1. Should the U.S. government make laws that favor some countries and impact the United States and other countries so dramatically?
2. Find another example of a U.S. law or trade agreement that encourages or discourages trade with foreign countries. Discuss the positive and negative consequences of the law.
The U.S. apparel industry is fiercely competitive, and marketers often need to keep prices low to survive. Many apparel manufacturers have shuttered their U.S. factories in favor of cheaper labor across the globe, and our government is encouraging this behavior. For example, the African Growth and Opportunity Act (AGOA) was signed into law in 2000 to foster economic growth in sub-Saharan Africa countries. Consequently, several clothing manufacturers have located in Africa to take advantage of the cheap labor and liberal U.S. market access to these countries.
The AGAO allows poorly developed African countries to export to the United States duty-free. There has been an unintended consequence, however, as more-developed African countries such as South Africa, which must pay regular duties to export to the United States, are seeing their textile industries suffer. One factor is rising labor costs-65 cents per hour in South Africa but only 19 cents in neighboring African countries such as Lesotho, Swaziland, and Mozambique. Another significant factor is the ability of these countries to export to the United States duty-free as allowed by the AGAO. As a result, the South African textile industry saw 52 factories closed in the first half of 2011 alone, 8,000 jobs lost, and a reduction of $1.5 billion in direct investment. Although regulations enacted in the United States are not completely responsible for this decline, critics argue that the AGOA plays a major role.