Sunday, August 21, 2005

Nobody benefits

Nobody benefits from the ridiculous quota on Chinese textiles. This blog has said it and now Alex Singleton, President of the Globalization Institute says it in the Business.

In his article entitled Mandelson and the EU taking the clothes off our backs Singleton goes into the history of the textile trade and the various attempts on the part of the developed countries to restrict the production in the developing ones. It seemed that the ending of the Multi-Fibre Agreement at the beginning of this year brought an end to that pernicious practice.

If anybody doubts that the practice is pernicious, let me remind them that Christian Aid favours the preservation of quotas, believing that politicians, civil servants and tranzis like themselves are the proper people to decide how trade and economic development should be arranged across the world.
“Christian Aid took out advertisements attacking the end of quotas: it preferred the Multi-Fibre Agreement's quota system, believing that so-called managed trade works better than free trade. They wrongly feared China would be a success but only as part of a race to the bottom, cutting the wages of workers as competition intensified.”
In fact, the reverse is true. Those who work directly or indirectly for Western companies in the developing countries are paid considerably more than other people in those countries, though considerably less than workers in the West.
“But Chinese textile workers actually command relatively high wages of $120 or so a month. In the last two years, Chinese producers invested $25bn to retool and streamline their facilities. During the past 20 years, thanks to free-market reforms and free-trade, 200m Chinese have been lifted out of poverty, though there are still 160m Chinese living on less than $1 a day. Chinese imports should not just been seen as a way of getting cheap clothing for the West, but also as a way of helping lift people out of poverty.”
A morally admirable aim, one would have thought, but also an economically sensible one. The more Chinese people have money, the more they spread it around within and outside their country.

Think of all those better off Chinese workers buying goods from Britain among other countries. Think of all those Chinese visitors. They are here already. We are getting Chinese students in some of the best universities (they routinely beat our own poorly educated youngsters but that is another and sadder tale); Chinese businessmen are still few and far between, what with the large numbers who find themselves on trial for massive embezzlement but Chinese tourists are becoming a sizeable force in London. They all leave money here one way or another.

If all goes well and China is too volatile for anyone to make safe predictions, there will not be all that many of them who will be prepared to work for that mythical one bowl of rice a day.

Other developing countries have benefited from free trade.
"While more than half of the population in the 10 countries Powell and Skarbek studied lived on less than $2 per day, in 90% of the countries, working a 10-hour day in the apparel industry is enough to lift a worker above - often far above - that standard, the authors found. In Honduras, a nation often criticised by protectionists, the average worker in the textiles industry makes $13.10 per day, even though 44% of the population has to make do with under $2 per day."
Trade managed by officials of the kind favoured by Christian Aid and the European Union, always skews it in favour of some developed countries or, to be quite precise, the most vocal of the lobbies in those countries.

It is good to see someone else, apart from this blog, putting the boot into Mandelson’s undeserved reputation as a free-marketeer.
“Mandelson's behaviour has been disappointing to say the least. When he took office as EU trade commissioner, he was hailed as a great champion of free trade (though not by this newspaper). Harlem Desir, a French MEP, denounced his appointment saying that his free trade views were unacceptable. Desir need not have worried: despite Mandelson's rhetoric, he has allowed himself to cave in to special interests. Mandelson, who will always remain a spin-doctor at heart,initially tried to blame retailers for the stockpiles, but he has faced a growing backlash. Pressure from the governments of Germany, the Netherlands,Sweden and Denmark led him to organise crisis talks with the Chinese authorities, aiming to bring forward some of next year's quotas.”
Unfortunately for Mandelson at such an early point of his career as Commissioner, this is one problem out of which he is not going to be able to spin his way. Bringing forward next year’s quotas is not going to solve the problem, merely postpone it. And he cannot simply get rid of them without agreement by the relevant Council of Ministers. We shall watch developments with interest.

And let us not forget the people whom it hits hardest in the developed countries: those who cannot afford expensive clothes and for whom cheap imported textile meant being able to buy a variety of goods. Nor should we forget those who work in the retail industry. They, too, will be hard hit. So, does anyone benefit?

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