On January 1, 2005, the textile andapparel quota regime, administered underthe World Trade Organization’s Agreementon Textiles and Clothing, is slated to termi-nate. After decades of protectionist excep-tions, textile trade finally will be subject tothe same rules that govern internationaltrade in other manufactured products.

Getting to this point has been difficult.The United States is widely perceived tohave obstructed implementation of anagreement that was intended to achieveincremental liberalization in four stages over10 years. To this day, most products thatwere to be liberated from quotas remainunder quantitative restrictions. There can belittle doubt that U.S. failure in this regardcontributed to the breakdown of theSeptember WTO talks in Cancun, Mexico,where developing countries were outspokenabout the failure of rich-country policies tolive up to their rhetorical promise.

Meanwhile, the U.S. textile lobby haslaunched a rearguard campaign to preserveand expand import barriers. Recently, a coali-tion of textile producers filed petitions seek-

ing new restrictions on certain Chineseexports. Talk of filing new trade remedy caseshas become more pronounced. And thespecter of job losses in the U.S. textile indus-try is once again being used to vilify trade.

The reality, however, is that Americantextile workers have had decades to adjusttheir expectations and seek new skills.Textile communities, and their leaders, havehad ample opportunity to prepare for tran-sition to employment in new industries.

Meanwhile, the enormous costs of textileprotectionism have been borne dispropor-tionately by America’s lower-income fami-lies, who spend a higher proportion of theirearnings on clothing. Textile protectionismhas also deprived poor countries of exportopportunities—precisely the kind of oppor-tunities the Bush administration identifies asvital for promoting economic stability andsecurity. Considering its burgeoning propen-sity to use trade policy to advance foreignpolicy and national security objectives, theadministration should clearly articulate itssupport for freer trade in textiles and apparelby denying the industry’s rearguard efforts.

Threadbare ExcusesThe Textile Industry’s Campaign to Preserve

Import Restraintsby Dan Ikenson

October 15, 2003 No. 25

Dan Ikenson is a trade policy analyst with the Cato Institute and coauthor of AntidumpingExposed: The Devilish Details of Unfair Trade Law (2003).

Executive Summary

Introduction

Few manufacturing sectors have been moreimmune from the broader strokes of interna-tional trade liberalization than the textile andapparel industries. Textile and apparel trade hasoperated under a set of rules distinct fromthose governing trade in other products formost of the post–World War II period.

Although international commitment toincremental trade liberalization under the aus-pices of the General Agreement on Tariffs andTrade precipitated decades of trade barrierreductions in other sectors, textile and appareltrade has been subject to heavy and prolongedrestrictions. Specifically, most textile and appar-el imports into the United States (as well as theEuropean Union and Canada) have been sub-ject to quantitative restrictions since 1974. Somerestraints even go as far back as the 1950s.

But the textile and apparel quota regime,administered under the World Trade Organi-zation’s Agreement on Textiles and Clothing, isslated to terminate on January 1, 2005. Pursuantto the ATC, negotiated during the UruguayRound, which concluded in 1994, textile andapparel quotas will be abolished and trade inthose sectors will be considered “integrated”with the GATT and subject to the same disci-plines that govern trade in other products.

Thus far, the United States has proven lessthan steadfast in its commitment to the objec-tives of the ATC. Incremental liberalizationthat was to transpire in four stages over thecourse of 10 years has been mostly cosmetic.The majority of products important to textileand apparel exporters have been back loadedfor liberalization in the final stage.

As 2005 approaches, domestic voices ofopposition to liberalization have been growinglouder. New demands that foreign countriesopen their own textile and apparel markets as aprecondition for further U.S. liberalization arebeing thrust into official commentary on thetopic. Side deals effectively reversing previousliberalizations were demanded by some mem-bers of Congress—and granted by the Bushadministration—to secure votes on the Trade

Promotion Authority legislation in 2001 and2002. In July 2003 domestic producers filed aspecial safeguard case against certain textile andapparel products from China, and textile pro-ducers are already signaling their intention tobring cases under the antidumping and coun-tervailing duty laws.

The Bush administration’s silence—and insome cases acquiescence to the textile industry’sdemands—is only exacerbating internationalperceptions of a shaky U.S. commitment totrade agreements, much as the 2002 steel safe-guard has. Such acquiescence likely contributedto the failure to make progress on multilateraltrade negotiations in Cancun, where among thecrosscurrents was developing-country reluctanceto forge agreements that are too often ignoredby rich countries. The fact that a U.S. presiden-tial election year will precede full implementa-tion of the ATC only raises further doubts.

Despite decades of U.S. market share andemployment losses, textile and apparel produc-ers still have political clout. But the drive forcontinued protection comes primarily from thetextile industry. For the most part, apparel pro-ducers heeded the writing on the wall and glob-alized operations years ago. They are lessinclined to obstruct trade today.

Textile producers, on the other hand, areplaying by the old rules—the only rules theyunderstand, frankly—and are agitating for morerestrictions. They are sure to exploit the specterof increasing legions of displaced textile workersto advance their claims. But the reality is thatAmerican textile workers have had decades toadjust their expectations and seek new skills.Textile communities, and their leaders, have hadample opportunity to prepare subsequent gener-ations for transition to employment in newindustries. There has been plenty of time to pro-mote and adopt policies to attract investment innew business. Agitating for more protectionnow amounts to a confession that opportunitiesand time have been squandered. Those withoutoptions have nobody but themselves and theirpolitical and business leaders to blame.

Nevertheless, the employment outlook is notas bleak as industry advocates suggest. In recentyears, the major textile-producing states have

2

The Bush administration’ssilence—and in

some cases acquiescence to the

textile industry’sdemands—is

only exacerbatinginternational

perceptions of ashaky U.S.

commitment totrade agreements.

There is perhapsno better exampleof the folly of managed tradethan the ATC andits predecessorarrangements.

attracted investment in manufacturing that farexceeds the national average. Manufacturingoutput and exports from those states have alsobeen relatively strong. For workers having moredifficulty finding jobs, the trade adjustmentassistance program was expanded in 2002 toextend more benefits for a longer period of time.Accordingly, displaced textile workers haveaccess to government benefits not available tomost of the 2.6 million U.S. manufacturingworkers who have lost their jobs since January2001. Meanwhile, the economic costs of ensur-ing a soft landing for workers and communitieswho ignored the signs and warnings have beensubstantial. And they have been borne dispro-portionately by lower-income families through-out the United States.

The anticipated quota-free environmentportends substantial upheaval in global produc-tion. While most textile and apparel trade stillwill be subjected to higher-than-average tariffsafter integration, U.S. producers will face moreintensive foreign competition than they areaccustomed to, and there will be further con-traction in a domestic industry long in decline.

Ironically, many countries that were presum-ably constrained by the quotas will be on theoutside looking in, as they come to grips withthe fact that their own industries cannot com-pete effectively in a quota-free marketplace. Thefact that tariffs will remain relatively high accen-tuates the significance of the patchwork of free-trade agreements and regional trade preferenceprograms, such as the North American FreeTrade Agreement, the Africa Growth andOpportunity Act, the Andean Trade PreferencesAct, and the Caribbean Basin Trade PartnershipAct, as well as the proposed free-trade agree-ments with Central America, Southern Africa,Morocco, and the Dominican Republic.Producers in countries with preferential accessto the U.S. market could have an extended leaseon life, although duty avoidance under some ofthese programs is itself costly and does not guar-antee business.

But preferential access implies that otherproducers have less favorable access. So anydecision to bestow preferences on one countrynecessarily handicaps others, many of which

suffer from a dearth of economic opportuni-ties. And textile and apparel production is theprimary manufacturing activity in many of theworld’s poorest countries.

Considering its burgeoning propensity to usetrade policy to advance foreign policy andnational security objectives, the Bush adminis-tration should seek to ensure that its trade andforeign policies are coordinated. That willrequire an assessment of the prevailing high tar-iffs on textile and apparel imports, the strengthsand weaknesses of the various preference pro-grams, and the wisdom of restraining trade inthe future. An objective analysis will lead to theconclusion that it is time for U.S. trade policy towork for the benefit of all Americans, not justconcentrated pockets of rent-seeking industries.Trade policy should not anoint winners andlosers but should enable market-oriented deci-sionmaking to flourish. In the 21st century,there is no justification for prolonging the failedpolicies of the past.

Legacy of the MultifibreAgreement

There is perhaps no better example of thefolly of managed trade than the ATC and itspredecessor arrangements. What began as ashortsighted, GATT-subversive ploy by richcountries to insulate their textile and apparelindustries from developing-country competi-tion actually made matters worse for theintended beneficiaries. It encouraged world-wide capacity growth as industries budded inplaces not yet restricted, which intensifiedimport competition and price deflation, whichin turn begat progressive expansion of the webof restrictions to address the growing “prob-lem.” Meanwhile, job attrition in the U.S. tex-tile and apparel industries continued unabatedover the decades, while the cost of protectingthose jobs was thrust upon unwitting Americanconsumers. Today’s muddled landscape is adirect result of the original sin of the 1950s.

Inspired by a renewed international com-mitment to trade embodied in GATT, therecovering postwar economies began to trade

3

more vigorously and the world began to pros-per. But just seven years after its inception, theUnited States fired the first significant shotacross GATT’s nascent bow. In 1955 theUnited States compelled Japan to “voluntarily”restrain its exports of cotton fabrics and cloth-ing, which had risen to levels exceeding the pre-war peak. The U.S. restrictions on Japaneseexports were soon followed by similar under-takings by the United Kingdom, which extract-ed voluntary restraints on exports from HongKong, India, and Pakistan in the late 1950s.

By 1960 the concept of “market disruption”was recognized by GATT contracting partiesas a justification for imposing extra-GATTmeasures. The “market disruption” standard—which departed from GATT Article XIX’s“safeguard” provision by allowing protection-ism targeted at specific countries—led to theintroduction of discriminatory restraints in theShort-Term Arrangement of 1961, the termsof which were accepted by 19 exporting coun-tries. In 1962 the Long-Term Arrangementreplaced the STA as a five-year pact consistingof bilaterally agreed constraints and unilateralsafeguard actions. The LTA was renewed in1967 and again in 1970.

