Asian manufacturing marks return to centuries past.

WHEN all the world's attention is focused on a particular crisis--today, of course, on the turbulence in Iraq--it is important that public opinion and political leaders should not totally lose sight of other developments in international affairs, even if less dramatic.

Sometimes, the early signs of these trends appear in unglamorous places. Take, for example, a report in the business pages of The Financial Times titled "India waits to pounce as textile quota scheme lapses." What on earth could that mean, and why is it important news?

The background is this. For many years now the producers of textiles in Europe, the United States and other rich economies have been protected by a global quota system from full competition with more cheaply made clothes, sheets, towels and other goods produced in developing countries. This deal preserved jobs in the North, but caused frustration in the South, whose manufacturers in recent years were forced to turn down many foreign orders because their annual export quotas had already been reached.

Within nine months, however, this global quota system will end. In India, manufacturers are adding new production capacity. Textile exports from India are set to roar ahead, although consumers in the North may not know it because the items will bear the brand names of Gap, Marks and Spencer, and Wal-Mart. However, the workers employed in northern textile industries will certainly feel the impact, as their protection is removed and they succumb to competition from goods that are much cheaper but of equal quality.

Turning full circle

The historical irony of this, especially in India's case, could not be greater. It is as if the world had turned full circle. In the 18th century, India's textile industry was larger than and superior to all others. Its fine linens, silks and cottons, its "calicoes" (named after Calcutta) had no equal; in fact, some European states put up tariffs to ban their import.

The coming of the Industrial Revolution in Britain--and, more particularly, the clustering of hundreds of steam-driven textile machines under the roof of a single factory--dramatically changed the balance. Spinning machines operating 24-hours-a-day never got tired; they could produce cloth much more regularly, and much more cheaply, than Indian handloom weavers.

Moreover, once the British had conquered the Indian sub-continent, they could insist that there be no local quotas, no protection, against such imports from the imperial economy.

The result was not only a dramatic increase in British (and, later, other European and U.S.) exports of textiles to the non-industrialized world, and the beginnings of the first globalized economy in goods and services. It also led to the decimation of India's most famous industry, which could not protect itself from this mechanized avalanche. (It was unsurprising that, when Mohandas Gandhi began his campaign to free India from British rule, the movement's chosen "logo" was the traditional spinning wheel.)

By the late 19th century, as much as 45 percent of Lancashire's cotton exports went to India alone. As one country's industries surged, the other's withered or were rendered stagnant.

An even more important contrast is that, by 1900, Great Britain's per capita level of industrialization (a measure of the size of a nation's industrial product against its population) was one hundred times larger than India's! Yet they had been roughly equal a century and a half before. Even now, the average Briton earns 10 times more than the average Indian; the average American earns 15 times more.

Yet, in the early 21st century, the world turns. Again, the historic irony is impressive. After all, during the past few decades the North eagerly exported its textile and other machineries to the South, recruited management students from Asia and Latin America to U.S. business schools, offered venture capital and joint enterprises to new developments across the globe, and pressured governments into accepting open-market policies. The United States in particular emphasized the importance of creating an open playing field, just as the British did in early 19th century India.

Strong devour weak

But what is "open," asked Indian businessmen and nationalists back then, when one country has steam-driven textile machines, and the other does not? And what is "open," the American and European workers ask today, when the labor rates in India are perhaps one-eighth those in the North? And why should these complaints mean anything, when the whole purpose of establishing World Trade Organization rules was to stamp out protection? Let the strong devour the weak. Countries falling off the top of the ladder will be replaced by those coming up--and should not complain. They had their turn.

The flow of Indian textile goods to the North will therefore increase. Its chief competitor in those markets, ironically, will be China, whose export volumes are and will be even greater. These flows will include many other products, from toys and kitchen-ware and furniture to financial goods and services. How could it not, given the disparity in production costs and the equalization of manufacturing and services technology?

And with both India and China's economies growing at about 8 percent to 10 percent a year, their share of global product, and global wealth, and eventually of global power, seems assured. There will be much turbulence in this headlong growth, to be sure, as there were in America's breathless economic expansion in the 19th century. But only some nuclear-war folly, or calamitous environmental crisis, could halt this upward movement.

This places Northern societies, their leaders and their workers on the horns of a dilemma. They could break with WTO rules, impose protective tariffs, and placate their frightened workforces. But they would pay a stiff price, both in direct terms (that is, counter-tariffs against selected American and European goods), and in the indirect yet real risk that a protectionist war might provoke a 1930s-style retreat into economic autarky and the rise of nationalist politicians capitalizing on their peoples' fears.

Alternatively, they could stay with the open playing field system, and see many of their home industries brushed off the side of the table ("outsourced"), which in turn would stoke domestic resentments. Although much is written each day about this dilemma, I see no economist at present who has come up with an answer to this problem.

What does this all mean, in our larger understanding of global trends? In the late 18th century, public opinion in the North was convulsed by the revolt of the American colonists and, even more, by the coming of the French Revolution and Napoleon. Not too many observers noted that the world was being transformed in quite another way, by the steam engine and the industrial factory. Only later historians would point to the chronological overlap. 2 In much the same way, I suspect, will scholars a few decades forward remark upon the interesting coincidence that, just as our leaders, publics and media obsessed about Iraq, terrorists and the like, the balances in the productive world were shifting from the "First" World to the "Third." We were coming full circle, and hardly noticing it.

Paul Kennedy is the Dilworth Professor of History and Director of International Security Studies at Yale University.