Protectionist policies hurt America’s low-income families

December 23, 2003

Free Market Foundation

On January 1, 2005, the textile and apparel quota regime, administered under the World Trade Organisation’s Agreement on Textiles and Clothing, is scheduled to terminate. After decades of protectionist exceptions, textile trade finally will be subject to the same rules that govern international trade in other manufactured products, says Dan Ikenson, a trade policy analyst with the Cato Institute.

Despite its intentions, decades of protectionism have hurt both the industry and the overall economy:

Jobs in the industry have declined since 1977, when it employed some 2.3 million people these numbers have since fallen to 900 thousand in 2003; the main culprit is technology and the increased productivity that comes with it.

Quantitative restrictions and tariffs constitute a $13 billion dollar loss to the U.S. economy each year; in 1990, it’s estimated that protections cost the economy upwards of $33 billion.

Quotas add 10 to 50 percent to the average price paid by an American company for an imported garment; this translates into higher clothing prices for the American public.

The costs of textile protections are borne by America’s low-income families, who spend a higher proportion of earnings on clothes and purchase clothes made from cotton and man-made fibres that are subject to higher tariffs.

By using job losses to vilify trade, the industry is now seeking to preserve and expand these import barriers.

If the Bush Administration allows this to occur, only U.S. exporters will be hurt. By maintaining closed markets, other countries will find it easier to adopt similar policies. Instead, the administration should articulate its support for freer trade in textiles and apparel by denying the industry’s efforts of resistance, says the author.

Source: Dan Ikenson, Threadbare Excuses: The Textile Industry’s Campaign to Preserve Import Restraints, Cato Institute, October 15, 2003.

For text http://www.freetrade.org/pubs/pas/tpa-025.pdf

For more on Tariffs and Trade Barriers http://www.ncpa.org/iss/int/

FMF Policy Bulletin\16 December 2003