In 1974 the textile loophole in GATT dis-cipline expanded dramatically. The MultifibreArrangement provided a framework in whichrich countries could limit the access to theirmarkets of textile and apparel products fromdeveloping countries. The MFA covered tradein a much wider variety of products than wasthe case under the STA, LTA, and previousrestrictive regimes. It was expanded to includeproducts of wool, man-made fibers, and certainvegetable fibers.

The web of quotas that developed under theMFA contravened GATT’s preference for tar-iffs over quantitative restrictions. It also violat-ed the principle of nondiscrimination, whichprovided that all signatory members shouldhave equal access to the markets of all other sig-natory members, since the MFA comprised aseries of individual bilateral agreements withdifferent quota levels.

Not only were the MFA and its predecessorarrangements a departure from GATT princi-

ples; they exacerbated the very problem theywere supposed to address. World supply did notcontract. World prices did not rise. Rather, sup-ply expanded and prices fell as more and moreunrestricted countries began producing textilesand clothing for export to rich-country markets.Consider the following trends. In 1965 the top13 exporters of textiles and clothing were Japan,Italy, France, the United Kingdom, Germany,Belgium and Luxembourg, the United States,India, the Netherlands, Switzerland, Austria,Hong Kong, and China. Together, those coun-tries accounted for 88 percent of the $10.33 bil-lion of exports of textiles and clothing in thatyear. Exports from Japan, India, Hong Kong,and China were subject to MFA quotas. 1

By 1996 the Netherlands, Switzerland, andAustria dropped out of the top 13, and Korea,Taiwan, and Turkey were added. Exports fromeach of the newcomers were subject to quotas.From 1965 to 1996 China graduated from the11th largest to the largest exporter, Japandescended from the largest to the 13th largest,Korea jumped from 23rd to 4th, Taiwan wentfrom 21st to 6th, and Turkey moved up from39th to 12th. But most telling is that the entiretop 13 in 1996 accounted for only 56.2 percentof the $313.54 billion of exports, suggesting awidespread proliferation of textile and apparelproduction and exporting worldwide. Whereasthe smaller exporters in 1965 accounted foronly 12 percent (or $1.2 billion) of the $10 bil-lion in exports, they accounted for 44 percent(almost $14 billion) of the $313 billion inexports in 1996.2

The “problem,” it would seem, got larger.That is the legacy of the MFA. There are morecountries producing textiles and clothing thanprobably would have been the case had theMFA never been implemented. And that over-capacity has suppressed worldwide prices,adding to the woes of all producers.

Meanwhile, jobs in the U.S. textile andapparel industries continued to decline despitethe protection. According to U.S. CensusBureau figures, total employment in the textileand apparel industries was 2.3 million in 1977.By 2000 that figure had declined to 1.1 million.3

Today, the combined figure is closer to 900,000.

4

Not only were the MFA and its

predecessorarrangements adeparture from

GATT principles;they exacerbatedthe very problem

they were supposedto address.

In a 1994 study from the Institute for Inter-national Economics, Gary Hufbauer andKimberly Elliot estimated that protection inthe textile and apparel sectors cost the econo-my upward of $33 billion in 1990. Accordingto their estimates, the cost per job saved wasclose to $200,000 per year.4 It is a testament tothe perversity of protectionism that Americanswould protest violently if the governmentannounced plans to pay textile and apparelworker each $100,000 not to work, yet theyacquiesce to a bill that is twice as high.

Quotas and tariffs increase the price of textilesand clothing by restricting supply. They alsointroduce into the supply chain additional coststhat get passed on to consumers. As an example,in 2002 the right to export (i.e., the right to use aquota allotment for) a cotton quilt made in Chinacost $8.50. In other words, Chinese exporterswere required to pay $8.50 to the Chinese gov-ernment (which owns all of the quota rights) foreach cotton quilt exported to the United States in2002. Those costs are reflected in the price U.S.consumers pay for quilts. So, in one year, U.S.consumers paid $50.3 million to the Chinesegovernment just to cover the cost of quota rightsto export cotton quilts.5 Ted Sattler of Phillips-Van Heusen Corporation estimates that Chineseclothing producers paid around $360 million lastyear to the Chinese government for quota rightsin 12 textile and apparel categories. He also esti-mates that quotas add from 10 to 50 percent tothe average price paid by an American companyfor an imported garment.6

By any reasonable measure, the MFA was anabject failure. First, it subverted GATT princi-ples and opened the door to bureaucracy, footdragging, and exception making. Second, itfailed to save textile and apparel jobs in richcountries. Third, it imposed an enormous eco-nomic burden on the U.S. economy—a burdenborne disproportionately by lower-incomeAmericans for whom clothing costs are a rela-tively large budget expense. Fourth, it inspiredproduction decisions that were based not onoptimal economic considerations but primarilyon avoiding quota restrictions.

By the launch of the Uruguay Round in1986, developing countries had made their case

that no new multilateral trade agreementswould be forthcoming without an agreementto end the MFA. The developed countries con-sented to the ATC, but only after securingloopholes in the agreement that undermine itshonest implementation to this day.

Failing the Spirit of the ATC

Today, the vestiges of the MFA endure with-in the ATC, which allows for the continued useof quantitative restrictions with the ultimateobjective of eliminating all quotas over 10 years.The four-stage process of quota retirementspecified in the ATC began on January 1, 1995,and is slated for completion on January 1, 2005,at which point the textile and apparel sectorswill be considered “integrated” into the GATTsystem and subject to the same rules and disci-plines that apply to other commodities.

If the ATC was celebrated as a long-await-ed step toward liberalization of the textile andapparel trade, the champagne was uncorked fartoo early. Importing countries quickly exploit-ed loopholes, violating at least the spirit if notthe letter of the ATC. At the launch of theDoha Round in 2001, developing countriesexpressed their outrage at the trivial degree ofliberalization that had occurred:

We remain deeply disappointed andconcerned that major developed coun-tries have not yet delivered on theircommitment to liberalize trade in tex-tiles and clothing in any meaningfulmanner, for developing countries tobenefit from. Seven years from theUruguay Round Agreement on Textilesand Clothing (ATC), few quota restric-tions have been phased out. The plansannounced for the remainder of the 10-year period are no more encouraging.Unless major improvements are effect-ed, the large bulk of quotas will remainuntil the end of the transitional periodon 1 January 2005; 701 out of 758 inthe US, 167 out of 219 in the EU, 239out of 295 in Canada.7

5

If the ATC was celebrated as along-awaited steptoward liberaliza-tion of the textileand apparel trade,the champagne wasuncorked far tooearly.

Yet, in response to such allegations, U.S. andEuropean officials have consistently taken theposition that they have upheld their end of thebargain. How could such different conclusionsbe drawn from the same set of facts? Like toomany trade agreements hastily drafted withouttackling some of the stickier issues, the rulesgoverning the ATC are intentionally murky.And as hindsight now confirms, the rules ofimplementation should not have been left tothe discretion of the importing countries.

The ATC includes a detailed list of prod-ucts—well over one thousand specific tariff pro-visions—to which its rules apply. Each importingcountry is required to integrate (remove fromquota restraints) products from the list covered bythe ATC in compliance with the followingschedule:

By January 1, 1995—Products that account-ed for at least 16 percent of the country’s1990 import volumeBy January 1, 1998—Products that account-ed for at least an additional 17 percent of thecountry’s 1990 import volumeBy January 1, 2002—Products that account-ed for at least an additional 18 percent of thecountry’s 1990 import volumeBy January 1, 2005—All remaining products

In addition, growth in the quota levels foreach product remaining under quantitativerestraint after each stage of integration was to beaccelerated. After the first stage, the growth rateof quotas applying to products still underrestraint was to be increased by 16 percent abovethe rate prevailing under the MFA schedule.After the second stage, the rate was to be accel-erated by at least another 25 percent. And afterthe third stage, the remaining quotas were to beincreased by at least an additional 27 percent.

The ATC allowed the importing countriesto decide which products would be integratedat each stage, with the condition that the list ateach stage should include products from foursubgroups: tops (unspun fibers) and yarns, fab-rics, made-up textile products, and clothing.

In implementing the ATC, each of theimporting countries took full advantage of the

discretion afforded them. The list of products tobe integrated under the ATC was included asthe annex to the agreement. It included a sub-stantial number of products that were nevereven restricted under the MFA. According toestimates in a 1994 Journal of World Trade arti-cle, previously unrestricted products accountedfor 37 percent of U.S. total annex import volumein 1990 (the base year for integration considera-tions). For the EU, previously unrestrictedimports accounted for 34 percent of the annex,and for Canada the figure was 47 percent.8 Eachof those members included previously unre-stricted products in their respective integrationschedules for the first three stages of the ATC,9

thus enabling them to claim compliance with-out really liberalizing the quotas for many prod-ucts.

Exercising more discretion, the importingcountries chose to integrate primarily products inthe tops and yarns, fabrics, and made-up textilecategories in the earlier stages, pushing off mostclothing categories to the final stage. Of course,developing countries have the greatest compara-tive advantage in labor-intensive clothing pro-duction. Clothing has also been more heavilyrestricted than the other groups of products.10

The use of historic imports as the basis forquota retirement offered the importing coun-tries another way to defer liberalization.Imports do not necessarily reflect products thatare restricted. In fact, many imports occurbecause there is no or little domestic produc-tion. So, by using imports as the benchmark,rather than domestic production, which moreaccurately reflects products restricted, the ATCwas ripe for exploitation by the importingcountries.11

Meanwhile, the growth-on-growth provi-sions of the ATC were marred by the fact thatthe base rates of growth (those in effect underthe MFA) were relatively small. Applying fac-tors of 16 percent, 25 percent, and 27 percentmay have seemed like major concessions to theexporting countries, but in practice it keptgrowth rates lower than they might have beenunder the old system.

