There's a war over trousers that's about to engulf the US, the EU, and China, along with several other developing countries. And while a war over trousers (and underwear and blouses) may seem trivial, it's a war that will likely lead BushCo to do something counterproductive and dangerous. On this issue, the Democrats need to formulate a leadership position, rather than simply an oppositional stance.
The war is rooted in the January 1 lifting of quotas on textile imports. When the quotas were lifted, everyone expected China to greatly increase its textile exports to the developed world--and for once, economic expectations proved correct. In the first quarter, imports of cotton trousers from China have jumped 1,521% percent; overall imports from China went up 62.5% year on year.
"However, the United States should look for the reason from itself so as to adjust the unbalanced sectors in its economy," Qin told a regular news briefing.
Bush, in particular, is in a tight spot on this issue. He needs to appease textile manufacturers enough to retain their support for CAFTA, which is being debated as we speak. Plus, one state that stands to be hardest hit by this is North Carolina, probably too marginal of a red state (unlike fellow textile state South Carolina) to piss off. Perhaps most importantly, reimposing quotas risks angering China, which could respond by shifting its reserves out of the dollar. On the other side, retailers want the added profits they can get from Chinese-made underwear. And some of the manufacturers in China are jointly-owned by US companies. So Bush, as he did before with steel tariffs, looks to be stalling for time. I wouldn't be at all surprised if Bush took a similarly counter-productive approach as he did with steel tariffs; the steel tariffs devastated steel-consuming manufacturers without making US steel manufacturers any more competitive. While Wal-Mart isn't going out of business if it has to pay $.25 for a pair of underwear, it's not clear that new tariffs are going to bring back the jobs that have been lost--or make US manufacturers more competitive with cheap producers, in China, or in Bangladesh.
There are 665,000 US textile jobs left in the US, down one million since 1990 and down 381,000 since 2001. Most of those, of course, were lost before the trade quotas were lifted. 17,000 jobs have been lost this year. But those jobs were lost because of the overall global economy, not just Chinese imports.
If possible, the problems from the end of quotas will be even worse for workers from other developing nations--poorer countries like Bangladesh, El Salvador, and Cambodia. As this excellent series from the LA Times (with photo essays on the effects of the textile industry in Cambodia, Mauritius, Lesotho, and China) shows, this will have an effect on a lot of people who were just beginning to improve their lives through trade. The problem with these countries isn't that their workers aren't working for low pay. Rather, their countries don't have the infrastructure (fancy new highways and busy shipping ports and excellent telecommunications networks and efficient factories) that China has. While they won't lose on wages, they're losing on efficiency.
What many failed to foresee was that the dynamics of global competitiveness would be turned upside-down with the emergence of China and India as economic powerhouses.
Within their vast borders, the two countries -- the most populous in the world -- can offer the low wages of poor nations along with the efficiencies of modern economies. The advantages are perhaps most evident in the textile and apparel industry, which requires large pools of unskilled laborers but also depends on fast delivery and the ability to change production specs on a dime.
The costs to the countries that are losing clothing and textile contracts have only begun to be counted. Many trade specialists see the post-quota era as every bit as potentially destructive as the unrestrained capitalism of the late 19th and early 20th centuries that spawned sweatshop conditions and price-fixing monopolies.
Already, gains in wage levels and working conditions are starting to unravel. In Lesotho, the government has agreed to give apparel and textile factory owners an exemption from paying a mandatory cost-of-living increase. Business leaders in El Salvador want to reduce the nation's $5.04-a-day maquiladora minimum wage in rural areas to stay competitive with China and its lower-cost neighbors in Central America.
Halfway around the world in the Philippines, a panel of business and government officials has proposed exempting garment makers from paying the minimum daily wage, which ranges from about $3.75 to $5.
My point is, it is a lose-lose situation for workers across the US and the developing world. This event may be--should be--the one that finally forces the developed world to try to solve the "race to the bottom" logic of the global trade regime we designed. If we don't, there will be a lot of countries that have had their traditional rural lifestyles disrupted, but which have little to offer those uprooted people in terms of jobs.
It's time for the Democrats to take the lead on designing a new "fair" globalization. In our own country, we should be calling for universal health care, which would make the US more competitive in manufacturing industries that compete against countries that subsidize their health care. We should try to find a long-term solution for the many older companies (United, GM, steel manufacturers) now struggling to pay the pensions they've promised their workers. And overseas, the lifting of quotas provides a perfect (if unfortunate) opportunity to start providing incentives for labor standards and minimum wages.
Thus far, though, Democrats are mostly asking Bush to take more trade issues to the WTO, rather than offering creative solutions to address the larger problems with globalization. Given how badly Bush botched the steel tariffs, I think the Dems should be more aggressive--and direct--in looking for real solutions to what are fairly intractable problems.
Perhaps best idea I've heard of so far is one coming from Cambodia, a country derives 80% of its export earnings from its garment industry. As the LA Times article cited above shows, Cambodia can't compete head-to-head with China. Instead, it is marketing itself as the clean clothes manufacturer:
"No question that such a reputation is a plus. ... Having confidence that a factory is doing the right things for workers in terms of pay, benefits, working conditions, etc., is important to us and could be a deciding factor in where the business goes," Wal-Mart spokesman William Wertz wrote in an e-mail.
Cambodia's big advantage is having its factories certified by an independent monitor with international credibility, the ILO. Established in 2001 following a trade deal with the U.S., the program sends monitors armed with a 500-item checklist on unannounced factory visits.
The aim: to hold factories to Cambodian labor law, which stipulates a $45 monthly minimum wage and a six-day, 48-hour workweek with no more than two hours of daily overtime. The ILO reports give companies confidence that their brand names won't be tarnished if they buy here. As factory conditions improved, Cambodia's share of U.S. garment imports rose to 14% last year from 9% in 2002.
Congress is already considering eliminating the 15 to 25% tariffs we impose on Cambodian goods (sweat-free policies add 10 to 20% to a manufacturers' costs, so such an incentive may be critical to keeping Cambodia price-competitive). Why not offer similar incentives to countries that can prove themselves sweat-free, or tying tariffs (if you're going to impose them) to factory standards? That would create a competitive advantage for countries like Cambodia--at least for the moment--and would raise the overall costs associated with imported textile goods such that it might make it possible for the remaining US manufacturers to stay in business.
Things could get ugly with this impending Trouser War. If we (as distinct from the EU) re-impose quotas, we risk angering our biggest creditor. And at the very least, the Trouser War threatens to exacerbate all the underlying tensions in the global trade regime. We certainly don't want to lose the remaining textile jobs we've got. Neither should we want to deprive very poor developing nations of one of the few sources of income. But we're going to get ourselves in trouble if we push China too far...Perhaps, then, rather than simply re-imposing quotas, we need to use this opportunity to find creative ways to make fair trade--rather than "free" trade--more competitive.