Globalization in the Textile and Apparel Industry: Trade, Barriers, and Partners

Walk into a store in Mumbai and pick up a cotton t-shirt. The fibre may have been grown in Gujarat, spun into yarn in Tamil Nadu, woven into fabric in Surat, dyed in Ludhiana, stitched into a garment in Bangladesh, and finally sold under a European brand name. This chain of countries working together on a single product is globalization at work, and it is the backbone of how the modern textile and apparel industry functions. For anyone studying retail and sourcing, understanding this concept is the first step toward understanding everything else in global trade.

What globalization means for the textile and apparel trade 🔗

Globalization is the process by which economies, businesses, and people across different countries become increasingly interconnected through trade, investment, technology, and the movement of goods and services. In the context of retailing, it means that a product no longer has to be entirely designed, made, and sold within one country. Instead, different stages of production happen wherever it is most efficient, and the finished item travels across borders to reach the final customer.

This is fundamentally different from domestic trade, where goods and services are bought and sold within a single country’s borders, following that country’s laws, currency, and market conditions alone. International trade, on the other hand, involves the exchange of goods across national boundaries and is shaped by exchange rates, import duties, shipping logistics, and trade agreements between governments. A domestic garment manufacturer only has to think about local competitors and local demand. An exporter has to think about currency fluctuations, customs regulations, quality standards in a foreign market, and geopolitical relationships between countries.

Why apparel production crosses borders 🔗

The apparel supply chain is uniquely suited to globalization because it can be broken into distinct stages: growing or producing fibre, spinning yarn, weaving or knitting fabric, dyeing and finishing, cutting and sewing, and finally distribution and retail. Each of these stages has different requirements in terms of labour cost, skill level, machinery, and raw material access. A country rich in cotton but with high labour costs might focus on growing fibre and spinning yarn, while a country with abundant, lower-cost labour might specialise in the labour-intensive cutting and sewing stage. This is why a single garment can carry a “Made in Bangladesh” or “Made in Vietnam” label even though the fabric and design work happened somewhere else entirely.

This interconnectedness benefits retailers because it allows them to source the highest quality material at the lowest possible cost, but it also means the industry is exposed to risks that are outside any single country’s control. A shipping delay in the Red Sea, a labour strike in one country, or a change in trade policy in another can disrupt an entire supply chain that stretches across continents.

Trade barriers and their history 🔗

Globalization did not happen overnight or without resistance. For much of the twentieth century, countries used trade barriers to protect their domestic industries from foreign competition. The two most common tools were tariffs and quotas.

Tariffs and quotas: the tools of protection 🔗

A tariff is essentially a tax imposed on imported goods, making foreign products more expensive so that domestically made goods appear more competitively priced. A quota, by contrast, is a limit on the physical quantity of a good that can be imported into a country during a given period, regardless of price. Governments used both tools to shield local textile mills and garment factories, especially during periods when cheaper imports from developing countries threatened to displace domestic production and jobs.

GATT: the 1947 push to reduce barriers 🔗

The General Agreement on Tariffs and Trade (GATT) was established in 1947 as an international treaty aimed at reducing tariffs and other trade barriers between member countries, encouraging freer and more predictable trade after the disruptions of the Second World War. GATT operated on the principle that trade restrictions should generally take the form of tariffs rather than quotas, and that all trading partners should be treated equally under what is known as the most-favoured-nation principle. This framework laid the groundwork for the multilateral trading system that eventually evolved into the World Trade Organization in 1995.

The Multi-Fibre Arrangement and its quotas 🔗

Textiles and apparel, however, were treated as a special case for decades. The Multi-Fibre Arrangement (MFA) was introduced in 1974 specifically to regulate trade in textiles and clothing, allowing developed countries to impose bilateral quotas on textile and apparel exports from developing countries. The stated purpose was to give developed-country industries time to adjust to rising import competition, but in practice, the MFA restricted how much developing nations like India, Bangladesh, and South Korea could export to markets such as the United States and the European Community, even when those countries were fully capable of producing and exporting far more.

