Impact of trade openness in labour intensive full package manufacturing industries and its fragmented value chain

This paper adopts a theoretical approach based on certain trade statistics ofBangladesh and existing literature to examine the relationship between trade openness andeconomic development in the case where fragmented value chain based labour intensivebuyer driven manufacturing industry is dominant, taking ready-made garments sector ofBangladesh as an example. Despite there exists no uniform conclusion in the literature thattrade openness will always lead to positive development outcome in every context, this paperargues that an open trade economy with comparative advantage in labour supply willalways be benefited from the changing nature of global production system that relies moreon fragmented value chain. The study finds that in the case of Bangladesh, a shift in policyregime towards an open trade economy from an infant industry protection policy hasbrought significant positive development outcomes not only for the country’s economy butalso for the society as a whole as it flourished the development of buyer driven labourintensive readymade garments industry in Bangladesh. Both the static and dynamic gainsfrom trade openness in the country has been substantial in the form of generatingemployment and export revenue, increasing investments, reducing poverty, raisingcompetitiveness in the global market, promoting female labour force participation in theeconomy and in many other ways. As such, this paper advocates that further liberalization oftrade policies and integrating in the global production value chain should be the primepolicy objective of the government in order to establish Bangladesh as a global productionhub in the future.