WORLD-TRADE IN APPAREL - AN ANALYSIS OF TRADE-FLOWS USING THE GRAVITYMODEL

Although apparel trade is highly regulated, trade flows conform to pat terns predicted from a simple gravity model centered on distance, size , and cost variables. For low-value apparel products, which tend to co mpete on price, labor costs were a significant determinant of trade fl ows, causing production to be dispersed to low-wage areas. For high-va lue products, which tend to compete on quality, fashion, and quick res ponse to changing demand conditions, production for export tended to t ake place near fabric suppliers and final markets, which tend to be in higher-wage areas. Apparel production cannot be characterized exclusi vely according to the New International Division of Labor (NIDL) hypot hesis or by other explanations based on comparative factor costs. Prox imity to markets and suppliers often outweighs the importance of labor costs, particularly for high-end apparel production.