The Travels of a T-Shirt in the Global Economy

Key Events in a T-Shirt's life

less about competitive economic markets, more about politics, history, and creative maneuver to avoid market competition

Where was the T-Shirt screen printed?

in Miami Florida at Sherry Manufacturing Company, run by Gary Sandler

How much did the T-Shirt cost?

$1.42 including a $0.24 tariff

Where was the T-Shirt made?

in China at Shanghai Knitwear, owned by Patrick Xu (Xu Zhao Min)

Where is the cotton grown?

Lubbock, Texas at Reinsch Cotton Farm, owned by Nelson and Ruth Neinsch, largest since 1890, 30% of US cotton comes from Texas

U.S. Comparative Advantage in Cotton

government subsidies, innovation, avoiding risk with slavery (control, monitor, and incentives), Eli Whitney's cotton gin, governance (property rights, incentive structures), and public policy (slavery, sharecropping, and cotton factories)

Risks of the US Cotton Industry

labor market, weed, insect, and weather

Texas started selling cotton to China

in the 1920s

Modern US Cotton Competitive Advantages

mechanization, scientific research, public policy (political influence), GM cotton in 1996

Virtuous Circle Relationship

between farmers, private companies, universities, and the US government to supply funding, technical, and business assistance, without it and education, farmers are unlikely to understand the scientific complexity of introducing technologies

Turn Waste Disposal Problem Into Revenue

fertilizer, animal feed, food, oil and meal from the seed, linters

Farmers Also Own

the Compress, denim mills, PYCO oil mills, PCCA marketing pools

Marketing Cotton

"grad a handful" to high-volume instrumentation testing for quality

China

the world's largest producer and consumer of cotton, 40% of the world's cotton textiles

Why does cotton travel to China?

labor still accounts for more than half of the value added in the production of apparel

Shanghai Number 36 Cotton Yarn Factory

turns cotton into yarn

Shanghai Brightness Number 3 Garment Factory

turns yarn into clothing, sewing stage is the most difficult to mechanize, sent to Shanghai Knitwear

Chinese Working Conditions

lowest wages, poorest conditions, and restrictive regimes, sweatshops spawned by global capitalism exploit the poor and powerless, forcing people without alternatives to work in prison like conditions for subsistence pay

The Great Divergence

Europe's leap forward began with the industrial revolution, started cheap, serviceable cotton garments

James Hargreaves

invented the spinning jenny

Race to the Bottom

the idea that free trade gives states the incentive to lower regulations and standards in order to beat out the competition in producing goods cheaply

Why did women work in mills?

lack of alternatives, better than the farm, little experience, limited horizons, abundance, low price, just as productive as men but a lot less trouble

Hukou

China's traditional household registration system that makes it difficult to move from one place to another and defines and limits a worker's ability to participate in the market as full citizens

Forces that changed working conditions

conscience, religion, and politics

Code of Conduct

a company makes its suppliers follow certain guidelines regarding working conditions, wages, and child labor

The Scale Effect

trade increases the level of economic activity and therefore also increases the level of production and consumption of goods and services

Environmental Kuznets Curve

poor countries appear relatively unpolluted, middle-income countries more polluted, and rich countries clean again, more trade leads to better environmental protection

Trade is hindered by

a lack of democracy

Textile and Apparel industry in America

the most managed and protected manufacturing trade in history, better to build a fence to keep out the lions than to run an unfair race that can't be won

imported Textile and Apparel in 2008

a free trade agreement should make it easier, not harder, to trade, t-shirts that didn't meet trade agreement requirements had a 16.5% tariff, other items up to 30%, as well as import quotas for China

Dominance of Politics in Textile and Apparel Industry

-the size even today

-one voice goes a long way

-congresspeople represent these people

-public is increasingly nervous about trade, especially with China

average tariff for apparel

22.5%

Agreement against all textile and apparel restrictions

by limiting access to foreign fabrics, trade restrictions were making it more, not less, difficult to keep their production in America

Modern Textile Industry Trends

while employment is falling, production is steady or even rising due to mechanization (labor productivity) and technology

Unintended Consequences of competitiveness, trade agreements, and regulatory risks

higher cost for one another at each stage of a t-shirt's production

Trade Barriers do not protect America

they protect the apparel industries of America's friends

globalization of apparel industry

in response to trade barriers, China makes clothing and labels it as another country's or buys up necessary quota in advance and then resells it for profit

compensation principle

the best economic policy is not to erect trade barriers but to instead compensate the losers

creative destruction

the destruction of certain jobs and industries is a necessary evil for the creation of others due to new international business models, environmental and social responsibility, and technological and scientific innovations

China's domination of the US market

hurts developing countries that got parts of quotas and lower tariffs, would be little left for Africa and nothing left for Trans-America

winners of the t-shirt race

best negotiators, not best t-shirts

Secondhand t-shirts

U.S. has all supply and no demand, industry now has more than 100 countries, most years the U.S. is the world's largest exporter of used clothing, the only trade fashioned by economics rather than politics

World Trade in Cotton

subsidies

world trade in finished t-shirts

tariffs, quotas, and trade agreements

Trans-Americas Trading Company

the Stubin Family (Ed and Eric) buy used clothes from charity and either sell them as clothing, wiping rags, or fiber

shoddy

t-shirts that are shredded into bits and used for stuffing furniture or respun into yarn

Mitumba

the resale of used textiles from the US and Europe to Africa; considered a "real" economic market (no politics), price discrimination against men, created more jobs than it has destroyed, good for the planet

Ed Stubin and Geofrey

buys used clothing, depends on personal relationships with suppliers and personal knowledge about their customers

Barriers of Mitumba Trade

local textile industry due to overvaluation, corruption, simple ineptitude, political risk, low education levels, insecure property rights, macroeconomic instability, and ineffective commercial codes, lacks of software, suppression of markets rather than market itself

banning trade

only drives it underground

Export Processing Zones (EPZs)

goods are allowed into the country for assembly or processing and subsequent re-export, but are not allowed into the domestic marketplace for consumption

How to improve free trade

cutting agricultural subsidies, democratization, and giving poor countries a place at the table at trade negotiations