The United States has imposed new quotas on textile imports in order to protect American textiles manufacturers from competition. The move is bad news for American consumers and it is also bad news for the world’s poorest. Some of the blame must be apportioned to the campaigns of protectionists like Britain’s Christian Aid which have been claiming – incorrectly – that textiles liberalization is not in the interests of the poor. They have helped create a worldwide feeling of unease about the end of quotas.
The result is that America has now taken action, not to help producers in developing countries, but to protect uncompetitive American producers. America’s move is unwarranted and unjustified. The former European trade commissioner and future WTO boss, Pascal Lamy, has attacked the new quotas:
Mr. Lamy said that the global trade body [WTO] had been easing out the quota system over the last decade and that all countries had been given ample opportunity to prepare for the changes.
“It is not the law of the jungle, and the W.T.O. rules were clearly set,” he said. “Why are some politicians now not recognizing that fact?”
Fortunately, the new quotas will have to go by 2008. But in the meantime, America’s move means that developing countries will have worse jobs, less wealth creation and less trade. Is this really what Christian Aid was aiming for?
Crossposted from the Globalisation Institute Blog.
The EU imposed similar quotas a short while ago. I hope that Lamy, who is almost certainly the next head of the WTO, will indeed act as the commited free trader he claims to be.
How refreshing to hear a French official denounce protectionism as the ‘law of the jungle’, when the very same expression is usually used in his own country to justify stifling state regulation and other protectionist measures.
Sylvain,
long time no ‘see’! How are you?
” But in the meantime, America’s move means that developing countries will have worse jobs, less wealth creation and less trade.”
To the hell with developing countries. Why do some libertarians always repeat the lefties’ mantra about caring for developing countries ?
It’s not sincere.
I wish the best to developing countries, but their fate is not my MAIN concern. These quotas are bad because they deprive Americans of cheap textiles, and of the possibility to buy the merchandise of their choice. They restrict the liberty and wellbeing of American people. That’s why they are bad.
Stop this insincere crapping about developing countries.
Like Jacob, I too feel uneasy when “the world’s poorest” mantra pops up in contexts that are secondary. Jacob is correct when he says this is bad news for Americans, who will be needlessly robbed of their chance to purchase cheap textiles. How dare the American government act against the interests of the American consumer? It’s outrageous.
Yes, poor textile manufacturers will suffer, but as far as I am concerned, although it is unjust and awful, it’s secondary. Every single time some stupid government interferes with the marketplace, everybody loses. Every time they do away with quotas, everybody – including the poor folks in the third world who keep getting shut out – wins.
Thunderous silence about the “Downing Street Memo” from the deluded pro-Bush false Libertarians.
What’s one of THE most important pillars of genuine Libertarians?
Something about never instigating armed force against another person or soverign nation, if I’m not mistaken.
Keep clapping louder, boys and girls. Keep supporting Bush and his cronies. Try not to think about all the dead non-combatants, killed for no good reason.
Tell me about the mass graves of Saddam’s victims. All those mass graves which seem to date from after Gulf War 1, you know, when Bush the Elder encouraged the masses to rise in revolt against Saddam and that the armed might of the US would be behind them?
Rememebr how well THAT worked out for the Iraqi people? Sure you do!
Tell me how all those millions of people vioted for a government that hides in the Green Zone and is as impotent as Bob Dole, sans Viagra. ROusing success that was, eh, chaps?
Yep, Saddam was a bad man and the Iraqui people no longer need to fear his death squads.
Not to worry, though. Car bombs, roadside bombs, suicide bombers, dirty water, broken sewers, US Marines, US Army, US Air Force, British Armed Forces, hired mercenaries (Blackwater), not to mention all those foreigners rusihing to Iraq to kill Americans and other infidels have more than taken up the slack, now that Saddam and his Ba’thist cronies are all locked up.
Clap louder, boys and girls. Clap as loud as you can, and maybe, just maybe, you will drown out the sound of your consciences telling you what an obscene mistake you all made by your continuing support for Bush and Blair.
In a Libertarian Utopia poor Bob would have had his meds by now.
Listen, Bobby. I have had the builders in for three weeks. I haven’t had time to take my large, wasteful gas guzzler to the car wash for an entire month. All the gravel in my yard has got mixed in with leaves falling off the bougainvillea and mango trees and will have to be raked and bagged. The dog next door is on a bark-a-thon. My banana tree, which produced around 20 bananas, which seemed like a nice amount, doesn’t know when to stop and now I have over 100 bananas growing and more popping out daily. What the hell am I going to do with 100 bananas? I have to worry about poor third world textile manufacturers getting locked out of the US and poor African growers being excluded from the EU. You think I have time for “Oh What A Lovely War”? Give me a cotton pickin’ break!
Oh dear. Is it the same Bob who was drivelling incoherently in a recent threat? Bob – this isn’t Democratic Underground. It’s time for you to MoveOn.
Fortunately, the new quotas will have to go by 2008. But in the meantime, America’s move means that developing countries will have worse jobs, less wealth creation and less trade. Is this really what Christian Aid was aiming for?
I take issue with this over generalization. I haven’t seen anything that says the U.S. has revoked the tariff free status of African textiles.
In fact a tariff on Chinese textiles may be the best thing to happen for Africa. Also I’m going to wait and see what happens with CAFTA, ( Central America Free Trade Agreement) before I get upset.