First, under the MFA each country’s basequota allotment was renegotiated every two to

6

Like too manytrade agreements

hastily draftedwithout tackling

some of the stickierissues, the rules

governing the ATCare intentionally

murky.

four years—and usually raised. Then the growthrate was applied to an expanding base allotment,resulting in a faster pace of liberalization thanhas been experienced by most categories underthe ATC. But there is no renegotiation of bilat-eral textile agreements under the ATC. Second,in the run-up to implementation of the ATC,the United States used the last renegotiation ofbilateral agreements to achieve reductions inannual growth rates. The resulting decelerationof quota growth, combined with increases inconsumer demand, has made the ATC morerestrictive on remaining quotas than would havebeen the case under the MFA.12

Furthermore, Article 6 of the ATC containsa transitional safeguard provision, which import-ing countries can invoke if “it is demonstratedthat a particular product is being imported intoits territory in such increased quantities as tocause serious damage, or actual threat thereof, tothe domestic industry producing like and/ordirectly competitive products. Serious damage oractual threat thereof must demonstrably becaused by such increased quantities in totalimports of that product and not by such otherfactors as technological changes or changes inconsumer preference.”13 That an agreement toend 40 years of quantitative restrictions on tex-tiles and apparel contains such a provision isincongruous to say the least. Its effect has been toexpose products that had never been restrainedto the possibility of country-specific sanctions.

Despite the language in Article 6 suggestingthat “the transitional safeguard should beapplied as sparingly as possible, consistentlywith the provisions of this Article and effectiveimplementation of the integration processunder this Agreement,”14 the United Statesembraced the provision with zeal. In the firstyear of the ATC alone, the United Statesinvoked the transitional safeguard mechanismon 24 occasions.15 While the EU was morerestrained in its use of the safeguard, it initiated53 antidumping proceedings against imports oftextiles and apparel between 1994 and 2001.Developing countries were targeted in 46 ofthose 53 cases (87 percent of the time).16

Although the importing countries can sayfor the most part that they have technically

upheld their end of the deal, the objectives andvast potential of honest implementation of theATC—as the exporting countries maintain—have not been realized. Wherever there wasdiscretion, the importing countries exercised itto the detriment of the exporting countries—and their own consumers. Wherever the ATCspecified goals and objectives, but not man-dates, the importing countries ignored them.

Textiles vs. Apparel

Textile and apparel manufacturing are twoof the oldest industries in the United States.Like other aging U.S. manufacturing sectors,the textile and apparel industries have been ina state of slow, steady decline over the past cou-ple of decades. As the economy has grown andAmerica has become wealthier, producing tra-ditional textiles and clothing here has becomea relatively inefficient use of resources. Theincreasing propensity of nations to trade hasexposed that inefficiency, particularly in themore labor-intensive processes of apparel cut-ting, sewing, and assembly.

As noted previously, over the past fewdecades, as imports have taken a larger share ofdomestic consumption and new capital andtechnology have been introduced to makedomestic production more efficient, jobs havedeclined in both industries. The industries’contribution to gross national product has alsodeclined by about 50 percent, but in a shorterspan of time. In 1987 the value added of textileand apparel production was about $4.31 bil-lion. By 2001 that figure was nearly identical at$4.54 billion. However, during this periodgross domestic product increased from $4.74trillion to $10.1 trillion. Accordingly, theindustries’ joint value-added contributiondecreased by more than 50 percent to just 0.4percent of GDP. Overall manufacturing’s shareof GDP also declined, but at a less pronouncedpace of 25 percent.17

It is customary in trade policy discussions totreat the textile and apparel industries as a sin-gle, cohesive entity. That perspective no longermakes sense. The two industries have pursued

7

Although theimporting countries can sayfor the most partthat they havetechnically upheldtheir end of thedeal, the objectivesand vast potentialof honest imple-mentation of theATC—as theexporting countriesmaintain—havenot been realized.

different strategies with respect to operating ina postquota environment. Perhaps the mostsuccinct way to convey the differences is tocompare the mission statements of their mostprominent trade associations.

The American Apparel and FootwearAssociation represents more American clothingmanufacturers than any other organization. Itsmission is “to promote and enhance its mem-bers’ competitiveness, productivity and prof-itability in the global market by minimizing reg-ulatory, legal, commercial, political and traderestraints.” During the 1990s, apparel producerscame to understand that the only way to survivein the postquota world was to diversify produc-tion. Even after decades of quotas and high tar-iffs on foreign competition, clothing producerscould not afford to have all of their manufactur-ing operations in the United States. So theybegan to invest abroad. Today, AAFA membersproduce and sell all over the world, optimizingoperations in the face of continuing restraintsand uncertainty. Those producers now want tobe able to optimize without the restraints ofquotas, high tariffs, and onerous rules of originthat increase the costs of production. And theywant to minimize the uncertainty of investing innew production facilities—uncertainty that tothis day renders business development in Chinaa risky endeavor. For the most part, the apparelindustry has adopted a favorable view of trade.

The November 2002 proposal by the U.S.Trade Representative to eliminate all industrialtariffs worldwide by 2015 was embraced by theAAFA. “Essentially, the United States isproposing to launch a Planet Earth Free TradeAgreement. The scope and reciprocal nature ofthis initiative are unprecedented. It is long over-due. . . . This proposal not only removes U.S.import barriers, but it also eliminates barriersthat are imposed on U.S. branded apparel andfootwear by other countries. . . . This is veryexciting. Since WTO member countries wouldbe required to eventually eliminate tariff andnon-tariff barriers on all products from allnations, it will enable AAFA’s members to enjoygreater access to all markets.”18

AAFA is also on record as opposing therecent safeguard petitions brought by the tex-

tile industry against brassieres and dressinggowns from China.

While there is still a significant amount ofdomestic apparel production—about 500,000workers are employed in the industry—manyof the operations are owned by companies thathave diversified production overseas. The tradeviews of most of those companies are reflectedby the policy positions articulated by theAAFA. There are some apparel producers,however, who produce exclusively in theUnited States. Many such producers are locat-ed near military bases and produce clothing forthe armed services under the “Buy American”provisions of the Berry Amendment. In asense, they cater to a captive market within animport-restricted U.S. market. There are alsocertain high-end or specialty apparel producersthat are able to avoid competing with importsexclusively on the basis of price.

Some of the 500,000 apparel workers aremembers of organized textile and apparel laborunions, the most prominent of which may bethe Union of Needletrades, Industrial, andTextile Employees. It is unsurprising that thoseunions are committed to promoting productsmade in the United States. Nevertheless, theirfocus has been on pushing for labor and envi-ronmental provisions in trade agreements andstrengthened “Buy American” provisions ratherthan on opposing international economic inte-gration outright.

By contrast, the textile industry has pursueda path of intransigent obstruction. It has lob-bied for minimal compliance with the ATC,the inclusion in trade agreements and prefer-ence programs of strict rules of origin mandat-ing the use of U.S. textiles in garments import-ed into the United States, an easy-to-wieldsafeguard mechanism, and outright rejection ofthe administration’s proposal to eliminateindustrial tariffs by 2015. The industry is rep-resented by a multitude of trade associations,but the American Textile ManufacturingInstitute touts itself as “the textile industry’sprimary spokesman with the legislative andadministrative branches of the federal govern-ment as well as the news media.”19 Its approachto trade policy is made clear by this “scorecard,”

8

During the 1990s,apparel producers

came to understandthat the only way to

survive in thepostquota worldwas to diversify

production.

appearing on the ATMI website, of lobbyingsuccesses:

• ATMI convinced the administration tooppose efforts to accelerate the phaseoutof textile quotas.

• ATMI successfully lobbied Congress andthe Bush administration to reject Pakistan’srequest for improved market access inreturn for that nation’s support in the waron terrorism.

• ATMI continued to assist members inopposing “short supply”20 petitions filedby importers in connection with theCaribbean Basin and African preferentialtrade programs.

• ATMI prevailed on Congress to approvelegislation specifying that printing, dye-ing, and finishing of U.S. fabrics used inapparel imports from the CaribbeanBasin must be performed in the UnitedStates.

• ATMI worked to ensure that the Berry-Hefner “Buy American” law for militarypurchases of textile products is maintained.

• ATMI lobbied the Bush administrationto incorporate strict rules of origin andcustoms enforcement provisions in theSingapore and Chilean free-trade agree-ments.

• ATMI pressed the U.S. government totake action against rising imports fromVietnam and to negotiate a bilateral agree-ment to better control such trade.

• ATMI actively lobbied Congress to pre-serve U.S. dumping, countervailing duty,and other trade remedy laws.

• ATMI recently requested that the govern-ment impose special “textile safeguard”quotas on surging textile and apparelimports from China in product categoriesthat were recently released from quotarestraint.

• ATMI convinced the Bush administra-tion to remove textile and apparel prod-ucts from a proposed Qualified IndustrialZone for Turkey. QIZs allow countries toship goods to the United States duty-freefrom the zones.21

In stark contrast to the apparel producers’pro-trade stance, the textile industry is clearlypinning its hopes on stifling foreign competi-tion through every available policy means.

Resistance to Reformsand Liberalization

The impending fulfillment of the ATC hasled to familiar refrains from the textile industryand its supporters. In a coauthored op-ed placedin the Charlotte Observer in April 2002, then-senator Jesse Helms (R-NC) and Sen. ErnestHollings (D-SC) intoned, “Never has therebeen a more crucial time than now for us tostand up against the reckless destruction of thetextile and apparel industry.”22 DemocraticNorth Carolina senator and presidential hopefulJohn Edwards has charged that the industry is“clearly being destroyed by trade.”23

Such handwringing is not new to the textileindustry. Its use of alarmist rhetoric is well doc-umented:24

• 1948: “[S]ix more months . . . would bringan almost complete collapse of the textileindustry here.” David E. Hand, president,John Hand & Sons, New York Times,March 9, 1948.

