Panorama's Dollar a Day Dress

By Tim Worstall | 8 March 2005

Sunday night in the UK Panorama, the BBC's flagship documentary programme, ran a piece on the textiles industry called The Dollar a Day Dress. The transcript is here but the essence of the argument can be boiled down to four points as it is on Panorama's website:

In Mali the famous Blue Men of the Sahara wear traditional cotton robes - but the country's impoverished cotton farms face unfair competition from subsidized American producers.

In Uganda markets are full of second-hand clothes donated to charities in the rich countries - clothes which are desperately needed but help prevent the textile industry recovering from the Idi Amin days.

In Peru alpaca farmers remain mired in poverty while the West fails to provide the technological help to rescue the industry from decline.

In Cambodia garment workers risk destitution as new trade rules threaten a Race to the Bottom over labour standards.

As they also note, the US cotton subsidies have just been ruled illegal by the WTO. So certainly this is an example of how the trade system is unfairly skewed against those in poor countries, yet it is also a sterling example of how the multilateral system polices the actions of governments and their subsidies. The ruling will mean that they are phased out, something that would not normally be possible with only the pressures of American domestic politics, thus allowing Mali to compete on a level playing field.

The Ugandan example - which concerns charitable giving - seems very odd indeed. The arrival of cheap clothing means that, yes, there will be pressures on the Ugandan textile industry, but the scarce resources not used to try and build one can be used to build something else, making Uganda better off, as we would expect from any imports cheaper than those that can be made at home.

The programme talks in greater detail about how the Peruvian farmers have used less advanced breeding techniques than growers in other countries. The result is that the quality of their wool is worse. Where a producer's product is of a poor quality, this is hardly a case for giving them a guaranteed market.

The final piece on Cambodia refers to the freeing of markets from the trade rules that detailed quotas for imports and exports known as the Multi-Fibre Agreement. The belief is that production will move to China now that the restrictions have been lifted. The MFA was a type of protectionism directly comparable to CAP protecting farmers. We all agree that CAP is a cause of poverty in the Third World, the message having finally gotten through. In time, free trade in textiles will help the fight against poverty just as the removal of CAP will.

What the programme has caught is a transition effect of getting rid of a bad system of restrictions on free trade. The transition is not pleasant for those involved, and there is a good case for aid to deal with that transition, but the long-term answer is not to have such protectionism in the first place. If China is more efficient at textiles than Cambodia, it is better for the trade to go there.

I would therefore read the main points of the programme as follows: that we do have in place a system to correct the unfairnesses of the trading system; that imports cheaper than what one can produce domestically are a good thing because they free resources to do other things; that those who are bad at a particular task are being told by the price system to do something else; and that there are transition effects, even if one is pulling down an absurd system of trade restrictions. Not really a series of points that argue against free trade, rather a series that support it.