Phasing out the MFA: from ATC to free trade zones 🔗

Recognising that these quotas contradicted the broader goal of free trade, the Agreement on Textiles and Clothing (ATC) was adopted during the Uruguay Round negotiations and came into effect on 1 January 1995. It set out a ten-year, phased schedule to eliminate MFA-style quotas and bring the textile and clothing sector fully under normal WTO and GATT rules. The last of these quotas came off on 1 January 2005, ending three decades of restricted trade in this sector.

The removal of quotas reshaped the industry almost immediately. Countries that had previously been limited by quota allocations, regardless of how competitive they were, could now export freely based on price, quality, and speed. This intensified competition and accelerated the shift of manufacturing toward countries with lower production costs, while also encouraging the creation of free trade zones and preferential trade agreements designed to give certain countries duty-free or reduced-tariff access to major markets like the US and EU.

Key trading partners in global textiles and apparel 🔗

With quotas gone, the map of global textile and apparel trade has been redrawn largely by cost competitiveness, raw material access, and trade agreements rather than by quota allocations.

The world leaders: China and the EU 🔗

China and the European Union have consistently dominated global textile and apparel exports. In fact, China, the EU, and India have held the top three positions among world textile exporters, together accounting for a substantial majority of global textile export value. China’s scale, integrated supply chain, and manufacturing infrastructure make it the single largest player, while the EU’s exports benefit from high-value technical textiles and established fashion brands with strong distribution networks worldwide.

India’s place in the global map 🔗

India occupies a distinctive position in this landscape. While rankings vary slightly depending on the year and how “textiles” and “apparel” are categorised separately, India has been recognised as the world’s third-largest textile exporter, reflecting its strength in yarn, fabric, and home textile categories, while ranking as the sixth-largest apparel exporter globally in finished garments. This gap between the two rankings tells its own story. India has an unusually self-sufficient raw material base, with more than 90 percent of the fibre needed for its apparel production sourced domestically, which is a major advantage over countries like Vietnam and Cambodia that rely heavily on imported fabric and yarn. Yet India has not scaled up finished-garment manufacturing at the same pace as competitors, leaving room to grow further up the value chain.

Overall, India currently ranks as the sixth-largest exporter of textiles and apparel combined, holding close to a 4 percent share of global trade in the sector, with the industry contributing over 8 percent of the country’s total merchandise exports.

Who India trades with 🔗

On the export side, the United States and the European Union together account for nearly 47 percent of India’s total textile and apparel exports, making them by far the most important destination markets. Beyond these two, Bangladesh, the UAE, the UK, and Germany also feature among India’s leading export partners, with Bangladesh in particular importing Indian yarn and fabric to feed its own large garment export industry.

On the import side, the picture looks quite different. China remains India’s single largest supplier of textile and apparel products, accounting for over 40 percent of India’s imports in this category, followed by Bangladesh and Vietnam. Much of what India imports consists of specific raw materials, synthetic fibres, and finished items that are either re-exported or used to fill gaps in domestic production capacity, rather than a sign of dependency. This two-way relationship, where India exports heavily to Western markets while importing a meaningful share from its Asian neighbours, illustrates exactly the kind of interconnected, multi-country value chain that defines globalization in this industry today.

Understanding this framework, from the historical shift away from tariffs and quotas to the current pattern of trading partners, is essential for anyone entering fashion retail or sourcing. Every business decision in this field, from where to source fabric to which markets to target for export, is shaped by these forces of globalization.

What do you think? As India works to close the gap between its strong textile-export ranking and its comparatively lower apparel-export ranking, what changes do you think would help the country move further up the value chain into finished garments? And with trade increasingly shaped by tariffs, geopolitical shifts, and free trade agreements rather than quotas, how do you think Indian exporters should prepare for the next major shift in global sourcing patterns?

References

1. https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm5_e.htm
2. https://www.wto.org/english/tratop_e/texti_e/texintro_e.htm
3. https://www.fashionatingworld.com/new1-2/world-textiles-apparel-exports-fell-in-2019-india-remained-among-top-exporter-wto
4. https://shenglufashion.com/2024/12/01/new-study-exploring-india-as-an-apparel-sourcing-base-for-u-s-fashion-companies/
5. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2089508
6. https://wits.worldbank.org/CountryProfile/en/Country/IND/Year/LTST/TradeFlow/Export/Partner/by-country/Product/50-63_TextCloth
7. https://citiindia.org/statistics/india-textile-and-apparel-imports/