• 1955: “[T]he textile industry . . . faces los-ing odds in its struggle to keep mills run-ning.” A. K. Winget, president, AmericanCotton Manufacturers Institute, NewYork Times, September 10, 1955.

• 1961: “[T]he collapse which the industryhad been predicting to our Governmentfor several years arrived with a bang.”Robert T. Stevens, president, J.P. Stevens& Co, testimony before the SenateCommittee on Interstate and ForeignCommerce, February 6–7, 1961.

• 1961: “[U]nless immediate relief is provid-ed, the domestic textile industry will bedestroyed by foreign textile imports.” J. M.Cheatham, president, American CottonManufacturers Institute, testimony beforethe Senate Committee on Interstate andForeign Commerce, February 6–7, 1961.

9

In stark contrast tothe apparel produc-ers’ pro-tradestance, the textileindustry is clearlypinning its hopeson stifling foreigncompetitionthrough everyavailable policymeans.

• 1970: “We are going out of business, andfast. The Mills bill [a textile quota bill] isthe only thing that is going to save us.”Rep. L. Mendel Rivers (D-SC), beforethe House Ways and Means Committee,91st Cong., 2d sess., 1970.

• 1985: “If we do not act now to curbimports, in five years our entire industry . . .will simply cease to exist.” John Gregg,president, Man-Made Fiber ProducersAssociation, March 19, 1985.

• 1985: “Well, this is the last gasp of theindustry.” Rep. Ed Jenkins (D-GA), spon-sor of the Textile Quota Bill (HR 1562),prior to the House vote on October 10,1985.

• 1990: “If the current trend continues . . . atthe turn of the century the U.S. textile indus-try will go the way of the dinosaurs—anextinct species.” Sen. Ernest Hollings (D-SC), during Senate floor debate on theTextile Quota Bill (HR 4328), July 12, 1990.

In early 2003, ATMI published its “TextileAction Plan for Growth,” in effect the industry’strade policy wish list. Interestingly, none of theeight points would seem to have anything to dowith “growth.” Among the points is ATMI’sinsistence that the United States not negotiateany further textile tariff reductions in the DohaRound unless and until other countries elimi-nate their nontariff barriers and reduce their tar-iffs to U.S. levels. ATMI urges the administra-tion to “reject demands of developing countriesto change the terms of existing agreements andprograms to further increase their access to theU.S. market at the expense of U.S. textile pro-ducers.” No terms of any agreements wouldneed to be changed for the United States toabandon its miserly approach to the ATC.ATMI implores the administration to imposenew quotas on textile imports from China. Itinsists on strong, enforceable yarn-forward rulesof origin25 in free-trade agreements and strongenforcement by U.S. customs. And it imploresthat access to the U.S. market not be used toenlist support for the war on terrorism.26

One oft-repeated gripe of the U.S. textileindustry is that other countries should reduce

their barriers to U.S. textile products prior toany commitment by the United States to fur-ther reduce its own tariffs. The industry citesArticle 7 of the ATC, which mandates that allmembers undertake efforts to achieve improvedaccess to their own textile and apparel markets.Despite the bald hypocrisy of insisting thatother countries improve access to their marketswhen the United States has continually exer-cised its discretion to ignore optional languagein the ATC, U.S. textile producers have littleabout which to complain on that score.Although overall U.S. export value decreased by2 percent between 1999 and 2002, exports oftextile products actually increased by 19 percentduring that period.27 Even more recent com-parisons suggest that textile producers are hav-ing a relatively easy time exporting. Betweenthe first half of 2002 and the first half of 2003,overall U.S. export value increased by 2 percent.The value of textile product exports increasedby 10 percent over the same period.28

The industry’s response to a USTR zero-tariff proposal—a bold proposal that answersfirmly the ATMI’s foreign market accessissue—confirms that its interest in foreign tradebarriers is less than sincere. Although the pro-posal was met with general enthusiasm by mostU.S. manufacturers, it was strongly criticized bythe textile industry. ATMI chairman Van Mayissued a statement that began: “Simply put, thistariff proposal is an outright gift to China—onewhich will come at the expense of U.S. textilemanufacturers and workers, and our potentialexport markets in the Western Hemisphere.”29

Certainly the industry has experienced sub-stantial job decline over the past severaldecades, a trend that will likely become morepronounced after 2004. But there is nothingunexpected about that. It has been entirelyexpected. Decades of quantitative restraintswere justified by the importing countries as ameans of allowing domestic businesses andworkers to adjust gradually without having toendure overwhelming social costs. That ration-ale is being cited again because little meaning-ful liberalization has yet occurred.

Between 1980 and 2000, U.S. textile andapparel industry employment declined by 35

10

Although overallU.S. export value

decreased by 2 percent between1999 and 2002,

exports of textileproducts actually

increased by 19 percent during that

period.

and 50 percent, respectively. But most of thatdecline, in both industries, is attributable togains in productivity, which were 111 and 115percent, respectively, during that period. Inother words, while employment fell in bothindustries by no more than 50 percent, produc-tivity more than doubled in both.30 Even a jointresolution seeking special treatment for the tex-tile and apparel industries, introduced in theHouse of Representatives by Howard Coble(R-NC) in the 107th Congress, acknowledgedthe vast productivity gains experienced by thoseindustries: “Whereas according to the Bureauof Labor Statistics, the textile and apparelindustry was one of the most productive in theUnited States during the decade of the 1990s,experiencing significant productivity growth inpractically all major product sectors. . . .”31

Although it is likely that productivitygrowth was stimulated by foreign competition,the fact is that technological progress all butensures a steady decline in U.S. manufacturingemployment across the board. The textileindustry is no exception to that general trend.Accusations that policies promoting freer tradeare unfair to displaced workers are withoutfoundation. On the contrary, because of tradeadjustment assistance, “trade-displaced work-ers” (as broadly as that is defined) actually enjoyspecial treatment relative to workers who losetheir jobs because of technological change,changes in consumer taste, or macroeconomicdownturns. Accordingly, displaced textile work-ers have access to government benefits notavailable to the millions of other U.S. manufac-turing workers who have lost their jobs in recentyears.32

The textile industry’s reliance on the specterof job loss to inspire sympathy for its causecontinues to pay dividends, however. In August2003 the Department of Labor announcedplans to provide grant assistance to workerswho lost jobs on account of the closure ofPillowtex in North Carolina. This is federalassistance on top of the recently expandedtrade adjustment assistance program.

Meanwhile, economic prospects in textile-producing states are hardly bleak. Investmentin manufacturing facilities in the southeastern

United States, where most U.S. textile produc-tion occurs, has been strong in recent years.Foreign automobile producers and parts sup-pliers have set up factories in South Carolina,Georgia, and Alabama. Fiber optics and newtechnology steel companies, such as Nucor,have set up shop and expanded operations inNorth Carolina.

Between 1997 and 2000, U.S. exports ofmanufactures to the world increased by 15.3percent. And in each of the major textile-pro-ducing states (with the exception of Virginia),the rate of export growth exceeded the nation-al average. Alabama’s exports increased by 24percent. Its largest manufacturing export cate-gory, reflecting both domestic and foreigninvestment in automobile plants, was trans-portation equipment, which registered over$1.5 billion in exports in 2000, growing bymore than 300 percent from 1997.

Over the same period, Georgia’s exports ofmanufactures increased by 21.3 percent, reflect-ing strong investment and growth in sales ofbeverage and tobacco products; nonmetallicmineral manufacturing; and electrical equip-ment, appliances, and parts.

North Carolina’s manufactures exportsincreased by 18.8 percent. The largest exportcategories, with sales of between $2 billion and$3 billion each, were computers and electricalproducts and chemical manufactures. But therewas also strong export growth in leather andrelated products (84.9 percent), primary metalproducts (57.7 percent), and plastic and rubberproducts (43.2 percent).

Exports of manufactures from SouthCarolina experienced the fastest growth of thetextile-producing states at 39.2 percent. Threesectors experienced more than $1 billion inexports: computer and electronics products ($1.7billion), transportation equipment ($1.2 billion),and plastic and rubber products ($1.1 billion).Seven other manufacturing sectors experienceddouble-digit growth between 1997 and 2000.33

Textile states have international trade andinvestment to thank for the vitality of theireconomies. Foreign investment and foreign pur-chases are possible because U.S. consumers pur-chase foreign products. Consequently, lower-paid

11

Textile states haveinternational tradeand investment tothank for the vitality of theireconomies.

textile workers and their children have opportuni-ties to improve their standards of living outsidethe mills.

Life after Quotas

In July 2003 the textile industry filed specialsafeguard petitions against Chinese exports ofbrassieres, dressing gowns, gloves, and knit fab-ric. Although the petition on gloves was reject-ed, those concerning the other products—allremoved from quotas in 2002—have gone for-ward.

Those petitions come on the heels of a high-profile textile industry campaign to alert policy-makers to China’s “imminent domination” ofworld textile and apparel trade. In a letter writ-ten in July 2003, AMTAC urged the presidentto “reaffirm [his] commitments to a healthyU.S. textile sector by taking strong specificactions regarding the enormous threat fromChina.”34 AMTAC asserts that China is“poised to seize 65 to 75 percent of the U.S. tex-tile and apparel market once remaining quotasare removed.”35

But according to those who should know—clothing producers, importers, and retailers—thatis hardly the case. Removing quotas naturallyencourages return to where production is optimal.And for many of the products liberated fromquotas in 2002, China is the most efficient pro-ducer. For many other products, though, China isnot expected to gain significant market share. AsPeter McGrath explained in his testimony beforethe U.S. International Trade Commission inJanuary 2003 (six months before the safeguardpetition):

It is important to note that China’sgains to date in those few productsthat are no longer under quota is notnecessarily indicative of what will hap-pen with all other textile and apparelproducts after 2004. The products thathave become quota-free—integrat-ed—are precisely those for whichChina is clearly the most desirableproducer. To some extent, USA-ITA

[U.S. Association of Importers ofTextiles and Apparel] suspects that theU.S. Government chose to integratebrassieres and textile luggage in StagesTwo and Three in part because it didnot expect China to be a member ofthe WTO by 1998 or even 2002.

