The End of Textile Quotas

With the start of 2005, one of the most aggregious examples of Western protectionism came to an end. Textile quotas first negotiated by John F. Kennedy have been phased out, as agreed by the U.S. and Europe during the creation of the WTO over a decade ago.

The quotas meant that each country could only export a stated amount of textiles into the West. This prevented large countries such as China or India from producing up to potential; on the other hand, it gave smaller countries like Bangladesh a chance to build their own textile industries to fill excess demand. While most of the smaller countries such as the Philippines have managed to climb the technological ladder somewhat, and no longer rely on textiles for the bulk of their trade, Bangladesh will be hurt badly by the end of the quotas. But Bangladeshi garment-manufacturers have known that the quotas would end for a long time, and failed to prepare adequately as did the Pilippines, Columbia, or Vietnam, all of which consolidated their industries and boosted productivity in order to stay competitive in the new environment. In a world without artificial government controls, inefficiency is punished and flexibility rewarded.

The big winners will be China and India. This should be seen as a good thing. India is a firm ally of the U.S. and Israel, helping to counterbalance China's regional ambitions, and fighting against Islamofascism along the Indo-Pakistani border. Increasing the Indian textile industry will go a long way towards alleviating the wide gap between the Indian poor and middle-class, and will increase India's economic power in general.

China's gains are good also, to the extent that one believes in the Trading States thesis of geopolitics—that is, that states that trade with each other are less likely to go to war. Additionally, a growing textile-industry will put more money in the hands of the Chinese people; the consensus is that once the Chinese middle-class becomes large enough, the Communist government will fall victim to endlessly-rising expectations, pushing China towards democracy. Since democratization is the only feasible way to permanently solve the China problem, it should be advanced at every opportunity.

Meanwhile, the cost of clothing is expected to drop by about 20%. This is great news for the poor of the West, who spend a large fraction of their income on clothing. Until now they have essentially been forced to overpay for clothing, courtesy of government trade-barriers. Now that these barriers are coming down, the poor will have more disposable income at the end of the day, which they can use to increase their standard of living, or perhaps even to leverage themselves out of poverty.

That this comes at the expense of others in Bangladesh, for example, should not be too distressing; the world was given fair warning that this would happen, and Bangladesh and Indonesia chose not to react. Their industries, wasteful and inefficient as they are, owe their existence to government protectionism that effectively stole money from the poorest members of society. Now that protectionism is ended, and the world should rejoice. Next up: agricultural caps!