By Jacob Goldstein
The classic way for a country to work its way out of poverty is to build a textiles industry. And if you're a developing country today looking to get into the textiles business -- making pants, shirts, that kind of thing -- you have to have a trade deal with the U.S.
Adam Davidson and Chana Joffe-Walt have been reporting recently on the effort by Haitian businesspeople to land a better trade deal with the U.S. (They did a podcast on the subject last week, and they have a story airing today on All Things Considered.)
To understand just how important trade deals are, I wanted to see the cost of some basic article of clothing -- a pair of jeans, say -- made in different countries. I tracked down Kristie Tippner, a retail strategist at Kurt Salmon Associates, a company that helps retailers figure out this sort of thing.
She put together the table below. It breaks down all the costs of making, shipping and importing jeans from different countries to the U.S. (These are basic jeans that would retail for about $20 to $40.)
The bottom line there -- "Total Landed Cost" -- shows what a U.S. company would pay for the same pair of jeans made in different countries.
That bottom line is roughly the same for everybody -- just over $7.50.
But that's only because three of the countries (the ones that aren't China) have special, trade deals with the U.S. that make their imports duty-free. China, on the other hand, is getting hit with a 16% tariff. If these poor countries had to pay the same import tax, they wouldn't stand a chance against China. Their apparel industries would be crushed.
I also asked how much the costs would be for a pair of jeans made in the U.S. But Tippner told me you just wouldn't make these kind of basic jeans in the U.S., because the costs would be too high. She didn't want to put too fine a point on how expensive they'd be, but she said the costs would be at least double.
A few other details about the line items in the chart:
- Trim is things like buttons and zippers.
- Wash/Finish is what makes jeans look broken in.
- Labor includes not only wages, but also productivity. So wages in Haiti are lower than wages in China, but Haitian workers make fewer jeans per day. On balance, labor costs in both countries are the same.
- Overhead/Financing is a catch-all that refers to everything not captured in the other categories.
- Duty refers to the tariff. There are all kinds of specific rules for the tariff-free imports. Here are the relevant U.S. laws for imports from Lesotho, Haiti and Nicaragua.
- Total landed cost is the bottom line -- the total cost to a U.S. company to buy jeans made in a foreign country and imported to this country.
- One other thing: Tippener said that all these costs can vary for any number of reasons. The figures in the table are estimates, not absolutes.