Wednesday, July 07, 2004

Textiles - Made in China

With the removal of trade quotas for the textile industry at the end of this year, China is poised to become the largest supplier of textiles to the world. There are numerous discussions about the impact this would have on the industry. Firstly, countries whose major source of income is textile exports will be hardest hit, as business will move to China. These are mostly poorer countries and this will be a severe blow to the people dependent on this industry for survival. Developed countries too will lose their export income to China.

Secondly, countries to which China is already a major supplier of other goods will become all the more dependent on China. For example, the US textile industry will completely be dependent on China within the next couple of years. So, variations if the Chinese economy will directly affect the US economy. And there will be little to fall back on, as the local industry would have already disappeared when the imports have grown significantly.

How does China achieve this market position? This again is a subject of discussion in many forums. Obvious reasons for China’s dominance include

Currency manipulation by the government
Highly subsidized industry
Low wages

All of these reasons are illegal as per the WTO or IMF regulations. But few countries have raised their voice against this. Are most countries already dependent on China that they are afraid of any change in Chinese policies? Does the business world just care for low prices regardless of how the prices came to be that low?

China and the textile industry are just one example. There are other countries too that use their dominance in a particular area to gain unfair advantage over other countries. And these situations will always exist as long as there is no authority to strictly govern all international trade.

Here’s one suggestion. How about a manufacturer’s label, similar to nutritional information on food products? So if a label states:

This product is cheap because of:

Illegal currency manipulation,
Unpaid Labor and
Unethical industry practices

Would a consumer then buy the product?

(Here’s a link to some interesting discussions on the textile industry).

No comments: