June, 2003: The Yankee Trader

By Greg Rushford

Published in the Rushford Report

For the U.S. textile lobby, protectionism has been a way of life since 1789, when the first Congress threw up high tariff walls to protect domestic cotton growers and clothing manufacturers. Over the years, the pampered infant industry has become the classic protectionist cry baby. The incessant demands for ever-more government largesse have at times run roughshod over important U.S. foreign policy considerations.

            Here’s a thumbnail history. Besides my own research, this article relies upon a historical chronology included in a 1990 study for U.S. importers and retailers written by Washington trade lawyers Frank Samolis and Jeffrey Turner, with the assistance of economist Laura Baughman: Two Centuries of Textile Trade Policy: From Button Tariffs to Global Quotas.

            On July 4, 1789 in one of its first acts, Congress enacted tariff barriers on imports including cotton, leather, clothing, gloves, and hats (whether made of beaver, fur, or wool). Even foreign buttons were taxed, although the origins of the domestic button lobby remain obscure.

            In 1816, U.S. tariff schedules were revised upwards to give the New England cotton lobby additional protection. This was followed by more protection for the domestic wool industry in 1824. Still unsatisfied, wool lobbyists asked for more, and in 1828 Congress passed what became known as the “Tariff of Abominations.”

            In 1883, Congress established a tariff commission. A wool lobbyist named John L. Hayes was the commission’s first head.

            In 1930, thanks to the Smoot-Hawley Act, “the average U.S. tariff on cotton goods was 46 percent and on woolen goods 60 percent,” the Samolis-Turner-Baughman study notes. Even buttons “which apparently posed a threat to someone,” got their own additional tariff protection. Six years later, as the world began to lurch toward World War II in part because of the Great Depression’s trade wars, Japan agreed “voluntarily” to limit its clothing and textile exports to America . There would be more such “voluntary” agreements by Tokyo in 1955 and 1957.

            In 1955, according to Townsend Hoopes’ The Devil and John Foster Dulles, a history of diplomacy in the Dwight Eisenhower presidency, Secretary of State Dulles offered American financing to build the Aswan High Dam in Egypt . The idea was to strengthen Premier Gamal Abdel Nasser domestically. Dulles hoped that the Aswan financing would give the Egyptian nationalist the necessary cover to negotiate a peace deal with Israel . But this high-minded foreign policy goal didn’t sit well with “a group of ‘cotton senators’ from the South who asserted that the dam would, by increasing the acreage available for Egyptian cotton

(fifteen to eighteen years thence) intensify a trade competition already tougher than their liking,” Hoopes reported. Ike was recovering slowly from a heart attack, and had neither the energy nor the political desire to fight the cotton boys. After Dulles abruptly withdrew the American financing offer, Nasser was furious. This gave the Soviet Union the opportunity “to break the Western arms monopoly in the Middle East and establish Russia as a power factor on the scene,” Hoopes observed.

            Fast forward to today, and the Textile Caucus’s successful opposition to the requests to President George W. Bush to give Pakistan increased quotas on textiles and apparel. The game hasn’t changed since the Eisenhower administration. The textile lobby has always put its own interests ahead of U.S. foreign policy considerations.

            In 1956, Congress again pressed Ike to limit textile and apparel imports. “The textile industry does not seek favors, but does ask, Mr. President, that the additional burden of ever-increasing imports not be added to its other troubles,” Republican Sen. Frederick G. Payne of Maine declared. “The industry seeks a chance to adjust, to work out its problems, so that once again it can stand strong against all competition from whatever source.”

            In the 1960s, Japan was still the U.S. textile lobby’s target. This led to President John F. Kennedy’s Short-Term Cotton Agreement of 1961, which lasted about a year and became the Long-Term Cotton Agreement.

            The protectionist pressures intensified during President Richard Nixon’s years in the White House. As part of his southern strategy in his 1968 campaign, Nixon had promised  that if elected he would curb imports of textiles and apparel. “Textile industry leaders raised a considerable sum which was used to run a special operation in key Southern states, all of which were carried except Georgia,” noted a June 4, 1970 memo to the president from two key Nixon aides, congressional relations lobbyist William Timmons and Republican political operative Harry Dent (see, Trade history as Déjà vu, The Rushford Report, February 2003).

            Nixon, like other politicians, put economics second. On July 9, 1970 , for example, the president met privately in the White House with top economic aides and congressional leaders, the most important of which was Rep. Wilbur Mills, a Democrat who chaired the Ways and Means Committee. “Mills indicated that there was a problem, since textiles could only show injury in limited areas,” notes a memorandum of conversation of that meeting that was drafted by National Security council aide Fred Bergsten. “In an aside, he remarked to the President that they had both been fooled by the textile industry, which had no case for overall

protection.”

            But while the textile lobby had long ago run out of an economic case, it had a political case.

            The Multifibre Arrangement of quotas that was initiated by President Richard Nixon in 1974 was supposed to last for three or four years. Instead, there have been four extensions.

            In 1985, lobbyists for the domestic textile and apparel industry warned that if they did not receive more protection, “in five years our entire industry and four million jobs that depend on it will simply cease to exist.” Responding the next year, President Ronald Reagan’s administration “negotiated the toughest renewal ever of the Multifibre Arrangement, extending its coverage to virtually all textile and apparel products,” according to the Samolis-Turner-Baughman study.

            Following up, Reagan pressed “tougher, more restrictive bilateral restraint agreements with all the major developing market suppliers to the United States, including China, Hong Kong, Taiwan, and Korea,” the study noted. Between 1985 and 1989, Reagan’s team “called” nearly 400 product categories, slapping on new quota limits on imports that covered more than three quarters of all textile and apparel imports.

            More than eighty percent of those quotas will continue to exist until finally phased out on December 31, 2004 , according to a schedule established by the 1995 creation of the World Trade Organization.

            Over the years, first Japan, then Hong Kong, South Korea, and Singapore — all targets of the U.S. textile lobby in the 1960s, 1970s, and 1980s — developed their economies far beyond the rag trade and moved up the ladder. But in southern states like North and South Carolina , the women who today trudge into the remaining mills are the granddaughters of the women who were intended to benefit from the “temporary” protectionism.  

            In the Carolinas , the political pressures for continued textile protectionism continue as if this were still the 18th century, despite today’s global economy. Just one example: In Catawba County, North Carolina, the local economy has been transformed by the growth of the fiber-optic industry. “With 40 percent of the world’s supply of fiber-optic cable being produced here, Catawba County is at the hub of a $5.5 billion global industry,” touts a press release issued by the North Carolina Citizens for Business and Industry.

            Meanwhile, the Republican congressman who represents Catawba County , Cass Ballenger, still is fighting to keep the textile mills on economic life support. Ballenger advocates continued high tariffs on clothing and textiles. At the same time, he has worked to advance legislation to cut tariffs on the power weaving and textile printing machinery that the textile mills in districts like his import for their own needs. To the textile lobby, there are good tariffs and bad tariffs. 

            All this protection, at the end of the day, has not saved the mill towns from dying — slowly. Over the years, the only jobs that have really been saved by the continuing protectionist machinations have been those of the politicians who have found it expedient to push them.      

TOP