China/EU dispute: Crazy logic of the profit system

THE MEDIA has been resounding to waves of denunciation and counter-denunciation over the banning of imports of clothes from China to the European Union (EU) - the so-called 'bra wars'.

Ron Groves

European textile manufactures complained that a flood of cheap imports is ruining their businesses. But clothes retailers were crying that there could be a shortage of bras and trousers in the shops at Christmas. 80 million items of embargoed clothing sat in EU warehouses.

Poised uncomfortably in the middle was Peter Mandelson, Blair's former spin-guru, now EU commissioner for trade. He brokered a 'compromise deal' on 5 September of a temporary stopping of China's clothing exports with around half the blocked items counted against the 2006 quotas.

Mandelson hopes this will be accepted by the EU - he would like to lift the restrictions in line with his neo-liberal Thatcherite economic ideas, but his boss in the EU, Jose Manuel Barroso made him back down.

Barroso came under intense pressure from some EU countries that see their own industries decimated and demand protectionist policies. Manufacturers from countries demanding a ban, mainly from southern Europe and Poland, point to the ballooning of clothing imports from China after 1 January 2005 when the World Trade Organisation (WTO) lifted restrictions. Imports of many clothing items shot up by several hundred percent in a couple of months.

Typical of the anti-embargo camp is Peter Simon, boss of Monsoon fashion chain. He claims boosting profits had nothing to do with his firm's decision to outsource to China rather than use EU-based manufacturers, but a typical blouse made in Britain has a cost price to the retailer of £10, compared to £6.50 for one from China.

Simon hypocritically expresses concern for super-exploited Chinese workers used by his company who will be hit by these protectionist trade measures, and says that the 'ethical' trading initiatives Western firms are supposed to have set up with Chinese firms will also be jeopardised.

However, a recent TV documentary investigating a Nokia supplier in China exposed how managers at the firm blatantly tried to pull the wool over the eyes of the Nokia team sent to check out the Chinese company. Notice was given of the inspection visit, so local bosses had plenty of time to fix things up by coaching workers in what to say and by fabricating documents on hours, pay and conditions.

Slave labour wages

THE BASIS of the Chinese cost advantage is the slave labour wages and conditions suffered by workers there. The workforce is mainly very young women who recently moved from rural areas to the fast-growing industrial regions in southern and eastern China where wages are typically about £2 a day.

The Chinese textile manufacturers are also undermining the clothing industry in ex-colonial countries like Bangladesh. Although manufacturers in both countries pay starvation wages, China has more modern and efficient production methods.

Workers in regions affected by the surge of imports could be sympathetic to demands for protectionist measures to save their jobs, but these would not solve their problems.

EU firms will use any advantage gained from protectionism to boost their profits while keeping relentless pressure on their own workers' pay and conditions. In the longer term, wide-scale protectionism would cut the market and possibly precipitate a 1930s-type economic slump.

On the other hand, free market, neo-liberal policies will be just as bad for EU workers, because whole industries could be wiped out by outsourcing to countries like China, leading to further mass unemployment.

Chinese textile workers should also not believe their bosses' claims that a neo-liberal, free trade approach is in their interests. There are already signs that rising wages are encouraging China's manufacturers to move production to new, poorer areas where they can pay even less and increase their profits.

This is the crazy logic of the capitalist profit-driven system. This system is the real culprit that workers in the EU and China should blame for their plight. That's why we fight for a socialist planned economy internationally.

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In The Socialist 25 August 2005:

Hurricane Katrina exposes Bush's rotten capitalist system