What should take precedence in decisions about the future direction of free trade and the global economy: the pursuit of free and unregulated trade around the world, or the protection of domestic industries–even if they are less efficient and more costly? This question is central to the current conflict that exists among the United States, the European Union, China, and many other trading partners, particularly in terms of the recent changes to international law surrounding the garment/textile industry.

As of January 2005, under the rules of the World Trade Organization (WTO) and in accordance with free trade principles, the import quota laws that have restricted the flow of garments and textiles were abolished worldwide. By the summer, economic superpowers were already beginning to feel the squeeze on domestic markets caused by China's dominance in the industry. Under the 30-year-old Multi-Fibre Agreement, nations were set annual clothing export limits. But the demise of that arrangement led to a massive increase in Chinese clothing exports to the European Union (EU) and the United States, which reacted by imposing import quotas. Later in 2005, The EU and the United States brokered separate agreements with the Chinese government to curb imports of certain categories and individual products of Chinese textiles. The EU and US textile limited quota agreements with China expire in 2008. In the near future, policy makers in the United States and Europe will have to decide whether to proceed with the free trade goal of abolishing all textile quotas or negotiating new bilateral trade agreements with China concerning textiles.

Abolishing the quotas gives all WTO member states unrestricted access to global markets. Yet, it also requires that there be major global economic restructuring, and, as with any restructuring effort, there are winners and losers. The winners include China and India, where labor is cheap, garment factories are plentiful because manufacturing costs are low, and, most importantly, production is efficient. The losers certainly include the United States and members of the European Union—the countries the quota laws were designed to protect in the first place. The United States is expected to lose a large number of jobs in this sector, which has dwindled significantly over the past decades. In 1974, for example, there were 2.4 million workers in the textile sector in the United States, but by 2000, 40% of these jobs were gone. Similar statistics can be cited for European countries, such as France, Spain, and Portugal.

But the big economic powers are not the only losers to consider here. Many smaller developing and underdeveloped countries have relied on these quotas to build nascent textile industries of their own. Countries such as Bangladesh, Cambodia, and Sri Lanka, with weak and unstable economic and political systems, have become dependent on exporting textiles, and they may be seriously affected by the fact that their exports will be forced to compete with those of giants like China and India. The garment factory workers in these countries—the ones who will soon lose their jobs—represent one of the most vulnerable segments in society. They include the poorest and least educated citizens in countries where social welfare safety nets are almost nonexistent. Most often the workers are women, as the global economy has come to rely on their cheap (and easily dispensable) work.

Nevertheless, continuing to enforce textile quotas to protect U.S. firms and workers will also drive up the cost of clothing and other textiles for the American consumer. The quotas also stand to pose a significant political obstacle to U.S.-Chinese relations and for international credibility more broadly, given that such quotas are clearly inimical to the free trade rhetoric so often espoused by Washington.

Questions to Consider:

* What is a more important issue today: pursuing free trade or protecting American industries such as the textile industry?

* Who should have the power to decide situations such as this? Should U.S. law (and that of other countries in similar cases) be superseded by the decisions of international organizations such as the WTO?

Before answering the questions below, use the following links to help you better understand the complexities of these policy decisions:

http://www.wto.org/english/tratop_e/texti_e/texti_e.htm
Information from the World Trade Organization on its role in the global textile industry.

http://news.bbc.co.uk/1/hi/business/4098305.stm
News Analysis from BBC: "New Look for Global Clothing Industry."
http://news.bbc.co.uk/2/hi/business/4100249.stm
News Analysis from BBC "Millions to Lose Textile Jobs"

http://europa.eu.int/comm/trade/index_en.htm
The European Union's Department on External Trade

http://www.globalpolicy.org/socecon/trade/indexarch.htm
http://www.globalpolicy.org/socecon/index.htm
Numerous articles and Web links related to international textile trade from the Global Policy Forum.

http://www.ncto.org/threat/index.asp
Information on the "China Threat" from the National Council of Textile Organizations, an association that is focused on creating powerful alliances and coalitions to advance the interests of the entire U.S. textile sector.

Policy Recommendations:

1			As a personal adviser to the Bush administration, should the United States lift the current quotas placed on Chinese textiles? Why or why not?
2			As an employee of the World Trade Organization, should the United States lift the current quotas placed on Chinese textiles? Why or why not?
3			As the prime minister of Cambodia, should the United States lift the current quotas placed on Chinese textiles? Why or why not?
4			How do your responses compare and contrast for the first two questions? What does this tell you about the nature of the global economy and national economic interests for the United States and other countries more broadly?
5			Do you think free trade is a good thing overall? Why or why not?