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Industry, the state, and the new protectionism: textiles in Canada and France

  • Rianne Mahon (a1) and Lynn Krieger Mytelka (a1)

Abstract

In this article we address two questions pertinent to the debate on the relationship between industrial restructuring and the new protectionism. First, does the appearance of industry-specific trade barriers necessarily indicate an attempt to preserve those traditional sectors in which advanced capitalist states no longer enjoy a comparative advantage? Second, are all advanced capitalist states equally susceptible to protectionist pressures or will neomercantilist states, given their established capacity for sectoral intervention, find such pressures easier to resist than their liberal counterparts? After analyzing recent changes in textile technology and in the pattern of international competition in the textile industry, we examine the response of two states—the relatively liberal Canadian state and the neomercantilist French state—to this complex set of changes. The textile case indicates that it is a mistake to assume that states have but two options: protect or adjust. Links may be established between hightechnology and traditional industries that make it possible for inputs from the former to restore the competitive position of the latter. If such links are forged, then states may use trade barriers to allow producers time to adjust. French and Canadian textile policies reveal the conditions under which such states, although constrained by established policy networks, are nevertheless induced to respond in similar fashions to contemporary changes in the world economy.

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The support of the German Marshall Fund and the Social Sciences and Humanities Research Council of Canada in the preparation of this study is gratefully acknowledged.

1. Overproduction and underconsumption have long been seen as critical elements in recurrent crises within capitalism. Recently Susan Strange has reintroduced the notion of surplus capacity into debates over industrial restructuring on a world scale. See Strange, and Tooze, R., eds., The International Politics of Surplus Capacity: Competition for Market Shares in the World Recession (London: Allen & Unwin, 1981).

2. The “new” protectionism is, of course, hardly new. But in its most recent form it is distinguished from traditional tariff barriers in its emphasis on quantitative trade restrictions. In terms of optimal resource allocation such restrictions are regarded in the economic literature as far more negative than across-the-board tariffs. See, for example, Balassa, Bela, “The New Protectionism: Evaluation and Proposals for Reform,” in Amacher, R. C., Haberler, G., and Willett, T., eds., Challenges to a Liberal International Economic Order (Washington, D.C.: American Enterprise Institute, 1980), pp. 279302; Blackhurst, R., Marian, N., and Tumlir, J., “Trade Liberalization, Protectionism and Interdependence,” GATT Studies in International Trade no. 5 (1977), and “Adjustment, Trade and Growth in Developed and Developing Countries,” ibid, no. 6 (1978); Nelson, Douglas R., “The Political Structure of the New Protectionism,” World Bank Staff Working Paper no. 471 (07 1981); and Yoffie, David B., “The Newly Industrializing Countries and the Political Economy of Protectionism,” International Studies Quarterly 25 (12 1981), pp. 569–99.

3. On the GATT see Finlayson, Jock A. and Zacher, Mark W., “The GATT and the Regulation of Trade Barriers: Regime Dynamics and Functions,” International Organization 35 (Autumn 1981), pp. 561602.

4. Helleiner, G. K., Intra-Firm Trade and the Developing Countries (London: Macmillan, 1981); Sharpston, Michael, “International Subcontracting,” World Development no. 4 (04 1976), pp. 330–37; in the case of West German subcontracting to nonaffiliates in Eastern Europe, see Fröbel, Folker, Heinrichs, Jurgen, and Kreye, Otto, The New International Division of Labour (Cambridge: Cambridge University Press, 1980).

5. Mytelka, Lynn K., “The Lomé Convention and a New International Division of Labour,” Journal of European Integration 1 (09 1977), pp. 6376; Mytelka, and Dolan, Michael, “The Political Economy of EEC-ACP Relations in a Changing International Division of Labour,” in Vaitsos, C. and Seers, D., eds., European Integration and Unequal Development (London: Macmillan, 1980), pp. 237–60.

6. Adam, Gyorgy, “Multinational Corporations and Worldwide Sourcing,” in Radice, H., ed., International Firms and Modern Imperialism (Harmondsworth: Penguin, 1975), pp. 107–34; Fröbel, Folker, Heinrichs, Jurgen, and Kreye, Otto, “The World Market for Labor and the World Market for Industrial Sites,” Journal of Economic Issues (12 1978), pp. 843–58; Helleiner, G. K., “Transnational Enterprises and the New Political Economy of U.S. Trade Policy,” Oxford Economic Papers 29 (1977); Lipson, Charles, “Transformation of World Trade: The Role of Inter-State and Market Structures,” paper presented at the annual meeting of the American Political Science Association, 1980; Strange, Susan, “The Management of Surplus Capacity: or How Does Theory Stand up to Protectionism 1970s Style?International Organization 33 (Summer 1979), pp. 303–34.

