Restricting Cotton Imports May Backfire.

50 years ago, Buffett bought a large textile enterprise in the US because of the extremely cheap price. How can we resist the competition of low cost emerging markets? American textile The textile industry is not immune to the declining industry. Buffett could not bring the company back to life. Finally, Buffett had to abandon investment in textiles and instead use cash flow to acquire shares in other private enterprises and listed companies. The name of the textile enterprise is Boxill Hathaway, the largest Invest-holding Company in the world today. The original textile industry has disappeared in this company, and its core business is insurance.

50 years later, the textile industry in the United States seems to have regained its advantages in cost and has successfully attracted investment from the global textile industry hegemony in China. According to reports, cotton textile leading enterprise Cole Zhejiang Group Co., Ltd. will open its first overseas factory in Lancaster County, South Carolina, with a total investment of US $218 million. The first phase of the project will start in February 2014 and is expected to be put into operation in October 2014.

The textile industry has always been regarded as a labor-intensive industry. When labor costs continue to rise, textile enterprises have the power to move factories to countries and regions where labor costs are lower. This has also led to the continuous shift of the global textile center: the United Kingdom after the industrial revolution, the United States, an emerging market country after World War II, China. Nowadays, as China's labor costs continue to rise, Chinese textile enterprises are increasingly in Vietnam, Kampuchea, Indonesia and so on. Southeast Asian countries Invest in factories.

It seems a bit puzzling for cotton mills to move to the us with higher labor costs. What advantages of the United States has attracted Zhejiang Cole? The answer is the price of cotton. It was the huge price gap between China and the United States that attracted Cole to build factories in the United States. Cole calculated the bill: in the newly established factory in the United States, the annual cotton consumption is about 150 thousand tons and employs 500 people. The domestic labor force costs about 50 thousand yuan per person per year, while the United States needs 200 thousand yuan, but the domestic labor cost is rising year by year, and the US level has been maintained for 20 years. Even if the trend of wage reduction between China and the United States is not considered, the current wage gap will cost Cole 75 million yuan a year. However, the average price of cotton in the United States is 5000 yuan / ton cheaper than that in the domestic market. In this case, cotton price is saved by 750 million yuan. American workers' wages doubled, too.

Someone may have doubts. American cotton Cheap and direct imports are the factories that are built at home, which can also make use of relatively cheap labor in China. But at present, cotton imports are restricted in China. When the price difference between inside and outside is large enough, capital can be used to directly run factories abroad and purchase locally. In fact, it is the same for developed countries to face the temptation of cheap labor abroad to invest abroad.

In order to protect the interests of cotton farmers and restrict the import of cotton, the result may not be beneficial to the domestic textile industry. This disadvantage is reflected in three aspects: first, the flow of capital from the textile industry to foreign countries; the other is that the textile enterprises staying at home can not compete with international rivals because of the high cost; another is that restricting the import of foreign cotton may lead to foreign trade retaliation. Cotton is the raw material of the textile industry. If cotton protectionism is not conducive to domestic textile industry, it will also greatly weaken the demand for domestic cotton. With the weakening of demand, the price of domestic cotton is hard to maintain, and the ultimate damage is the interests of cotton farmers.