As one example, brassieres fit themodel for what China does best. Highsewing needle dexterity is what setsChina apart from many other coun-tries. Its advantage is detail and abilityto work with difficult to sew fabrics.Brassieres typically have more than 24components, involve at least 32 sewingoperations and are linked togetherwith 145 feet of thread. It is no wonderbusiness moved to China last year.

Textile luggage is also most logical-ly produced in China both because ofthe complexity of the manufacturingprocess and because that is where theraw materials are located. Likebrassieres, luggage is a highly laborintensive product involving a largenumber of components and sewingoperations. But just as significantly,luggage also requires hardware—itemssuch as metal frames, buckles, clips andhooks, rivets, hinge partitions, handleand wheel systems, and zippers—which are produced in China.Previously, because of the quota restric-tions on China, companies were com-pelled to ship all that hardware fromChina to other manufacturing sitesoutside China. Now that logisticalnightmare, including additional costsand time, has finally ended.36

Realistically, textile producers have muchless to fear from Chinese exports than the cur-rent level of hysteria would indicate. U.S. textileproducers manufacture some finished products,such as bed linens, which they sell to retailers.But most textile output goes directly into man-ufacturing other items, such as clothing, lug-gage, tires, furniture, and automobiles. Most ofthe industry’s apparel customers have moved

12

Textile producershave much less to

fear from Chineseexports than the

current level of hysteria would

indicate.

operations offshore, where U.S. import re-straints against Chinese textiles have no effect.That’s why the petition on knit fabrics is socurious. Besides, as Laura Jones of the UnitedStates Association of Importers of Textiles andApparel points out: “China is not even thelargest supplier. Canada is number one,accounting for almost 40 percent of theimports, and its trade is up, and Korea is num-ber two, accounting for 25 percent of theimports. In fact, Korea’s trade is up by over 100percent and is four times the size of China’strade. That petition doesn’t even attempt to tryto explain why China should be restrainedwhen the larger suppliers should not.”37

With respect to the cases brought on theother products, the industry is suggesting that itscustomers, mostly in Latin America, will losebusiness as U.S. importers choose instead topurchase from China. But the facts don’t sup-port this claim. Imports from China are displac-ing imports from other Asian suppliers. Theyare not displacing imports from suppliers in theWestern Hemisphere. Imports of dressinggowns increased by 57 percent from Honduras,by 35 percent from El Salvador, and by 17 per-cent from the Dominican Republic in 2002compared with 2001. Imports of brassieres fromHonduras and El Salvador have increased by 22percent and 31 percent, respectively.38

A review of U.S. import data contradicts theassertion that China will dominate textile andapparel trade. While there may have been sub-stantial increases in import volume from China inproducts recently liberated from quotas, the samedoes not hold for all products. The volume ofimports of textiles and clothing from Chinaincreased by 11.74 percent per year between 1994and 2002. But imports from Mexico, the secondlargest source just behind China in 2002,increased at an annual rate of 20.48 percent.Combined imports from Caribbean and NAFTAcountries were 132 percent higher by volume thanimports from China and were growing at a fasterannual rate of 18 percent. Honduras, El Salvador,Pakistan, and Maldives each had higher annualrates of growth than China.39

With respect to clothing, the evidence is evenless persuasive. Both import volume (2.2 billion

square meter equivalents, or SME) and the annu-al rate of volume growth (21 percent) are highestfrom Mexico. China’s volume was 1.6 billionSME and experienced an annual growth rate of 7percent between 1994 and 2002. By contrast,combined import volume from Caribbean andNAFTA countries was 6.2 billion SME andgrowth was at an annual rate of 14 percent.40

At the request of the U.S. Trade Represent-ative, in early 2003 the U.S. International TradeCommission conducted an investigation of“Textiles and Apparel: Assessment of theCompetitiveness of Certain Foreign Suppliersto the U.S. Market.” Although a public report ofthe ITC investigation has not been published,some of the testimony provided in that investi-gation is available. The predominant theme inthe testimony of apparel producers, importers,and retailers is that, even without the new safe-guard case, there are plenty of reasons to limitbusiness with China. The notion that apparel isa commodity for which production costs are theexclusive business consideration is a myth. Andeven if input costs were the only or most impor-tant consideration, China would be passed overin favor of many other lower-priced producers.

Kevin Burke, president and CEO of theAmerican Apparel & Footwear Association, anorganization representing 700 companies thatproduce and market clothing and shoes, testifiedthat sourcing decisions are based on whether anapparel company can deliver the right garmentat the right time at the right price. Determiningfactors include the following:

1. Ease of compliance with local and U.S.customs requirements;

2. The level of U.S. customs enforcementefforts with respect to the country;

3. Labor conditions in the factories;4. Ability to guarantee security of ship-

ments from the factory through thecountry’s infrastructure;

5. Cost and availability of a trained ortrainable workforce;

6. Price and availability of the appropriatetextile inputs;

7. Price and availability of quota or exportlicensing regimes;

13

Imports fromChina are displac-ing imports fromother Asian suppli-ers. They are notdisplacing importsfrom suppliers inthe WesternHemisphere.

8. Speed and quality of output;9. Whether the country has preferential

access to foreign markets and whethercompliance with conditions conferringsuch access is relatively simple and inex-pensive;

10. Transparency and predictability of thecountry’s commercial, regulatory, andlegal system;

11. Transparency in the country’s politicalsystem;

12. Ability to communicate efficiently andeffectively with the factory; and

13. Ability to move inputs into the factoryand final product out of the factory.41

Burke added: “A country’s competitivenessdepends largely on its ability to meet each ofthese key factors. Not all these factors carry thesame importance for each factory in each coun-try, but in most cases they all play a role. . . . Butit is naïve to assume—as many do—that costsonly manifest themselves through wages. Eachof the factors identified above has the ability toadd costs at multiple points in the supplychain.”42

In testimony for the same investigation, theU.S. Association of Importers of Textiles andApparel, the largest organization representingimporters of textiles and clothing, offered thefollowing:

Logistics, infrastructure, supply chainmanagement, social and governmentstability, human rights, plant efficien-cy, including skill levels and qualitycontrol, reliability, trusted relation-ships and costs, including compliancecosts, are also all factors in the sourc-ing process. Each of the additionalfactors will continue to influence thedecision-making process. . . . WhileChina will inevitably pick up morebusiness as a result of the eliminationof quotas, because the quotas haveheld China back, the basic strategy formost U.S. importers and retailers is tomaintain business relationships withlongtime trusted suppliers, particularly

where those suppliers are verticallyintegrated and can provide a “fullpackage,” from inputs to completedproduct. A number of suppliers thatare the focus of the Commission’sstudy fit this description, including butnot limited to Korea, Taiwan, Indiaand Pakistan. . . . Moreover, differentsuppliers serve different price points inthe U.S. market, and China is not thelowest cost supplier in a broad range ofgoods.43

J.C. Penney, one of the largest U.S. apparelretailers, also emphasized the diversity of sourc-ing considerations as well as the risk of sourcingfrom China exclusively:

While quota limitations are just oneelement in sourcing decisions, the elim-ination of that factor means that eachcompany can make some adjustments.However, the core considerations forselecting a particular supplier andcountry for each product will remainthese five criteria: speed, quality, legalcompliance, logistics and product costs.. . . There will be a variety of businessmodels that will be used in the post-2004 environment, just as there aretoday. . . . Given the risks involved, nocompany can afford to put too large aportion of its business in a single coun-try. . . . As a practical matter, the majorimporters in the United States willlimit the amount of business they placein China. . . . Putting too much of yourbusiness in one country, or one factoryfor that matter, is not a good businesspractice and this is especially true forChina. . . . Given the possibility of spe-cial textile safeguard measures beingtaken against Chinese goods underrules and definitions that are still notyet decided upon, added to the threat ofantidumping measures and broadersafeguard actions, companies have nochoice but to be concerned and to limittheir exposure.44

14

J.C. Penney, one ofthe largest U.S.

apparel retailers,emphasized the

diversity of sourc-ing considerations

as well as the risk ofsourcing from

China exclusively.

Thus, the belief that China will dominateworld textile trade after 2005 is not held bythose whose business decisions will influenceproduction and trade in those commodities.Producers, importers, and retailers all allude tothe risk of investing too heavily in relationshipswith single sources of supply, which is an evenriskier proposition when that source is Chinesebecause of the variety of arrows in the protec-tionist quiver designed specifically to thwartimports from that country.

Considerations of timeliness and the desireto shorten the supply chain work to the benefitof Western Hemisphere producers, who areobviously in closer proximity to U.S. con-sumers. But supply chain optimization is also afunction of minimizing transportation andother logistical costs of multiple location pro-duction arrangements. The quota system neces-sitated such convoluted supply chains. Its elim-ination will offer greater opportunities to gar-ment suppliers in countries with substantialproduction of the requisite apparel inputs:threads, yarns, and fabric.

In a speech in early 2003, Brenda Jacobs, anattorney and former U.S. textile negotiator,gave Indian textile and apparel producers causefor confidence in the postquota environment.

Asian suppliers have developed a majorpresence in the U.S. market because oftheir ability to offer vertical integrationat a low cost. India is a prime exampleof this point. The development of sub-stantial yarn, fabric, and garment pro-duction (as well as “made-ups” such asbed linens) that allows you to provide afull package to customers means thatyou will continue to be importantsources of supply to the U.S. market inthe post-2004 world.45

For similar reasons, textile and apparelindustries in Pakistan and some of the Andeancountries are expected to fare well after thequota system expires.

But again, other factors influence sourcingdecisions. Since tariffs will remain relativelyhigh on textile and apparel products after the

quotas are gone, one potentially important fac-tor is whether the producer is a party to a free-trade agreement or preferential program—andwhether the costs of preferential access are man-ageable.

