THE FLANARANT: Apparel lobbyists add to trade barriers
Western voters - and shoppers - are seeking tangible benefits from free trade deals
A decade-long enthusiasm for cutting trade barriers has come to an end, with sceptical electorates no longer seeing the benefits. But trade lobbyists continue to chase new barrier cuts, or defend concessions that have already reached the end of the road.
The 15 years that just-style has been reporting on the apparel industry have spanned an extraordinary set of changes.
Until around 1999, cross-border trade was seriously tied down by restrictions: the EU, for example, still slapped import quotas on clothes from neighbours like Poland and Hungary.
Then came a decade of collapsing barriers:
- The EU and US abolished apparel and textile import quotas almost completely.
- The EU extended membership to 13 poor neighbours, and practically no-strings duty-free access to another hundred of the world's poorer countries.
- The US introduced its AGOA (African Growth and Opportunity Act) programme offering duty-free access to sub-Saharan Africa, and similar programmes for Central America and most garment factories in Egypt and Jordan.
- Both also signed a raft of Free Trade Agreements (FTAs), giving duty-free access to generally better-off countries in return for better access to their markets.
But since 2009, that enthusiasm has cooled:
- While some FTA negotiations in the 1990s took months, they're now taking decades.
- The EU has started removing duty concessions this year from some middle-income countries who wouldn't sign FTAs. Both the EU and US have removed concessions from countries failing human rights tests.
- A number of US duty concessions have expired, while AGOA, and rules allowing duty-free access for Nicaraguan-made clothes using Asian fabric, are about to. Congress can't agree on how (or whether) they should be renewed.
Some blame this on politicians: both the European Parliament and the US Congress now influence trade rules more than in the last decade. "Trade is good, and the administration and Congress haven't been helpful," says Rick Helfenbein, chairman of US trade lobbyist the American Apparel and Footwear Association (AAFA), and president of Luen Thai USA.
In a recent survey of 44 countries by the Pew Research Center, most Americans said they thought trade with other countries was good.
However, when probed:
- 50% thought trade reduced jobs, while 20% thought it increased them.
- 45% thought it meant lower wages, while 17% thought it meant wages grew.
- 67% thought foreigners buying local companies was bad: just 28% thought it was good.
- Only 35% thought it brought prices down.
Hostility to trade was constant throughout the West, with Americans among those most anti-trade. 56% of people in rich countries didn't agree that trade created jobs; whereas in the world's poorest countries (like Tunisia or Bangladesh), only a quarter were as sceptical.
Trade looks a good thing if you run the US arm of a Chinese apparel maker. But not if you've lost your job, know someone who has, or risk retrenchment at work - like most European and American voters.
The world has changed since 2009, and lobbying groups in Brussels or Washington have to convince a very sceptical public of their case.
- AGOA needs urgent renewal for buyers to place African orders in confidence. Many US politicians don't want their taxes to subsidise duty-free access from middle-income countries like South Africa without anything in return. So President Obama said South African benefits should be reduced - or reciprocated. The response? South Africa demanded even more concessions - and American trade lobbyists supported South Africa.
- On the proposed EU/US free trade agreement, garment lobbyists want what Europe's Foreign Trade Association calls "the systematic use of non-preferential rules of origin, where the last substantial transformation would be decisive." That is, they want duty-free US imports of Chinese fabric sewn in Romania - because taxing Chinese fabric would be "burdensome and time-consuming."
- Nicaragua's special concession, granted in 2004 to help develop its garment industry, expires on 31 December. Garment exports have grown fivefold since 1999, and the rest of Central America has to use more expensive yarn spun in the Americas. Congressional opponents of the concession have offered a compromise, allowing Nicaragua to keep using Asian-spun yarn - if matched by an equal amount of yarn from the Americas. The AAFA is still campaigning to keep Nicaragua's concessions unchanged from a decade ago.
Pro-trade lobbies are pushing for deals that cost jobs and taxes at home when voters are making it clear they've had enough.
The European Branded Clothing Alliance (EBCA) and the AAFA claim "70% of the retail value of US apparel imports is created in the United States. A similar study commissioned by EBCA showed that 50% to 80% of the value of European apparel and footwear imports is created in Europe."
The US study claimed that "selling [imported] products...translates directly into US jobs" which "are primarily medium- to high-skilled positions, and many are professional and managerial."
In fact, the "70% of the retail value" is simply apparel retailers' mark-up. It's the very substantial costs of the real estate and (largely minimum-wage) salaries needed to run US distribution and retail operations - plus markdowns and net profit. Those operating costs are the same whether the garments are made in Poughkeepsie, New York or Phnom Penh, Cambodia.
In 1984 almost all that retail value was retained in the US. Moving it offshore has caused an 87% collapse in America's 2m garment and textile making workforce. Manufacturing jobs have fallen at least as fast in Western Europe. What irks European and American voters is how little benefit they see for losing them.
Special exemptions for Nicaragua, better benefits for South Africa or easier access for Chinese yarn aren't things any voter sees as a benefit.
15 years on, a campaign for more poor-world jobs and lower Western prices has morphed into wish-lists for the EU-US FTA that send even trade rules obsessives like me off to sleep.
So my suggestion: turn those dreary lists into a vision for a real free trade area that means something to today's voters.
This morning, an order of shoes from Germany came through my letterbox. If ordered from an American site, there'd have been forms to sign, import duty to pay and a ton of other palaver.
Why aren't garment brands lobbying for customers throughout Europe to get clothes through the web from anywhere in North America as painlessly as from the country next door? Organising the process might be "burdensome and time-consuming" - but would give voters real, tangible, benefits.
Lobbyists can't go on blaming politicians who understand Western shopper-voters better than they do.
Though shopkeepers' representatives, they seem to have forgotten that, in retail, the customer is always right. If they can't convince their members' customers, their members need to start lobbying for causes customers want.
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