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

 

The $819 billion stimulus plan proposedby President Obama is raising debates. The 'buy American' clause proposed inthe legislation urging the purchase of locally produced products is stirring upa controversy. This indicates the protectionist thinking that is slitheringinto US. The stimulus package also mentions that particular type of uniformscan be purchased only if they are 100% US made. This has given an alarm to theeconomic analysts worldwide; as this might result in an economic downturn.Earlier the same protectionist strategy practiced during the 1930's had causeda major downturn in the economy and resulted in a decline in the fabrication ofsociety 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 aleading 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 comprisesto be 49% of the total revenue generated.

 

Dip in the US Apparel Exports:

 

Apparel sector, being the biggestexport sector of Sri Lanka contributes to 10% of the country's GDP. US is themajor 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 apparelsector experienced a decline of 5.5% during 2008, and is continuing with theslump. 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, mayshift towards the purchase of man made fibre clothing which is cheaper anddurable. This gives a further threat to the apparel industry in Sri Lanka.

 

Apparel Exportsfrom Sri Lanka to US


 

The decline in the consumerdemand for clothing in the US has resulted in a drop in shipments to US by5.2%. 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 SriLankan companies had to go for a cut in their prices so as to remaincompetitive.

 

 

Stimulus Package:

 

Sri Lanka recently declared a stimulus package of 5% for the exporters, those who equal or exceed quarterly exports, and also maintain the employment at the same level. Maintaining a successful balance between value and employment is quite a tough challenge in the current situation, where companies are opting for lay-offs.

 

Globalization generates positive multiplier effects. Obama's reign may be a turning point in the U.S. trade policy, making the industry critics to contemplate and debate about the impact of the billion dollar global apparel and textile trade. While the rest of the world looks at US for an economic turnaround, Sri Lankan apparel industry faces the key challenge of losing its competitive edge in the apparel exports due to the policies of the US Government.

 

References:

 

  1. &sec=article&uinfo=<%=server.URLEncode(1862)%>" target="_blank">http://www.nation.lk
  2. &sec=article&uinfo=<%=server.URLEncode(1862)%>" target="_blank">http://www.portfolio.com
  3. &sec=article&uinfo=<%=server.URLEncode(1862)%>" target="_blank">http://srilanka-apparel.com