7. Zysman, J., Political Strategies for Industrial Order: State, Market and Industry in France (Berkeley: University of California Press, 1977).

8. This prescription ignores the competition among advanced capitalist economies in hightechnology sectors–a competition in which those less well placed to win may be tempted to resort to various forms of nontariff protection. See Lazar, F., The New Protectionism: Non-Tariff Barriers and Their Effects on Canada (Ottawa: Canadian Institute for Economic Policy, 1981).

9. Strange, , “Management of Surplus Capacity,” p. 328.

10. Helleiner, , “Transnational Enterprises,” and “The New Industrial Protectionism and the Developing Countries,” Trade and Development no. 1 (Spring 1979).

11. Katzenstein, Peter J., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States, special issue of International Organization 31 (Autumn 1977), Introduction and Conclusion.

12. Ibid., pp. 306, 308.

13. Ibid., p. 33.

14. Hobsbawm, E. J., Industry and Empire (Harmondsworth: Pelican, 1968); Landes, David, The Unbound Prometheus: Technological Change and Industrial Development in Europe from 1760 to the Present (Cambridge: Cambridge University Press, 1969); and Maizels, Alfred, Industrial Growth and World Trade (Cambridge: Cambridge University Press, 1963).

15. Woolcock, Stephen, “Textiles and Clothing,” in Turner, Louis and McMullen, Neil, The Newly Industrializing Countries: Trade and Adjustment (London: Allen & Unwin, 1982), p. 32.

16. The European Community and the Textile Arrangements (Brussels: Commission of the European Communities, 1979), p. 2; see also UNCTAD, Fibres and Textiles: Dimensions of Corporate Marketing Structures, Doc. no. TD/B/C.1/219 (19 November 1980).

17. Woolcock, , “Textiles and Clothing,“ p. 33.

18. Barron, Ian and Curnow, Ray, The Future with Microelectronics (London: Frances Pinter, 1979); Forester, T., ed., The Microelectronic Revolution (Oxford: Basil Blackwell, 1980); Hoffman, Kurt, Microelectronics and Garments: Impact of Technical Change on the Global Industry (Geneva: ILO, 1982).

19. Catling, H. and Rothwell, R., “Automation in Textile Machinery,” Research Policy no. 6 (1977), pp. 164–76.

20. Leeds (U.K.) Trade Union and Community Resource and Information Centre, TUCRIC Bulletin, 1980.

21. Kanemoto, Y., Industrial Robots in Japan (Tokyo: 1979), p. 13.

22. Rothwell, R. and Zegveld, W., Technical Change and Employment (London: Frances Pinter, 1979), p. 56.

23. Bergom-Larsson, Maria, “Women and Technology in the Industrialized Countries,” UNITAR Science and Technology Working Paper Series no. 8 (1979), p. 29.

24. The Liberal Party has been the dominant party at the federal level since the mid 1930s. The Progressive Conservative Party was only able to form the government twice: 1957–1963 and 1979–1980.

25. This is not, of course, uncontentious. Some like James Laxer have argued that, since the war, American capital has been the dominant force in Canada: Laxer, , Canada's Energy Crisis (Toronto: James Lorimer, 1975). Wallace Clement has demonstrated, however, that indigenous capital based in financial institutions has remained at the center of Canada's “corporate elite” although it has established a partnership, asymmetrical in structure, with American capital: Clement, , Canada's Corporate Elite (Toronto: McClelland & Stewart, 1975), and Continental Corporate Power (Toronto: McClelland & Stewart, 1977). The position we take is closest to that of Mel Watkins who, while accepting Clement's point, argues that the development strategy pursued in the postwar period has reflected a strategic alliance between Canadian financial interests and resource-based companies, foreign and national; Watkins, , “The State in a Staples Economy,” notes for a conference on the American Empire and Dependent States, University of Toronto, 18–19 11 1977. More recently a number of authors have suggested that the active role being played by certain provincial governments reflects a challenge to these central Canadian interests by regional fractions: see Pratt, L. R., “The State and Province Building: Alberta's Development Strategy,” in Panitch, Leo, ed., The Canadian State (Toronto: University of Toronto Press, 1977), and Foumier, Pierre, “The Parameters of the Quebec Bourgeoisie,” Studies in Political Economy no. 3 (Spring 1980).

26. See Wolfe, D., “The Delicate Balance” (Ph.D. diss., University of Toronto, 1980), chap. 6.

27. Stevenson, G., “Federalism and the Political Economy of the Canadian State,” in Panitch, , The Canadian State, pp. 71100.

