What Would Happen if the New T-shirt Market Operated as a Free Market?
The producers in the new T-shirt value chain do not operate in a free market system. Government protectionist measures such as subsidies, quotas, and tariffs have limited economic success to a fortunate few. According to the author Pietra Rivoli, “the winners at various stages of my T-shirt’s life are adept not so much at competing in markets but at avoiding them.” These winners include the U.S. cotton farmer and the China apparel industry. Their market dominance and profitability have benefitted significantly from the political prowess of their government to limit competition.
If government intervention was removed from all segments of the new T-shirt value
apparel industry. According to the author, the textile and apparel trade is the most managed and protected manufacturing trade in U.S. history. Once trade barriers are removed, the American apparel manufacturer has no hope of competing with China or other low cost producers. In time, the remaining mills will be forced to shut their doors.
Other losers include apparel manufacturers in countries who have duty free access to the U.S. market and poor countries who benefitted from the quota on Chinese apparel. Certain countries such as Japan, Germany, Costa Rica, and Honduras receive duty free access to the U.S. market. The removal of these tariffs forces them to compete with China and other low cost producers.
Regarding the impact on poor countries, the loss of quotas would allow unrestrained sourcing from China. With the quotas, retailers and other garment sources were forced to work with as many as 50 countries to fill their orders. Once the MFA laws are removed, retailers are expected to consolidate the number of countries who produce their apparel. The financial impact on these developing countries will be significant given apparel and textile exports make up more than 50% of their exports. Worst case predictions suggest the end of the MFA law could mean the loss of 30 million jobs in the developed world.
In conclusion, the removal of government interventions in the new T-shirt free trade system would hurt the profitability of the most heavily