Textile industry over the world comprises a large chunk of the many economies all over the world. In fact we are told that international trade in textiles reached a whopping 530 billion dollars, which is about 5% of total world merchandise trade. It is therefore an area that is sensitive to many governments.
Trade and Conflicts
Trade in textiles and apparel has caused many conflicts between developed and developing countries due to various reasons. One major reason is that textile industry, being labor intensive, employs so many people such that should it be disrupted, many would lose their employment (Griffin &Pustay, 266). Such a scenario would first of all worry politicians in such countries since it could lead to their losing their seats or even general instability.
This could equally cause an economic crisis no one can fathom due to the numbers that will lose a source of livelihood, not forgetting their dependents. Cheap labor in developing countries make them produce textile products that may be cheap in such a case that when exported to developed countries, will be cheaper than what the developed countries produce.This could make workers in the developed industries to lose their source of livelihood too (Griffin &Pustay, 267). This may lead to conflict between nations.
Trade and Barriers
I feel totally free trade in textile and apparel is not a good thing. This is because different countries have different intervening factors. Some countries, as already seen, have some advantages over others in terms of labor, management, government subsidy etc. For instance cheap labor can make one country gain undue advantage over the other country whose labor cost is higher.
Some governments, on the other hand,subsidize their farmers thus making them also have undue advantage over those that do not. Other countries have management advantage over the others. This is why it is good for a kind of balance to be imposed to control skewed trade that may cater for such imbalances (Griffin &Pustay, 267). For instance bodies like GATT and MFA were formed in 1961 and 1974 respectively to give some quotas.
MFA was particularlymeant to shield textile industries in the developed world from cheaper exports coming from developing countries. Due to such sensitivities, it is therefore good for nations to be allowed to erect some trade barriers to trade in these goods. However, some countries have found maneuvers that circumvent the trade quotas.
Some for example, use quotas underutilized by other countries to manufacture and end export large quantities of cheap textile products to US. They do this through for instance building industries in these countries. But this has been detrimental to the US for example since it has to use enormous resources vetting the exact source hence furthering the cost of the textile products (Griffin &Pustay, 268). With the aforementioned, it is therefore crucial for individual countries to impose certain safe- guard measures to protect jobs and economy.
Who Benefits or loses in Free Trade
The other tricky question is who benefits and who loses in free trade in textile? As things appear now China seems to have an upper hand in this field due to many factors favoring it. However were the industry made free could be benefits for all since the textile industry would grow as quota restrictions will no longer be there to limit expansion (Griffin &Pustay, 269). Faced with cut-throat competitionfrom China, US factories may shut down as many workers lose employment.
In conclusion it can be seen that free trade is an issue that should be handled intricately. Due to the stakes that the industry holds, it is imperative that delicate balancing act is done to cushion vulnerable nations from the vagaries of open competition while at the same time allowing for the free growth of the industry.
Griffin, Ricky W &Pustay, W Michael.International Business (6th Ed). New Jersey, Prentice hall, 2010
For Discussion tab
A country embracing membership to MFN is required to mandatory extend its signatory to tariff concessions fixed to other participating nations. The sole purpose of the principle is to simplify tariff bargaining thus increasing prospect of tariff decrease.
The principle of MFN which encourages nations treats the second nation as it would treat the third one helps most countries in balancing trading activities. Besides lowering trade tariffs, it promotes multilateralism, unlike bilateralism since by practicing bilateralism it would be going against the GATT requirements that require that nations compete in trade non-discriminately. In essence this would also go against GATT’s requirement of reducing barriers to trade, so that trade is increased.
MFN brings about considerable advantages to countries which take part. Some of the benefits anchored on this principle. A country that embraces MFN on imports will get favors from the most efficient and reliable supplier. This is unlike in the case where tariffs may differ from other countries.
Also, small nations benefit immensely from developed nations thus this advantage wouldn’t be accomplished on their own. Though MFN enhances mutual and free trading practices within signatory members, powerful nations have a dominant presence. Thus, they tend to overlook the needs of poor or developing nations. Besides, regional blocks such as European Union have constantly eliminated tariffs amongst its members whereas upholding tariff walls to poor nations across the world.