The changing face of protectionism
The latest form of protectionism turns conventional wisdom on its head. Instead of calling on rich countries to protect their domestic markets from cheap garment imports, the new view is that developing countries should limit trade with these low cost importers to preserve their own textile industries. David Birnbaum sheds light on the debate.
We in the garment industry know everything there is to know about protectionism. You might say that each of us has earned a PhD in that great school of experience. We have lived through punitive duties, import quotas and export quotas, anti-dumping suits and anti-shlumping suits.
We have also lived through the more subtle protectionist strategies. Who among us will ever forget the dual ad campaigns of the 1990s with their messages 'Crafted with Pride in the United States' and 'Made in Sweatshops in Communist Asia'?
These messages would have been more credible had the local police not raided a Los Angeles garment factory where they found Asian women literally chained to sewing machines. Thus are the hopes of men forever undone by reality.
In the end, two great truths finally began to seep through the protectionist mindset:
• All those quota, duties and both the anti-dumping and anti-shlumping lawsuits failed to save any jobs. In fact, the higher the protection wall, the faster was the decline of the domestic industry and the greater the job losses;
• The bill for protectionism is paid by the consumer in the form of more expensive and lower quality clothes.
And so it was that after 43 years, the fires of protectionism began to fade out.
Or so I thought.
Protectionism's new face
A new form of protectionism has recently appeared on the scene.
These neo-protectionists no longer argue that garment importing countries should protect their domestic markets against competition from imports. They argue that garment exporting countries should protect their exports from exports.
If this sounds a bit confusing, don't worry. I guarantee the more deeply you go into this, the more confusing it will become.
The underlying argument is that garment factories in the developing and least developed countries cannot compete because these countries have high macro costs, which they define as poor logistics and infrastructure.
And until these countries are able to build better roads, rail networks, port facilities, and increase electrification, so this new reasoning continues, importing countries should restrict imports from the more productive countries (for 'more productive countries' read 'CHINA').
This is a wonderful argument. I will try to translate it from la-la language to reality.
I can understand trying to convince a Wal-Mart shopper in Arkansas that he/she must help protect jobs in North Carolina by not buying made-in-China garments. (This has never worked, but I can understand making the effort.)
However, I am having difficulty visualising someone walking up to some guy in Little Rock Arkansas and saying: "Bubba don't buy that made-in-China polo-shirt. Buy this one made in Bangladesh. I know the made-in-China polo shirt is better. I know it is cheaper. But you have to do your part to protect jobs in Chittagong."
Do you really believe this will work? Of course not; and neither do the neo-protectionists. Their plan is to go directly to the WTO and place textiles and garments in a special category where protectionism is permitted. However, once again reality steps in.
The WTO operates by consensus - every member has to agree. Last time I looked, China was a WTO member. I am trying to envisage someone walking up to China's ambassador to the WTO to convince him to agree to anti-China textile/garment quotas… No. I can't see it. No matter how much I try to suspend reality, my mind boggles.
The real point is that protectionism simply does not work.
Impediments to change
First of all, the important impediments to reducing macro costs are not physical. Good logistics is important and so too is increased electrification. It is equally true that these cost money.
However, the greatest macro costs are corruption, bureaucratic red tape and governments that have no interest in industrial development. Reducing these macro costs is free. All that is necessary is for politicians in these countries to steal less.
I am not saying do not steal. I am not asking the impossible. I am asking only that they take fewer kickbacks and slightly smaller bribes. I can assure you that demand for corruption is elastic. What you lose in each transaction, you will more than make back with increased volume.
Secondly, protectionism is not the way to develop infrastructure. Actually the opposite is true.
Imagine you are a government. And imagine, for reasons of your own, you did not want more roads, you did not want better ports, and you did not want more electrification.
Now try to create the best policy that will achieve these goals.
Well, the first problem is that there are some people in your country who actually want these things. I am not talking about the common people. They do not count. I am talking about important people - people with money. These are mostly business people, industrialists, and factory owners.
Your challenge is to convince these people to go along with you. You must offer them something in place of those roads, ports and electric generating stations. Imagine you went to these people and said: "I know you need the roads, ports and electric generating stations to compete with the more productive countries who already have these things.
"However, I have arranged for exports from these more productive countries to be restricted by quota. This way we will never need roads, or ports, or electric generating stations."
You think this is a joke. The sad truth is that this is reality.
An interactive databank with intelligence on the major apparel sourcing countries
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