The Demo Site

During the colonial period, when East Bengal was used by the British to produce primary goods for processing elsewhere, raw jute was the main product. Calcutta became the manufacturing center where jute was transformed into twine and rope, sacking material, and carpet backing. The partition of British India in 1947 put an international boundary between the source of the basic commodity and the manufacturing center and imposed a great burden on Pakistan to compensate for the disruption of the industry that was its greatest source of foreign earnings. Between 1947 and 1971 jute mills were constructed in East Pakistan, but industrialization proceeded slowly.

In the 1960s, petroleum-based synthetics entered the market, competing with jute for practically all of its uses. The upheavals culminating in the emergence of independent Bangladesh drove many traditional buyers of jute to shift to synthetics. World trade in jute and jute goods declined absolutely from 1.8 million tons in 1970 to 1.5 million tons in 1982. Despite some major year-to-year swings, prices fell precipitously through the mid-1980s. Prices were too low to cover the costs of production, but the government nonetheless deemed it essential to subsidize growers and industry and ensure the continued existence of as large a foreign market as possible.

There have been enormous year-to-year fluctuations both of producer prices and of production. An extreme example occurred between FY 1984 and FY 1986. Carry-over stocks had been run down since the previous production surge in FY 1980, and serious floods in 1984 resulted in unanticipated production losses. The price doubled to US$600 per ton at the export level, which triggered the traditional response of farmers; they planted much more of their land in jute, and between one year and the next production rose more than 50 percent, from 5.1 million bales in FY 1985 to 8.6 million bales the following year. History proved true to itself yet again when export prices then fell by 50 percent at the export level and by more than 30 percent at the farm-gate level.

When the farm-gate price for jute is 50 percent higher than the price for rice, farmers respond by planting more land in jute at the expense of rice. With the expansion of irrigation facilities in the 1980s, the economic incentives to stick with rice have increased, but there may be scope for increasing jute production by substituting it for the low-yield broadcast auks rice grown on unrelated land during the same season as jute.

High as Bangladesh's share of world trade has been--in 1985 it amounted to 77 percent of all raw jute trade and 45 percent of jute goods--there are realistic possibilities for expanding the share still further. The World Bank has estimated that Bangladesh's share could rise to 84 percent for raw jute and 55 percent for manufactures. Jute production appeared in the late 1980s to be an essential part of the long-term development plan because, for all the troubles and struggles associated with its planting and marketing, no alternative activity offered any promise of being more profitable.

Of thirty major primary commodities traded internationally, only about six have as much price and supply instability as jute. In FY 1986 export sales remained low despite a 35-percent decline in export prices; the fall in world oil prices had also resulted in declines in the prices of polypropylene substitutes for jute as well, and most buyers that had switched to synthetics chose not to return to jute. In the late 1980s, there was nothing in the offing to arrest the trend of several decades of decreasing global demand for jute and declines in the value of jute relative to the goods Bangladesh must import to meet the basic needs of a desperately poor economy.

Some hope for a better future has been placed in cooperation among jute-producing countries through the International Jute Organization, based in Dhaka. Member countries in 1988 were the producing countries of Bangladesh, Bhutan, China, India, Nepal, and Thailand and more than twenty consuming countries, including the United States. The goals of the fledgling International Jute Organization were appropriately modest to begin with, centering on better dissemination of basic information, coordination of agricultural and industrial research and of economic studies, and steps toward coordination of marketing. It remained to be seen in mid-1988 whether this poorly financed new organization, representing the first feeble effort at a coordinated approach to the problems of jute, would be effective in arresting its long decline as an important international commodity.

The nature of competition in the US and EU market

Bangladesh faces tough competition both in us and EU markets. Mention below some of the relatively strong competitions. We have already know that Mexico has become a stronger competitor of Bangladesh in us markets both in knit wear (category H S 61) and woven wear.

(Category HS62) China is a very close competitor of Bangladesh in category 35. (Cotton pajamas). During 1997-99 its average share in the US market (import) was about 5.6% where in that of Bangladesh was 7.17% China creates competitive pressure for Bangladesh in many category including category 363 (cotton terry towels). Category 237(play shirts) category 334(M/B cotton pants), category 350 (cotton bath robs) cat 634 (M/B coats and jackets MMF)Cat 640(W/G pants MMF)category 369(cotton made ups)category 335(W/G cotton coats and jackets) category 341(W/G cotton woven blouses)category 348(W/G cotton pants)category 359(Overalls and other apparels) and category 647(M/B pants MMF)

Hong Kong’s exports of product category 334(men’s and boy’s coat and jacket) compete

With that Bangladesh at the lower end market. HK also competes with Bangladesh in product category 340 (M/B cotton shirt) category 345 (cotton sweater) and category 347 (M/B cotton pants). It may be mentioned that the average unit prices of apparels from Hong Kong are India; Taiwan developed its RMG industry in the 1950 using imported cotton and other raw materials to serve mainly domestic needs.

The industry was made export oriented by the mid sixties because it does not grow cotton. Taiwan has focused on the establishment of man made fibre and assigned high priority to the establishment of backward linkage industries. Taiwan was one of the leading exporters to the US and EU markets during 1980. But it quickly lost ground.

The South Korean apparel industry went though similar cycle as did Japan’s the industry grew rapidly. By 1970 textile and apparel accounted for 41% of Korea’s total exports Korea was the seventh largest supplier of apparels in the US market in 1999, As their exports encountered difficulties in the global markets, Korean garments produces moved to Indonesia, Philippines, Guatemala, Bangladesh and other countries.