WASHINGTON — Retailers and apparel importers went on the offensive Tuesday, reiterating their opposition to quotas and tariffs.
As the stakes get higher in the final year of apparel and textile trade restrained by quotas, trade associations are gearing up for an intense debate in a presidential election year. Five trade groups, espousing the long-held belief that quotas and tariffs have created an undue tax burden on low-income families and have not protected U.S. jobs, have struck first in the new year with a commissioned study entitled: “The Big Bang: Ending Quotas and Tariff Policies.”
Apparel and textile imports from around the world have been controlled by quotas for decades, but the entire system of global restraints will be eliminated on midnight Dec. 31 and everyone is bracing for the fallout.
The Bush administration — keeping an eye on the continuing loss of domestic manufacturing jobs in an election year — is facing some pressure from domestic textile groups to address the anticipated global shakeup and extend quotas beyond 2004. However, developing countries, which stand to lose thousands of jobs, have not yet made a strong push to extend quotas.
A group of Democratic House leaders has called on the President to convene a summit on the issue to develop a comprehensive plan to prevent the expected loss of millions of textile workers in the U.S. and in developing countries. But Republicans, in control of the House, have not taken a stance. In addition, U.S. trade officials have maintained they will not seek an extension of quotas on apparel and textiles, which would be a monumental task since all 146 members of the World Trade Organization would have to approve it.
It is unclear what kind of traction the issue will have this year, but importers and retailers aren’t taking any chances.
“We are entering dangerous territory in an election year,” said Erik Autor, vice president and international counsel at the National Retail Federation. “In a period where people are concerned about the economy and manufacturing employment, that is a volatile mix. We’ve got to take that challenge head on and this study is part of that effort.”
Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel, said: “We called it ‘big bang’ and it is not really hyperbole. We are looking at a major change that I think importers and retailers are prepared for. But many other countries have not understood what will happen.”
According to the study, compiled by Ed Gresser, director of the trade and global market project at the Progressive Policy Institute, quota and tariff policies, in place for 40 years, now add as much as $80 billion a year to the retail cost of clothes and shoes.
“The current system’s major effect is to raise prices for goods, especially important to poorer families,” the study stated. According to the study, 2,400 products are covered by separate quotas for 58 separate countries.
“Each one funnels thousands or millions of dollars from American families to federal and provincial governments in China, India and elsewhere in the world,” the study said. “The quota system is mainly an affliction of the poor.”
It claimed tariffs are a “discriminatory tax” that charges poor families a greater percentage of disposable income than wealthy ones. The U.S. collected $9.5 billion in tariffs on imports of apparel, textiles and footwear out of a total of $19.1 billion in tariff revenues in 2002.
Efforts to eliminate tariffs, however, have been put on hold. The U.S. had proposed to eliminate tariffs on all industrial products by 2015 as part of the round of global WTO talks, but that round collapsed in Cancún, Mexico, and has not yet been revived.
Citing an estimate from the International Trade Commission, the study said Americans currently spend $315 billion a year on shoes and clothes. The ITC estimates that quotas and tariffs raise the price of goods by 34.4 percent, with 23 percent of the increase coming from quota policy and 12 percent from tariffs.
“If this figure is correct, eliminating the two systems could save families as much as $80 billion a year,” the study predicted.
The study also concluded that quotas and tariffs have not protected U.S. jobs, which have fallen steadily for the past decade. Finally, the study said a major policy reform such as eliminating quotas will mean an “adjustment” for the U.S. and other nations that rely on clothes and fabric.
It made some recommendations to help the domestic textile industry weather the impact, such as eliminating global tariffs to expand export markets, maintaining trade adjustment assistance for workers displaced by trade and improving support for U.S. manufacturers.
A coalition of domestic textile and fiber groups has claimed the impact of quota elimination will be much more than an “adjustment” and more like Armageddon. Many trade experts join this coalition in the belief that China will dominate global apparel and textile trade in 2005 and beyond, as other foreign suppliers fall by the wayside and experience massive economic upheaval.
The study, on the other hand, claims countries involved in U.S. preferential programs such as sub-Saharan African nations, Andean nations and Central America and the Caribbean, will remain competitive.
“It’s going to be an economic disaster we have never really seen,” predicted Jock Nash, Washington counsel for Milliken & Co, noting that developing countries will lose 30 to 50 percent of their hard-currency earnings when quotas are removed.
Cass Johnson, acting president at the American Textile Manufacturers Institute, said: “You have people suddenly waking up and realizing that they may lose their textile and apparel industries in the very near future and they recognize they need to do something about it. It’s ironic that importers and retailers have always stressed how important it was to bolster the economies of poor countries, but are now wholeheartedly supporting what is essentially China taking over most these countries’ export markets.”