COMMENT: Protectionist policies do more harm than good
While the global financial outlook inevitably remains the main focus for governments around the world, fiscal stimulus and bilateral trade agreements are at the centre of many recovery packages aiming to aid the textile and apparel sectors. But there is a real danger that protectionist policies could in fact prolong the effects of recession rather than solve them.
In the face of these continuing difficulties there can hardly be a country on the planet that isn't acting to protect its domestic industries, despite the fact that there can barely be a government which isn't opposed to protectionism.
As fears of protectionist policies mount throughout the garment sector, the EU has announced that it will be vigilant in the face of nationalistic activities while the US has introduced the controversial 'Buy American' bill to aid the country's textile and apparel industries.
The retail, apparel and textile industries together create a large amount of export revenue for many countries, in addition to significant levels of consumer spending, which means that in order to begin economic recovery these are key areas on which to focus fiscal stimulus strategies.
In a bid to enhance consumer spending and steer investments towards the domestic apparel market, authorities may act to introduce policies and trade barriers which can be considered as protectionist.
In times of recession a short-sighted view would suggest that protectionism really can help the domestic market, increasing revenue and introducing more job opportunities for the growing number of unemployed citizens.
For example, if large retailers are told that all supplies must be sourced from America this will directly aid US based manufacturers and in turn create more jobs for the unemployed masses.
However, nationalistic activities, such as protectionism, can in fact be considerably detrimental to other nations, developing countries in particular, and also to the domestic retailers themselves.
Taking trade away from emerging economies not only halts development but can result in a dramatic setback in the country's advancement.
Similarly, limiting companies to source from domestic manufacturers alone can result in greatly increased costs, an increase that may cause many already struggling retailers to go out of business.
If protectionism were to become a widespread strategy it would act to close the Western markets to the developing world, and may be a sign of the end of free trade within the garment industry.
Survival of the fittest is not the best way towards a quick solution to the global recession; internationally renowned economists suggest that introducing both a co-ordinated global regulatory framework and a reduction in trade barriers are essential to getting the global economy back on track.
European Union Ambassador to Washington John Bruton stated that: "Open markets remain the essential precondition for a rapid recovery from the crisis," (The Times newspaper).
The implementation of protectionist policies could in fact act to prolong the effects of recession as opposed to solving them.
Slowdown in demand
US consumer demand has for many years been a major driver for global growth and development across not only the apparel industry, but all sectors of the market.
However, 2009 has seen a great decline in consumer demand not only in the US but the majority of chief trading nations - something that has greatly impacted the global export market.
As a result of a decrease in global demand and a drop in export levels, economists have forecasted that overall world trade could drop by 10% in 2009.
Growing worries concerning the financial landscape are widespread; many governments are continuing to focus on strategies to enable them to restore their economy to full potential.
Many nations appear to be focusing on their domestic finances as opposed to boosting the global economy as a whole; by January 2009 direct foreign investment in emerging economies had dropped by approximately 80%.
Many developing nations do not have the 'fiscal space' to launch economic stimulus packages of their own, and with a substantial decrease in support the outlook for many emerging economies is not positive.
Fiscal stimulus package
February 2009 saw the introduction of the American $800 billion fiscal stimulus package.
The 'Buy American' clause of the stimulus package was introduced to aid the country's textile industry; the clause limits the US Transportation Security Administration to buy uniforms and textile products made solely with US materials and labour.
In 2008 the textiles sector in the US saw the closing of 44 factories, resulting in the loss of more than 60,000 jobs; in reflection of this, the bill has received support from the US garment industry, who will certainly receive a much needed boost.
"For every $100m spent annually under the [Buy American bill], the US government will create or save 5,000 US manufacturing and other jobs," stated Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition (AMTAC).
However, despite its benefits to the US textiles industry, many have taken the 'Buy American' programme as a sign the US will introduce protectionist policies in the future.
The European Commission has commented that the 'Buy American' bill is "the worst possible signal" that could be sent to world trade.
A spokesperson further stated that they are "particularly concerned about the signal that these measures could send to the world at a time when all countries are facing difficulties. Where America leads, many others tend to follow."
The US government, however, maintains that protectionism is not the aim of this policy.
President Barack Obama told Fox TV: "I agree that we can't send a protectionist message. I think it would be a mistake, at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade."
Within the textiles and apparel industry, protectionist policies could be truly damaging as developing nations that rely heavily upon the export of goods for revenue would experience a substantial deficit in demand.
However, in contradiction to mounting claims of protectionism in the apparel sector, a recent survey has shown that in the past six months leading textile and garment importers have abolished more barriers to trade than ever before.
"Contrary to the myth, there's no serious increase in garment industry protectionism," said Mike Flanagan, Clothesource CEO.
Additionally, July 2009 saw China and the US commit to non-protectionist practices at the same time as the US abandoned quota restrictions on Chinese clothing.
The 27 nations of the European Union have abandoned the requirement for Chinese clothing imports to have import licences.
Meanwhile, Japan has implemented free trade agreements with most of South East Asia, and has begun giving duty-free access to a growing proportion of South East Asian clothing.
All of these actions appear to point towards a positive step in the direction of recovery.
And it is important to remember the words of John Bruton, representative of the European Union, who stated that: "Open markets remain the essential precondition for a rapid recovery from the crisis."
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