A WORLD UNRAVELS Clothes Will Cost Less, but Some Nations Pay Consumers gain when textile quotas end and jobs move to China and India. Poor countries lose out. By Tyler Marshall, Evelyn Iritani and Marla Dickerson Times Staff Writers January 16, 2005 As a poor nation struggling to compete in an increasingly globalized economy, Cambodia has little to offer factory owner Leon Hsu. Electricity is erratic. Traffic along the road to the port of Sihanoukville includes the occasional elephant. If a truckload of men's shirts doesn't reach the port on time, it may be days before another vessel departs for Singapore, where goods are transferred to a larger ship for the voyage to the United States. None of that much mattered over the years, because international quotas guaranteed Cambodia the chance to sell clothing and textiles to retailers in rich, developed nations. Designed to protect manufacturers in North America and Europe from foreign competition, the import quotas ended up working as a global version of Head Start, an affirmative action program for countries that had large, unskilled workforces and not much else. The last provisions of the 30-year quota system disappeared at the beginning of the month, leaving Hsu few reasons to stay in Cambodia. Beckoning him are far more efficient venues — chief among them China — with modern factories, highways and ports, prolific workers and all the fabric, thread and buttons he could want. Miss a shipping date out of southern China, and another vessel is leaving soon, often within 24 hours. And it's a direct shot to Los Angeles or Rotterdam, Netherlands. "I'll be happy to go," Hsu said. When he does, he won't be alone. The end of the quotas has triggered what trade expertsbelieve could be one of the largest migrations of production in history, jeopardizing Cambodia's 220,000 apparel jobs. Hundreds of thousands more are threatened in Bangladesh, El Salvador, Lesotho and other countries that prospered under the quota system. The massive manufacturing shift will be a windfall for billions of people, bringing huge savings to consumers and accelerating the transfer of jobs to engines of low-cost production in China and India. But it could cripple economies across Latin America, Africa and Asia. Relative newcomers to the international commerce club risk losing their claim to an industry that lets them play in the big leagues. Millions of people whose jobs sewing knit shirts or jeans have meant schooling for their children or roofs over their heads could slide further into poverty. In Africa, where manufacturers supply employees with condoms and healthcare, the battle against AIDS could be weakened. Illegal immigration from Latin America to North America may rise. Efforts to improve the economic position of women in predominantly Muslim countries are threatened. The quota system "has been an extremely cost-effective method of bringing social and political stability to a very needy part of the world," said Peter Craig, a Washington-based trade commissioner for the Indian Ocean island nation of Mauritius, which has lost 20,000 apparel jobs since 2003. When the full effects of its end are felt, "it'll be horrendous." Already, the unleashing of free-market forces has begun to shake the foundation of a trading scheme that brought undreamed-of prosperity to millions and helped create the corporations that dominate international commerce. Now that the rules have changed, those corporations are likely to become even more powerful, and some of the poorest will see their short-lived gains slip away. "Very few people understand, or they're just starting to understand, what this means," said Mark Levinson, a U.S. apparel union economist who estimates that as much as $40 billion of production will be transferred to China from the developing world. "It's going to be chaos in the global economy." Advocates of free trade see it all very differently. They argue that the quotas' demise should be celebrated. In their view, governments no longer protected by quotas will be forced to get rid of the corruption and inefficiencies that, in fact, have held them back. "This isn't punishment for those countries" that are losing factories and jobs, said Dean Spinanger, a senior researcher at the Kiel Institute for World Economics in Germany and an expert on the quota system. Instead, "it will make them aware that they have to shape up."Supporters also point out that the full effect of the phaseout isn't likely to be felt immediately, because Washington has the right, under World Trade Organization rules, to reimpose restrictions on Beijing through 2008 if the United States is swamped with too many Chinese imports. China has responded to the global angst. Last month, officials in Beijing said they were going to try to control their growth by imposing a small tax on apparel and textile exports and monitoring their factories' output. For his part, David Spooner, the U.S. trade official in charge of textile policy, believes that the elimination of quotas will be far less disruptive than many predict. A small nation, he said, might be able to develop a niche market and flourish. In any event, he added, a lot of the anxiety is unnecessary, because not all the big buyers of cut-rate T-shirts and jeans will abandon their longtime suppliers and rush to China. Wal-Mart Stores Inc., for one, says it isn't planning any dramatic moves. But of course Wal-Mart already is the leading U.S. importer of goods from China; it's expected to bring in $18 billion of goods this year. Spokesman William Wertz said the company expect to remain a major player in other countries such as Bangladesh, at least "until we see how things sort out." The chief purchasing executive for J.C. Penney Co., Peter McGrath, said he couldn't imagine the giant retailer's supplier base falling below a dozen countries, in large part because it doesn't want to be too dependent on any one region. On the other hand, J.C. Penney has in the last three years slimmed down its supply network from 5,000 manufacturing plants in 51 countries to about 1,800 in 23, which McGrath reckons will reduce import costs as much as 18%. J.C. Penney's purchasing freedom had been curbed by a 1974 trade pact called the Multifiber Arrangement, or MFA. Its members — the United States, Canada and 13 countries in Europe — used quotas to regulate access to their clothing and textile markets. The quota system was a