Casualties of the Trade Wars

If you think fashion is unpredictable, try world trade. 1)___. Last year she did 60% of her $2.5 million annual sales in the United Stated, but this year is starting differently. 2)____. «We’re low on work at the moment», she says, because the mere threat of US trade sanctions has put American buyers in wait-and-see mode.
3)___. Officials fear the loss there of as many as 700 further jobs.

Hawick’s fate is tied, bizarrely, to bananas. Because the US believes EU trade policy unfairly favors crops from ex-colonies in the Caribbean and Africa over those owned by US firms like Chiquita and Dole, it threatens more than $500 million in «cross-sanctions» against unrelated European exports from almost 20 product categories like plastics, sweet biscuits – and cashmere.

Washington won’t introduce the 100% punitive tariffs until March at the earliest, depending on the outcome of negotiations at the World Trade Organization in Geneva. But the threat alone is enough to damage Hawick’s cashmere industry. Clan Douglas Ltd., for instance, landed a $1.65 million order from an American department store just before Christmas. That price included normal duties of $100,000, but if the sanctions kick in they will rise to almost $800,000. «Our commitment to our contract could force us into bankruptcy», says finance director Jeff Gutteridge.

There’s no American cashmere to fill the gap. Top-grade weaves come from Scotland and from Northern Italy, whose industry faces the same US sanctions; next in line is China with whom the US already has an immense trade deficit. «If this goes through,» says Gutteridge, «the Americans will be handing over our business to China and destroying the economic base of this town.»

Little wonder that the weavers of Hawick, like Belgian biscuit makers and German plastics manufacturers, hope sanctions can be avoided. But with serious issues of procedure and precedent on the line at WTO for both Washington and Brussels, negotiators were pessimistic on prospects of a compromise. In trade as in fashion, reason isn’t necessarily the highest good.

By James L Graff/Brussels

Time magazine (adapted)