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DOGS SNARLING TOGETHER

HOW POLITICS CAME TO RULE THE GLOBAL APPAREL TRADE

 

 

 

How did the United States—as the self-anointed free trade champion of the universe—end up with such a dauntingly complex and downright silly mass of barriers to the import of T-shirts? Why, in an era of progressive trade liberalization and increasing deference to the market mechanism, has the role of politics remained so pervasive in this industry?

The first factor to explain the dominance of politics in the trade is the size of the textile and apparel manufacturing base, even today. While textile and apparel employment in the United States peaked shortly after World War II at approximately 2.5 million workers, the industries in 2008 employed about 500,000 people, which accounts for about 4 percent of manufacturing employment.¹ Given the size of the employment base, the unrelenting job losses related to the global race to the bottom have strengthened the political voice of the industry, as the “groans of the weavers” have become both louder and more sophisticated. Winning industries do not groan, and losing industries’ groans become louder with the extent of their misfortune. The U.S. textile industry felt the first serious threat from imports immediately after World War II, and foreign competition since that time has been growing steadily and sometimes exponentially, which has led to compensating cries for help from Washington.

Yet the withering of America’s competitive position in these industries is not sufficient to explain their political power, as industries from toys to bicycles to televisions have faded away with few rescue missions from Washington. Political response to industrial demise is the result of not only the demise itself, or even the size of the industry, but the strength of industry alliances and the access the alliances have to policymakers.² Or, as Jock Nash, perhaps the American textile industry’s most colorful voice in Washington, reportedly advises, when a pack of dogs snarl together, people have to listen. The extent to which the industry can speak with one voice—or snarl together—goes a long way toward explaining its political influence.

Erik Autor, Vice-President for International Trade at the National Retail Federation, is continually frustrated by the “snarl together” phenomenon. Though retailers ranging from a beachfront tourist shop to Saks Fifth Avenue to Wal-Mart all benefit from access to cheaper T-shirts from abroad, such diverse groups of businesses find it difficult to speak with a single voice. Southern textile leaders, however, share a cultural and historical bond that allows them to speak together. (“They all know each other,” Erik told me. “Their daddies all knew each other. Their granddaddies all built the mills, and they all knew each other, too.”)

Related to the historical and cultural bond that strengthens their collective voice is the geographic concentration of the U.S. textile industry. More than 60 percent of apparel and textile manufacturing is located in Georgia, South Carolina, and North Carolina, and there remain many Congressional districts where the textile industry—or even a single firm—is the major employer. A geographic swath of Congresspeople remains beholden to the industry, even as its fortunes wane. The U.S. retail industry, in contrast, while employing significantly more people than the textile and apparel industries, is not only unable to snarl in unison, it is spread across the country in a manner that leaves it nobody’s Congressional priority.³

A third factor that lends support to the regime is that the American public is increasingly nervous about trade, especially trade with China, and especially when the trade is believed to have severe effects on small American communities. The “It coulda been me” syndrome leaves many American voters far more tolerant of complex trade protections than we might expect them to be. While North Carolina now has a diversified economy that has “moved up” from textiles, many towns, along with many less-skilled workers, have not moved up alongside Charlotte.

I was not able to find anyone in Washington and certainly no one in China who was happy with the rules governing imports of T-shirts into the United States, or indeed anyone who tried to defend these rules. Participants from across the spectrum agreed that the deal-making process often showed Washington politics at its worst. But observers on all sides also agree that access to the American apparel consumer is currency in Washington, and this currency, like any good money, can and has been traded for almost anything. Often, the currency has been traded for votes, which has left generations of congresspeople and even a few presidents indebted to the textile industry. Access to the American apparel consumer has also frequently been traded for foreign policy favors, from crushing Communism in Central America to crippling terrorists in Pakistan. Ironically, however, perhaps the most common use of the currency has been to pay Auggie Tantillo and his troops to move out of the way of broader trade-liberalizing initiatives. Beginning at least with Dwight Eisenhower, every U.S. president has paid the U.S. textile industry to be quiet so that America could get on with the business of free trade.