28. Eighteen VERs were negotiated between 1961 and 1970, of which 7 were limited to a single product. In contrast, the United States by 1980 had VERs with over 20 countries and many of these covered all fibers with several hundred product distinctions. See Yoffie, “Newly Industrializing Countries,” note 2.

29. With the exception of the manmade fiber division, neither industry had been significantly affected by Canada's open-door policy on foreign investment. Until the 1970s, Celanese and DuPont were the two largest subsidiaries of foreign-based transnationals in Canada although Courtaulds of the U.K. also had facilities for producing cellulosic fibers in Canada. It should be noted, however, that the Canadian branch plants were not export-oriented; like their domestic competitors, they looked primarily to the Canadian market.

30. These were the Amalgamated Clothing and Textile Union, whose membership was 29,291 in 1977; the United Textile Workers of America, with 6, 771 workers; and the textile and clothing affiliates of the Québec Conféderation des Syndicate Démocratiques, which had 15,007 members.

31. Pestieau, Caroline, The Canadian Textile Policy: A Sectoral Trade Adjustment Strategy? (Montreal: C. D. Howe Research Institute, 1976), pp. 1415.

32. See, for instance, Biggs, Margaret, The Challenge: Adjust or Protect (Ottawa: North-South Institute, 1980). Neither Biggs nor other liberal critics of the policy have bothered to examine the possibility of protection while adjustment occurs.

33. The Canadian textile industry is vertically integrated and, in most divisions, highly concentrated. Dom Tex dominates cotton and cotton-blend production; Celanese and DuPont account for the lion's share of manmade fiber production. Five firms, including Celanese, account for over 90% of manmade fabric production and three firms account for 75% of domestic worsted fabric production. The knitting and hosiery divisions, however, are more akin to the highly fragmented clothing industry.

34. The pressure from import competition, which affected textiles in 1974, came mainly from other advanced capitalist economies, notably the United States, which continue to dominate the world textile trade. The surge of low-wage imports was most pronounced in clothing but this did not affect the Canadian market until late in 1975.

35. A more cohesive and powerful labor movement may well have permitted a more forceful articulation of labor's own interests and led to the adoption of more effective labor adjustment measures, as the Dutch case suggests. See Langdon, Steven, “Industrial Restructuring in the Dutch Textile Industry,” paper presented to the European Politics Group conference, Canadian Political Science Association, Ottawa, 12 1981.

36. In the late 1970s Consolidated Textiles took over the other major medium-sized firm, Bruck Mills, which had been operating in the red throughout the decade. Brack was initially acquired by Japanese interests, just after the 1971 policy came into effect, who thought that the policy would operate in a more protectionist manner. Its acquisition should thus be seen as an attempt to jump the “nontariff” wall. ConsolTex and Carrington Viyella had a clearer understanding of the intent of the new policy from the beginning.

37. Peter Clark, who, as a former senior Finance Department official, had been one of the Canadian negotiators of the original multifiber arrangement.

38. Textile and Clothing Board, Annual Report, 1981, p. 73.

39. The new board has been in operation for just over a year as we write; therefore it is too early to assess its effectiveness. However, a report in the Ottawa Citizen (19 October 1982) suggests that the depth of the domestic recession is pushing a growing number of clothing manufacturers to look to mergers and new techniques as a means of survival and the CIRB has the instruments to assist them.

40. Capronnier, François, La Crise de I'Industrie Cotonnière Française (Paris: Génin, 1969), and Sheahan, John, Promotion and Control of Industry in Postwar France (Cambridge: Harvard University Press, 1963).

41. See Mytelka, Lynn K., “The French Textile Industry: Crisis and Adjustment,” in Jacobson, H. K. and Sidjanski, D., eds., The Emerging International Economic Order: Dynamics, Constraints and Possibilities (Beverley Hills, Calif.: Sage, 1982), for further details.

42. Preferential treatment in the colonies and later the former colonies was pursued throughout the 1960s and 1970s through the Yaoundé and Lomé Conventions; see Mytelka and Dolan, “Political Economy of EC-ACP Relations.”

43. Workers were put on short hours at reduced pay rather than into retraining programs for transfer to higher skilled jobs in other industries. This induced workers to remain in the textile industry when economic conditions would have facilitated mobility. For a more detailed discussion of “chômage partiel” see Mytelka, “The French Textile Industry.”

44. Cohen, Stephen, Modern Capitalist Planning: The French Model (Cambridge: Harvard University Press, 1969); Guibert, Bernard et al. , La Mutation industrielle de la France du Traité de Rome à la crise pétroliére, 2 vols. (Paris: Collections de l''INSEE nos. 31–32E, 1975); Morvan, Yves, La Concentration de I'industrie en France (Paris: Armand Colin, 1972); and Shonfield, Andrew, Modern Capitalism (London: Oxford University Press, 1965).

