Reports
Discussion Papers
No.422 Political Crisis and Suspension of Duty-free Access in Madagascar: Assessment of Impacts on the Garment Industry
July 2013 (revised in August 2013)
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:
Manufacturing
Exports,
Garment
Industry,
Political
Crisis,
Duty-free
Access,
Employment,
Madagascar
JEL
classification:
D21,
F14,
F16,
J63,
L67,
O55
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.