Wednesday, June 18, 2008

The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade

Link of the day - Free $500 Southwest Airlines Gift Card

Link of the day - Free $500 Southwest Airlines Gift Card

Spurred by a Georgetown student anti-sweatshop protest, Pietra Rivoli took up the task of tracing the life of a (tacky souvenir) t-shirt she buys in Florida, to examine the economics and politics of this non-trivial segment of the apparel industry. Why she buys the t-shirt in the first place remains a mystery. Why she needs one from Florida that she will likely discard is even more of a mystery. She made me think about studying the American practice of souvenir shopping and excess consumption. But her t-shirt has a story worth telling.

Rivoli first adeptly traces the history of cotton as a critical world commodity, including the struggles in England two hundred fifty years ago by the wool industry to combat the comfort of cotton, going so far as to prohibit the use of calico and the requirement that people be buried in wool. The questionable economics of slavery moved cotton production to the United States, but it was and still is the intervention of technology, research and financial capital that made cotton farming so much more productive today. Nonetheless, the ability of Texas farmers to market "low quality" cotton can best be attributed to both technology and federal price supports, up to 19 cents on a 59 cent pound of cotton. Cotton, while still a major commodity in global trade, has probably declined in relative value and share of the world economy. What we may be seeing is more of the slow death of the importance a dated commodity and less of a "race to the bottom" that she suggests.

She then takes us to t-shirt and apparel manufacturing and employment, now on the wane in North Carolina, South Carolina and Georgia. People mistakenly think that these jobs are being sent to China. They're not. In fact, they're just disappearing. Rivoli notes that China, between 1995 and 2003, lost ten times the numbers of textiles manufacturing jobs as did the United States (p. 142), and Chinese workers have little or no safety net or alternative employment, unlike their displaced American brethren. In the ill-fated "race to the bottom," it should be clear that this fate seems to await any industry that is unable to maintain a long-term competitive advantage, and the only way to do that seems to be through protectionism. While t-shirts are cheap, saving textile jobs is not cheap. Saving American textile jobs costs between $135,000 and $180,000 per job saved, according to best estimates (p. 144), costing American taxpayers and consumers billions of dollars. Where jobs are being created is in the lobbying and trade association industry. This section (Part III) is an overwhelming alphabet-soup of acronyms - WTO, AGOA, NAFTA, CBTPA, ADTPA, ATC, MFA, ACMI, LTA, ATMI, and ITCB -- for trade agreements, trade associations, trade and lobbying groups, and other defenders of (primarily) protectionism. The complexity of the letters is exceeded by the complexity of the trade agreements they promulgate. It takes a lot of honest, well-intentioned effort and dollars to disrupt the free flow of trade.

As noted above, Rivoli generally passes over the details of the American retail trade for apparel, other than minimal attention to the hated global icon Wal-mart. She observes the expensive foreign vehicles and SUVs in the American shopping mall parking lot, lined up to drop off used clothing at the Salvation Army van in anticipation of going inside and buying up more equally recyclable apparel. I doubt that those malls contain a Wal-mart, and that there is likely a big difference between those who shop at Wal-mart and those who re-cycle clothes before shopping at Lord & Taylor.

This recycled donation sets the stage for the best example of free trade in the book - the used clothing stalls in Tanzania, where savvy shoppers brand shop at rock bottom prices, haggling and playing the market from dawn to dusk. Discriminating, well-informed, fashion-conscious shoppers happily haggle, engaged in one of Tanzania's functioning markets. She is careful not to buy the `humiliation' argument, the one that says that Africans should be ashamed to wear second-hand clothes. As she notes, some of the used stuff dropped off at the American mall never makes it to Africa; it gets picked off along the way as "vintage clothing" and worn by Americans and Japanese willing to pay "hundreds of dollars" for used jeans. As she notes, while much has remained the same in impoverished Africa, most Africans do dress better today, thanks to this free market.

She offers a short conclusion (pp. 211-215) and analysis. She does see some hope: "Cutting agricultural subsidies, democratization, and giving poor countries a place at the table at trade negotiations are all steps in the right direction." She notes Cordell Hull's view, that global commerce may be the best prevention for war.

The book is relatively short (215 pages), well-written, engaging, and, despite the need to use acronyms, very clear and readable. It is an excellent primer on the problems of protectionism and the intricacies of delivering on truly free trade, while noting that many who espouse free trade really don't want to practice it or, more commonly, be subjected to the competition from free trade.

Three minor quibbles.

She writes deferentially about Tom Friedman, his lions and gazelles metaphors, hardware and software analogies, but forgets that he also says that the world is flat. This book shows that the world markets for t-shirts is not free, fair or flat. And the playing field is not level. It is full of lumps, dips, and massive mountains. And, as Rivoli notes, it was not made or kept this way other than by "snarling dogs", not lions, not gazelles. Friedman has popularized interest in globalization but he has shed little light on its understanding or analysis.

With two or three almost casual asides, she seems intent on laying this travesty of fair or free markets at the feet of George Bush, if only because west Texas cotton farmers are such beneficiaries of federal subsidies. A fairer view would recognize that people of the same political and social demeanor who now fight against globalization once fought --- and still do fight -- for crop price protection for farmers.

Rivoli claims that economists everywhere around the globe appear to have universally adopted, recommended and embraced free trade ("virtually unanimous support among professional economists, a group almost without exception who scorn protectionism in general" p. 148). I am not willing to go that far. But you should go so far as to read this good book.

Further Reading:

Behind the Label: Inequality in the Los Angeles Apparel Industry

The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger


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