Auggie Goes to Washington

Auggie had thought little about politics and even less about trade policy as he neared his college graduation from Clemson University in 1980. He didn’t know what his next step would be, and it was a fluke and a stroke of luck that led to a job as an assistant in Senator Strom Thurmond’s office. Auggie left for the big city, having no idea what to expect. If he had opinions about politics, he doesn’t remember them. Whatever illusions he might have had, however, were shattered at the ripe old age of 21, when he saw how Washington really worked. Auggie likens his Washington awakening to the day he discovered that Santa Claus was a fake. Santa Claus was President Ronald Reagan.

Strom Thurmond had figured critically in Reagan’s 1980 election. Though the U.S. textile industry had a variety of trade protections in place at the time, Asian imports were gushing through new holes in the dike by the day. Between 1976 and 1979, textile and apparel imports into the United States had increased by nearly 50 percent.⁴ In exchange for Thurmond’s support, Reagan promised, if elected, to put a stop to it. In a letter to Strom Thurmond several months before the election, Reagan promised to limit the growth in textile and apparel imports to the growth in the domestic market.⁵

Thurmond kept his end of the deal and delivered a large Southern vote to Ronald Reagan. Reagan, however, shuffled his feet as Asian imports continued to soar. Auggie was just a note-taker and a gopher, but he remembers Thurmond’s outrage as he raced around Washington meeting with Edwin Meese, George Shultz, and James Baker. He pounded the table, shoved the letter under their noses, as mill after mill closed and imports surged. “You’ve got to do something about this. You promised.”

Several people who had been involved with the negotiations in Washington told me that the infamous Reagan textile promise would have been impossible to keep, even with the best of intentions. It would have been a foreign policy disaster to renege on the deals already in place, which allowed imports under quota to grow at a rate of 6 percent, rather than the approximately 1 percent growth in the domestic market. It also would have required the United States to bring under quota many countries that had never been subject to export restraints, as well as to limit imports of many types of textiles and apparel that had also been without quota.

But to Auggie, Strom Thurmond, and the still millions of textile and apparel workers, a deal had been a deal. So, Auggie Tantillo’s introduction to Washington was the broken Reagan textile promise. It was Auggie’s first experience in the value of textile promises as currency, but it was not the last. Strom Thurmond, who died in 2003 at the age of 100, had played this game before and he would play it again. In fact, every post-World War II president has made his own version of the campaign textile promise to Strom Thurmond, and, beginning in the 1960s, to Fritz Hollings and Jesse Helms as well. Some of the promises have been kept, and some have not.

Since the end of World War II, every U.S. president has also publicly supported the doctrine of free trade. Indeed, scholars of presidential rhetoric cite free trade doctrine as a “remarkably consistent rhetoric” across both time and party lines.⁶ For some presidents, free trade was a foreign policy choice, designed to keep Communists or war at bay. For others, it was a clear case of the best economic policy. For yet others, a free trade posture was a matter of moral consistency. The United States had been the architect of the postwar General Agreement on Tariffs and Trade (GATT), a set of rules with free trade principles at its very core. For more than half a century, the United States has been the world’s self-appointed champion of free trade, in word if not in deed.

Regardless of what has motivated the free trade rhetoric of U.S. presidents, all have found it impossible to implement the rhetoric without paying the textile and apparel industries to get out of the way. While a long list of trade-liberalizing initiatives—from tariff reductions to NAFTA to CAFTA to China’s WTO accession—has been championed by the United States, these initiatives have been politically possible only by making exceptions for Southern textile interests. In television appearances and public speeches, each postwar president has eloquently advanced the case for free trade on the grounds of freedom, prosperity, and morality.⁷ But away from the cameras, in private phone calls, furtive telegrams, and secret meetings, each of them has assured the domestic textile industry that he had not really been talking to them.

In 2008, I mentioned this historical pattern to Steve Lamar, EVP for the (pro-trade) American Apparel and Footwear Association. Steve just sighed. “We deal with it all the time,” he said. “We call it the ‘wink and nod.’ ”

For nearly 60 years, U.S. policymakers have played a wink-and-nod balancing act with Auggie and his troops, trying to toss (or promise) them enough crumbs to get their votes and cooperation, but not so many as to make an obvious mockery of the free trade rhetoric. Almost every postwar president has needed help from the senators and governors in the Carolinas, who in turn needed help for their textile towns. Each special deal for the industry was labeled a temporary measure, but many of them, in one form or another, are still in place.