Many of the costs associated with these pro-grams stem from the need to comply with so-called rules of origin. In order for garmentexports to qualify for duty-free or preferentialaccess to the U.S. market, they must meet cer-tain qualifications that confer status as a productof that country. In many cases, those qualifica-tions are so rigid that they introduce additionalcosts that negate the benefits of preferentialaccess.

Most U.S. free-trade agreements and tradepreference programs feature to a greater or less-er degree a “yarn-forward” rule of origin, underwhich clothing from the beneficiary countryreceives duty-free treatment only if it is cut andsewn in the preference area from fabric wovenof yarn spun in the United States or the prefer-ence area. This extremely rigid rule greatlyrestricts the benefits of duty-free treatmentunder NAFTA, the new free-trade agreementwith Chile, the CBTPA, the ATPA, and theAGOA. (Fortunately, our FTA partners Israeland Jordan enjoy much more liberal rules oforigin, as do some of the poorest African coun-tries under AGOA.)

Maintaining generally high tariff levels ontextiles and clothing, and restrictive rules oforigin in trade agreements, is the U.S. textileindustry’s game plan for preserving an artificialmarket for its products. With such trade barri-ers in place, U.S. textile producers will have aninside track with offshore clothing producerslooking to sell to the lucrative U.S. market.

The U.S. textile lobby is pushing hard forrigid rules of origin in the Central AmericanFree Trade Agreement now under negotiation.The Central American countries are seeking theability to use inputs from any country with whichthe United States maintains trade agreements orpreference programs. The U.S. textile industry isinsisting that only inputs from the United Statesor Central America may be used. Ultimately, theway to cut the Gordian knot of all artificialrestrictions is to eliminate all duties on textiles

15

The quota system necessitated convoluted supply chains. Itselimination willoffer greater opportunities togarment suppliersin countries with substantial production of therequisite apparelinputs: threads,yarns, and fabric.

and clothing. Little wonder, then, that despite itsprofessed concern with foreign trade barriers, theU.S. textile industry was strongly opposed to theUSTR’s zero-tariff proposal.

Getting to 2005

Precisely because so many products—about80 percent of those slated for integration—arestill subject to quotas, 2004 promises to test U.S.commitment to real liberalization. For almost 30years under the MFA and through the currentyear of the ATC, the quota system has accom-modated the need for “carry forward.” Whenexports are nearing their quota limits, countriesare permitted to borrow a percentage from thefollowing year’s quota allotment. That mecha-nism mitigates price spikes and supply shortagesand was included to prevent a total disruption toU.S. retailers and consumers. But in 2004, thefinal year of the ATC, there will be no “carry for-ward” from which to borrow (since there will beno quotas in 2005). This portends a particularlyunstable situation next year, when competitionfor quotas will be fierce, driving up the price ofquotas and, ultimately, the prices of textile andapparel imports in 2004.

In many ways, this is an apt conclusion to a10-year phaseout that has not lived up to itspromise. The intent was incremental integrationto allow gradual and measured adjustment. Formany products and countries, however, theexperience has been one of decreasing access.That the final year of the ATC will likely featureeven greater restrictiveness should be a lesson tothe developing countries as they negotiate in thecurrent Doha Round: Buyer beware. Indeed, itappears that this sentiment played a significantrole in the failure of ministers to achieve con-sensus on any new agreements at the criticalCancun meeting last month.

Not only will reduced market access andhigher prices be felt by U.S. consumers, but thedramatic price decreases and volume surgesexpected after the quotas expire in 2005 are pre-cisely what the domestic industry hopes to useto advance new protectionist measures.Significant price declines are expected in 2005

because of the sudden availability of previouslyrestrained supply, much of which stems fromcapacity that was built around the world inresponse to the quantitative restraints. Theremoval of quotas will also eliminate the sub-stantial cost of owning quota rights, which hasbeen a significant component of import pricesfor 30 years.

The combined volume surges and dramaticprice declines in a variety of products are nec-essary conditions of a successful safeguard(Section 201) petition. But meeting the condi-tion under the WTO Safeguard Agreementthat the import surge be “unforeseen” is simplyimplausible. At this point, the surge isinevitable unless something is done to preventthe severe fluctuations that are forecast.

Alternatively, lower prices in the UnitedStates could invite the filing of dozens ofantidumping cases. Although affirmative find-ings in those cases depend on findings ofdumping, current rules allow such findings evenin the absence of anything that could plausiblybe considered “unfair trade.”46 In any event, thecredibility of the threat of either safeguard orantidumping petitions could intimidate foreignproducers into new voluntary export restraints.In this industry and others, there is a rich histo-ry of using protectionist threats to coerce volun-tary restraint measures. There is accordingly avery real possibility that the end of import quo-tas under the ATC will not mark the true endof quantitative restrictions.

Stuck with the Bill

In its annual report on the cost of trade bar-riers, the U.S. International Trade Commissionestimated that the quantitative restrictions andtariffs on textile and apparel imports constitutea $13 billion drag on the economy.47 In light ofthe stubbornness of the recent economicdownturn and the diminishing scope for fur-ther monetary or fiscal stimulus, the time isripe for revising trade policies that interferewith economic growth. Removing barriers totrade in raw materials such as steel, lumber, andtextiles and consumables such as clothing

16

That the final yearof the ATC will

likely feature evengreater restrictive-

ness should be alesson to the devel-

oping countries asthey negotiate in

the current DohaRound: Buyer

beware.

would be a windfall for businesses and con-sumers alike. The wealth effects on corporateand family budgets—particularly those oflower income families—would be good medi-cine for the economy.

In a 2002 paper from the Progressive PolicyInstitute, Edward Gresser demonstrates howduties on imported shoes and clothing accountfor the bulk of U.S. tariff revenue and are mostpunitive for lower-income Americans. Whileaccounting for only 6.7 percent of the value ofU.S. imports, shoes and clothes account foralmost half of all tariff revenue collected. In2001, $8.7 billion of the $18.6 billion of tariffscollected came from shoes and clothes alone.Those tariff revenues were almost twice theamount of revenues collected on the next fivelargest sources (autos and auto parts, electron-ics, industrial machinery, nonclothing leathergoods, and food) combined.48

The tariff on “women’s underwear and paja-mas” ranges from 2.4 percent to 16.2 percent.Those made of silk, which are purchased bywealthier consumers, are subject to a 2.4 percenttariff. Those of cotton and of man-made fiber arehit with tariffs of 11.3 and 16.2 percent, respec-tively. With respect to “men’s knitted shirts,” thepattern is the same. Silk shirts are subject to a 1.9percent tariff; cotton shirts get a 20 percent tar-iff; and shirts of man-made fiber are hit with awhopping 32.5 percent duty. Tariffs on babies’clothes “are still more troubling, as they falldirectly on young mothers who have to buy newsets of jumpers, shirts, and trousers every fewmonths.” Tariffs on “woven baby trousers” reachas high as 29 percent, if the trousers are made ofman-made fiber, while those of silk are subject toa rate of only 2.8 percent.49

The Way Forward

The costs of textile protectionism are notlimited to higher prices paid by U.S. consumersfor clothing. When the United States maintainsclosed markets, other countries find it easier toadopt similar policies—policies that depriveU.S. exporters of sales opportunities. If theUnited States fails to implement the ATC in

good faith—which means without adoption ofsubstitute measures and with addressing theimminent problem of quota shortage in 2004—America’s role in encouraging economic liberal-ization abroad will be needlessly compromised.In particular, the Doha Round of WTO talkscould very well wind up a casualty of any failureto stand up to the textile lobby.

Developing countries are already bitter aboutwhat they see as broken promises on textilestrade. At the close of the Uruguay Round in1994, the ATC was perceived as the single mostimportant success of the round for developingcountries. If disappointment about its trackrecord thus far is compounded by furtherbetrayals, the United States will be hard-pressedto obtain agreement from developing countrieson its own negotiation priorities: tariff reduc-tions, services liberalization, intellectual proper-ty, and so on.

The political and economic stakes are toohigh to justify any further appeasement of anindustry that has been given decades to preparefor the inevitable. Further trade protection isundeserved and would undermine U.S. policyobjectives. Failure to open markets in the cur-rent round of multilateral trade negotiationswould be a major psychological and economicsetback for the world economy. And honoringcommitments to the developing world is requi-site to the realization of U.S. foreign and secu-rity policy objectives. As U.S. TradeRepresentative Robert Zoellick wrote inDecember 2002, “America’s trade policies areconnected to our broader economic, politicaland security aims.”50

In similar remarks made before the NationalPress Club in October 2002, Zoellick pro-claimed that

America’s strategy to promote a moresecure world recognizes the ties of freetrade and free societies. Our enemiestargeted the World Trade Towersbecause they recognized that econom-ic strength is at the foundation ofAmerica’s hard and soft power. Ourcampaign against them and othersshould employ economic and trade

17

The political andeconomic stakesare too high to justify any furtherappeasement of anindustry that hasbeen given decadesto prepare for theinevitable.

policies to underpin America’s long-term security.

The source of terrorism is notpoverty. . . . Terrorism’s roots lie in adeep evil. But there is no doubt thatsocieties that fragment, that are poor,that have no sense of hope, becomefertile grounds in which terrorists canburrow. So all of us have a stake indevelopment, in democracy, in open-ness, in hope, in opportunity.51

The U.S. approach to textile and appareltrade has undermined those virtuous objec-tives. The Bush administration’s national secu-rity strategy, released in September 2002,emphasizes the need for “[promoting] the con-nection between trade and development.”52 Yetin that same month, the CommerceDepartment published its “Report to theCongressional Textile Caucus” in which itboasts of “[successfully resisting] demands inthe WTO by textile supplying countries toaccelerate the integration of our textile quo-tas.”53 But those are precisely the products thatmuch of the developing world can trade.

