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Bashing China (and the those who wear clothes)

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I wrote the other day [2] about how weird it is that we invited China into the WTO on the condition that we could limit Chines textile imports and then proceeded to limit those exports, punishing the Chinese and American consumers.

I never stopped to think how that happens exactly.  I didn’t hear about the President doing it.  Greg Hitt of the WSJ has actually lifted the rock and found the bugs scurrying underneath who make the decision and implement it.  His superb report (sr) is here. [3]  Here’s a taste:

In the past four years, U.S. industries from
mattress-spring makers to wire-coat-hanger manufacturers have requested
federal protection from surges in Chinese imports. Only one has
received it: textiles.

To understand one reason why, peek inside the third
floor of the Herbert Hoover building, a stone fortress around the
corner from the White House and home to the Committee for the
Implementation of Textile Agreements.

This obscure corner of the federal bureaucracy, known as CITA
(pronounced SEE-ta), has in the past year imposed trade barriers on a
range of Chinese goods from shirts to dressing gowns to man-made fiber
underwear. The U.S. government is broadly worried about China, from the
tight grip it maintains on its currency to the problem of piracy. But
CITA is a notable example of the U.S. directly challenging its new
rival. As such, it shows how a powerful industry lobby can have a big
effect on foreign policy.

Few American industries enjoy such a dedicated
bureaucratic focus in Washington — and such a powerful one. CITA’s
founding charter gives it unilateral power to impose limits on textile
imports. Its actions are final. Its deliberations are exempt from
public disclosure on the grounds that they have foreign-policy
implications. Until recently, CITA publicized its decisions only
through filings in the Federal Register, the government’s daily notice
of administrative actions.

James C. Leonard III, CITA’s chairman and a
textile-company veteran, says the agency weighs all sides in making its
decisions, but allows that it has a protectionist bent. CITA’s core
mission, as he describes it, is "trying to help maintain a domestic
manufacturing industry."

Hitt then gets the economics exactly right:

The impact of CITA’s decisions on U.S. consumers is considerable.
Chinese manufacturers produce apparel at lower cost than their U.S.
competitors because of their economies of scale and low-priced labor.
Import limits therefore tend to lead to higher domestic prices as
apparel companies scramble to hook up with new — and often more
expensive — suppliers elsewhere in Asia and Central America.

How did this happen?  Who created CITA?

Richard Nixon created CITA in the midst of his 1972 re-election
campaign at a time when the U.S. textile industry was under pressure
from Japan and Taiwan. The president was wooing Southern textile barons
to make Republican inroads in the region, much as the current
Republican administration is concerned about protecting those gains as
it pursues its own trade policy. CITA is now buried within the Commerce
Department’s sprawling D.C. bureaucracy, where 20,000 workers consider
patent requests, plot strategies to restore salmon stocks and catalogue
statistics about life in America.

The five-member panel is charged with overseeing a regime of
regulations governing global textile trade. It has wide discretion over
how quotas should be enforced and whether new ones should be slapped
on. Its members are drawn from the Labor, Treasury and State
departments, as well as the Office of the U.S. Trade Representative, an
arm of the White House.

The Treasury and State departments have opposed import
curbs over the years, according to people familiar with the debates.
The Treasury Department, which has long had a free-trade bent, even
boycotted meetings in the 1990s in protest of the group’s protectionist
leanings, says a former CITA member.

But Commerce is the lead agency. With its mission to
promote domestic industry, it has set a tone sympathetic to producers.
By tradition, the Commerce Department’s CITA seat has been filled by a
political appointee with ties to the textile industry. That seat also
brings with it the committee’s chairmanship.

Read the rest of the article.  And thank you Greg Hitt for uncovering this outrage.  But the discretionary powers and even the existence of CITA remind me of something depressingly true that I once heard Milton Friedman say: "Everyone knows it’s a bad idea.  But you can’t do anything about it."  He was talking about sugar quotas, but it applies with equal power to restricting Chinese imports.  Of course he was using the rhetorical "everybody."  Those who benefit from textile and sugar quotas at the expense of the rest of us think they’re just dandy.

When the WTO was created, people complained that a bunch of faceless unaccountable international bureaucrats could dictate US policy.  That claim was highly exaggerated.  Unfortunately, faceless, unaccountable domestic bureaucrats dictate US policy.  Remind me again—why should the Commerce Department exist?

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