ABSTRACT
High degrees of economic transactions within the South vis-à-vis those between North and South countries was long described as the ‘flight of the chicken’ – one that is always promising, but failing to materialize. The reasons behind this observed trend, naturally eclectic, have been discussed in various ways. Among these however, the lack of intra-industry trade was considered reasonably potent in explaining why the North–South interactions are still overwhelmingly important. Differences in production technologies, according to the Heckscher–Ohlin–Ricardo model of trade (1995 for APEC region and so on) or imperfect competition à la Krugman (1980, 1981), provide strong grounds for intra-industry trade, and yet smaller domestic markets and other institutional barriers did not allow these to successfully explain intra-South trade in goods. In more recent times, however, there has been a significant growth in the flow of goods and services within the countries of the South, mainly owing to the benefits of globalization reaching large masses in the South. What we argue in this chapter is that certain changes, ushered in with regime shifts in the WTO policies, have caused to bring the South countries closer through competition than they ever were. With regard to such exogenous policy shifts we shall invoke the well-known Multi-Fibre Arrangement (henceforth, MFA) in clothing and textile and its slow phasing out over a period of ten years. For a large number of Asian countries that traditionally enjoyed high comparative advantages in the production of these commodities, the demise of the MFA brought in varied and significant economic changes. This chapter traces the impact of MFA withdrawal for a handful of Asian countries and reflects on the implications for the global South. Although much has been written on the role of MFA and its implications, a cross-country analysis of the nature, as the one developed here, is not yet available in the current literature.