At the highest levels, trade liberalization istouted as the path out of poverty for the world’spoorest people and as the path to greater pros-perity for all others. Yet the most enduring U.S.trade barriers have the distinct feature ofaffecting the world’s poorest people—includ-ing some U.S. citizens—most adversely.

The Bush administration’s trade legacy willdepend heavily on its success in defusing resis-tance from the textile and apparel lobbies andhonoring its commitment to liberalize trade inthose sectors. New trade agreements will beelusive unless the administration takes a prin-cipled stance against attempts to prolong quan-titative restrictions or to obtain other forms oftextile and apparel protection.

As the first priority, the administrationshould act with dispatch to prevent the tight-supply, high-price scenario projected for 2004from unfolding. No agreements need bebreached or revisited. The U.S. government hasthe discretion to increase—or even eliminate—quotas as it sees fit. It is a perversity of the

ATC phase-out schedule that the final year ofthe quotas will otherwise be characterized by areduction in U.S. market access. Accordingly,the administration should announce plans toincrease all quotas in 2004 to prevent that situ-ation from unfolding. To compensate for itsadversarial approach to the ATC over the pre-vious nine years and to inject some good willinto the Doha Round, the administrationshould lift several important quotas.

Second, the administration should deny thetextile industry’s request for new importrestrictions on Chinese dressing gowns,brassieres, and knit fabric. The first cases filedunder the China-specific textile safeguard lawwill set important precedents concerning evi-dentiary requirements and the correlationbetween Chinese imports and domestic “mar-ket disruption.”54 In light of the evidence that,as expected, quota elimination has led toincreasing Chinese exports, which are displac-ing exports from other Asian countries—adynamic that makes sense given China’s rela-tive strengths in producing those products—adetermination of market disruption would setan unacceptably low threshold and encouragemany more petitions.

Third, the administration should stop push-ing restrictive rules of origin in FTA negotia-tions. Textile trade issues figure prominently inongoing negotiations with Central America, theSouthern Africa Customs Union, and Morocco.The value of these agreements will therefore beseverely undermined if access to the U.S. marketis blocked by yarn-forward rules.

Fourth, the administration should recog-nize that elimination of quotas in 2005 is like-ly to cause an increase in imports and adecrease in the price of most textile and appar-el products. The probable response of the U.S.textile industry will be to bring or threatenmultiple antidumping cases (irrespective ofwhether there is actually dumping). It is imper-ative to recognize that the mere threat ofbringing an antidumping case is trade divertingbecause U.S. importers do not like the risk anduncertainty of purchasing from a source thatmay be dogged by allegations, proceedings, andpossibly extra duties.

18

The Bush administration’strade legacy will

depend heavily onits success in defus-ing resistance from

the textile andapparel lobbies and

honoring its commitment to

liberalize trade inthose sectors.

In light of the volatility of trade in textilesand apparel, as the system attempts to adjust toa greater market orientation after 40 years ofmanaged trade, the administration should exer-cise restraint in accepting antidumping peti-tions on those products. In an effort to smooththe transition from managed to market-basedtrade, the administration should consider pre-cluding acceptance of antidumping petitionsfor a period of two years after full implementa-tion of the ATC. Otherwise, the domesticindustry will likely use the threat of antidump-ing cases to achieve new restrictions before theobjectives of the ATC can be realized.

Finally, the administration should not aban-don the principles inherent in the zero-tariff pro-posal unveiled by the USTR in November 2002.Particularly in the area of textiles and apparel,tariffs will remain relatively high after the quotasare gone. A significant amount of the $13 billionannual welfare loss associated with textile andapparel protection is attributable to persistenthigh tariffs. Disproportionately, America’s lower-income families carry that burden. The mosteffective means of promoting the noble goal ofspreading prosperity through trade would be toeliminate tariffs on one of the developing world’smost important sources of revenue.

Notes1. Dean Spinanger, “Textiles beyond the MFAPhase-Out,” World Economy 22, no. 4 (June 1999):461 (compiled from Table 2).

2. Ibid.

3. U.S. Bureau of the Census, 1993–1996 AnnualSurvey of Manufactures and 2000 Annual Surveyof Manufactures, www.census.gov//prod/www/abs/industry.html.

4. Gary Hufbauer and Kimberly Elliot, “Measuringthe Cost of Protection in the United States,”Institute for International Economics, Washing-ton, 1994.

5. Peter McGrath, president of J.C. Penney Purchas-ing Corporation, Testimony before the U.S.International Trade Commission, Investigation332-448, January 22, 2003.

6. Cited in Murray Hiebert, “Getting Ready forFree Trade,” Far Eastern Economic Review, July 31,

2003.

7. Statement circulated by the ministers of mem-bers of the International Textiles and ClothingBureau, Doha, Qatar, November 9, 2001.

8. Sanjoy Bagchi, “The Integration of the TextileTrade into GATT,” Journal of World Trade 28, no. 6(December 1994): 31–42.

9. “Textiles and Apparel Module, Dispute Settle-ment,” UNCTAD report, www.itcb.org/Documents/ITCB-MI38.pdf.

10. Ibid.

11. Laura Baughman et al., “Of Tyre Cords, Tiesand Tents: Window-Dressing in the ATC?” WorldEconomy 20, no. 4 (July 1997): 412.

12. Conversation with Brenda Jacobs, trade attor-ney and former U.S. textile negotiator, July 2003.

13. WTO Agreement on Textiles and Clothing,Article 6.2.

14. WTO Agreement on Textiles and Clothing,Article 6.1.

15. World Trade Organization, www.wto.org/english/thewto_e/whatis_e/eol/e/wto02/wto2_38.htm#note6.

16. International Textiles and Clothing Bureau,“Anti-dumping Actions in the Area of Textilesand Clothing: Developing Members’ Experiencesand Concerns,” Submission to WTO NegotiatingGroup on Rules, February 2003.

17. Bureau of Economic Analysis, IndustryAccounts Data, Gross Domestic Product byIndustry, 1987–2001, October 28, 2002, www.bea.doc.gov/bea/dnz/gpoc.html.

18. Kevin Burke, Comments in “AAFA PresidentApplauds U.S. Government’s New Global MarketAccess Initiative,” AAFA Press release, November26, 2002.

19. American Textile Manufacturers Institute,www.atmi.org.

20. “Short supply” petitions are used to achieverelaxation of import restrictions when domesticproduction cannot satisfy domestic demand.

21. American Textile Manufacturers Institute,www.atmi.org.

22. Jesse Helms and Ernest F. Hollings, “We Uniteagainst Destruction of the Textile Industry,”Charlotte Observer, April 21, 2002, p. 3D.

23. Quoted in John Wagner, “Edwards Wins One

19

for Textile Industry,” Raleigh News and Observer ,March 16, 2002.

24. The following bulleted quotes were compiledfrom a table titled “A History of Appeals,” whichappears in “The Politics of U.S. Textile TradePolicy: Two Centuries of Temporary Protection,”Retail Industry Trade Action Coalition, Washing-ton, 1986.

25. Yarn-forward rules of origin generally, withsome limited exceptions, require the use of U.S. orlocal yarn in the final product if it is to obtainpreferential access to the U.S. market.

26. “Textile Action Plan for Growth,” AmericanTextile Manufacturers Institute, January 2003,www.ati.org.

27. U.S. Bureau of the Census, IM145 ImportData 1999–2000, www.litr.com.

28. Ibid.

29. Van May, Comments in “ATMI Blasts DohaTariff Proposal,” ATMI Press release, November26, 2002.

30. Calculated from data provided in Bernard A.Gelb, “Textile and Apparel Trade Issues,” Con-gressional Research Service Report for Congress,RS20436, March 20, 2001, p.2.

31. H. J. Res. 105, 107th Cong., 2d sess., in theHouse of Representatives, July 11, 2002.

32. The U.S. Trade Adjustment Assistance pro-gram was revised and expanded to provide unem-ployment benefits to a broader group of workersfor a longer period of time as part of the Trade Actof 2002. The primary requirement for qualifica-tion is that the worker’s job loss be directly orindirectly attributable to import competition.

33. U.S. Department of Commerce, InternationalTrade Administration, Office of Trade andEconomic Analysis, “State Merchandise Exports tothe World, 1997–2000, By Product Sector,” n.d.,http://itc.doc.gove/td/industry/otea/state/industry/world.pdf.

34. AMTAC, Letter to President Bush, July 7,2003, www.amtacdc.org/media/030707ltr.asp.

35. Ibid.

36. McGrath.

37. Laura E. Jones, United States Association ofImporters of Textiles and Apparel, Comments in“Importers Denounce Textile Safeguard Petitionsagainst China,” Press release, July 24, 2003, www.usaita.com.

38. Ibid.

39. U.S. Department of Commerce, Office ofTextiles and Apparel, “TQ Data as of December2002,” http://otexa.ita.doc.gov/msrpoint.htm.

40. Ibid.

41. Kevin Burke, Testimony before the U.S.International Trade Commission, Investigation332-448, January 22, 2003.

42. Ibid.

43. Laura Jones, Testimony before the U.S.International Trade Commission, Investigation332-448, January 22, 2003.

44. McGrath.

45. Brenda Jacobs, Speech before the Afro-AsianTextile and Apparel Congress, Mumbai, India,March 10, 2003.

46. For a detailed discussion of antidumping cal-culation methodology, see Brink Lindsey and DanIkenson, “Antidumping 101: The Devilish Detailsof ‘Unfair Trade’ Law,” Cato Institute Trade PolicyAnalysis no. 20, November 26, 2002.

47. U.S. International Trade Commission, “TheEconomic Effects of Significant U.S. ImportRestraints, Third Update,” 2002, p. 21.

48. Edward Gresser, “America’s Hidden Tax onthe Poor: The Case for Reforming U.S. TariffPolicy,” Progressive Policy Institute Policy Report,March 25, 2002, p. 4.

