Bra Wars: China Strikes Back

Written By Brian Hicks

Posted February 28, 2006

The Cantonese streets of Hong Kong are packed with Mandarin speakers, yammering away about the sights and sounds of their favorite Special Administrative Region.

The attraction is neither the casinos of Macau nor the hyper-capitalist skyscrapers of Victoria.

It’s the Golden Dome Cabaret Show International which is attracting mainland tourists as the newest lure of the former British bulwark.

Thai entrepreneur Apichar Siritanchakul calls himself the "daddy of the lady boys"…that’s right, transvestites in bikinis and gold lame bras are strutting their stuff all through the town, and the rest of China is soon to experience the wave of sequins and Madonna karaoke.

But as enticing as these girly imports might be to Chinese sightseers, it’s the feminine exports from the Middle Kingdom that have caused the real fuss overseas.

I’m talking about the Bra Wars, last summer’s showdown between the EU’s foreign trade apparatus and the fire-breathing dragon that China calls its textile industry.

Busting it Up

Following the expiration of the Multi-Fiber Arrangement, also known as the Agreement on Textile and Clothing, which governed the world textile trade for three decades since 1974, the World Trade Organization became the sole mechanism for regulating the flow of shirts, socks, and unmentionables around the world.

As the WTO is a decidedly liberal trade body, the general bent of WTO members is away from regulation and towards out-and-out competition. Of course, this spells a huge advantage for high-quantity, mid-quality, low-price producers.

China is, of course, the giant of this category, and Chinese textile manufacturers started licking their chops the second the MFA expired at the beginning of 2005.

So, the floodgates opened, and Chinese exports to the West experienced 100% growth on the same time in the previous year. To stop the bleeding, US and UK trade officials invoked China’s WTO accession agreement, where the upstream consumer countries could limit trade growth to 7.5% per annum.

China agreed to a 10% growth rate in China-EU textile trade over 3 years, but like a Thai burlesque dancer in Hong Kong, the West knew that what is attractive is not always honest.

Chinese manufacturers rushed their goods to port in late summer of 2005, speedily reaching their yearly quota that had just been agreed.

European leaders and trade representatives fumed, and held up some 75 million Chinese garment imports from windbreakers to jockstraps in European ports. Finally, Tony Blair achieved a resolution to these Bra Wars during a diplomatic visit to China, and all was well with the galaxy for the time being.

A Never-ending Saga

Like the Star Wars movies, this story will just keep on going. Why? Because the feeble agreements called frameworks and memoranda of understanding that have been signed between China and her western trading partners serve only to postpone further trade spats. These disputes are inevitable in every manufacturing sector and will become more and more grave as once cottage industries like the northern Italian textile mills near Milan feel the pressure of unbeatable Chinese labor prices.

The next installment in this epic is taking place now, with the European Trade Commission’s recent publication of trade limits on footwear imports from China and Vietnam. Yep, here come the Shoe Wars.

Chinese leather shoes will suffer a four-stage tariff, to be ramped up gradually from 7% starting in April of this year to nearly 20% come September.

Is this necessary? Well, during the same period that apparel was pouring into Rotterdam and elsewhere after that sector’s tariffs were lifted, Chinese footwear experienced a 300% growth spurt on 2004.

The protectionist in all of us hates to see domestic workers lose jobs. But there are nevertheless industry leaders who, while their pockets and those of their shareholders (you?) are busting at the Chinese-sewn seams, would hate to see the savings stop now or ever.

So, while the Italian National Footwear-makers’ Association weeps for the future of haute chaussure produced on its shores, the European Branded Footwear Coalition cries foul at EU Trade Commissioner Peter Mandelson for daring to meddle.

The broad dramatic tension here is perhaps the most important economic shift of our time: agreement-based trade liberalism. The result to this point is anarchic, with every country demanding free trade but then getting in a huff when each realizes the pitfalls such liberalism poses to its own people.

The current tussle over the Dubai Ports World acquisition of US ports (one of whose cranes I can see out my window) is less like the dramatic loggerheads some would believe and more like an episode of "The Benny Hill Show." Pretty girls and big profits are fun to chase after, but soon chaos ensues and the wacky trumpets set a-tooting.

Oh, and why did our Thai businessman decide to move operations to Hong Kong in the first place? "The Thai transvestite entertainment market was saturated."

Ahhh, free markets… Thanks for the laughs!

– Sam Hopkins

Angel Pub Investor Club Discord - Chat Now

Brian Hicks Premium