Making Deals and Making Exceptions

The first groans of the weavers came shortly after World War II, as cheap Japanese cotton goods took the lead in the race to the bottom. Though official U.S. policy was to open trade with Japan to encourage prosperity and thus stave off the Communist threat in Asia, the mill owners in both New England and the South felt a more immediate threat from the growing imports from Japan than they did from the Communists. The American Cotton Manufacturers Institute (ACMI) announced that a crisis was at hand:

We are face to face with a life or death question of whether our own government will stand idly by and permit low-wage competition from Japan to seriously cripple our industry. Must there be closed mills and bread-lines before the administration in Washington concedes the possibility of irreparable damage to our industry?⁸

In order to quiet the groans and especially to advance its broader trade-liberalizing agenda, the Eisenhower administration persuaded Japan to “voluntarily” limit its exports of cotton textiles to the United States to allow temporary breathing room for the U.S. industry. Like much else from the 1950s, from today’s perspective the Voluntary Export Restraint (VER) agreement with Japan looks charmingly simple and innocent. The agreement was merely temporary, and it dealt with just one country, Japan. Only one alphabet troop, the American Cotton Manufacturers Institute (ACMI), had been involved, and the agreement covered only a narrow range of goods. Though Eisenhower saw no choice but to toss the crumbs, he was clearly not happy about it. In his diary, he later wrote of the “short-sightedness bordering on tragic stupidity” of the protectionists, and worried that unless the United States opened its markets, Japan would “fall prey to the Communists.”⁹

In what would become a long epic of unintended consequences, the politics served to accelerate rather than slow the race to the bottom. The VER, which limited imports from Japan, supplied not so much protection for the U.S. textile industry as an opening for Japan’s competitors in the race—especially Hong Kong and Taiwan—to supply the U.S. market. In a pattern that continues to this day, the effect of plugging one hole in the dike was to increase the force of imports gushing through others. Between 1956 and 1961, imports of cotton goods from Hong Kong rose by nearly 700 percent.¹⁰

The soaring imports led to predictable cries lamenting the imminent collapse of the U.S. industry.¹¹ In the 1960 presidential campaign, John F. Kennedy promised Governor Ernest Hollings of South Carolina that he would help. Kennedy fulfilled his promise by instituting the Short Term Arrangement on Cotton Textiles (STA) as temporary assistance to the industry. The arrangement allowed the United States to negotiate import limits from other countries—not just Japan—in cotton textiles. The effect was a bigger program, covering both more countries and more goods than the original Japanese VER.

Of course, a short-term reprieve was not enough to save the U.S. industry. In response to the continuing groans, on the expiration of the STA the Kennedy administration created the Long Term Arrangement for Cotton Textiles (LTA), effective from 1962 to 1967. Just as the STA was a bigger VER, the LTA was a bigger STA, covering more countries, more products, and more years.

In exchange for protecting its own industry against imports, the ACMI dropped its fight against Kennedy’s Trade Expansion Act and allowed the Kennedy Round trade liberalization to continue. The Kennedy Round resulted in tariff cuts on U.S. imports of 30 percent, but textile and apparel tariffs were off-limits in the negotiation. They maintained their already high levels and were, in the case of apparel, even increased.¹² Representative Carl Vinson of Georgia proudly wrote the ACMI that, “Thanks to their good friends in Congress, the industry had been singled out for special treatment by President Kennedy and his Cabinet.”¹³

The “temporary” LTA was renewed in 1967 and again in 1970, each time as a bribe to allow Lyndon Johnson and then Richard Nixon to seek trade liberalization in other ways. By 1973, the LTA was restricting hundreds of categories of cotton textile imports from dozens of countries. With the passage of the LTA and its extensions, U.S. trade policy for textiles and apparel took the seemingly irreversible step to a complexity that left it unintelligible to all but a few.

However, just as blocking the flow of clothing from Japan had resulted in an even more forceful flow of imports from Hong Kong, blocking imports of cotton textiles and apparel also served to accelerate rather than slow the race to the bottom.

