Geographical Indication, Saree and Firms’ Competitiveness

Management experts often talks about firms’ competitiveness in order to justify their survival in the market. According to them productivity enhancing firms will only survive because of cost considerations. Some of the important facets such as foreign exchange rate and certain products that correspond to a specific geographical location or origin (e.g. a town, region, or country) are unfortunately ignored here.
For example a firm may remain competitive by producing any product if the said country’s Central Bank decides to follow fixed exchange rate against a standard foreign currency. Assume trade baskets of two countries such as A and B is same. Country A follows fixed exchange rate regime and country B follows managed float regime. Now consider FoB (free on board or border price) price of a shirt is $10 in both country A and B. The condition is more interesting when country B’s currency appreciates (say from US$ 1=Tk 70 to US$ 1=Tk 60) because she follows managed float. As a result the US$ price of the shirt may be US$11.67 if this is imported from country B. In contrast country A is not affected because she follows fixed exchange rate regime. So firms in country A are still remain price competitive because they follow fixed exchange rate regime. Accordingly, firms in country B lost so-called competitiveness. This will affect job in country B in the garments sector.
Likewise, the sarees produced in Bangladesh such as Rajshahi Silk, Tangail Tant, Pabna Tant, Dhakai Jamdani Saree may be cited here. This year we have observed huge imports of sarees such as Pochampally, Kancheepuram , Mysore silk, Banarasi silk sarees and their made ups in Indian market from China. The said management expert may be tempted to argue in the light of scale economies, large scale production and so on. Imagine a situation if you see a China made Dhakai Jamadani saree in one of the retail store in Dhaka . The price will definitely be cheaper than that of Bangladeshi product due to two important considerations, one, exchange rate distortion and two, the Chinese product is machine-made.
All told, the geographical contours of global production of goods and services have seen significant shifts in recent times. This has been caused as much by forces of globalisation as by technological changes. In fact, the interaction of the two have caused an impact which in magnitude is greater than that of either alone.
While globalisation has made almost all product and factor markets global, technological change is bringing equally massive upheavals in its wake — all of which is still not fully understood. In the midst of such massive changes, the immobility of labour will perhaps continue and all our policy decisions will have to be based on this feature in the foreseeable future though even fewer services will need to be produced locally.
What was the basic idea of globalization? The answer is that the firms must explore their comparative advantage by specializing their skills. If firms in Bangladesh are specialized in producing final product in the garments sector, some firms are equally specialized in Taiwan in producing zippers. Hence the trade possibilities exist between Bangladesh and Taiwan. Firms can even upgrade their technology in their respective clusters. Think it. Why is chom chom of Porabari special? It is special because, historically, the supply of labour with relevant skill-set has been available in Porabari. In other words, labours are efficient in Porabari in producing chom chom. In the name of so called competitiveness, you cannot just change a chom chom producing worker to health technician.
Most newer technologies entering the market through newer products and processes are skill-biased in the sense that they use skilled workers more intensively than the older technology. Economists have found that adoption of new technology is affected by the relative supply of skilled workers in a country — countries having a higher supply are likely to be quicker in new technology adoption. Their overall costs are lower, so the proportional increase is greater. As a result weavers of Rajshahi Silk, Tangail Tant, Pabna Tant, Dhakai Jamdani Saree may lose their job.
Another example may be cited here in order to understand of how government miserably failed for not taking appropriate steps such as upgrading the traditional skill-set to new skill-set in accordance with the new product. About 15,000 people, both men and women, were directly involved in activities starting from manufacturing metallic utensils products to trading in Dhamrai and its neighbouring areas. The indirect job losses are even higher. They lost their jobs because of the introduction of low cost aluminum and plastic products. They are now the candidates for poverty in this region.
Take the cases of women labour such as Jariman bibi and Batasi in this context. They were indirectly employed in this industry. The loss of their job however, implied more responsibilities for Batasi and Jariman from household management to reproduction. Later, they started working as maids. When they returned late, the husbands abused them as prostitutes and beat them. The advocates of firms’ competitiveness should understand this aspect. Did you think about the pains when the policy entrepreneurs decide to destroy Adamjee?
The above case is a government failure case. The government now can play as a biggest easer in the saree sector. In the short run, government can form a statutory body for preparing the saree industry for globalization in the WTO regime. As it is, a geographical indication (GI) is a name or sign used on certain products which corresponds to a specific geographical location or origin (e.g. a town, region, or country). GI is a part of the Trade Related Intellectual Property Rights (TRIPS) agreement signed under the WTO frame-work. GIs are defined as indications, which identify a good as originating in the territory and having specific attributes. It confers legal protection to the products, safeguarding against unauthorised use by other countries. Accordingly government can help the weavers of Rajshahi Silk, Tangail Tant, Pabna Tant, Dhakai Jamdani Saree to register under GI system a form of Intellectual Property Rights protection.
People are now worried in this sector. A good government actually creates condition for level playing field before facing external competition. In the process they build trust rather than destroying it.