European ministers: China import quotas "economic suicide"

As an armada of Chinese cardigans and trousers lies stranded in European ports (by some estimates, around 60 million items), some European politicians are finally starting to oppose this madness. This morning's Financial Times (subscribers only) features an article by Swedish, Dutch, Finnish and Danish ministers attacking the import ban.

Karien van Gennip, Bendt Bendtsen, Thomas Östros and Paula Lehtomäki argue that the import quotas "were introduced, without proper regard for the realities of modern commerce." The ministers don't pull many punches; these quotas will cost jobs:

Scores of European trading companies are facing bankruptcy or severe financial losses. Many jobs are likely to be lost.

They also argue that import quotas ignore the nature of modern globalised production, where "much trade is intra-company or trade in goods produced at the importer’s initiative", and "goods are ordered, and often paid for, months ahead."

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.

Import quotas won't save Europe’s remaining textile industry. But it will reduce consumer choice, raise prices, cut retailer's revenues, bankrupt some importers, and likely costs jobs. A textbook example of the unintended consequences of knee-jerk protectionism.

As today's Times editorial notes, the Commission has underestimated the importance of Chinese textiles on the high street. The dispute has also "split the EU right down the middle between producing and consuming nations." EU Trade Commissioner Mandelson needs to find a solution soon - but given those internal divisions, it won't be easy.

(For background on this issue please see my earlier post. For another FT story today, which is not restricted to subscribers, go here).

Comments

[Edward Hugh]

I'm right with you. And don't miss today's inflation reading. We could pay for pampering these inefficient textile manufacturers by getting a monetary tightening in the eurozone that Germany needs like it needs a hole in the head.

[ivan]

"the unintended consequences of knee-jerk protectionism"

Unintended? I'm sceptical. I think they know exactly what they are doing. They protect the textile industry while the rest of us pay the costs.