QUOTA NIGHTMARE

QUOTA NIGHTMARE

The inefficiencies produced by the quota system on imports of textiles and apparel can be staggering. For example, Paul Davril Inc., a Los Angeles importer, has stockpiled more than 14,000 items of men's clothing for the fall fashion season just because it wants to avoid finding itself shorthanded if the quotas for Chinese-made shirts and pants suddenly fill up, according to a front-page story in this newspaper on July 12.

Besides the capital tied up in inventory, Paul Davril - and hundreds of other importers like it - also has to pay for warehousing and insurance. And if they're rushing to beat quotas, they may have to pay the additional cost of air freight.What's especially unpredictable is whether the quota from a particular nation for a specific type of garment will suddenly be filled by mid-year. That may explain in part why ships and planes from Asia have been so filled with cargo almost from the beginning of the year, well before the start of the peak season.

Fortunately, this system is due to be phased out in 2005 when the multilateral Agreement on Textiles and Clothing expires. Protectionists will undoubtedly wage a fierce battle to extend the quotas. To combat the emotion-charged arguments in favor of protecting jobs of domestic textile workers, free traders will have to muster extensive economic data on the costs of protectionism. One place to start would be by citing Paul Davril's inventory and warehousing costs.