America's imposition of tariffs on imported steel products threatens to lead to a full-scale trade war - one that textile firms will be watching with interest. However, Mike Flanagan, CEO of Clothesource, believes the western world's protectionism of its garment and textiles industries does nothing to safeguard its jobs. Instead, he says, it perpetuates poverty in the Third World - and this lack of wealth is the real barrier preventing western companies doing business with the 85 per cent of the planet's population.

US president George Bush's decision to impose tariffs of up to 30 per cent on imported steel products has opened up the debate on free trade. On the one hand the move is seen as pandering to steel workers - voters - in the hotly contested states of Pennsylvania and West Virginia. On the other, Bush's defenders seem to be arguing to the effect that in order to promote free trade it must be abolished!

US trade representative Robert Zoellick, for instance, says: "In order to promote free trade, the US has to manage the home front and the international front." He adds that the president must help "domestic industries that have really got flattened" by imports to maintain a consensus in favour of freer trade.

But what are the import tariffs likely to mean for domestic steel manufacturers? Bush believes he is giving companies a chance to modernise and restructure, but the more likely outcome will be a hike in manufacturing costs, making the US industry even less competitive and workers' jobs more vulnerable. Substitute "steel" for "textiles" and you have a scenario that is already being played out across the textile industry. And underlying all this is the fear that action is not limited to steel: not surprisingly, America's troubled textile firms have been watching the action with interest.

At a meeting in Washington DC earlier this year to review prospects for international trade in textiles and clothing following the launch of the World Trade Organisation (WTO) Doha Development Agenda, the developed world's apparel trade associations called for freer trading in garments and textiles. They claimed their sales are depressed by high import duties in countries like Malaysia. If only it was this straightforward.

It is the western world's protectionism on its garment and textiles industries that destroys its jobs, makes speculators and tax evaders rich, and perpetuates poverty in the Third World. And this poverty is the real barrier preventing western garment companies doing business with the 85 per cent of the planet's population who live in poor countries. Protectionism does next to nothing to guard real jobs in the west - it merely inflates the cost of living for westerners.

Steps towards eliminating quotas should be accelerated, and extended to all countries. And, if they really cared about their societies' well-being, western governments would be eliminating the tortuous complexity of duty schemes designed to inflate the price of garments from some countries more than others.

The theory
The Clothesource PriceTrak survey of clothing imports shows that the average T-shirt made in China and arriving in the European Union in the first half of 2001 cost about €4.16 ($3.74). Thirty per cent of this cost is the price paid by the Chinese manufacturer to buy quota entitling him to sell a T-shirt to the EU. The EU then adds another 12 per cent to this cost - essentially to discourage its citizens from buying Chinese products. So around $2 of the cost of the T-shirt is a surcharge imposed to discourage Chinese manufacture.

Who benefits from that surcharge? Well, according to the lobbyists for the system, the garment workers of South Carolina in the US, Northern France and the UK's East Midlands, whose jobs are threatened by "unfair" low-cost competition.

The practice
But there aren't many such workers. The proportion of T-shirts sold in the US and made in the US in 2000 was - well, practically impossible to find out. In fact domestic T-shirt production is now so low in the west that the UK and US governments have to suppress information about it, as it would reveal confidential data about the few remaining manufacturers.

But, for some products, we do know the details. Imports accounted, for example, for 96 per cent of the men's sweaters moving into consumption in the US in the third quarter of 2001. Sweaters, remember, have a large enough domestic manufacture that the US government can releas

"86 per cent of clothes on sale in Japan were imported "
e data. How low must it be in categories like trousers, skirts, shirts and blouses where the data is censored?

One country does release data on total clothing import penetration: Japan estimates that in 2000, 86 per cent of clothes on sale in Japan were imported - almost entirely from low-income countries in Asia. And, looking at the data the UK and US governments don't suppress, we'd estimate imports account for about 80 per cent of clothes sold in these two countries - probably rather more in Germany, and a bit less in France and Italy.

So where are the workers?
In fact, the truth now is that most jobs in western garment industries are in design, handling, transportation and retailing - not in sewing or weaving.

The US provides the best data for this. The Bureau of Labor Statistics' Occupational Employment Statistics for 2000 shows that employment in apparel stores was 1.2 million. This number excludes workers in non-speciality retailers (such as Wal-mart and department stores), which account for 60 per cent of US apparel sales - as well as workers in storage and distribution companies.

Employment in apparel manufacture, by comparison, was around half that. And those 600,000 garment workers weren't by any means all sewing machine operators, whose jobs are clearly threatened by overseas manufacture. In fact, only 245,000 operated machines. Most of the rest designed clothes, sold them to retailers, co-ordinated the complexities of overseas production, commuted to and from overseas production locations or managed the business. At Clothesource, we estimate that three-quarters of garment workers do jobs that are unaffected by where the garments are made.

