I, T-Shirt: a T-shirt's journey unravels the costs of protectionism.
DAYS AFTER terrorist attacks destroyed the World Trade Center, U.S. President George W. Bush and Pakistani President Pervez Musharraf were negotiating the price of Pakistan's solidarity. As downtown New York smoldered, Musharraf accepted billions in grants and other forms of aid, but his most fervent request was for relief from U.S. tariffs on textiles. In return for his cooperation in the war on terror, Musharraf wanted free trade in T-shirts. Bush said he would do what he could, and the two countries plunged into negotiations. The result was a Byzantine trade agreement that seemed a convoluted response to Musharraf's request. For those who know the game, though, the response was easy to summarize: It was no.
How did a bunch of Pakistani T-shirts get mixed up in a hunt for terrorists? If cotton and national security seem an unlikely mix, consider the enormous impact the U.S. cotton and textile industries have had on American history: fueling the industrial revolution, driving the civil war, foiling a host of free trade deals. Today textiles might seem an anomaly in a high-tech service economy, struggling to hold on as the winds of trade blow elsewhere. Yet centuries after factory workers first started stitching shirts in New England, the most protected industries in American history are brazen enough to dictate U.S. foreign policy in Pakistan.
Agricultural protectionism is not news, but even by the generous standards of American farm subsidies, cotton handouts are something special. Per acre, cotton farmers are treated to subsidies five to 10 times as high as those for corn, soybeans, and wheat. The Crop Disaster Program reimburses farmers for the ravages of bad weather; farm loan programs offer credit to those who can't obtain it elsewhere; "trade and aid" programs guarantee exporters against customer default. Despite all that, prices for U.S. cotton are often higher than global prices--so tax dollars pay textile mills in North Carolina to buy cotton from Texas. In that way, cotton feeds into a new level of state-supported industry: textile factories buffeted by a complex system of quotas and subsidies.
It's easy to list the ways in which U.S. cotton and textile policies are intensely stupid. They jack up prices, muck up foreign policy, and keep us all looking a little more J.C. Penney than Bergdorf Goodman. What's harder is to explain is why no one much cares, or at least cares enough to change a sorry state of affairs that has persisted for centuries. In The Travels of a T-Shirt in the Global Economy, Pietra Rivoli, a business professor at Georgetown University, goes a long way toward explaining why we continue to support an economically preposterous industry. Tracing the deeply politicized life of a six-dollar shirt, Rivoli draws on economic theory, American history, and her travels through Texas, Dares Salaam, Shanghai, and Washington. The result is lively, accessible, and infuriating.
Rivoli's book comes at a trying time for advocates of free trade, who can't seem to muster much enthusiasm among their fellow Americans. When open markets usher competition into the backyards of Texas cotton growers or Minnesota sugar farmers, ambivalence turns to organized hostility. By the time President Bush signed the Central American Free Trade Agreement in August, the deal had been gutted of meaningful reform and riddled with pork. Sensing that the usual talking points weren't doing the trick, CAFTA'S supporters were reduced to selling the agreement as a way to fend off the threat of a globalized China.
In 1994, when free-wade sentiment was less precarious, the U.S. and other developed nations agreed to phase out quotas on Chinese textile imports over 10 years. The barriers were removed in January 2005, and American consumers got a glimpse of how ridiculously low the quotas had been set. Imports of knitted shirts shot up 1,250 percent; cotton pants, 1,500 percent; underwear, 300 percent. But the textile lobbying machine was quick to mobilize, and the clothing bonanza was not to last. By May the textile industry had complained, Congress had balked, and quotas had been reimposed.
This kind of politicking makes Rivoli's topic a compelling clash of interests, but it also cripples the work as a travel narrative. It's impossible to tell a picaresque tale of a trip that's been scripted from takeoff to homecoming. AT-shirt's journey, as Rivoli tells it, is a tightly scheduled one--more a seniors' bus tour of the world than a backpacker's adventure. From seed to shirt, the path is determined by subsidies, quotas, tariffs, and taxes; well before a bale of cotton sets sail for the factories of China, its fate has been sealed by a series of protectionist policies. And the battle over those policies is waged in the less-than-exotic city of Washington, D.C.
Rivoli is at her best in relating the perverse politics that have spawned generations of textile trade regulations, "perhaps the most tortuously complex set of trade protections in U.S. history." Cotton never would have taken root in America without the government's help--most crucially, its embrace of slavery. There followed a long series of policies aimed at keeping labor costs low, notably the crop lien laws that demoted sharecroppers from tenants with some ownership over the crop to workers paid with the crop, shutting them out of capital markets. The industry also embraced the company town, a community built around the plantation. By 1920 cotton factories weren't just influencing public policy but creating it, erecting hierarchically managed housing, schools, and churches to keep labor ready and dependent.
But textile protectionism is a more modern beast, a convergence of lawyers, lobbyists, and bureaucrats that began holding back waves of foreign competition after World War II. Today, officials from the Department of the Treasury, the Department of Commerce, the Congressional Textile Caucus, the U.S. Trade Representative, and the Interdepartmental Committee for the Implementation of Textile Agreements craft, administer, and interpret the tangle of regulations. There are rules governing how many T-shirts the U.S. can import from Sri Lanka and how many from Egypt, rules governing where the fabric can be dyed, rules governing what percentage of a bra must be foreign-made for it to bear foreign tariffs. Together, they are keeping the American textile industry alive.
