Constituent Interests and U.S. Trade Policies

7. U.S. Trade Policies for the Textile and Apparel Industries: The Political Economy of the Post-MFA Environment

CHAPTER 7 u.s. Trade Policies for the Textile and Apparel Industries: The Political Economy of the Post-MFA Environment Robert E. Scott I. Introduction Textiles and apparel have received the highest levels of persistent, long-term protection afforded to any U.S. manufactured products in the post-World Warn era. The first cotton textile quotas were negotiated with Japan in 1937 (Finger and Harris 1996, p. 205) and the Multi-Fiber Arrangement (MFA), which ultimately replaced these quotas, will be in effect for another 10 years under the Uruguay Round trade agreements. Cline (1990, p. 191) estimated that the average equivalent level of protection in 1986 (tariffs plus the tariff equivalent of quotas) was 53% in apparel and 28% in textiles. In contrast, according to Hufbauer et al. (1986, p. 256) the Voluntary Restraint Agreements that limited Japanese auto exports to the United States beginning in 1981 resulted in an effective level of protection of approximately 11%.1 The political economy of the MFA, the preceding Long Term Arrangement (LTA) and its antecedents have been extensively studied. Finger and Harrison (1996) emphasize the role of administrative protection, including the escape clause and section 22 of the Agricultural Adjustment Act of 1935 as well as presidential politics, all of which led tg the negotiation of a series of Voluntary Export Restraints (the LTA and the MFA). Examining product-level data, they found that both import competition measures and the statutory criteria for imposing a quota under the MFA are useful in explaining: (1) whether a quota exists; and (2) how the size of the quota changes over time. They conclude (p. 245) that products were more likely to be protected if they were made by sectors with "fewer employees, more plants, lower wages, lower profits, falling investment, higher import penetration and larger plant sizes," and if the imports originated in the richest developing countries (e.g., Hong Kong and Taiwan). Structural and geographic concentration helped limit freerider problems and build key congressional support. In general, protection was found to be comprehensive but increasingly leaky, especially in the 1980s. 146 Constituent Interests and U.S. Trade Policies Destler (1996) has commented that Finger and Harrison's model did not adequately explain recent changes in trade policy in these sectors, nor shifts in the strategies of key participants. The interests of textile and apparel producers began to diverge in the 1960s, as the textile producers experienced rapid productivity growth, growing exports and a relatively stable trade deficit and employment levels. Apparel production was much more vulnerable to import growth, particularly during the 1980s, when import penetration nearly trebled (Finger and Harrison 1996, p. 224). These differing experiences led to a divergence in the political positions of the textile and apparel industries according to Destler (1996, p. 257). This had two distinct consequences. First, the textile and apparel industries split on the North American Free Trade Agreement (NAFfA), with textile producers (as represented by the American Textile Manufacturers Institute, ATMI) supporting NAFfA in exchange for special provisions designed to encourage U.S. textile exports to Mexico (the "triple transformation" test regarding the origin of fibers in North American Apparel), while the apparel manufacturers and the unions were united in their opposition to NAFfA. The second major consequence of the political split between textile and apparel producers was a change in strategy which contributed to the elimination of the MFA in the Uruguay Round. Prior to the mid-1980s, the two industries used their power in Congress to block approval of fast-track authority for multilateral trade negotiations until they were guaranteed that the MFA would be protected.2 In the late 1980s the two industries changed strategies, and attempted to move formal quota legislation, which passed Congress and was vetoed on three separate occasions. However, they did not mount a significant effort to block fast-track authority for the Uruguay Round. Destler (1996) suggests that these changes in textile/apparel strategy were the result of either: (1) the misguided influence of a few textile executives; or (2) the waning political influence of these industries. The next section of this paper proposes some alternative theories to explain the shifting trade strategies of textile and apparel industries in the last decade. The effects of NAFfA and its implications for textile and apparel interests are considered thereafter. The paper concludes with a discussion of issues for the future, including the role of organized labor and strategies for addressing new issues in trade such as international labor...