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December 13, 2004

Paul Blustein Writes About the Bushies Latest "Free Trade" Policy

From this morning's Washington Post: "U.S. Imposes New Curbs on Clothing Imports." Another sign that the Bushies' 2003-2004 economic team has been completely unsuccessful: nothing but words on the importance of reducing the deficit, no success at blocking Bush's signing of the ridiculous corporate tax bill of last October, and no success at blocking trade restrictions. From outside, at least, it looks like a strikeout.

U.S. Imposes New Curbs on Clothing Imports (washingtonpost.com): Eighteen days before the end of a 30 year-old system restricting international trade in textiles and apparel, the Bush administration is imposing new barriers on imported clothing that is likely to curtail an expected flood of Chinese imports in the first few months of next year. The administration's measures include an embargo that will be imposed throughout the month of January on some of the clothing shipped to the United States during the final months of 2004.

The new rules, scheduled to be published today in the Federal Register, were posted in recent days on a government Web site. Word of their impending imposition has stirred anger among clothing retailers and importers, who contend that the barriers contravene an international agreement to open the worldwide textile trade starting in 2005.... The quota system that has governed the textile trade since the mid-1970s will expire, eliminating rules that capped the amount of trousers, shirts, sweaters, towels and other such items that each developing country was allowed to ship to the United States, Europe and Canada. That system was aimed at protecting the domestic textile industries of the rich nations, and once it ends, allowing countries to ship as much as they can sell, China is widely forecast to garner the lion's share of the world market because of its low costs, enormous labor supply and competitiveness....

The barriers on imports to be unveiled today are different from the safeguards, which are still under consideration. Since shipments of certain types of clothing during 2004 apparently exceeded quota ceilings, an inter-agency panel, the Committee for the Implementation of Textile Agreements, is imposing restrictions on the overshipped goods. For such goods, "entry [into the U.S. market] will not be permitted until February 1, 2005," the new rules state. And after that point, Washington will allow the goods to trickle into the U.S. market based on a "staged" system, whereby the amount allowed each month into the market will be five percent of the 2004 quota ceiling....

Let me try to state this clearly and concisely: the U.S. has a *massive* national security interest in encouraging the industrialization of China as fast as possible. A poor China is an unstable China, and unstable countries ruled by oligarchies often turn to aggressive expansion as a way of using nationalism to slow the crumbling of their rule. A world sixty years from now in which Chinese schoolchildren are taught that the U.S. did what it could to speed Chinese economic growth is a much safer world for my great-grandchildren than a world in which Chinese schoolchildren are taught that the U.S. did all it could to keep China poor.

Posted by DeLong at December 13, 2004 12:14 PM

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Another Brad (though slightly more grizzled), Brad DeLong reports on the other Bush failure (the economy) and the half-assed attempts by the administration to blow a little smoke across some mirrors... [Read More]

Tracked on December 13, 2004 03:06 PM

» Because I Care... from Everything You Know Is Wrong
Another Brad (though slightly more grizzled), Brad DeLong reports on the other Bush failure (the economy) and the half-assed attempts by the administration to blow a little smoke across some mirrors... [Read More]

Tracked on December 13, 2004 03:14 PM

» Because I Care... from Everything You Know Is Wrong
Another Brad (though slightly more grizzled), Brad DeLong reports on the other Bush failure (the economy) and the half-assed attempts by the administration to blow a little smoke across some mirrors... [Read More]

Tracked on December 13, 2004 03:26 PM

Comments

It's in our LONG-term interest to help China's economy become market. It's in China's LONG-term interest that they buy our securities now to such an extent that we can't interfere with their taking complete control of Tibet, Taiwan, etc.

Too bad it's not in our interest to support the people of Tibet or Taiwan. Then again, the Administration makes it clear with this move that they have nothing left to offer.

Posted by: Ken Houghton at December 13, 2004 12:27 PM


Doesn't your White House know about "Comparative Advantage"? The Chinese produce clothing the US produces Treasuries.

Posted by: big al at December 13, 2004 12:28 PM


Well, I'm glad that you included the caveat "From outside, at least, it looks like a strikeout." The little-known truth is that the signal failures on free trade, budget, and progressive taxation were mere strategic retreats as Mssrs. Mankiw, Snow, et al. successfully stopped the central Bush plan to institute serfdom. So huzzah! to the Bush economic team.

Posted by: JRoth at December 13, 2004 12:31 PM


Brilliant:

"...unstable countries ruled by oligarchies often turn to aggressive expansion as a way of using nationalism to slow the crumbling of their rule."

Posted by: dstein at December 13, 2004 12:44 PM


Finally, something we agree on! Well, mostly. We might end up going to war with them anyway, at some point. But shutting down imports is as likely to exacerbate the underlying problems as not.

Still, the rules mentioned in the article are, in essence, retrospective rather than prospective. They're hitting the merest leading edge of a much larger tide of imports that's about to begin. The longer-term "solution" that both sides are likely to try and implement later are a much bigger issue.

Posted by: Bernard Guerrero at December 13, 2004 12:50 PM


http://www.nytimes.com/2004/12/06/business/businessspecial2/06chinaworker.html

From a Poor Village to Job Security
By DAVID BARBOZA

ZHANGJIAGANG, CHINA

The world's factory floors are now populated with people like Yun Liu, a 23-year-old woman from the countryside who shares a cramped house with her sister and eight other women who work in a factory. All the women are from her hometown, Siyang, about four hours north of here.