In the absence of the tens of thou sands of pages of regulations currently holding the East at bay, the U.S. textile market would be buried by an avalanche of cheap Chinese imports--and American consumers would catch a considerable break. Quotas add a little over 70 cents to the cost of each pair of underwear from China and nearly $54 to the cost of a woman's wool coat. In their 1994 book The Uruguay Round, the economists Jeffrey Schott and Johanna Buurman estimated that the combined tariffs and quotas in place at the time amounted to an effective apparel tax of 48 percent. Persuading Americans to pay inflated prices for their clothes even while showering subsidies on the industry is the crowning achievement of a relentless lobbying machine.
They aren't the only lobbyists on K Street, of course. Wal-Mart's PAC donated $1.5 million during the 2004 elections, and its key interests were the same as the average American consumer's: cheap clothes. Retailers and their cash, however, have proven ineffective against the cultural and geographic bonds that keep the textile industry speaking--and voting--in unison.
"They all know each other. Their daddies all knew each other," a frustrated retail lobbyist tells Rivoli. Concentrated in Georgia, South Carolina, and North Carolina, the apparel manufacturers have pushed their agenda far more effectively than retailers and consumers, who are spread too thinly to be anyone's particular priority. Year after year Strom Thurmond (R-N.C.), a senator with one foot perpetually in the grave, spent his last breaths defending an industry as prehistoric as he was.
Even in periods where trade was making strides, foreign textiles stayed entangled in regulations. From a succession of presidents who purportedly supported free markets, Thurmond, Sen. Fritz Hollings (D-S.C.), and Sen. Jesse Helms (R-N.C.) extracted repeated promises of protection. The price? Their support for open markets in other commodities. When free trade agreements needed votes in the Carolinas, the price was often a pledge that textiles wouldn't be touched. Rivoli explains: "Beginning with Dwight Eisenhower and ending with George W. Bush, every U.S. president has paid the U.S. textile industry to be quiet so that America could get on with the business of free trade."
This pattern endures. In May 2005, after this book was published, President Bush renewed import quotas on Chinese textiles, sacrificing the interests of the tiny minority of Americans who wear clothes for the alleged protection of 600,000 textile jobs. But concessions were needed to ease CAFTA's rocky passage. Once again, the cost of a high profile free trade agreement was the loss of hard-fought progress in the battle against textile protectionism.
Limits on Chinese imports hit American pocketbooks, but more disturbingly, they've distorted the production cycle in countries desperate for trading opportunities. As Rivoli explains, quotas imposed on China led production to shift to Hong Kong; when Hong Kong was hit with similar restrictions, factories popped up in the Philippines and Sri Lanka. Factories throughout Asia and Africa now depend on the U.S. quota system to keep China from putting them out of business. When restrictions on China lessen, fall, or merely change, factories will likely close in Cambodia and Bangladesh--places where being jobless carries significantly more risks than in North Carolina.
That's not to say that all is bleak n the developing world. In fact, the brightest moments in Rivoli's travelogue happen in the least developed country she visits. The one free market Rivoli finds isn't in Texas, where cotton grows out of taxpayer largesse, or China, where the state constrains labor mobility and helps pack factory floors, but in Dares Salaam, Tanzania, where T-shirts go to be reborn.
The average American throws away about 68 pounds of clothing and textiles per year, much of which finds its way to Eastern Europe, Asia, and, most commonly, Africa. Castoff clothes, donated to charities like the Salvation Army and eventually sold to African middlemen, enter a complex distribution network. Studying conditions in a rural Tanzanian village between 1985 and 1995, sociologist Tony Waters noted that not much had changed in 10 years of economic liberalization. Except that is, for one thing: The villagers were better dressed. A constant influx of used American clothing had brought affordable tees to Tanzania.
The mitumba trade, as it is known, is a free-trade success story in the unlikeliest of places. When bales of used clothing show up on Tanzania's shores, dealers bid on them and set up shop in outdoor markets. Pricing is based on the demands of the African public, and tastes in that market are no less dynamic than they would have been the first time around in shopping malls and sports stores. Tanzanians pay well for T-shirts advertising winning sports teams, less for summer camps and family reunions. Recognizable logos fetch a premium, but knock-offs fool no one. Competition is tough, prices are fluctuating, and businesses are small. Dealers tell Rivoli that clothing made in Tanzania has just started popping up, ripe for resale, in mitumba bins.
What emerges in Tanzania is not just a freer market, but a better narrative--a story of choices, change, and competition rather than scripted stasis. This is clearly the tale Rivoli set off wanting to tell. The mitumba trade, she writes, "is run by the masses rather than the elite, and is governed by relationships among importers, customers, drivers, menders and dealers rather than by what many observers have titled the 'kleptocracies' still common in much of Africa."
Rivoli's optimism in places like Tanzania, and the power of trade to bring reform from the bottom up, permeate the travelogue. But for a story that takes place primarily in Washington, this sunny view seems oddly misplaced. Customers may be king in Dares Salaam, but in Washington, the Department of Commerce still runs the show.
It's a valuable exercise to follow the tortured life of a T-shirt as it navigates the perversions of international trade. But to see what we are sacrificing by embracing protectionism while preaching free markets, Americans need look no further than their closets.
Kerry Howley (email@example.com) is an assistant editor at reason.
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|Title Annotation:||The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade|
|Article Type:||Book Review|
|Date:||Jan 1, 2006|
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