The extraordinary myth about politicians’ trade restrictions

The extraordinary tizzy Brexit and Trump threw commentators into tell us more about commentators than about global politics.

But it casts light on the changes the global apparel has been through over the past eighteen months

In late September 2016, leaving the Sourcing Journal Summit in New York, I received a text from my wife and Clothesource co-owner Liz Leffman back in England’s Cotswolds. She’d just won the nomination to stand for Britain’s Parliament in the country’s first special election since voters called for Britain to leave the EU in the non-binding Brexit referendum three months earlier.

After flying straight home, I couldn’t even get from my car to our front door without being stopped by well-wishers telling me what we had to do to stop this Brexit nonsense. Our idyllic country cottage was already transformed into a maelstrom of earnest Remainers doing incomprehensible things to their tablets and iPhones.

Five weeks of life-changing chaos later she and five other anti-Brexit candidates together got  55% of the vote. But the only serious candidate supporting Brexit got just a bit more than Liz. In the UK as in the US, it’s winner take all, so he’s now my representative in Parliament.

We were both disappointed Liz didn’t make it to Parliament.

Apart from simple ambition, we both thought leaving the EU would be disastrous for Britain. But for our company, we thought leaving might offer both opportunities and threats.

  • The threat. Most Clothesource income comes from helping European retailers – especially in the UK – source from low-income countries in Europe. Brexit would create import barriers with the EU that seriously threatened that business.
  • The opportunity. We also make money through offering consultancy on apparel sourcing generally. Brexit and the rise of Donald Trump both promised massive changes to the barriers legally imposed on apparel importers.

Our consultancy revenue had soared in the years leading up to 2005, when quotas were taken off European and US imports from most of the developing world.  With Trump threatening even more extreme revolutions in America’s sourcing rules – especially with China and Mexico –  we expected a repeat.

A few days before Trump was inaugurated we got even more excited when Emmanuel Macron, the front-runner in the 2017 French Presidential election, promised anti-import laws in words almost identical to Trump’s inauguration speech.

How naive we were.

As we come to the end of 2017, it’s clear that Brexit, Macron and Trump are – as we put in so delicately in our native Liverpool – all mouth and trouser leg. And that the apparel industry, so desperate to be kept up to date on sourcing changes a decade ago, is completely uninterested in the issue now

With hindsight, there were clues a year ago about how insubstantial the politicians’ threats were, and how little they meant to our industry.

Both mistakes underline some fundamentals about our industry.

Baseless threats from politicians

Neither Trump nor Macron have done anything  significant to advance those threats:

  • Macron has done nothing at all, though he occasionally churns out the old rhetoric
  • The US has started renegotiating its NAFTA trade treaty with Mexico – but the negotiations centre on obscure issues few care about and even fewer understand. All light years from the nuclear destruction of trade links Trump promised.

China? Trump spends most of his life tweeting about what a great leader the country’s got

Brexit, though, threatened far more chaos for our trade than Trump or Macron were threatening:

  • Most UK garment retailers depend heavily on the easy availability of EU workers that Brexit would have banned. So does Britain’s small but now stable garment making industry.
  • Brexit would have imposed new import duties on the 20% of Britain’s clothing market imported from low-income European countries like Romania, Lithuania and Turkey . It would also have dramatically slowed Customs clearance for all clothing imports.

In early December, Britain’s Prime Minister, Theresa May, committed her government to forgetting all those new barriers for the foreseeable future “while still committed to leaving the EU”. There’s no date for leaving anymore.

Now before becoming Prime Minister in 2016, Mrs May had been responsible for immigration policy and policy enforcement for the previous seven years. Each years she’d promised to cut immigration the following year by 75% – and most years it’s actually increased. Everyone (including Mrs May) knows those promises were merely sops to the anti-immigration lobby. In politics, as in life, saying one thing but doing another is an essential survival weapon

Britain might still leave the EU. But not for years – and only after it’s ensured  trading relations with it will remain virtually unchanged from today.

Any changes will be in minor details. Britain’s now going to change the color of its passports for example: 30 years ago all EU members adopted a common Burgundy color in one of those nutty Euro-solidarity gestures that have been giving British tabloids something new to get outraged about ever since Britain joined the European Common Market in 1973.

Why do they make them?

The real irony in all of this, of course, is that Britain, the US and France developed all the mechanisms that make Western politicians’ promises pointless.

Between Britain’s Glorious Revolution of 1688, through American  independence and the 1789 French Revolution, the three countries separately established the common principle of representative democracy: virtually all laws are made, not by a monarch or opinion polls, but by elected legislators. Legislators can promise anything they like and voters can kick those legislators out if they lose patience with legislators. But voters can’t force legislators to vote for what legislators don’t want to vote for.

Yet every decade or so the three most experienced representative democracies on earth forget the fundamental principles they were founded on. Some populist obsession becomes fashionable, politicians promise to do something about it, and the media believes they’ll do what they said.

Even the most seasoned politicians forget: but voters rarely do. Throughout Liz’s campaign last year we were besieged by national leaders, convinced that our election was all about Brexit. Neither we amateurs nor our political betters noticed that none of the electorate wanted to talk about Brexit at all:  upgrading roads, making houses affordable and the appalling ignorance of Liz’s main opponent dominated our meetings and doorstep conversations.

Indeed, we reflected afterwards, Liz would probably have won if she’d avoided talking about Brexit.

Do businesses believe them?

Not really. Businesses realise that hundreds of commitments get made in the hurly-burly of elections: what matters are the debates in and out of legislatures  afterwards.  Once there’s a Congress or Parliament elected, businesses put their energy into lobbying members, rather than analysing ancient promises.

Does sourcing matter that much anyway?

Sort of.

Yes: in each of the developed world’s major economies – the US, Japan, Germany, UK, France and Italy – between 95% and 99% of clothing on sale is imported from somewhere else. That share hasn’t grown since about 2009 – but it hasn’t fallen significantly either: both conventional domestic manufacture and hi-tech robots have attracted immense publicity over the past decade, but have virtually no sales.

Supplying countries’ shares haven’t changed that much either: Vietnam and Bangladesh have taken a bit of share from China – but the much-vaunted great alternatives (Myanmar, Africa and Haiti) have made next to no impact in the last decade – and even their loudest boosters seem pretty restrained these days.

A year ago, a lot of lobbyists fussed over US membership of the Trans-Pacific Partnership (TPP): but all that was ever going to mean for the US apparel industry was cheaper access to Vietnam – and for many apparel categories not until about 2025 at the earliest.

Getting your supply chain right is still vital. But no-one in our industry seriously believes the US or EU – or the UK, in or out of the EU – is going to make serious changes to the legal framework governing supply chains.

And we knew all that a year ago too.  I’d been at the Sourcing Journal Summit to speak about Trump. TPP and Brexit – but all the attendees wanted to discuss  was a speech from SJ founder Ed Hertzman worrying about how the fizz had gone out of our industry.

Six weeks later, Ed and I met again at a conference in Amsterdam. Again, I was speaking about Trump, TPP and Brexit. This time, all the attendees wanted to talk about were the jeans makers in the parallel trade show and the fabric they were using. All Ed and I wanted to talk about was whether the jeans and fabric makers in the show would add much-needed fizz to our industry.

The Brexit/Macron/Trump blip’s distracted a lot of industry attention from the reasons the fizz has all gone – and the sooner we get back to serious debate about it the better.

Oddly, the answer was staring Ed and me in the face. But we’ll come back to that over the next few months

 

This is a demo store for testing purposes — no orders shall be fulfilled. Dismiss