49. Ibid., p. 5.

50. Robert Zoellick, “Unleashing the TradeWinds,” The Economist, December 7–13, 2002.

51. Robert Zoellick, “Globalization, Trade, andEconomic Security,” Speech at the National PressClub, October 1, 2002.

52. George W. Bush, The National Security Strategy ofthe United States of America (Washington: The WhiteHouse, September 17, 2002), p. 19.

53. U.S. Department of Commerce, “Report tothe Congressional Textile Caucus on theAdministration’s Efforts on Textile Issues,” Sep-tember 2002, p. 1.

54. In order for import protection to be grantedunder this statute, a finding by the authorities of“market disruption” is necessary. Since no caseshave been decided under this statute yet, the deci-sions in the three cases in progress will establish aprecedent for what constitutes market disruption.

20

Trade Briefing Papers from the Cato Institute

“Free-Trade Agreements: Steppingstones to a More Open World” by Daniel T. Griswold (no. 18, July 10, 2003)

“Ending the ‘Chicken War’: The Case for Abolishing the 25 Percent Truck Tariff” by Dan Ikenson (no. 17, June 18, 2003)

“Grounds for Complaint? Understanding the ‘Coffee Crisis’” by Brink Lindsey (no. 16, May 6, 2003)

“Rethinking the Export-Import Bank” by Aaron Lukas and Ian Vásquez (no. 15, March 12, 2002)

“Steel Trap: How Subsidies and Protectionism Weaken the U.S. Steel Industry” by Dan Ikenson (no. 14, March 1, 2002)

“America’s Bittersweet Sugar Policy” by Mark A. Groombridge (no. 13, December 4, 2001)

“Missing the Target: The Failure of the Helms-Burton Act” by Mark A. Groombridge (no. 12, June 5, 2001)

“The Case for Open Capital Markets” by Robert Krol (no. 11, March 15, 2001)

“WTO Report Card III: Globalization and Developing Countries” by Aaron Lukas (no. 10, June 20, 2000)

“WTO Report Card II: An Exercise or Surrender of U.S. Sovereignty?” by William H. Lash III and Daniel T. Griswold (no.9, May 4, 2000)

“WTO Report Card: America’s Economic Stake in Open Trade” by Daniel T. Griswold (no. 8, April 3, 2000)

“The H-1B Straitjacket: Why Congress Should Repeal the Cap on Foreign-Born Highly Skilled Workers” by Suzette BrooksMasters and Ted Ruthizer (no. 7, March 3, 2000)

“Trade, Jobs, and Manufacturing: Why (Almost All) U.S. Workers Should Welcome Imports” by Daniel T. Griswold (no. 6,September 30, 1999)

“Trade and the Transformation of China: The Case for Normal Trade Relations” by Daniel T. Griswold, Ned Graham, RobertKapp, and Nicholas Lardy (no. 5, July 19, 1999)

“The Steel ‘Crisis’ and the Costs of Protectionism” by Brink Lindsey, Daniel T. Griswold, and Aaron Lukas (no. 4, April 16, 1999)

“State and Local Sanctions Fail Constitutional Test” by David R. Schmahmann and James S. Finch (no. 3, August 6, 1998)

“Free Trade and Human Rights: The Moral Case for Engagement” by Robert A. Sirico (no. 2, July 17, 1998)

“The Blessings of Free Trade” by James K. Glassman (no. 1, May 1, 1998)

From the Cato Institute Briefing Papers Series

“The Myth of Superiority of American Encryption Products” by Henry B. Wolfe (no. 42, November 12, 1998)

21

“The Fast Track to Freer Trade” by Daniel T. Griswold (no. 34, October 30, 1997)

“Anti-Dumping Laws Trash Supercomputer Competition” by Christopher M. Dumler (no. 32, October 14, 1997)

Trade Policy Analysis Papers from the Cato Institute

“The Trade Front: Combating Terrorism with Open Markets” by Brink Lindsey (no. 24, August 5, 2003)

“Whither the WTO? A Progress Report on the Doha Round” by Razeen Sally (no. 23, March 3, 2003)

“Free Trade, Free Markets: Rating the 107th Congress” by Daniel T. Griswold (no. 22, January 30, 2003)

“Reforming the Antidumping Agreement: A Road Map for WTO Negotiations” by Brink Lindsey and Dan Ikenson (no. 21,December 11, 2002)

“Antidumping 101: The Devilish Details of ‘Unfair Trade’ Law” by Brink Lindsey and Dan Ikenson (no. 20, November 21,2002)

“Willing Workers: Fixing the Problem of Illegal Mexican Migration to the United States” by Daniel T. Griswold (no. 19,October 15, 2002)

“The Looming Trade War over Plant Biotechnology” by Ronald Bailey (no. 18, August 1, 2002)

“Safety Valve or Flash Point? The Worsening Conflict between U.S. Trade Laws and WTO Rules” by Lewis E. Leibowitz (no. 17,November 6, 2001)

“Safe Harbor or Stormy Waters? Living with the EU Data Protection Directive” by Aaron Lukas (no. 16, October 30, 2001)

“Trade, Labor, and the Environment: How Blue and Green Sanctions Threaten Higher Standards” by Daniel T. Griswold (no. 15,August 2, 2001)

“Coming Home to Roost: Proliferating Antidumping Laws and the Growing Threat to U.S. Exports” by Brink Lindsey andDan Ikenson (no. 14, July 30, 2001)

“Free Trade, Free Markets: Rating the 106th Congress” by Daniel T. Griswold (no. 13, March 26, 2001)

“America’s Record Trade Deficit: A Symbol of Economic Strength” by Daniel T. Griswold (no. 12, February 9, 2001)

“Nailing the Homeowner: The Economic Impact of Trade Protection of the Softwood Lumber Industry” by Brink Linsey,Mark A. Groombridge, and Prakash Loungani (no. 11, July 6, 2000)

“China’s Long March to a Market Economy: The Case for Permanent Normal Trade Relations with the People’s Republic ofChina” by Mark A. Groombridge (no. 10, April 24, 2000)

“Tax Bytes: A Primer on the Taxation of Electronic Commerce” by Aaron Lukas (no. 9, December 17, 1999)

“Seattle and Beyond: A WTO Agenda for the New Millennium” by Brink Lindsey, Daniel T. Griswold, Mark A.

22

Groombridge, and Aaron Lukas (no. 8, November 4, 1999)

“The U.S. Antidumping Law: Rhetoric versus Reality” by Brink Lindsey (no. 7, August 16, 1999)

“Free Trade, Free Markets: Rating the 105th Congress” by Daniel T. Griswold (no. 6, February 3, 1999)

“Opening U.S. Skies to Global Airline Competition” by Kenneth J. Button (no. 5, November 24, 1998)

“A New Track for U.S. Trade Policy” by Brink Lindsey (no. 4, September 11, 1998)

“Revisiting the ‘Revisionists’: The Rise and Fall of the Japanese Economic Model” by Brink Lindsey and Aaron Lukas (no. 3, July 31,1998)

23

Nothing in Trade Policy Analysis should be construed as necessarily reflecting the views of theCenter for Trade Policy Studies or the Cato Institute or as an attempt to aid or hinder the pas-sage of any bill before Congress. Contact the Cato Institute for reprint permission. Additionalcopies of Trade Policy Analysis are $6 each ($3 for five or more). To order, contact the CatoInstitute, 1000 Massachusetts Avenue, N.W., Washington, D.C. 20001. (202) 842-0200, fax(202) 842-3490, www.cato.org.

The mission of the Cato Institute’s Center for Trade Policy Studies is to increase publicunderstanding of the benefits of free trade and the costs of protectionism. The center

publishes briefing papers, policy analyses, and books and hosts frequent policy forums andconferences on the full range of trade policy issues.

Scholars at the Cato trade policy center recognize that open markets mean wider choicesand lower prices for businesses and consumers, as well as more vigorous competition thatencourages greater productivity and innovation. Those benefits are available to any countrythat adopts free trade policies; they are not contingent upon “fair trade” or a “level playingfield” in other countries. Moreover, the case for free trade goes beyond economic efficiency.The freedom to trade is a basic human liberty, and its exercise across political borders unitespeople in peaceful cooperation and mutual prosperity.

The center is part of the Cato Institute, an independent policy research organization inWashington, D.C. The Cato Institute pursues a broad-based research program rooted in thetraditional American principles of individual liberty and limited government.

For more information on the Center for Trade Policy Studies, visit www.freetrade.org.

Recent Trade Studies from the Cato Institute

“The Trade Front: Combating Terrorism with Open Markets” by Brink Lindsey, TradePolicy Analysis no. 24 (August 5, 2003)

“Free-Trade Agreements: Steppingstones to a More Open World” by Daniel T. Griswold,Trade Briefing Paper no. 18 (July 10, 2003)

“Ending the ‘Chicken War’: The Case for Abolishing the 25 Percent Truck Tariff” by DanIkenson, Trade Briefing Paper no. 17 (June 18, 2003)

“Grounds for Complaint? Understanding the ‘Coffee Crisis’” by Brink Lindsey, TradeBriefing Paper no. 16 (May 6, 2003)

“Rethinking the Export-Import Bank” by Aaron Lukas and Ian Vásquez, Trade BriefingPaper no. 15 (March 12, 2003)

“Whither the WTO? A Progress Report on the Doha Round” by Razeen Sally, TradePolicy Analysis no. 23 (March 3, 2003)

“Steel Trap: How Subsidies and Protectionism Weaken the U.S. Steel Industry” by DanIkenson, Trade Briefing Paper no. 14 (March 1, 2003)

CENTER FOR TRADE POLICY STUDIESBoard of Advisers

James K. GlassmanAmerican EnterpriseInstitute

Douglas A. IrwinDartmouth College

Lawrence KudlowKudlow & Co.

José PiñeraInternational Center forPension Reform

Razeen SallyLondon School ofEconomics

George P. ShultzHoover Institution

Walter B. WristonFormer Chairman andCEO, Citicorp/Citibank

Clayton YeutterFormer U.S. TradeRepresentative