Another $46 billion in taxes

December 10, 1993|By Myron E. Ullman 3rd

CAVEAT emptor -- let the buyer beware -- was once the guiding principle for shoppers. Those days are long gone, but the attitude has apparently not disappeared from U.S. trade policy.

The Clinton administration is pushing for a concession in the Uruguay round of the General Agreement on Tariffs and Trade, which ends next week, that would inflate U.S. consumer prices on imported clothing and textiles for the next 15 years.

While most consumers don't realize it, they pay $46 billion a year to subsidize U.S. textile and apparel producers -- more than $700 per family. This is because of tariffs and quotas under the Multifiber Arrangement, a 1974 exception to the GATT effort to reduce worldwide trade barriers.

Although the arrangement was supposed to last just four years, it has been extended four times and quotas remain in effect.

In addition, U.S. tariffs can be as high as 34.6 percent of the value of imported merchandise. Without these protectionist charges, a wool blazer with a $150 price tag might cost $100.

The Uruguay round of GATT was expected to call for a 10-year phasing out of the Multifiber Arrangement.

But this fall, to secure votes for the North American Free Trade Agreement, the administration assured the textile lobby that it would seek to extend the phase-out period to 15 years.

Ten years is more than enough time for U.S. textile companies to take the necessary steps to become more competitive -- steps they should have taken during the almost two decades that the temporary arrangement has been in effect.

In fact, the textile industry is already competitive. Exports have soared, profits have been solid even during the recession and most factories have been operating consistently at the high rate of over 85 percent of capacity.

While originally portrayed as necessary to protect millions of workers, tariffs and quotas protect fewer than 170,000 U.S. jobs. Consumers subsidize each job to the tune of $270,000 in higher retail costs -- 15 times the average yearly wage.

Passing NAFTA was an important step on the road to global free trade. That's why the retail industry strongly supported the administration's efforts.

But now NAFTA is being used to delay the elimination of the Multifiber Arrangement and thereby extend trade barriers. That is not a fair trade for free trade.

The administration should reconsider its concession and, even better, should try to limit the extension of the arrangement to five years.

It is time to stop forcing consumers to subsidize America's thriving textile industry.

Myron E. Ullman 3rd is chairman of R.H. Macy & Co.

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