Skip to: Content
Skip to: Site Navigation
Skip to: Search


Unbuttoning the Clothes Trade

December 31, 2004



Come the new year, Americans will begin to see prices of new clothes drop as much as 20 percent because a global restriction on trade in textiles comes to an end on Jan. 1. That's quite a bonus for families struggling to get by. In all, US consumers may see $14 billion in savings.

Skip to next paragraph

This market opening in a $353 billion world industry is just one more example of the steady progress in international agreements over recent decades that let private competition set the pace in expanding trade in goods and services.

Still, many governments with powerful textile lobbies want to continue protecting inefficient or high-wage home industries. They're planning new barriers to this market opening. It's a bit late, though. They've already been given a decade by the 147-member World Trade Organization to adjust to the lifting of the textile quotas that were set down by the 1973 Multifiber Agreement. Ten years is a generous adjustment period for any industry to come out from behind protectionist walls.

The great worry among nations with inefficient textile businesses is China. Its 2,700 firms now command 17 percent of the world apparel market, mainly due to such advantages as low wages, good ports, and quick management reactions to fashion trends in rich nations. (China also pegs its currency to the US dollar rather than letting it "float." That's an anticompetitive advantage that needs adjusting.)

In theory, China's global market share could quickly rise to 50 percent by 2007 under the new, quota-free textile system. If true, that could knock back industries in nations like Bangladesh, where the poor have benefited with textile jobs under the old quota system.

But despite such concerns, many nations that thought they could never compete with China have learned to boost productivity or find niche markets. Many garment-export nations realize they must improve roads, electricity, and other government services to industry, as well as curb official corruption. In addition, many garment-importing companies don't want to risk relying solely on China in case of trouble there. They prefer to diversify by also buying from other nations.

China itself, worried about a backlash against its market dominance, plans to place duties on many of its garment exports. This tax would be based on the quantity of items rather than the value of the goods. That will help push Chinese companies to make high-end textiles and allow the Bangladeshes of the world to produce low-end goods.

Eventually, more governments will realize that pushing uncompetitive firms into a free market is a stitch in time that will eventually feel just fine.

Permissions