Textile Prices: Socks and Shoes

Mike Shedlock looks at a worldwide dispute over Textile Prices — and has a 14-step plan to “Whip Low Prices Now!”

“The cost of shoes could jump by £15 a pair if the European Commission slaps a putative anti-dumping tax on Chinese footwear imports, a report warned [Dec. 28].

“European Union member states are expected to vote in favor of protectionist barriers against Chinese and Vietnamese leather shoe imports next month in a rerun of the recent textiles dispute with Beijing.

“Retailers are likely to make shoppers foot the bill for any increase in duties, PricewaterhouseCoopers, the consultancy firm, said yesterday.

“The so-called bra wars in the summer, which followed the massive shift in textile and clothing production from the EU to China, triggered the reimposition of quotas on Chinese imports after intense lobbying by the likes of the Italian and Spanish garment industries.”

Textile Prices: “The Chinese Sock Threat”

Here in the United States, “Bush Battles the Chinese Sock Threat”:

“After five months and seven rounds of contentious negotiations, the Bush administration and the American textile lobby got what they wanted: a cap on China’s booming export business in the sensitive trade.

“The agreement sets quotas (or ‘safeguards,’ in security speak) for nearly half of the Chinese textile exports to America, such as bras, baby socks, bath towels, wool suits, window shades, etc. Thus are American consumers protected from the presumed disaster of paying too little for these essentials of life.

“The agreement comes on the heels of a similar arrangement between Beijing and the European Union, and less than a year after the expiration of a decades-old system of textile quotas that had both governed and distorted the trade…

“For China’s competitive textile industry, the prospect of quota-free trade was an immensely appealing inducement for its government to join the World Trade Organization. Since Jan. 1, Chinese exports of clothing and textile products to the United States, the world’s largest textile market, have jumped more than 40%.

“Anxious about Beijing’s growing economic clout and nebulous military ambitions, the Bush administration has invoked safeguard clauses embedded in China’s conditions for WTO membership to unilaterally reinstitute limits on import levels of individual product lines. In the 11 months since the expiration of the MFA, the administration has exercised this option for 19 categories of clothing…

“Nevertheless, the justification and efficacy of government meddling in trade matters — especially in the case of Washington’s embrace of textile quotas — is dubious. Not only are political means counterproductive, but such interventionist measures tend to generate real dislocations in [their] wake, where only supposed ones existed.

“According to politicians, labor unions, and threatened domestic manufacturers, the textile industry is another example of U.S. job losses to Chinese firms supported by a militaristic government and an artificially cheap currency. Although the American trade deficit to China has doubled since the latter’s WTO accession in 2001, such a raw analysis ignores the context of changing economic circumstances in the Far East.

“Manufacturing is moving out of high-cost Asian countries to China, meaning that while America’s deficit with China has grown, its trade gap with other Asian nations, including Japan, is decreasing. Indeed, Asian investment in Chinese assembly plants translates into even lower prices for labor-intensive consumer goods ultimately purchased by Americans. Moreover, to decry a cheap yuan while turning a blind eye to the Fed’s printing press, much less the presence of U.S. military personnel in over 100 countries, smacks of hypocrisy…

“It is estimated that the quotas will cost American consumers $3-6 billion annually, but whether Washington’s gambit will provide predictability to the textile trade or shore up ailing domestic companies is less certain…

“What’s more, Washington’s textile intervention may even accelerate the undoing of its intended beneficiaries in two respects. First, with exports in low value-added textile products subject to quotas, Chinese firms will likely opt to move up the value chain into direct competition with American manufacturers that generally do not compete head-on with the Chinese and cannot compete on the basis of cost.

“Secondly, other Asian countries will fill the void created by the coerced reduction of Chinese clothing exports to America. In the face of unfettered Chinese competition, India’s clothing exports to the United States this year nonetheless rose 34%, Bangladesh 24%, and Indonesia’s exports 17%.”

Textile Prices: Whip Low Prices Now

Quite frankly, I am getting tired of harping about the benefits of free trade. With that in mind, I have changed my tune. We need to “Whip Low Prices” now.

Mish’s 14-step program to Whip Low Prices:

1. Put tariffs on shoes.
2. Put tariffs on socks, underwear, bras, and other textiles.
3. Increase tariffs on beef, sugar, cotton, and cattle.
4. Scrap NAFTA and tell Canada where to go over lumber.
5. Label China, Japan, and India “currency manipulators.”
6. Put additional tariffs on all goods from India, China, Japan, and other currency manipulators.
7. Up the minimum wage to $15 per hour.
8. Mandate unions at Wal-Mart.
9. Have the government guarantee the wages of airline pilots and GM pensions.
10. Have the government bail out any city, state, or local pension plans that are in trouble.
11. Tax companies on the difference between pay rates in India and China and rates in the U.S.
12. Expand U.S. military bases all over the world. We simply do not have enough.
13. Increase military spending. Spending 100% of what the rest of the world combined does is obviously not enough. It did not stop Sept. 11, now did it? I propose we spend 300% of what the rest of the world does. If terrorism does not abate within 2 years, I propose we immediately up that to 600% of what the rest of the world spends. Double military spending every 2 years until the war on terrorism is won.
14. To pay for military spending, I propose we slash taxes across the board by 75%. Everyone can see how the Bush tax cuts benefited the wealthy; the reason it did not properly trickle down is that the cuts simply were not big enough. A 75% further tax cut should cause a trickle-down effect. If not, taxes should be slashed 90%, or whatever it takes until everyone is happy.

Most of those ideas have been proposed by others to varying degrees. All am doing is packaging them up in a nice, neat bundle. Some are even being implemented already. But if people want to pay more for shoes and socks and panties and food, then let’s do it. To hell with free trade and lower prices.

To save 750 textile jobs in the United States, let’s quadruple the price of underwear. It makes perfect sense to someone. If $15 an hour minimum wages with matching tariffs do not Whip Low Prices, then we could resort to putting a head tax on every customer who goes through the door at Wal-Mart. We would give that money to the owner of Joe’s Convenience Store, who was rudely awakened from slumber by “unfair competition.”

Please note, however, that although higher-priced underwear is supposedly a good thing, higher-priced oil and health care is not. Why is that anyway? Oh well, who cares why? The solutions are obvious: “Free” universal health care and an adequately beefed-up military, so we can just take all the oil that we want from whoever has it.

As for me, I am tired of watching this scenario slowly but surely play out. I propose we just take the plunge right now and get it over with. The quicker the existing system blows up, the quicker we can put a new one in its place. Death by a thousand cuts is maddening. Let’s see some real action now.

Please call your senators and congressmen tomorrow and tell them you are sick and tired of paying too little for underwear, socks, shoes, pots, toys and electronics from China. Demand higher prices today. Tell them you are therefore in favor of a big bang enactment of Mish’s 14-point proposal to Whip Low Prices now.

Regards,
Mike Shedlock ~ “Mish”
January 26, 2005