Political crisis and suspension of duty-free access in Madagascar: assessment of impacts on the garment industry

Takahiro Fukunishi

No 422, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: The export-oriented garment industry in Madagascar has displayed robust growth, thus both contributing to the economy and creating formal employment opportunities. However, it experienced a critical situation after the political turmoil that occurred in 2009. Our investigation using the trade data demonstrates that suspension of duty-free access to the US market (AGOA) resulting from the turmoil had a greater impact on exports, 64%–78% reduction, than the turmoil itself. Our original factory-level data demonstrates that AGOA suspension increased the probability of closure by 57.8% for the factories supplying exclusively to US market, and reduced 6405 jobs for low-skilled positions during the post turmoil period. The factory-level adverse impacts are much less than those on export value at the industry level because of the maintained duty-free access to EU, which has provided an alternative market. It suggests that if EU also had cancelled duty-free access, adverse impacts would have been enormous. Given the general pattern of comparative advantage in low-income countries, unplanned cancellation of duty-free access for them hurts labor-intensive industries and low-skilled workers.

Keywords: Madagascar; Apparel industry; Exports; Politics; Employment; Manufacturing Exports; Garment Industry; Political Crisis; Duty-free Access (search for similar items in EconPapers)
JEL-codes: D21 F14 F16 J63 L67 O55 (search for similar items in EconPapers)
Date: 2013-07-01
New Economics Papers: this item is included in nep-afr and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 422. 2013-07-01

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