Travels of a T-Shirt
What Would Happen if the New T-shirt Market Operated as a Free Market?
The producers in the new T-shirt value chain do not operate in a free market system. Government protectionist measures such as subsidies, quotas, and tariffs have limited economic success to a fortunate few. According to the author Pietra Rivoli, “the winners at various stages of my T-shirt’s life are adept not so much at competing in markets but at avoiding them.” These winners include the U.S. cotton farmer and the China apparel industry. Their market dominance and profitability have benefitted significantly from the political prowess of their government to limit competition.
If government intervention was removed from all segments of the new T-shirt value chain, the current leading producers would gradually lose their dominance as global competition intensifies. The race to the bottom would occur more quickly as more poor countries compete to become the producer of the cheapest cotton and T-shirts. As garment manufacturing develops in their country, industrialization would occur which would cause their standard of living to increase.
Although competition would intensify in the free market system, it is doubtful that the current top producers (U.S. cotton farmer, China apparel manufacturer) will lose their position in the near future. If the U.S. government removes the direct subsidies to the American cotton farmer, the world market price for cotton would increase by 3% to 15% and weaken U.S. cotton exports. American farmers would not be able to compete on price with farmers outside the U.S. such as those in China, India, Pakistan, or Africa because of their low priced or free family labor. T-shirt manufactures seeking to lower their cost and improve their margins will buy cotton from the cheapest providers. As a result, U.S. farmers will see a decline in their cotton production profits while farmers in emerging and developed nations will see an increase in their income. Over
The producers in the new T-shirt value chain do not operate in a free market system. Government protectionist measures such as subsidies, quotas, and tariffs have limited economic success to a fortunate few. According to the author Pietra Rivoli, “the winners at various stages of my T-shirt’s life are adept not so much at competing in markets but at avoiding them.” These winners include the U.S. cotton farmer and the China apparel industry. Their market dominance and profitability have benefitted significantly from the political prowess of their government to limit competition.
If government intervention was removed from all segments of the new T-shirt value chain, the current leading producers would gradually lose their dominance as global competition intensifies. The race to the bottom would occur more quickly as more poor countries compete to become the producer of the cheapest cotton and T-shirts. As garment manufacturing develops in their country, industrialization would occur which would cause their standard of living to increase.
Although competition would intensify in the free market system, it is doubtful that the current top producers (U.S. cotton farmer, China apparel manufacturer) will lose their position in the near future. If the U.S. government removes the direct subsidies to the American cotton farmer, the world market price for cotton would increase by 3% to 15% and weaken U.S. cotton exports. American farmers would not be able to compete on price with farmers outside the U.S. such as those in China, India, Pakistan, or Africa because of their low priced or free family labor. T-shirt manufactures seeking to lower their cost and improve their margins will buy cotton from the cheapest providers. As a result, U.S. farmers will see a decline in their cotton production profits while farmers in emerging and developed nations will see an increase in their income. Over