By limiting imports of cotton textiles and apparel, U.S. policy unwittingly encouraged its trading partners to upgrade their production and sales efforts to wool and to the increasingly popular synthetic fibers such as nylon and polyester. Predictably, imports of synthetic fiber apparel from Asia soon soared, with U.S. imports of these fibers from developing countries increasing 2,500 percent between 1964 and 1970.¹⁴ Just as predictably, U.S. textile interests extended their groans to these other sectors. The ACMI morphed into the ATMI (American Textile Manufacturers Institute), and U.S. textile interests began an intensive campaign to extend the LTA to other fibers, calling for the implementation of a Multifiber Agreement (MFA).

In his 1968 presidential campaign, Richard Nixon promised Senator Strom Thurmond that he would seek to broaden the LTA into an MFA and would extend quotas from cotton to wool, synthetic fibers, and blends.¹⁵ Once elected, Nixon faced the familiar challenge of reconciling his free trade rhetoric with his campaign promise. On the one hand, Nixon had a vision of trade as a path not just to economic growth but to political freedom. On the other hand, there was the MFA promise telegram to Thurmond that had been printed in newspapers all over the South. Nixon’s rhetoric showed the balancing act, and was typical of rhetoric from Dwight D. Eisenhower to Barack Obama: Free trade was good, but there was a wink and nod for textiles:

By expanding world markets, our trade policies have speeded the pace of our own economic progress and aided the development of others…. We must seek a continued expansion of world trade, even as we also seek the dismantling of those other barriers—political, social, and ideological—that have stood in the way of a freer exchange of people and ideas, as well as of goods and technology….

[H]owever, the textile import problem, of course, is a special circumstance that requires special measures.¹⁶

In the end, MFA I, in effect from 1974 to 1977, was signed by 50 countries and covered approximately 75 percent of U.S. textile and apparel imports.¹⁷ In painstaking bilateral negotiations, country after country hammered out with U.S. negotiators how much of which categories of textiles and clothing could enter the U.S. market. Though largely successful in satisfying the domestic textile interests, the MFA was, as William Cline wrote, “an embarrassing breach of the GATT principles,” principles that the United States had authored and continued to espouse.¹⁸

In the 1976 campaign, Jimmy Carter promised to extend the “temporary” MFA. MFA II, which extended the arrangement through 1981, was more restrictive still in allowing access to U.S. and European markets. In the meantime, Carter and then Reagan also wished to maintain the free trade momentum on a new round of trade-liberalization talks—the so-called Tokyo Round. Once again, the textile and apparel industries were largely exempt: The United States cut its import tariffs on manufactured goods to an average of 6.5 percent, but apparel tariffs, while reduced from their postwar highs, remained at an average of 22.5 percent.¹⁹

Though Ronald Reagan had not kept his election-year textile promise to Strom Thurmond, Reagan had little choice but to toss some crumbs in the direction of the textile industry. Reagan would have to show his face in South Carolina in the 1984 campaign, as Thurmond kept reminding him. With MFA III, the temporary regime of textile and apparel quotas was extended yet again. In effect for the 1981-1986 period, MFA III was the most restrictive yet.

1985 to 1990: The Seed-to-Shirt Coalition

In what had become a predictable pattern, even with the stricter quotas under MFA III, the crisis continued in the U.S. industry and the groans of the weavers were unabated. Though the speakers had changed, the speeches had not. In 1985, Representative Ed Jenkins of Georgia told his House colleagues that the industry was experiencing its “last gasp,” while a textile association president threatened that “in five years, the industry will cease to exist.”²⁰

The renewal of the MFA also did little to lessen the sense of betrayal that still stung from Reagan’s unfulfilled promise to Strom Thurmond, and once Reagan had won a second term, the industry’s hopes for justice were further dashed. Strom Thurmond’s leverage over Reagan was gone, and White House aides had stopped picking up the phone. Ronald Reagan would not have to go back to South Carolina. Yet there was a silver lining in the betrayal: The injustice united the industry in a manner seen neither before nor since. Snarling together, they almost achieved the impossible.

If the White House would not listen, the Congress would have to. The mid-1980s were a golden era of sorts for the domestic textile and apparel industries. Though their fortunes were shrinking and their plants were closing, there was an energy and unity of purpose that propelled them forward. It was a pinnacle, according to Auggie Tantillo and many others with whom I spoke, where standing upon each other’s shoulders they had made their greatest reach, coming within only inches of achieving justice. All of the alphabet armies in the U.S. textile and apparel complex, from cotton farmers to yarn spinners to fabric producers to apparel manufacturers—along with the unions representing the workers—began to snarl together. The wide-ranging alliance was dubbed the seed-to-shirt coalition.

