The bra in your wardrobe
(Jagdish Bhagwati and Arvind Panagariya)
(WSJ, 27 Dec 2004)
Abstract:
The longstanding Multi-fiber Arrangement (MFA) on Textiles -- next to agricultural subsidies and trade barriers the most objectionable trade-restricting affliction of the world trading system -- will finally become history on Jan. 1, 2005. The textile lobbies in many rich, and in some poor, countries are scrambling already to resurrect its protective effects in alternative ways: for the removal of the MFA means that the rich countries will face more competition; as will those poor countries, with no inherent ability to compete, that had developed production simply because they had a guaranteed MFA quota.
The focus of the huge media attention, therefore, has been the rich drama within the textiles sphere itself: Who will win, who will lose? Yet the real story lies in the lessons that this episode offers more generally for trade policy. What are these lessons, as seen from the "textiles lens"?
Lobbyists as Termites
When the MFA's demise was negotiated at the conclusion of the Uruguay Round, a 10-year "gradual" removal of restrictions was agreed to, so as to ease the pain of adjustment. With the trajectory of the reductions having been agreed only with loopholes, some feared that the textile lobbies would end up "backloading" the reductions to the end of the period. That would, in turn, enable the American textile lobbies to scream successfully for help in the form of renewed quotas or a blizzard of antidumping and safeguard actions (as happened with steel in 2001).
That is exactly what has transpired. The U.S. has surrendered to protectionism. For those of us who thought that the Bush administration, in contrast with a Kerry administration, would avoid protectionism, this latest throwback to the steel and farm protectionism of George W. Bush's first term is a sad reality check. President Bush may be talking to God -- who, we hope, likes free trade, since he cares for the poor; but Karl Rove talks to the textile lobbyists, who have other ideas. Indeed, the textile lobbyists had already managed during the election to impose special one-year quotas on bra imports from China -- a wit has remarked that the lobbyist behind this must have been Club Med -- as well as on Chinese dressing gowns and knitted fabrics.