Reference no: EM133128660
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In an earlier era (before my time, in case you're wondering), women wore camisoles and corsets instead of bras. Women who wore modern contrivances such as bras were considered feminists. Then, the feminist movement took a new turn in the 1960's;; the demonstrations against the Miss America beauty pageant showed braburning feminists. In the 1970's, feminists who lobbied for the Equal Rights Amendment (ERA) were described as "braless and brainless broads." Today, instead of being a symbol for or against feminism, the bra has become a part of the trade war between the U.S. and China. The world's textile industry has been in turmoil since Chinese exports surged into the U.S. and Europe after the lifting of the global import quota on January 1, 2005. After months of negotiations, China and the U.S. agreed to limit the growth of a broad range of textiles, including bras, flooding the U.S. market from 2005 to 2008. This accord follows a similar agreement with the European Union signed in June 2005. Critics consider these agreements illegal under the World Trade Organization (WTO) rules because they curb trade growth. These trade agreements worry Chinese exporters who fear that they will be forced to undercut each other on prices. Many are moving away from being low-cost producers to making high-end products. The Chinese bra exporters have long shifted to high-end products even before the lifting of the import quota in January 2005. These exporters invested in bra research centers and bra towns, where most businesses are exclusively devoted to bra production. Wholesalers of hook and eye, which is a two-piece component in bra production, have offices and factories in the bra towns. The creation of a degree course in bra studies started this year at Hong Kong's Polytechnic University. Chinese exporters have also invested in high-tech equipment for bra production.
The efforts of Chinese bra exporters have resulted in their growing reputation as sophisticated bra producers even before the lifting of the quota this year. They have produced for well-known labels such as Victoria's Secret, Playtex, Maidenform, Calvin Klein and Debenhams. From simple cut-and-sew bras, bra production is now a process that can be likened to car assembly. The improved production processes have eliminated the need for hand-sewing or using high temperatures to mold sheets of synthetic fibers into wafer-thin shells. This has led to the production of seamless molded bras, which has helped bra makers increase their average price from US$2.99 in 2002 to about US$3.10 today. The seamless bras are popular because they provide a smooth profile when worn under knit shirts. Other product innovations led to bras that provide extra cleavage and bras with reversible and changeable cups. From awful bras that looked like cones in the 1950's to the 1960's, there are now trendy sports bras, nursing bras, strapless bras, bridal bras, etc. The investments in research and innovation have helped Chinese bra exporters survive the trade restraints. Since 2002, U.S. imports of Chinese bras have been slapped twice with safeguard quotas. Despite these quotas, U.S.. imports of Chinese bras have doubled, especially as manufacturers took advantage of a window earlier in the year before the quotas were imposed. Notwithstanding trade woes, some Chinese exporters experienced growth in sales and profits. As one bra exporter said, "Times are hard but we can ride out this storm." There are lessons to be learned from this experience. Exporters should stay ahead of competition by shifting the premium products if cost competitiveness has stopped being a viable options. Research and product innovations are crucial, and are keys to surviving protectionism in the global marketplace. And from the marketer's viewpoint, lifting the body can be good for the soul.
Questions: Based on this article (own answer)
a.) What can an exporting company do when forced with import quotas?
b.) Why do trade liberals favor the use of tariffs instead of import quotas? Discuss briefly