Impact Assessment of the Ban on Turkish Imports on the Growth of Wearing Apparel Manufacturing in Armenia

Abstract

Armenia imposed a temporary ban on imports of Turkish apparel in 2021, and lifted it on January 1, 2022. The government gave manufacturers a chance to capture that market share. In this article, the role of domestic and foreign sales of various groups of firms in explaining real changes in industry output for various periods in the short run was estimated based on industry-level monthly data for June 2011-September 2021 and using the least squares estimation method. The study identified the priorities of various groups of manufacturers and revealed that industry domestic and foreign sales (mainly exports to Russia) are complements. It was determined that large firms engaged in cut-make-trim (CMT) manufacturing were not and would not be interested in capturing that market share, while large own-brand manufacturers are and will be interested in doing so; however, exports to Russia could be preferred to domestic sales. Micro and small-sized firms managed to capture the market segment of items included in Category 6114 of Harmonised System (HS) codes. However, the firms will meet tougher competition in the future than in 2020, with importers re-switching to Turkish suppliers and Russia emerging as a key player. Hence, the exports will drive the industry growth, regardless of a possible decline in domestic sales. The research results can be used by the Ministry of Economy of Armenia, and the Eurasian Economic Commission in creating various industry development strategies, and implementing import substitution strategies for member-states of the Eurasian Economic Union. Further research on firm-level upgrading strategies will be required to reinforce the obtained results.

Keywords

• wearing apparel manufacturing, Armenia, outsourcing, import, export, Turkey, complements, substitutes