"This is my room," Ms. Yun says shyly, as she steps into a room that is about 10 feet by 10 feet and furnished only with a bed, two small tables and a tiny dresser. "There's not much here, but it's comfortable."

Four years ago, Ms. Yun came here to work in this bustling factory town about two hours north of Shanghai at one of China's largest textile mills, the Huafang Cotton Weaving Company. Huafang's 30,000 employees are mostly young women who were lured here from small villages in the Chinese countryside.

Like most of the women at Huafang, Ms. Yun came here right after high school, intending to work a few years and save money, before returning home to get married.

She has already stayed longer than most.

"I'm going to get married late," she says matter of factly. "I want to work a few more years. Then we'll see what happens." Ms. Yun, who earns about $130 a month, works the morning shift in a factory that operates around the clock.

She works at station No. 13, operating a group of machines that spin raw cotton into thinner and thinner threads that eventually end up on a spool that is destined for clothing makers. She swabs the machines with a brush, cleans cotton out of the gears, patches up strands of cotton and pushes wheelbarrows of spun cotton to their next destination in the spinning process.

Here in Huafang's new, 30,000 square meter plant, the floors hum with the sound of hundreds of whirring machines. Fine pieces of cotton float through the air, landing on the faces, brows and hair of the young women who dominate the floor.

After work, Ms. Yun walks just a few hundred yards to the house she shares. The women cook outside in the courtyard, in a makeshift kitchen constructed of cardboard and metal. They wash their clothes by hand, in a small pail. Each has a small room. And they share cleaning duties. But no one here seems to mind. Indeed, the women giggle and say they enjoy being here, as if they were away at college. "I feel comfortable here," says Ms. Yun, who pays $18 a month in rent. "And I know a lot of girls from my hometown, so my parents don't worry about me."

This attitude is one reason that companies have moved their manufacturing operations to China. Millions of poor men and women like Ms. Yun and her friends have been willing to migrate to factory cities like this one, where starting salaries are little more than $4 a day.

No one knows how long the migration will last, but many of China's 1.3 billion people seem willing to live such an existence.

Many of the 20,000 young women at Huafang, almost all outsiders to Zhangjiagang, live in company dormitories. They can be seen filing in and out of the dorms every eight hours, heading to their jobs, spinning and weaving the world's wear.

The women's dorms have a 9 p.m. curfew. No men are allowed in after that. There are televisions in the cafeteria. All housing, water and electricity costs are paid for by the company. The workers tend to buy only food and clothing.

"I like the environment here," Ms. Yun says, of her job. "The salary is stable, and they always pay us on time."

Posted by: anne at December 13, 2004 12:50 PM


"...than a world in which Chinese schoolchildren are taught that the U.S. did all it could to keep China poor."

China already isn't poor.

Assuming we don't deploy our global stagflation weapon (and perhaps even if we do) the chances that China will become poor seem pretty slim. They may run an oligarchy but these guys aren't stupid, either.

(at the risk of getting blacklisted here, there is this guy named Andy who writes a lot of good stuff about this)

Posted by: Michael Carroll at December 13, 2004 12:52 PM


This is the second time you've said something like this: we want to keep China poor- we want to keep India poor. You are taking about two of the most corrupt places on earth. According to the Internet Center for corruption research, The Corruption perception index score for India is 2.8 and China scores 3.4 on a scale of 0 - 10 where 10 is the least corrupt. (For comparison purposes, Sweden scores 9.2, the USA scores 7.5) This, as I understand it is the biggest roadblock to their conversion from third to first world status-

I doubt if I support whatever trade restrictions or quotas the current administration is proposing, but that's a separate issue- China keeps China poor, and India keeps India poor, not me.

Posted by: steve V. at December 13, 2004 01:04 PM


I have a few thoughts on this.

1. I don't want to sound like a huge dick, but aren't many of the textile plants in the South, like in South Carolina? If so, why aren't the Democrats going after this? Unless there happen to be some representatives in competitive districts that could suffer, what else do they have to lose?

2. The Post article is the only one that I've read about this subject, so maybe my perspective is limited, but it doesn't seem like the Bush administration is even trying to defend this with some nonsensical claim that it's really good for the economy. If we are trying to be positive and find a silver lining, maybe we can interpret this as a sign of a greater degree of honesty. It's a stretch, I know, but it's something.

3. For one reason or another, I was recently looking up "shock therapy" and other things about Poland's economic reforms. As that nation moved toward a more free-market system, it eliminated many subsidies to industry. Leaving aside the notion that a few subsidies may in some way be worthwhile, like those to promote energy independence, both sides agree that it's bad to subsidize various industries. Yet that's what Bush is doing. He's moving in the direction of European communists. Yet are we hearing a peep about this?

Posted by: Brian at December 13, 2004 01:23 PM


"A poor China is an unstable China, and unstable countries ruled by oligarchies often turn to aggressive expansion as a way of using nationalism to slow the crumbling of their rule."

I used to subscribe to this notion, but what about a country being poor has anything to do with all those latter bad things? Doesn't that scenario sound a bit familiar?

I'm poorer than I used to be, but I think the US is still rich.

Posted by: dennisS at December 13, 2004 01:41 PM


I await with baited breath for Steven Landsburg to call George Bush a rascist and say he was completely wrong in supporting him.

Posted by: Rob at December 13, 2004 01:55 PM


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