As a group the textiles and clothing industries in Australia and New Zealand have a number of features in common with each other and with other advanced industrial countries. One is that they are heavily protected by government policies. Another is that they have been facing increasing competition from Asia's newly industrialized economies (NIEs) and more recently from the People's Republic of China. Despite high protection, they have been declining in relative terms as contributors to their national economies in terms of both output and employment. The Australian and New Zealand experiences provide interesting case studies because, notwithstanding these similarities, some other trends and behaviour within this group of industries differ markedly both between Australia and New Zealand and between these two countries and other advanced industrial economies.

The first section of this chapter looks at the patterns of trade and production specialization in Australia and New Zealand and compares these patterns with those in other advanced industrial countries. The second and third sections examine these two country cases in greater detail, while the fourth analyses these stylized facts in terms of an adaptation of a model, developed by Dixit and Grossman (1982), of intra-industry production and trade for goods-in-process. This model can be used to interpret the trends in the region in relation to trends in the global industry.

Patterns of trade and production specialization

Most advanced industrial countries are net importers of textiles and clothing commodities as a group and most developing countries are net exporters.