Post-Covid19: Can the Sri Lankan apparel sector benefit from US-China decoupling? A statistical analysis
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The “US-China decoupling” has received much attention with the deterioration of US-China diplomatic and economic ties under the Trump administration. US firms seeking to reduce their reliance on China offers an economic opportunity for rest of the world to become an alternative supplier to products previously supplied by China. This paper assesses the extent to which such an economic opportunity is present in the US apparel market and Sri Lanka’s potential to benefit from this opportunity. The value (in current USD terms) of imports of apparel from China to the US started declining since 2015. The paper classifies a product as showing early signs of being diverted away from China if imports from China increased during 2011-2014, but declined during 2015-2019, while imports from the rest of the world increased. Of these products, potential products for Sri Lanka are identified based on the country’s capacity to supply the US market based on value of current imports into US from Sri Lanka and the rate of growth in imports. The analysis identifies 37 apparel products showing early signs of diversion and Sri Lanka has capacity to supply 21 of these products. Among the 21 products, Sri Lanka’s potential to benefit from US-China decoupling, is ‘high’ in nine products, ‘medium’ in seven and ‘low’ in the rest of the products. The research finds preferential access to the US market to be less important in becoming a preferred alternative sourcing destination. Countries such as Vietnam, Bangladesh, Cambodia, which do not have preferential access to the US market, stand out as the key competitors of Sri Lanka in the 21 potential products.
15p. This is a book chapter published in “COVID 19: Impact, Mitigation, Opportunities and Building Resilience "From Adversity to Serendipity", Perspectives of global relevance based on research, experience and successes in combating COVID-19 in Sri Lanka” by the National Science Foundation, Sri Lanka in 2021.
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