Revealed Comparative Advantage and Competitiveness for RMG Industry of Bangladesh: A Pre and Post US– GSP Suspension Analysis

This study investigates the Revealed Comparative Advantage (RCA) analysis for the ready-made garments (RMG) exports of Bangladesh and major competing countries i.e. India, Sri Lanka, Vietnam, Pakistan, China, Cambodia and Turkey. The purpose is to explore the impact assessment on the US-GSP suspension for Bangladesh as well as how US-GSP suspension influences Bangladesh’s manufacturing sectors and export of RMG goods. The RCA analyzes the extent of export competition between Bangladesh and its major competitors. For this reason, the study applies the Balassa Index. It argues that the degree of competition among major competitors intensifies with the implementation of the US-GSP requirements to get the GSP facilities to US market. After the suspension of the US–GSP, Bangladesh’s export share in the US market decreased from 6.01to 5.68 percent in 2014, amounting US$ 134.64 million. For the other destination, the EU–market share is remained steady for Bangladesh’s RMG exports. This indicates that the US–GSP status is important to enhance the positive image and increase trade volume of the world market. This paper contributes to the literature by investigating whether the US-GSP has any significant influence on the trade flow of Bangladesh. This study explores Bangladesh’s comparative advantage in the top ten RMG products amongst the major competing countries. Further, it also analyzes the RCA for the US and EU markets covering the pre and post US–GSP suspension periods and concludes that Bangladesh had a greater comparative advantage in the EU market compared to the US market than its competitors for the top ten RMG products during the period covering 2012 to 2015.