Yet the global treaty that created the World Trade Organization decreed a 10-year phase out for the MFA starting in 1995. This decision was a response to the retail industry’s seeking maximum sourcing flexibility, Western governments seized by post-Cold War free-market purism, larger developing-world exporters counting on dominating world markets and many smaller developing countries swept up in misplaced Third World solidarity.
Apparel exports still faced tariffs, which meant importing countries could continue to dole out limited policy favors. Moreover, a few new restraints were approved, including WTO permission to impose temporary tariffs on surges of Chinese garment shipments after China joined the trade body.
But without quota-granted guaranteed market access, cost- cutting became all the more important for smaller exporting countries simply to preserve their new gains. As U.S. trade data demonstrate, most of the freed-up customers were won by the huge Asian producers that enjoyed big natural and government-created cost advantages. For example, China’s share of U.S. apparel imports rose to 33.44 percent from 26.07 percent during the first two years of quota-free trade (2005-07) alone. Indonesian and Vietnamese sales boomed, too.
Significantly, Bangladesh also excelled, and like China, Indonesia and especially Vietnam, its market share has continued to grow, reaching 5.25 percent last year, despite the sluggish U.S. economy.
Unfortunately, however, much of the surge in Bangladeshi exports can be attributed to that country’s reliance on rock- bottom wages and firetrap factories, with the tragic consequences we recently witnessed.
Worse, the dynamics of today’s quotaless apparel trade practically guarantee that better, costlier work conditions in Bangladesh will simply drive much production and jobs elsewhere. That is what occurred in higher-cost garment exporters such as Turkey and South Africa, as well as smaller Western Hemisphere and African producers — most of whose U.S. exports have fallen in absolute terms since the quotas ended in 2005.
Re-establishing quotas, especially with expansion requirements, could begin reversing today’s perverse incentives. The biggest exporting countries could easily block WTO adoption — as well as any moves toward mandatory international labor standards. But management of the garment trade could be re- created through less orthodox approaches outside the WTO, especially since broad international support is easily within reach.
U.S. consumers appear increasingly receptive to such ideas. The European Union has already warned Bangladesh that it could face sanctions. And even before the quotas ended, dozens of non- Asian garment producers signaled their second thoughts by agitating for extensions.
The biggest missing ingredient is interest from President Barack Obama, who remains silent three weeks after the Bangladesh disaster.
Alan Tonelson is a research fellow at the U.S. Business and Industry Council, which represents almost 2,000 domestic manufacturing companies. He is the author of “The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade Are Sinking American Living Standards.”