Asia's Race to Capture Post-MFA Markets: A Snapshot of Labor Standards, Compliance, and Impacts on Competitiveness

Labor regulations designed to protect workers, promote workplace equality, and improve working conditions achieve social objectives and affect international competitiveness. Considering these dual outcomes has taken on added urgency as Asian economies adjust to an increase in global competition in textiles and clothing following the end of the Multi-Fiber Agreement, with large projected gains for China and potential losses for other Asian producers. Countries that stand to lose from the MFA phase-out face China’s low cost and high quality production. This paper shows that China’s competitive threat lies in its extremely poor compliance record with its own and international labor standards. Yet empirical evidence generally supports the argument that the costs of raising and enforcing labor standards are offset by dynamic efficiency gains and macroeconomic effects. This evidence supports the case for Asian economies to pursue the “high road” in their race to capture post-MFA markets in textiles and clothing.