10/07/1998
The Wall Street Journal
Page A22
(Copyright (c) 1998, Dow Jones & Company, Inc.)

By Greg Rushford

HONG KONG -- Talk about hypocrisy. Top American trade officials have no qualms defending an elaborate system of protectionism that denies U.S. consumers free access to clothes made abroad. But when those same officials travel to the Orient, they fill their own wardrobes with inexpensive but well-tailored clothing.

The evidence of this double standard is on display in Sam's Tailor shop in Kowloon. Sam's does a booming business making shirts and suits for the rich and famous, among them Henry Kissinger, Donald Trump and Margaret Thatcher. Two names stand out among the slew of celebrities' business cards posted on the wall: Commerce Secretary William Daley and Donald Johnson, the Clinton administration's chief textile negotiator. Mr. Johnson splurged on a suit and two shirts last month; Mr. Daley says he bought three suits and eight shirts in October 1997, plus some more made by an unidentified Hong Kong tailor this July.

These officials see nothing wrong in buying the best possible clothes at low prices. But remember there is a quota on imported clothing which drives up the price of every suit on every rack in every clothing store in America. Mr. Daley's Commerce Department and Mr. Johnson's Office of the U.S. Trade Representative are the lead agencies administering these quotas.

"I don't have any embarrassment about that," Mr. Johnson told me. "I have never bought a tailored suit before; I just wanted to try one out." A Commerce Department spokeswoman says Mr. Daley's response was that he had "bought a heck of a lot more suits in America in my life than in Hong Kong."

I asked both men if they had paid U.S. Customs duties on their Hong Kong clothes, as required by law. Mr. Johnson quickly called to say that he had declared his purchases upon his return to the U.S., making sure he paid the duty. Mr. Daley, however, didn't respond for two weeks, even though I put the question in writing.

It turns out that the commerce secretary did not declare his purchases. Some of the shirts were mailed, and an aide carried some suits back through U.S. Customs for the busy secretary. Just an oversight, says Mr. Daley's spokeswoman, adding that her boss has written to customs officials asking that they now send him a bill for the duty. "The secretary thanks you for bringing this to his attention."

If my question seems rude, it's not so different from the one U.S. officials like Mr. Daley routinely ask everyone else who has the slightest connection to the rag business: Can you prove that those "Made in Hong Kong" garments were not smuggled in from mainland China? The U.S. grants Hong Kong and China separate quotas for imported clothing, and the burden for showing that all of Hong Kong's quota was in fact made here falls on the territory's Trade Department. I spent several days last month learning about all the hoops Hong Kong officials must jump through to convince U.S. officials that their clothes are "clean."

Some 600 out of the 800 Trade Department employees enforce a sophisticated textiles export control system. Last year, they issued 359,837 export licenses for clothing destined for the U.S. market. Between January and July of 1998, 218,988 more licenses were issued. There is an audit trail for every single item of clothing made here. Beyond that are other standard tools of bureaucracy to back up the auditors: targeted surveillance, watch lists and factory inspections. The government even has computers that compare each factory's production capacity with its reported performance records.

Three days before assembling a consignment of shirts, Hong Kong factory representatives submit a standardized production notification form to the Trade Department, whose investigators then have the right to swoop in and check that collars, cuffs, and such are actually being sewn onto the shirts in Hong Kong.

I visited one prominent Hong Kong factory, TAL Apparel Ltd., and saw women sewing collars on shirts. There were actually computers wired into the women's desks, logging in work hours. Harry Lee, TAL's managing director, explained that the computers enable him to show the government the work wasn't done in China. How burdensome is this? "Well, two months ago we had to go back to our warehouse and dig up the paper," Mr. Lee recalls with a grimace. The paperwork hassle, Mr. Lee added, "becomes a significant portion of our costs."

The hassle isn't over when those Hong Kong shirts are shipped to America. Just showing invoices to the U.S. Customs officials is not enough. Importers may have to produce further documentation to support claims of where the production occurred, including cutting and sewing records.

The U.S. textile lobby has plans to keep this elaborate system of trade protection going as long as possible. Although the quotas are supposed to expire in 2005, that probably won't be the end of Hong Kong's troubles. If China joins the World Trade Organization, the textile lobby wants China's quotas to extend for at least another 10 years. Until then, if you want inexpensive, finely tailored clothes, your best bet may be to secure a high-level position in the federal government.

TOP