Depending on your point of view, a trade pact is the regulatory grease that lubricates international commerce or the mud of governmental meddling, oozing among the gears. To be sure, the tariff is an old form of regulation, designed to fulfill an expected win-win strategy of protecting local manufacturing and agriculture while drawing in revenue for a government that views hovering over trade to be part of its mission—which means just about any government. The problem with that in an interconnected world is that a tariff on whatever comes into a country is almost inevitably countered with a tariff on what goes back out—thereby risking the trade equivalent of trench warfare, fought to a stalemate.
Trade pacts are commercial peace treaties, and they have grown popular in an increasingly globalized economy. When tariffs are reduced or simply disappear, fashion companies that once owned their own factories or sourced manufacturing domestically are incentivized to source to lower-labor-cost countries, cutting costs and increasing competitiveness. That can be great for business, but it is never exciting for the families of the domestic garment workers who lose their jobs.
That explains in large part why the Trans-Pacific Partnership became an election issue in 2016. TPP was designed, with the best of intentions, to create a liberalized, more fluid trade zone that would ring the world’s largest ocean. In theory, each of the twelve signatory countries would share in the fruits of the reduction or elimination of tariffs, among other benefits. Domestically, the TPP had good support and was to be a milestone of the Obama administration, which had been criticized for inertia in international affairs.
During the 2016 presidential primaries, however, both major candidates who appealed to the working class—Bernie Sanders, a Democrat, and Donald Trump, a Republican—said TPP was terrible, and Hillary Clinton, the Democratic candidate who had once supported TPP, came out against it, putting its future in doubt no matter who won the election. What has now become clear (or at least seemingly clear) is that President-elect Trump indeed plans to withdraw American participation in TPP.
Does it matter? To fashion companies expecting TPP to facilitate the sale of American-made products to the same Asian countries from which so much clothing sold domestically is now imported, the sacrifice of TPP on the political altar might be troubling but not calamitous. The fashion industry has more pressing concerns than whatever opportunity has been lost to test if made-in-Sacramento distressed jeans will catch on with the teenagers of Sichuan and Lima.
When you consider that the election of Donald Trump was caused in primary part by the support of workers, the rejection of TPP is probably not a bad idea—and potentially a politically and financially profitable one. For their part, the Democrats will likely have to rethink their own approach to international trade–one that could result in a new, more protectionist consensus in the next Congress.
A rethink for the fashion business could run like this: for whatever gets made domestically for domestic consumption, there is no worry about treaties, about how fast the container ship will carry the goods to market, about the safety and child-labor practices of a factory a half a world away, or about the speed and efficiency of longshoremen or Customs and Border Protection officials. If something becomes hot at retail, just make more of it and call FedEx.
Only a generation ago, it would have been hard to find anything for sale in a clothing store standing outside the luxury market that was not made in the USA. It is not realistic to expect those days to return, but the message from voters (who, after all, double as consumers) is that the challenge now, for both industry and government, is to seek out a way to build the kind of clean and environmentally friendly domestic garment factory that will employ dozens who can profitably make the same goods as an Asian factory (sweatshop or otherwise) employing hundreds. That means an embrace of technology—and priority one for that could be the development of robots with the cleverness and work ethic of R2-D2. It also means that a worker who a generation ago would have been a seamstress will need the education and skill to serve as a technician for the “sewbots” and other sophisticated devices doing the actual labor.
For that to happen, there would need to be the will—an across-the aisle consensus in a polarized political environment—to offer tax incentives to build model factories and to provide government-subsidized training for a new generation of Americans who would make the term “working class” synonymous not with strong muscles but nimble minds. That would require governmental cooperation with industry on a scale and that has not been common in the USA other than in time of war.
There is no better incentive for lawmakers than voter gratification. Any politician who helps pump up the long-deflated domestic garment manufacturing business will likely be seen as some kind of hero—because jobs creation is a good deed that thankfully continues to go unpunished.
Alan Behr is Partner & Chairman, Fashion Law Practice; Member, Corporate and Intellectual Property Practices at Phillips Nizer LLP.