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USED-CLOTHES TRADE (Rick Wicks, Sweden)
We have just completed a study for Sida (the Swedish International
Development Cooperation Agency -- Swedish foreign aid) on the economic
effects of commercial and charitable exports of used clothes to
less-developed countries, with particular focus on the question whether
charitable exports should continue to be subsidized by Sida (and under what
circumstances, if so).
Here is a summary of the report:
The report includes a variety of statistics on the used-clothes trade in
general (for instance, the 127 gross used-clothes exporters in 1990, and the
181 gross used-clothes importers, with values, weights, average prices, and
weights per capita), as well as some specifics of U.S. and Swedish imports
and exports. There is also discussion of images of the used-clothes trade in
labor and popular media, trends in national trade policies and practices,
NGO attitudes and involvement, as well as a brief exploration of some
similar issues with food aid, and some excerpts regarding the used-clothes
trade in 18th century Britain.
To summarize the report, both theoretical analysis and empirical evidence
are unclear as to the actual effects of commercial used clothes imports in
developing countries, which generate a lot of employment and income while
providing consumers with cheap but usable goods, although they can reduce
domestic production, particularly if domestic industry is not exporting, and
if factor markets are not functioning well (so that there is significant
unemployment, and reallocation of labor and capital are difficult). If there
are positive externalities of textile or clothing production in developing
economies, such damage could be compounded. On the other hand, there may be
distributional advantages in used-clothes trade and consumption, since the
poor seem to benefit on both the supply and the demand sides.
If there is net damage from used-clothes imports, then subsidies which
increased the damage would obviously not be good, and probably constitute
illegal dumping besides. However, this problem could be avoided if subsidies
targeted those "too poor to enter the market". But such targeting is very
difficult to do (NGOs may not be as good at it as they are sometimes thought
to be), it's expensive, and it often seems to increase opportunities for
corruption and other forms of abuse. Besides, anecdotal evidence suggests
that much of the used-clothes so distributed would end up on the market
again anyway, thus defeating the point of the targeting.
Given all the uncertainties above, we cannot answer whether subsidizing used
clothes exports is good or bad based only on the direct effects, but rather
we have to look at the alternative costs. The simplest answer is not
necessarily the best: Just because we have used clothes and possible subsidy
funds, it's not necessarily the best idea to use the funds to send the
clothes to poor people.
Given that there are thriving used clothes markets worldwide and in most
less developed countries, there is no need for subsidies to make them
available to the public, and on the other hand, they can readily be
converted into cash through the commercial network, so there is no need for
subsidies simply to get them used. Poor people who need clothes need many
things. The most useful thing for them would be cash, or income-generating
projects, so that they can decide for themselves what they want to buy. Used
clothes can be sold and the proceeds used, along with erstwhile subsidies,
for such projects. Thus, greater benefits are possible for poor people with
a more imaginative approach.
A possible exception would be if supply has broken down due to some
catastrophe, and clothing is simply not available in the market. In that
case, relief agencies would have to make a determination whether used
clothes were the most available and most effective form of clothing
assistance, and if so, subsidized deliveries could be warranted. NGOs seem
increasingly skeptical of using used clothes in this manner, however.
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