45. France, Ministère du Développement Industriel et Scientifique, Service Central de la Statistique et des Informations Industrielles, Les Structures industrielles françaises, 1970, Textile Bonneterie (Paris, 1970), table 11, p. 11 and p. 54.

46. By running down their machinery and making no allocations for depreciation, and by undertaking no reinvestment, these firms were able to sell below their rivals and were accused of selling at or below cost. See also note 48 below.

47. This should not be confused with “efficiently.” See Mytelka, Lynn K., “Direct Foreign Investment and Technological Choice in the Ivorian Textile and Wood Industries,” Vierteljahresberichte no. 83 (03 1981), pp. 6181.

48. Many of the larger firms accused small, marginal companies of exacerbating the effects of international pressures by the “irrational and abnormal competition… of marginal firms which use outdated, largely amortized machinery in their effort to survive.” Dollfus-Mieg & Cie., Annual Report, 1968, pp. 5–6; our translation.

49. Interviews with officials at Agache Willot, Lille: 22 November 1978, and at Dollfus-Mieg, Paris: 28 November and 5 and 18 December 1978.

50. For more details on this period see Mytelka, Lynn K., “In Search of a Partner: The State and the Textile Industry in France,” in Cohen, Stephen and Gourevitch, Peter, eds., France in a Troubled World Economy (London: Butterworth, 1982), pp. 132–50.

51. Union des Industries Textiles, L'Industrie Textile Française, Données 1979 (Paris, 1979), p. 9.

52. Unemployment in the textile industry rose from an average of 15,347 persons unemployed per year during the years 1958–74 to 27,813 in 1975, 29,394 in 1976, and 35,195 in 1977: ILO, Yearbook of Labour Statistics (Geneva, 1978), pp. 305–9. In addition a large number of workers were on short hours.

53. Job security provisions enacted since 1968, they argued, made layoffs and firings so difficult that modernization was not possible. Similarly, modernization implied the use of highly automated textile equipment, which must run 24 hours a day, seven days a week to be amortized. This means four or five shifts and again social legislation stood in the way as women, who constitute more than 50% of the labor force in textiles, are prohibited from working the night shift.

54. France, , Projet de Loi Portant Reglement Définitifdu Budget de 1975, Annexe, , Rapport au Parlement sur les fonds publics attribués à titre d'aides aux entreprises industrielles (Paris: Imprimerie Nationale, 1977), and subsequent years–Budget de 1976, Budget de 1977, and Budget de 1978.

55. For an analysis of the distribution of loans by firm size see Mytelka, “The French Textile Industry.”

56. FSAI, Bilan de l'Action du fonds special d'adaptation industrielle au cours de l'Année 1979 (Paris: Ministère de l'Economie et du Finance, 1980), Annex I.

57. Ibid., p. 3.

58. Interview with M. Crinetz, Ministère de Finance, Paris: June 1980.

59. CIDISE, Bilan de l'Action du C.I.D.I.S.E. au course de l'Année 1979 (Paris: Ministere de l'Economie et du Finance, n.d.), p. 2, and Bilan de l'Action du C.I.D.I.S.E. au cours du ler Trimestre 1980 (Paris: Ministère de l'Economie et du Finance, n.d.), p. 3.

60. Interview with M. Delerive, Director of CIRIT, Paris: June 1980.

61. Ibid.; and interview with M. Bonnaillé, Syndicat Général de l'Industrie Cotonnière Française, Paris: June 1980.

62. France, Projet de Loi… Budget de 1978, p. 50.

63. See S. Cohen and C. Goldfinger's critique of the pluralist-incrementalist model, which focuses on changes in the French social security system “required” by the liberalization of the French economy: Cohen, and Goldfinger, , “From Permacrises to Real Crisis in French Social Security,” in Lindberg, L. N., Alford, R., Crouch, C., and Offe, C., Stress and Contradiction in Modern Capitalism (Lexington, Mass.: Lexington Books, 1975).

64. See Martin, Andrew, “The Dynamics of Change in the Keynesian Political Economy,” in Crouch, Colin, ed., State and Economy in Contemporary Capitalism (London: Croom Helm, 1979).

65. See Hobsbawm, Eric, “The State of the Left in Western Europe,” Marxism Today 26:10 (1982), for an interesting discussion of the difference between traditional and “neosocialist” parties.

Industry, the state, and the new protectionism: textiles in Canada and France

  • Rianne Mahon (a1) and Lynn Krieger Mytelka (a1)

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