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Friday, July 25, 2003

Textile Tariffs

These may be coming, reports NYT, after industry officials formally requested government protection from Chinese imports today. There is no doubt that the US textile companies have had a terrible time of late:

"According to the Labor Department, about 270,000 textile and apparel workers, or about a quarter of the industry, have lost their jobs over the last two years."

I disagree, however, with the response:

"'This industry is literally flat on its back, and if the government doesn't do something about it, we're going to disappear,' said Cass Johnson, a spokesman for the American Textile Manufacturers Institute, an industry lobbying group in Washington...

"'I have long maintained that China cheats on trade agreements,' Senator Lindsey Graham, Republican of South Carolina, said in a statement. 'The practices of Chinese companies and the policies of the Chinese government are illegal and give them an unfair advantage in the textile market.'"

The high degree of Congressional involvement means that district-level concerns, rather than the broader benefits to the whole country, rule the day on most trade disputes. If China wants to sell us cheaper textiles than those we produce at home, American consumers gain. The cost is the lost jobs in the industry, but every credible economist knows that the benefits of free trade outweigh the costs. Rather than erecting trade barriers that will create inefficiencies in world production, not to mention prompt retaliation and anger within the WTO (they would likely rule the tariffs illegal, as they did recently on steel), the US needs to redistribute some of the national economic gain from trade in textiles to the displaced workers, providing them with adequate unemployment and health insurance as well as job training programs to help them switch industries.

Textile manufacturing is not a growth industry for the 21st century economy. The only question is whether we will allow production to be redistributed toward developing economies like China now, or prolong the death pangs of the industry (again like steel) through protectionist measures that will ultimately prove unsuccessful and highly costly. The alternative path of bolstering the social safety net is preferable because it will cost less in the long run, promoting both a more harmonious global trading order and a more compassionate society at home.