Trade: Hanging by a Thread

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Many South Asian countries say they are fighting unfair competition. Bangladeshi exporter Faruq, like many others, believes that China manipulates its currency to keep it undervalued against the U.S. dollar, thereby making its exports cheaper than Bangladesh's. But even if its currency rose against the dollar, China would still have tremendous advantages, as shown by data compiled in an International Monetary Fund working paper. The average Chinese garment-industry worker was paid $1,600 in 2001, more than double his Indian counterpart's wage and four times the money earned by the Bangladeshi. Despite the higher pay, the study found, the Chinese worker's productivity was significantly higher, adding $5,000 a year in value to the garments he processed, compared with $2,600 for his Indian equivalent and $900 for the Bangladeshi. The difference reflects China's greater investment in modern manufacturing equipment and infrastructure like transportation.

South Asian nations may yet get a reprieve if the U.S. textile industry persuades Washington to restrict clothing imports from China for a few more years. Several Asian governments are lobbying the U.S. as well. Without special treatment, garment industries in countries like Nepal are likely to become a free-trade casualty. Says exporter Pokhrel: "Death is the only prediction we can make." --With reporting by Chaim Estulin/Hong Kong, Yubaraj Ghimire/Kathmandu, Ghulam Hasnain/Karachi, Saleem Samad/ Dhaka and Lasantha Wickrematunge/Colombo