Textile, Apparel ‘Managed Trade’ Is Still Protectionism
Few industries receive more protection from imports than textiles and apparel. Quotas limit imports. Tariffs are still high, averaging about 22% on apparel. In 1986 this protection raised clothing costs about $240 for a typical American family. For every job saved in the United States, consumers pay about $50,000. So what do these industries want? More protection.
Legislation passed by both the House and Senate would limit growth of textile and apparel imports to a mere 1% annually. Consumer clothing costs would rise further. Poor families would be hurt most, because they spend a larger share of their income on clothes.
Guiding the legislation through the Senate is Ernest F. Hollings (D-S.C.). In 1960, when Hollings was his state’s governor, he successfully urged presidential candidate John F. Kennedy to support action to restrict textile imports. In 1961 the Kennedy Administration began negotiating quotas on cotton products. Since then, restrictions have been progressively toughened and extended to more products.
The time has long passed when protection might be justified as a way of saving jobs. Consider South Carolina. Its unemployment rate (4.7% in July) is below the national average. True, textile employment dropped about 30,000 (22%) between 1980 and 1987, but the state’s total employment jumped 206,000 in the same period. Textile jobs now account for only one in ten of non-farm jobs; in 1950 the share was one in three. The decline mostly reflects the growth of other jobs.
Listening to Hollings’ rhetoric, you would think that imports had obliterated both the textile and apparel industries. Not so. Imports are highest in apparel, where they had 34% of domestic consumption in 1987. In textiles--the yarns and fabrics that are used for clothes, curtains and other products--import penetration was much lower. It was 5% for yarns and 14% for industrial and household textiles.
It’s important to distinguish between the textile and apparel industries. The textile industry is highly automated, and the drop in its work force reflects mostly the adoption of faster, more efficient machinery. Production has been rising slowly. By contrast, apparel has always been labor-intensive. Lots of workers are always losing their jobs, because small companies constantly go in and out of business.
The wonder is that Congress is considering this legislation at all. It flagrantly violates U.S. foreign-trade obligations and would surely provoke retaliation against U.S. exports. Any gains made by U.S. textile and apparel workers would probably be offset by losses in other industries. The timing is particularly bad, because U.S. exports are expanding rapidly. It makes no sense to give other countries a pretext to impose their own limits.
For years the protectionists have sought to make their cause respectable. “Managed trade” is one idea that they’ve tried to peddle. “Free trade” may be economically efficient, the argument goes, but it’s socially undesirable. Import surges cause too much unemployment too quickly. It’s better to negotiate import restrictions. Everyone ultimately benefits. Exporting countries can predict their markets. Industries in importing countries can adapt to new competition or can contract gradually.
It sounds reasonable. But, in practice, managed trade is a sham. Once industries get protection, they simply want more.
Take steel, for instance. In 1983 the Administration negotiated import quotas that will expire in 1989. Because the U.S. industry has improved its competitiveness, any need for protection has diminished. Between 1982 and 1987, the cost of producing a ton of steel dropped from about $700 to $480. Still, the industry wants the quotas renewed and tightened. Protection is being used to raise prices. The victims are major steel users like Deere & Co., which makes tractors and farm equipment.
This isn’t “managed” trade; it’s permanent protection. The point of trade is to raise living standards of all countries. Export industries are those in which relative efficiency is highest. Of course, there’s some disruption. All economic changes--from new technologies, for example--risk disruption. But are Americans better off because they export computers and import shoes? The answer is yes.
Hollings and other supporters of the textile bill seem oblivious to this logic. The logic works especially well in clothing. Developing countries with large numbers of low-skilled workers can make clothes inexpensively. Export earnings then enable them to buy consumer products and machinery from developed countries.
But why should Hollings care? The great beneficiaries of the drive for more trade restrictions are political middlemen. These are legislators, lawyers, lobbyists, publicists and consultants. The more that power is centralized in Washington, the more important they become. So Hollings’ policy is as self-interested as it is undesirable. President Reagan has promised to veto the textile bill. It doesn’t appear that Hollings and friends have enough votes to override the veto. The sooner this legislation is killed, the better.