Publication - Working Paper
World trade was severely disrupted by the global recession of 2008-09 with exports of most countries declining sharply. The economies of both of the major export markets of the world, the USA and the EU, shrank very substantially. This reduced their aggregate domestic expenditure, which in turn reduced their import demand for goods from the rest of the world. Curiously the export of Bangladesh, especially the export of ready made garments, which constitute more than three-quarters of the total export of the country, did not decrease much despite the fact that most of it is sold to the EU and the USA. It is argued that this favourable outcome is due to two factors. First, the exports of Bangladesh are almost entirely consumer goods whose demand does not fall as sharply as income; and second, Bangladesh has acquired a competitive edge in the world apparel market. Since most other competing countries did not fare as well during the recession, the share of Bangladesh in the total ready made garments import of the EU and the USA increased significantly. Although the impact of the recession has not fully played out, it seems certain that Bangladesh would emerge out of the recession as a more competitive economy than most of its rivals due to its intrinsic comparative advantage in ready made garments manufacturing. Recent export data that show an explosive growth of ready made garments export confirm that Bangladesh is consolidating its position in the world market.