Auggie Tantillo, still young but by now an expert in the areas of both textile trade policy and the ways of Washington, accepted a position to open the Washington office for Russell Mills, one of America’s largest T-shirt producers. United, the seed-to-shirt alliance formed an industry coalition, the Fiber, Fabric, and Apparel Coalition for Trade (FFACT), to battle the imports.

Auggie and his troops sought legislation that would keep the Reagan promise. The Jenkins Global Quota bill would not limit the growth of imports from particular countries, but would instead place a global cap on U.S. textile and apparel imports, and also give the United States unilateral power to restrict imports, rather than requiring negotiations with each trading partner. The bill would roll back quotas for the largest Asian suppliers, as well as negate more than 30 existing bilateral textile and apparel trade agreements.²¹ Ronald Reagan and his administration were nervous. Once Auggie and his troops got into the U.S. Capitol, there was no telling what would happen.

Though the framers of the U.S. Constitution placed responsibility for formulating trade policy on the shoulders of the Congress, during the past 50 years it has become increasingly clear—perhaps especially to Congress itself—that they are not up to the task of formulating rational trade policy.²² Members of Congress seeking election or reelection are often forced into protectionist postures, but can obtain protection for their interests only by offering the same to their congressional colleagues. “The political logic of protection leads to protection all around,” wrote an observer in 1935, because Congress’s natural tendency is a spiraling protectionism extending trade barriers into the districts of each congressperson.²³ A vote for free trade, according to another early observer, is an “unnatural act” for a congressperson.²⁴ Only a very few die-hard constitutional literalists believe that the U.S. Congress should be in charge of trade policy.

Julia Hughes understands this all too well. While she has some free trade allies in Congress, she know that nobody wins elections by promising free trade or help for the apparel consumer. Auggie, however, has comrades in Congress who will fall on their sword, or at least pretend to, to help the U.S. textile industry. From North Carolina through Georgia and Alabama, in town after town, the voters will choose the candidate who promises to keep the mill open. What members of Congress most want, however, is to make protectionist speeches without having to take protectionist actions. Indeed, as I.M. Destler notes, by surrendering power to make trade policy decisions, congresspeople are more freely able to spout protectionist rhetoric, secure in the knowledge that they will be unable to take action:

A congressman, no matter how keen his desire to help the toy marble makers, does not want to be given the right of voting them an increase in tariff rates. He prefers to be in the position of being allowed merely to place a speech in their favor in the Congressional Record...free to indulge the responsibility afforded those who do not participate in the final decision.²⁵

But FFACT, having been spurned by the Reagan administration, began knocking on the doors of members of Congress. The Jenkins Bill passed easily in both the Senate and the House, where it had 230 cosponsors. But this victory was only the first step, as Reagan swiftly vetoed the bill. Some of those involved in the negotiations told me that at least some congresspeople were able to vote for the bill because they felt assured that Reagan would veto it. Dan Rostenkowski, chair of the House Ways and Means Committee, though sympathetic to the plight of the mill workers, saw the bill as being fraught with unworkable elements. “This bill is garbage,” he allegedly remarked to Tip O’Neill. O’Neill, surveying the political landscape, replied, “Yeah, but move it along, Dan. Move the garbage.”

The override received 276 votes, just 8 votes short of the two-thirds needed to undo Reagan’s veto.²⁶ Yet it was a win of sorts. As Auggie Tantillo remembers, “We scared them good.”

To many observers, the close vote was a terrifying brush with insanity, an example of the madness that can result if trade policy is left in the hands of elected representatives. Economist William Cline estimated that the bill would have cut back imports of textiles from Hong Kong, Korea, and Taiwan by nearly 60 percent, and would have cost U.S. consumers approximately $43,945 per U.S. textile job saved.²⁷ In addition, by the sheer force of its hypocrisy when placed against American free trade rhetoric, it would also have likely tied U.S. hands in pursuing other trade negotiations. And finally, swift and disabling retaliation against U.S. exports was virtually assured.

