Dave Marrs
4 September 2007
column
Johannesburg — THERE is now clear evidence that the trade and industry department's ill-considered Chinese clothing import quotas have been a dismal failure, and in some cases are having the opposite effect to what was intended.
While Chinese imports dropped by more than a third initially, research by the Trade Law Centre for Southern Africa (Tralac) shows they have been substituted almost entirely by imports from other low-cost producers such as Pakistan.
Whereas Chinese imports dropped by 35% in the first quarter, overall imports declined by only 13%. And even those figures could be skewed by a surge of imports in December, as retailers pre-empted the quotas.
In addition, clothing imports from places like Malawi and Zimbabwe have suddenly shown extraordinary growth, hinting that Chinese producers are finding other ways of matching their supply with South African demand.
The Financial Mail reported a couple of weeks ago on a range of local clothing companies -- the ostensible beneficiaries of the quotas -- that are having to close down lines because they can't source suitable textiles. With their established suppliers no longer available to them, many tried to find domestic producers and either failed or were let down in terms of quality or reliability.
While the above points vindicate those, like the South African Exporter, who pointed out the folly of such protectionist measures from the word go, it gives us no joy to be the bearer of bad tidings. The collapse of the South African clothing and textiles manufacturing sector is real enough, as is the hardship caused by the closure of factories and loss of employment. National Bargaining Council figures show that the industry shed another 1751 jobs nationally between December and May after 33 firms were forced to close their doors.
It was suspected all along that the South African Clothing and Textile Workers' Union (Sactwu) was the driving force behind the quotas, and this has been confirmed by the way the department responded when the plan started running into problems. Applications for additional quotas are quite openly referred to the union, which invariably comes up with onerous conditions to be met before it will give its stamp of approval.
Companies that have been either unable or unwilling to bow to the union's demands have had to close down, while some of the bigger retailers have reluctantly agreed to sign long-term domestic procurement and employment agreements rather than run out of stock of certain lines.
The only hope for the survival of what remains of SA's clothing and textile sector is co-operation along the domestic value chain, yet the clothing quota issue has had the opposite effect, undoing progress that had been made to that end by means of the customised sector programme.
Such state-mandated blackmail is symptomatic of a dysfunctional trade and industry department that has abrogated its responsibilities and is unacceptable in a supposedly democratic market-orientated economy.
If this is a blueprint for the kind of interventions the government envisages in terms of its new National Industrial Policy Framework, SA is in deep trouble. As pointed out by one of our regular columnists, Phil Alves of the South African Institute of International Affairs, on Page 6 of this issue, the industrial policy action plan seems to depend to an extent on strategic protectionism, and that is a path full of pitfalls.
Apart from international legal issues, protecting preferred parts of value chains demands an extraordinary ability to predict where growth will come from in future, which is not traditionally a forte of bureaucrats.
Far more sensible are the suggestions from Chamber of Mines chief economist Roger Baxter, who was interviewed for our Driving Exports series, which appears on Page 12 in this edition of The South African Exporter.
Reducing red tape and improving infrastructure is surely a better way to boost exports than protectionist meddling.
Dave Marrs is editor of The South African Exporter and Cape editor of Business Day.
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