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Risky textiles policies
Question of the Day
In the month since trade talks failed in Cancun, U.S. agricultural policy has come under heavy indictment. Billions of dollars in federal subsidies lavished upon fat-cat U.S. agribusinesses depress world prices and undermine exports for struggling farmers in developing countries. It’s a despicable policy that must change.
But let us not forget America’s other trade sins. On par with farm policy — in terms of fomenting animus among developing countries against the United States — is, arguably, America’s failure to honor the World Trade Organization’s Agreement on Textiles and Clothing (ATC).
The ATC was widely perceived to be the single greatest success for developing countries in the Uruguay Round (1986-1994) of multilateral trade talks. Under its terms, rich-country quotas on developing-country exports of textiles and apparel terminate on Jan. 1, 2005.
Since the ATC’s initiation in 1995, however, the United States has played an obstructionist role. Incremental liberalization that was to transpire in four stages over the course of 10 years has been largely cosmetic. Most products important to textile and apparel exporters have yet to be liberalized as we approach the final year of the 10-year quota phaseout.
Through sleight-of-hand, the United States managed to load the list of products to be liberated from quotas with items that had never been subject to restraint. By declaring “quota-free” products like flags, tie and tents, which were never restricted, the United States was able to comply with the letter of an agreement that specified percentages, but not specific products, to be liberated at each stage.
Developing countries trusted the United States to implement the agreement in good faith, never expecting to be so deliberately deceived. Had the United States honored the minimum requirements of the ATC, no more than 51 percent of the volume of textile and apparel products that were subject to quota in 1994 would be under restraint today. Instead, that figure stands at about 80 percent.
On top of onerous quotas, the United States maintains some of its highest tariffs on clothing imported from the developing world. This one-two punch has deprived developing countries of an opportunity to, well, develop. While the administration claims to be cognizant of the potentially catastrophic effects of economic stagnation and hopelessness in poor countries, current U.S. textile policy perpetuates those underlying conditions.
It has also been costly at home. According to the U.S. International Trade Commission, textile and apparel protection constitutes a $13 billion annual drag on the U.S. economy. That cost is borne disproportionately by poorer Americans, who spend relatively higher amounts of their earnings on clothing.
Yet the textile lobby feels entitled to its space at the special interest trough. Unilateral changes to a U.S. import program, which adversely affected Caribbean apparel producers, were demanded by the Congressional Textile Caucus and granted by the Bush administration to secure votes on the Trade Promotion Authority legislation.
A proposal to increase U.S. market access for Pakistani apparel exporters as compensation for lost business associated with the war on terrorism was abandoned at the insistence of the textile lobby. In July 2003, textile producers filed special safeguard cases against certain textile and apparel products from China, and they are already signaling their intention to bring cases under the antidumping and countervailing duty laws.
The textile lobby relies on the specter of increasing legions of displaced workers to advance its claims. But the reality is that American textile workers have had decades to adjust their expectations and seek new skills. Textile communities have had ample opportunity to prepare subsequent generations for transition to employment in new industries. Indeed, this was precisely the justification for quotas in the first place. Still, displaced textile workers have access to government benefits under the Trade Adjustment Assistance program, not available to most of the 2.6 million U.S. manufacturing workers who have lost their jobs since January 2001.
The Bush administration’s history of acquiescence to the textile industry’s demands is exacerbating international perceptions of a shaky U.S. commitment to its trade agreements. It is also undermining America’s global leadership and breeding misgivings around the world. The fact a presidential election year will precede full implementation of the ATC only raises further doubts that the administration will avoid capitulating to new protectionist demands.
The Bush administration claims to recognize the nexus between economic stagnation and the potential for extremism to take root and flourish. Accordingly, it should seek to coordinate its trade and foreign policy objectives. Depriving developing countries of opportunities to trade their most important products is a shameful and dangerous failure of leadership.
By Michael Widlanski
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