But, like Auggie said, they had been scared. They had seen the whites of Auggie’s eyes, and were willing to talk. The USTR was willing to talk, Hong Kong was willing to talk, and even Reagan was willing to talk. The MFA IV, signed for a five-year period ending in 1991, was the most restrictive yet. For the first time, quotas were placed on fabrics not even produced in the United States, such as silk, ramie, and linen. The only fibers now exempt from U.S. quotas were jute and abaca, though U.S. negotiators warned that these, too, would be dealt with if imports surged.

In the meantime, Auggie Tantillo had moved up yet again. After serving a stint as Strom Thurmond’s Chief of Staff, Auggie was appointed by President George H. W. Bush as Undersecretary of Commerce for Textiles and Apparel. The job was the top textile post in Washington, and carried with it the chairmanship of the Committee for the Implementation of Textile Agreements (CITA), an interdepartmental policy committee with representatives from the Departments of State, Labor, Treasury, and the USTR. Auggie was just 28 years old.

Snarling Back

From the pinnacle of political power they held in the late 1980s, the U.S. textile and apparel industries’ influence declined rapidly in the 1990s. While their power remained the envy of virtually any other industry, compared to their influence in the heady days of the Jenkins Bill the troops were tattered and weakened. First, the seed-to-shirt coalition itself began to splinter, with infighting that weakened its collective snarl. More important, however, other political voices began to rise in volume, not drowning out but at least softening the snarls from the U.S. industry.

The “shirt” was the first to splinter off from the cause. Under the apparel industry’s new business models, Auggie was starting to sound more and more like a dinosaur. For the firms who continued to produce apparel in the United States, access to cheaper and more fashionable foreign fabrics was a necessity. By limiting their access to foreign fabrics, trade restrictions were making it more, not less, difficult to keep their production in America. For other apparel firms, such as Warnaco and Liz Claiborne, it was becoming more attractive to source their clothing from abroad, partly because of the restrictions associated with gaining access to their fabrics of choice, and partly because of the increasing quality and price competitiveness of the Asian producers.

The American Apparel Manufacturers Association (AAMA) made a clean break with Auggie in 1990, when they refused to sign on to support the 1990 version of the global quota bill. They did not cross the line to the dark side at first, but instead made clear that they were not going to help. By the mid-1990s, however, the AAMA was the enemy, fighting in direct opposition to Auggie’s efforts to contain textile and apparel imports. A short time later, with domestic manufacturing of both apparel and footwear increasingly irrelevant, and overseas sourcing increasingly important, the AAMA merged with the American Footwear Association to become the American Association of Footwear and Apparel (AAFA). The AAFA is today unabashedly pro-trade in its positions. The new acronym reflected the merger, but Keven Burke, AAFA’s president, told me that some members of the new generation of U.S. apparel firms—with their far-flung international supply chains and no manufacturing at all—were hesitant to belong to a trade association containing the M word. Today, the notion of a large U.S. apparel firm that actually has M in the United States is almost as archaic as a cotton farmer with a mule.

The textile workers’ union (UNITE), as well as the yarn and fabric sectors, also began to splinter into different directions. While the fabric producers wanted a freer rein to use imported yarn in production, the yarn spinners predictably preferred to limit the use of foreign yarn in U.S.made fabrics. As trade agreements started to be negotiated, further splits appeared. The yarn and fabric guys squabbled over the provisions in the agreements, and the union workers generally opposed any agreements at all. Unable to snarl in unison, the industry became an annoyance rather than a threat on Capitol Hill.

As the seed-to-shirt coalition’s united political front crumbled, other alphabet armies began to snarl in unison. For the first time, the U.S. retail industry formed a collective voice on the subject of trade in general, and apparel imports in particular. The Retail Industry Trade Action Coalition (RITAC) led by Sears, JCPenney, and Dayton Hudson, originally had been formed to counter FFACT on the Jenkins Bill, but soon took on the larger goal of doing away with all quotas.²⁸

Retailers and importers were also successful in beginning to get their voices heard on trade disputes. Until the 1990s, CITA (the Committee for the Implementation of Textile Agreements, headquartered at the Department of Commerce) was in the domestic industry’s back pocket. If the domestic industry wanted safeguard limits, or quotas, on certain goods from certain countries, they were only a phone call away. ‘They were good ole boys in a Star Chamber,” Brenda Jacobs, a leading trade lawyer, told me in 2008. (Ms. Jacobs was perhaps the fourth person to use the term Star Chamber to describe to me the early decision-making process at CITA, so I looked up the term: “A former English Court dealing with offenses against the Crown, notorious for its severity and arbitrary methods.”) Today, CITA’s membership represents importers’ and retailers’ interests as well, and safeguard quota decisions are made not in a Star Chamber but according to a specified and open process. The odds might still be with the domestic industry, as virtually all CITA chairpersons have roots in either the political or the business side of the domestic textile industry, but, as Brenda Jacobs told me, “At least there is a process in place and importers are allowed into the room.”

