The 'Buy American' anthem of President Obama. What will be its impact in the Sri Lankan apparel exports?

 

The $819 billion stimulus plan proposed by President Obama is raising debates. The 'buy American' clause proposed in the legislation urging the purchase of locally produced products is stirring up a controversy. This indicates the protectionist thinking that is slithering into US. The stimulus package also mentions that particular type of uniforms can be purchased only if they are 100% US made. This has given an alarm to the economic analysts worldwide; as this might result in an economic downturn. Earlier the same protectionist strategy practiced during the 1930's had caused a major downturn in the economy and resulted in a decline in the fabrication of society as other countries tried to retaliate.

 

Apparel Export sector of Sri Lanka:

 

The textile and apparel sector of Sri Lanka showed a steady growth since 1970s and during the 80s became a leading industry replacing the traditional rubber and tea business. Now, Sri Lanka is one of the most significant and dynamic country in the global apparel market. Garment industry in Sri Lanka retains a dominant position contribution to 40% of its industrial production. Export revenue generation of this sector comprises to be 49% of the total revenue generated.

 

Dip in the US Apparel Exports:

 

Apparel sector, being the biggest export sector of Sri Lanka contributes to 10% of the country's GDP. US is the major importer of Sri Lanka's apparels. The heat of the US recession is felt in the Sri Lankan apparel industry as well. The country's apparel sector experienced a decline of 5.5% during 2008, and is continuing with the slump. Quota removal on the Chinese exports has added to the woes of Sri Lanka. Possibilities exist, that the US consumers; to survive the credit crunch, may shift towards the purchase of man made fibre clothing which is cheaper and durable. This gives a further threat to the apparel industry in Sri Lanka.

 

Apparel Exports from Sri Lanka to US

 

The decline in the consumer demand for clothing in the US has resulted in a drop in shipments to US by 5.2%. As a result approximately 50 companies have shut down their operations, and 40,000 workers have lost their jobs. To ride the tide, many existing Sri Lankan companies had to go for a cut in their prices so as to remain competitive.