gaining a competitive edge over others. One such method is selling its products at a relatively low cost, making huge sales by capturing the market.
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Besides, free trade is beneficial as it allows Bangladesh to sell its products without government interference. Besides, since its products are cheap, it allows for a comparative advantage where consumers prefer cheap goods to others and use cheap labor and make huge returns.
Who benefits when retailers in the United States source textiles from low-wage countries such as Bangladesh?
When the United States source cheap goods from Bangladesh, both nations benefit. One of the benefits that the US has is cutting down operating expenses through exploiting cost arbitrage.
What international trade theories best explain the rise of Bangladesh as a textile exporting powerhouse?
Absolute advantage theory
Absolute advantage theory points towards Bangladesh’s ability to use limited resources and technology to produce textile goods more efficiently than other nations. Besides, individuals in Bangladesh can improve their living standards due to cheap goods.
Comparative advantage theory
The theory points towards Bangladesh’s ability to produce more goods efficiently with cheap labor and still supply and sell it cheaply. Bangladesh was able to overcome the financial crisis of 2008 due to its production and sale of cheap products when they were needed most.
How secure is Bangladesh’s textile industry from foreign competition?
The textile industry in Bangladesh has established itself as a major threat to other competing nations dealing with textile products. However, its industry has been affected by the nation’s poor infrastructure. Persistent power outages from underinvested power distribution systems, deprived ports, and roads are some of the areas that make the industry insecure.