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Dhaka Tribune

Denim Export To US: Competing countries fare better than Bangladesh

The protracted US-China trade war has also become a boon for the economies, as import orders from the US are diverting to those countries more than what was expected for Bangladesh

Update : 31 Oct 2019, 10:01 PM

Denim exporting nations like Vietnam, Pakistan Cambodia and Mexico are performing much better than their rival Bangladesh in the huge denim  market in the US.

The improvement in doing business index by the emerging economies concerned, coupled with their currencies being devalued, have helped the competing economies surpass Bangladesh handsomely, economists and industrialists state.

The protracted US-China trade war has also become a boon for the economies, as import orders from the US are diverting to those countries more than what was expected for Bangladesh.

Bangladesh, being the second largest exporter of apparel goods in the US, it was expected that the country would gain more from the trade friction in capturing market share of denim products. But its competitors—Vietnam and Pakistan-- gained the highest growth in the first eight months of the current year.

According to the US Office of Textiles and Apparel (OTEXA) data, Bangladesh’s denim exports to US market saw a 5.42% rise to $573.27 million during January-August period of 2019. It was $544 million during the same period last year.

Meanwhile, US total imports of denim products from the global markets recorded a 4.55% rise to $3.9 billion during the period of January-August.

Who gains most 

As an exporting country, Vietnam has gained the most from the US -China trade war because of its capacity to capture business derived from the diverted trade.

Vietnam, a long competitor of Bangladesh in US market, has earned $346.27 million from exporting denim products during the period, up by 34.43% from the same period of last year.

On the other hand, overall export earnings from Vietnam to the US have jumped by 33%, in contrast to only 13% growth by Bangladesh until August.

Pakistan has earned $262 million from denim, up by 14.20% from a year earlier.

Mexico, the second largest exporter of denim goods in the US, has seen an 8.80% increase in export, from $793.22 million to $863 million. 

China, the largest denim product exporter to the global markets, saw a 6.93% fall to $856.19 million, down from $920 million in the same period last year.

In 2018, the country exported denim goods worth $566.39 million to the US, up from $507 million in the previous year. 

What restricts Bangladesh to gain more

“Bangladesh’s denim product exports to the US performed better than last year due to the US-China trade war. But the country has so far been able only to gain a very insignificant portion of market derived from the trade conflict opportunity, while it competitors such as Vietnam and Cambodia reaped the most benefits,” Sharif Zahir,Managing Director of Ananta Denim Technology Ltd, has told Dhaka Tribune. 

Most of the diverted trade is going to Vietnam and Cambodia as the US retailers and investors feel comfortable due to their shorter lead times and better business enlivenment the countries have been offering to US importers, says Zahir, also a director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

Buyers are not willing to come to Bangladesh as the ease of doing business status of the country still lags behind to its competing countries, undermining the opportunity, Zahir adds.

“ Although Bangladesh saw an eight point jump in ease of doing business index in the latest World Bank’s ranking, the improvement is not enough to attract them,”  Zahir maintains.

According to Asian Development Outlook 2019, escalation of ongoing US-China trade conflicts will contribute 0.23% to Bangladesh GDP by next one to two years riding on exports, especially from apparel and leather goods.

How to gain from tariff tension   

In reaping the most benefits from the trade tension, experts and manufacturers have called for trade liberalization, product diversification and making the exchange rate competitive.

“Vietnam and Pakistan gained as they have devalued their currencies, while the appreciation of Taka against US dollar is eroding Bangladesh’s competitiveness in the global markets,” Zahid Hussain, a consultant at the World Bank Dhaka office, has told Dhaka Tribune. 

Even China has also devalued their currency to ward off the negative tariff implication imposed by the US government so that the exporters can remain competitive in the global markets, he adds.

As an immediate measure, he suggested making the exchange rate competitive and removing regulatory complexity in making the businesses more competitive and nvenient to both local and overseas investors, adds Zahid. 

Vietnam has also gained the most because of its readiness to welcome the redirected trade as the country has diversified products that resulted in receiving a large amount of FDI relocated from China, he says further.

Bangladesh has to offer better incentive such as quicker services by bringing about regulatory reforms and through improving infrastructure to attract FDI,” Zahid asserts.

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