These factors, as well as incentives such as liberal trade policies, low tariffs on imported machinery, and bonded warehouse facilities, which allow the importation of raw materials to be processed for export have done much to facilitate the growth of the garment industry. However, probably the most important factor in this growth is the benefit of reserved markets that Bangladesh enjoys under the Multi Fiber Arrangements, or MFA.
The Textile exporting nations in the world fall under the trading conditions determined by the MFA, which is included in the General Agreement for Tariff and Taxation, or GATT.
According to the MFA, developed nations are required to guarantee the import of a certain amount of their textile needs from developing nations. For example, the United States may have assigned the production of a certain amount of textiles to Bangladesh. This would mean that countries such as Bangladesh are assured a market for a specified number of yards of textiles each year. This agreement served to limit the dominance of the textile industries in the more developed world by limiting their share of the global market.
In addition, Bangladesh's garment exporters enjoy the privilege of quota-free entry into the European Union, or EU, whereas their major competitors, such as China, India, Indonesia, Pakistan, Sri Lanka, and Thailand, are subjected to the restrictions of an assigned quota. As a result Bangladesh is able to export everything that it produces, while its more developed competitors are limited to specific amounts assigned through quotas.
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