COLD DEATH:

Europe quotas on China textiles backfire (FT.COM, 8/17/05)

Shiploads of sweaters are piling up on Europe's doorstep, while European retailers and their customers are facing a "sweater-buying season" with far less choice than usual. Scores of European trading companies are facing bankruptcy or severe financial losses. Many jobs are likely to be lost.

Such are the consequences of the import restrictions on a number ofChinese textile products that came into effect on July 12. More precisely, they are consequences of the way in which these restrictions were introduced, without proper regard for the realities of modern commerce.

The prevailing thinking in the EU seems based on an outdated concept of trade in which foreign companies produce goods which they then try to sell to overseas customers. Importers buy a certain quantity and have it shipped to their home market. In this simple world, safeguard actions, anti-dumping duties and retaliatory measures are, at least in the short run, mainly detrimental to the exporting country.

Modern commerce is different. More and more European companies are heavily involved in the production of the goods they import. That is because they have set up production facilities in other countries or have otherwise outsourced production of what they can no longer produce profitably. By doing so and by concentrating on activities in which they have a competitive edge they survive and often prosper. Outsourcing is a growing trend. Many people in Europe and the US perceive it as a big threat. Wrongly so, we believe. Trying to stop imports and outsourcing amounts to economic suicide.

They're just now noticing that Europe is suicidal?

Posted by Orrin Judd at August 18, 2005 12:00 AM