So what's the problem?
The garment industry in the west isn't threatened any more by offshore production. That's pretty well all over and done with now. The real threat to the millions of people who design and sell clothes comes from the fact that these clothes are artificially overpriced - so clothing sales are unnecessarily depressed.

Who gains from this? Well, certainly not the average worker in Marks & Spencer, Hennes or Gap - nor in VF Corp, Sara Lee or Triumph. The beneficiaries are other people competing for consumers' spending. Restaurants, mutual funds or (at any rate in Europe) travel companies.

Industry lobbyists, by inflating clothing prices, make clothes relatively poor value. Which encourages customers to spend on other things and leads rapidly to job losses in apparel retailers and wholesalers.

So what's the point of trade barriers?
According to some of the overseas aid lobbyists, the point about duties and quotas is more complicated. Eliminate barriers and trade will flow from poor countries the lobbyists like (such as Bangladesh) to countries they don't (such as China). Leaving aside the ethics of pretending that jobs for some poor people are more valuable than jobs for others, the problem with this argument is that there's no evidence for it. When the US abolished quota on babywear, China wasn't the prime recipient: producers all over the world benefited - and China's sales growth was one of the least impressive.

Let's bang our industry's drum
Between 1990 and 2000, the apparel industry has been the scene of possibly the most benign economic development since the Industrial Revolution. At the beginning of the decade, clothing manufacture was concentrated almost entirely in rich countries or a few Asian "tiger" economies, but over the ten-year period shifted to the world's poorest countries. The Clothesource Handbook of Apparel Sourcing shows that 113 emerging nations sold over $1million worth of clothing in 2000.

As a result of this, the US, EU and Japan put about as much into the economies of poor countries by buying clothes from them as through their official Overseas Aid budgets. Put another way, our industry has been responsible for doubling poor countries' income from the west.

True, about 5 million industry jobs appear to have been lost in the west, in a decade in which the total number of people in work grew faster than ever before. But twice as many have been created in poor countries - and what overseas aid programme can boast that kind of achievement? At the same time, clothing prices have declined so fast that retailers still haven't learned to manage in an era of constant deflation. And those prices continue to fall: Clothesource Price Trak shows that clothing prices from emerging markets in the first half of 2001 were 15 per cent lower than in 1996. Emerging economies have improved their efficiency, and reduced their prices as a result - even though those prices are then inflated by the cost of quota acquisition and import duty

The textile industry in the west is no longer a group of weavers and seamstresses in factories. A huge number of people are today involved in moving the clothes around and selling them to customers, and their office-based jobs are much the same wherever the garments are made.

Reduce demand for clothes and you reduce the number of jobs in the clothing industry. Bring down the price of clothes and you may lose some of the west's few remaining sewing operatives. But you'll defend the millions of jobs in designing, warehousing, managing and selling those clothes

As well as continue the benign expansion of real economic development in the poor world.

Cui bono?
We've shown that western protectionists undermine jobs in their own country. So why do lobbyists, trade unionists and governments argue for them? The answer is because the web of quotas and duties do create jobs - but for trade unionists, lobbyists and negotiating officials. Not many, but enough for them to love what they're doing.

So let's be clear. When a Washington or Brussels bureaucrat announces proudly that he's safeguarded his constituents' interest by extending still further some complex piece of discrimination that increases the price of clothes in his country, and perpetuates Third World poverty, he knows whose interest he's defending. His own.

Or rather his own, and the crooks around the world who make an honest - or sometimes dishonest - buck from trading quota or faking origin declarations to get fraudulent duty benefits.

But, the smooth talkers say, get these barriers right, and we'll stop Third World exploitation. Let's examine that.

Indonesian employers pay their workers less than UK employers would if they still had any workers. So we should force them to pay more, right? Absolutely, and here's how not to: retain barriers to what they make. Because Indonesian employers don't pay less because they're bad people, or because their workers don't have proper trade unions. Indonesian employers pay less because Indonesians are prepared to work for less. Because there are tens of millions of Indonesians unemployed or underemployed. Create barriers against Indonesian products, and you inflate the number of Indonesians out of work, and prepared to work for a pittance. Abolish the barriers, and Indonesians will start to get living wages. Just as the Irish and the Italians have over the last half-century.

Richer Indonesians mean more emerging-market customers for Pringle, Levi's and Giorgio Armani. Because the real barrier to western garment sales in poor countries isn't local import duties, but the lack of wealthy consumers.

And lower garment prices mean western customers will buy more clothes, and relatively fewer cups of Starbucks coffee.

The author  ( is chief executive of Clothesource Sourcing Intelligence, a UK-based consultancy that provides the western apparel buying community with objective information on apparel production, trade, price competitiveness, and apparel producers in over 100 countries