Gone On Long Enough

Retailers were soon bolstered by another collective force as the developing countries that had been constrained by quotas also began to speak with one voice. The International Textiles and Clothing Bureau (ITCB), a coalition of developing-country textile and clothing exporters, began to echo the retailers’ call for the end of quotas. In a foreshadowing of the collective clout they would display in 2004, poor countries banded together to shape the global trade agenda.

Many of the family businesses in Asia had first come under quota under Kennedy’s administration, and some business owners remembered when their grandfathers had been assured that the quotas would be temporary. ITCB members were running out of patience in the globalized economy, where the MFA quotas appeared increasingly anomalous and hypocritical and were viewed as a rich-country plot that stood in the way of poor-country fortunes. In a twist on the well-worn historical pattern, America would now have to pay the developing countries to move out of the way of broader trade liberalization.

George H. W. Bush and then Bill Clinton were eager to see a successful conclusion of the Uruguay Round, the third major round of postwar trade liberalization talks. While both the Kennedy and Tokyo Rounds had focused on and achieved tariff reductions (though not for U.S. textile and apparel imports), U.S. aims for the Uruguay Round were more complex. In particular, U.S. negotiators wanted developing countries to liberalize rules for trade in financial and other services, and for foreign investment, and they also sought new agreements in areas such as intellectual property. The United States had little left to offer in return besides the MFA. Thanks to the successive rounds of liberalization, the United States maintained few trade barriers of any kind, save for those in place for agriculture and textiles, as tariffs for imports into the United States were close to zero for most goods outside of these industries. The developing countries made clear that they were willing to negotiate only if the MFA was on the table.

As Uruguay Round negotiations progressed, the MFA was extended twice more as the final agreement was hammered out. In the end, the negotiations took seven years and produced 22,000 pages of agreements.²⁹ With Auggie’s troops in splinters, the new voice of the retail industry rising in the background, and, most important, the developing countries united for the first time in history, the rich countries agreed to abandon the MFA.

The Slow Unraveling

If there were doubts about the political staying power of the U.S. industry, they were dashed as it became clear that an agreement to end the MFA was not the same thing as the end of the MFA. While retailers and developing countries wanted to yank the yarn to unravel the regime in a few pulls, the textile interests pushed the other way, and ultimately made sure that the unraveling would proceed at a snail’s pace. Negotiations over whether to end the MFA were simple compared to the negotiations over how to end the MFA.

Should the MFA be phased out over 5, 10, 15, or perhaps even 25 years? Should the poorest countries be freed from quotas first, or should the bigger exporters be allowed to go first? Or perhaps each category of clothing should be freed from constraint at the same time for all countries? The tortuous complexity that had characterized the administration of the MFA for decades was in the end trumped by the even more daunting complexity of the regime’s undoing. Finally, the countries agreed to a complex 10-year phase out, with the fourth and final “tranche” of quotas to be lifted in 2005.

However, the term phase out is quite a misnomer, because the agreement did not phase out quotas steadily but instead left most in place until the “cliff” in 2005. Approximately 85 percent of quotas were still in effect on December 31, 2004.³⁰ Indeed, in the first tranche the United States lifted only one quota: that for work gloves from Canada.³¹

Julia Hughes and Erik Autor could only shake their heads at the beginning of the “phase out” in 1996 as nonexistent quotas were rescinded on parachutes, kelims, silk sport bags, and laparoscopy sponges. Thanks to the weakened but still snarling domestic industry, they had to wait another 10 years to see the quotas vanish on things that people actually buy, such as cotton T-shirts, underwear, or pants. Even then, as we will see in Chapter 12, the quotas did not actually vanish.

When I last saw Julia in the fall of 2008, she was older and she was wiser, but she was still waiting for the quotas to go away.