The quotas come in RESPONSE to China’s continuing currency manipulation. The government of China manipulates the exchange rate between it and the United States to create de facto tarrifs on U.S. imports to China. At the same time, these manipulated exchange rates create a de facto subsidy to Chinese products exported to the U.S.
Additionally, currency manipulation of the U.S. dollar is a big part of the dollar’s current low valuation versus the euro. The U.S. government is pro-free trade like it is pro-democracy. Sometimes you have to fight for both and this is the first shot in the U.S. RESPONSE to economic warfare being waged by a totalitarian, communist state against the U.S.
If the U.S. wins this economic war, it will lead to a reduction of meddling by the Chinese government in world markets. This will lead to a market of true prices, not manipulated prices. In other words, the U.S. is just now starting a war to save the global free market.
“In other words, the U.S. is just now starting a war to save the global free market.”
Is that some kind of doubletalk or is it parody ? I’m puzzled.
I don’t think the US is opposed to China’s manipulation of it’s currency, since in doing so they pile up huge reserves of dollars which help finace US’s budget deficit.
Manipulation of currency is contrary to free market principles and is bad, but the one who suffers most is the manipulator himself. What each country must do is implement principles of the free market for it’s own good, and refrain from trying to educate or coerce other counries into doing the same. Trade wars pull both warriors down.
David –
Nice to see you toeing the (Republican) party line with this issue. Actually, I think John Kerry liked to beat this drum, too. Look, forget what you’ve been told about “Chinese economic warfare” – as I said in an earlier post, it’s what American legislators say to dodge responsibility for the fact that they haven’t been able to rectify the structural imbalances within the American economy.
China’s yuan is undervalued, true. And it’s held in check by currency controls that limit the economic actions of Chinese citizens, as well as investing in US assets on a massive scale. If China removed the controls and floated the yuan, the Chinese banking system, which is pretty much insolvent, would collapse. This would obviously be catastrophic for China, but also for the world economy at large. You think the US trade deficit is a problem? How do (possibly) several years of recession sound as an alternative? American legislators know this (well, they should), and I have a strong feeling that they’ll continue to loudly blame the mess on China whilst doing nothing behind the scenes.
All the Asian developing/developed economies want their currencies to stay cheap relative to the Greenback, and they all heavily invest in US government bonds and other such debt instruments to keep it that way. I am positive that China isn’t the only Asian economy that actively maintains a cheap currency. Shouldn’t you be castigating them, too?
Besides, a cheap Chinese currency is great news for American consumers.
Another point to consider; the Chinese trade surplus with the USA is huge, however its overall surplus is actually quite small. The Chinese government has a lot of reasons to do nothing about the status quo.
As someone to whom trading on the currency markets is one of the black arts, could you, Suffering, or anyone else tell me how the yuan is being “held in check”. Who is holding it “in check” and how are they doing it? Why is the dollar so weak? How can they make it weak, and then suddenly decide it’s going to be strong again?
And the greatest Delphic mystery of all, why, in the name of god, is the euro strong? It seems to be based on nothing. Who decided that the euro should be “strong” and why is everyone else going along with the gag?
Verity – I’m not precisely sure how it’s done in China, however when Argentina was pegging the peso to the dollar before its default, it required one US dollar in reserve for every peso in circulation to back the value of the currency. I am guessing that, since China has enormous foreign currency reserves – mostly US dollars – this is how they do it, too. Except that for every 8.28 yuan in circulation, there is one US dollar asset in reserve. They also have controls over locals exchanging yuan for foreign exchange and a bunch of other things that keep the technically insolvent Chinese banks on life support.
I should add that all the Asian industrial economies want their currencies to be weak – it advantages their exporters. All the ‘tiger’ Asian central banks are trying to keep the US dollar strong. The stronger the dollar is, the less competitive American exporters are. Also, cheap Asian currencies mean cheap imported goods for American consumers. One of the reasons this bout of consumption in the American market is so lengthy comes down to the cheap debt offered by Asian central banks, who snap up American bonds without hesitation. It’s also why the American government is happy to run such huge budget deficits – debt is artificially cheap. Any other country with the amount of outstanding bonds the US has would need to pay a far greater yield for that debt. Obviously, this leads Americans to take on more debt than what is good for them.
Efforts to keep the dollar strong are nothing new. The cheap yen is partially what made Japan so competitive in the 60s and 70s. The Bretton Woods agreement artificially made the dollar strong and the yen weak, and when BW collapsed, the Japanese Central bank did the rest.
Why is the Euro strong? Dunno. A floating currency is only worth what someone’s willing to pay for it!
Actually, I imagine it’s strong because of uncertainty surrounding the USD, which really should be cheaper than it is. The Asian central banks can’t defy gravity for ever. The Euro may seem a safer bet at present.
Thanks, Suffering. It’s a bit clearer … at least what you wrote makes sense.
Dubya imposes Steel tariffs against agreed WTO rules, to protect industry and jobs in the rust belt for Presidential elections, Dubya persist in ignoring WTO and eventually after British Steel collapses, 1000’s lose jobs, ditto in Europe he removes tariffs after WTO makes him (which he appeals). EU squeals, jobs losses, unilateral move on agreed policies etc, etc., this is BAD
Dubya imposes quotas on Chinese textiles (zero effect) they shipped 9 months supplies in January alone, correctly forecasting US actions to protect jobs in time for mid term Congressional elections in Carolinas, Alabama, Georgia. EU squeals and follows US…. this is GOOD.
Tricky stuff this globalisation …….
Forgive me for choking on a pretzel.