Winners and Losers

International trade creates both winners and losers, as is well known. An article in today’s Washington Post forecasts a grim turnabout in fortunes for a group of people that had been winners up until now, but may soon become losers from trade.

On Jan. 1, World Trade Organization rules governing the global textile trade will undergo their biggest revision in 30 years. The changes are expected to jeopardize as many as 30 million jobs in some of the world’s poorest places as the textile industry uproots and begins consolidating in a country that has become the world’s acknowledged low-cost producer: China.

Until now those textile workers in numerous developing countries other than China have benefited from the US’s increasing imports of textiles, as the number of jobs and their wages have been higher than they would otherwise have been. However, I suspect that the article is quite right in arguing that once the Multi Fiber Arrangement (MFA) expires this January — thus essentially ending the system of quotas that has severely limited US imports of textiles from China — a significant portion of the developing world’s textile production will migrate to China.

I am sympathetic to the point of the article; it is important to remember that international trade does create losers as well as winners. But the article is also deeply misleading, because it fails to even mention that there will be at least as many (and almost certainly more) winners from the increase in trade. In addition to lower-income Americans being able to buy more clothing, the expiration of the MFA means that millions of Chinese who are currently underemployed and in poverty will have greater employment opportunities at higher wages than they would have otherwise had.

Of course that doesn’t make the losses that other developing countries will face any less painful. But the best lesson to draw from stories like this WaPost article is that the rich world needs to do more to help developing countries. And the single best way to do that would probably be for the US to reduce agricultural subsidies. The developing world wants and needs more trade, not less of it.