Date:28/04/2005 URL: http://www.thehindubusinessline.com/2005/04/28/stories/2005042800800700.htm

Back `Asia to dominate cotton textile production, consumption'

Our Bureau

Mumbai , April 27

WORLD textile and cotton markets are undergoing significant changes following the elimination of quotas and the phase-out of the Multi-Fibre Agreement (MFA) and other forces.

However, far from being uniform, the impact of these would be felt differently in different countries and regions. Interestingly, while removal of quotas is likely to leave the level of worldwide consumption littler changed, the geography of textile production is poised to shift.

With reduction in prices, developed country consumers will consume more cotton products and developing country textile mills will consume more cotton fibre, according to a study by the Economic Research Service of the US Department of Agriculture.

Along with China, India is seen as a major driver of demand for clothing because of income growth and population increase.

Products purchased by Indian consumers account for more cotton than the products purchased in almost any other country. Domestic policies in India were long biased against manmade fibres, ensuring consumers largely purchased cotton products.

Market liberalisation during the 1990s removed some of this bias, contributing to a declining share off or cotton products in household consumption. More recently, cotton products' share of household demand has stabilised.

The country's economy and consumer spending are expected to continue rising in 2005 and beyond, and consumers appear to have responded positively to recent industry efforts to promote cotton products, the report noted adding that the end of MFA quotas could, however, result in higher clothing prices in India, just as in China, somewhat dampening demand increases, although market segmentation may minimise this in the short run.

The geographic distribution of industrial production has and will continue to change. The economics of comparative advantage favours production of clothing in lower income countries.

Asia is set to become the major hub for textile and clothing production apart from being the region with high consumption growth potential.

Investment in textile production has grown significantly in China as well as in India and Pakistan.

Meanwhile, disinvestment has occurred in North America, European Union and higher income East Asia.

These two trends are clearly linked. The US textile plants have been shutdown, disassembled and shipped to a number of countries, most prominently China, India and Pakistan, the report remarked.