The Virtuous Circle

Topic: BusinessInternational Marketing
Sample donated:
Last updated: March 31, 2019

This paper will focus on how the inputs and linkages between each key phase of the American t-shirt would change if produced in a true free trade market.

The value chain can be categorized into the following key phases: raw materials (Cotton Farmers), work-in-progress or WIP (Apparel Manufacturers), and finished goods (T-Shirt Retailers). These inputs and linkages between the key phases are woven around constantly changing social, political, and cultural contexts severely stifling any resemblance of a free trade market.The key inputs for raw materials are the Virtuous Circle.

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The Virtuous Circle consists of the cotton farmers, private agricultural companies, university researchers, and the U. S. government. The farmers both contribute to and benefit from the research that takes place in the universities and firms, while the USDA supports them both with farming, technical, and business assistance.

This circle has continuously fought to protect cotton farmers from the riskiest factors in producing cotton, such as the labor market.The private companies have developed technologies ranging from cotton field freezing chemical compounds to mechanical cotton strippers (work of 10 men in 1/2 a day) to the genetically modified (GM) cotton seed. Collectively, these innovations have reduced the need for seasonal labor and significantly increased the overall yield of cotton. The GM technology increased U. S. cotton farmers’ income approx. $1 billion.

In addition, further USDA research helped transform the cotton farmers’ waste products into revenue by recycling and/or reusing in items ranging from cattle feed to corn oil. After all this, the government subsidies kick-in.Based on the above factors, I believe that a free trade market for American t-shirts would not change the activities instituted by the Virtuous Circle as the technological advances minus the government subsidies would still generate enough profits to appropriate amongst the shareholders. Also, these technologies have been made available in other countries that have not realized similar success due to a lack of comparable stakeholders (i. e.

, financial leverage needed for the capital investments). The linkages from the raw material phase to the WIP phase primarily consists of the “Race to the Bottom”.The race to the bottom argued that the surplus of inexpensive labor in China threatened workers worldwide, as international competition applied downward pressure on wages and working conditions in other countries in order to be competitive. While the competitive market forces were strong, there were also opposing forces at work. These opposing forces of conscience, religion, and politics have been governments, labor unions, religious leaders, student activists, and the workers themselves. Together these forces have actually been cooperators and improved the human work condition at the bottom.

Based on the these factors, I believe that a free trade market for American t-shirts would not change the linkages from raw material to WIP by slowing down the race to the bottom. I say this because if we remove the 16. 5% apparel tariff for ALL importing countries (thus creating a free trade market), the pace of the race to the bottom would eventually be triggered by a country with the desire to capture more of the U. S. apparel market share. The primary way of capturing a greater share of the U. S.

market would be to become one of the lowest cost providers, thus beginning the race to the bottom once more.The positive effect of the race to the bottom is that it brings about wealth to citizens who in turn demand for environmental protection that results in more sustainably produced products. Note this is only true in a democratized environment. The linkages from WIP to the finished goods phase primarily consist of the U. S.

import process of quotas. In most global industries, the supply chain is designed to obtain the best products at the most competitive pricing. Due to political influence of the Virtuous Circle, several restrictions were placed on apparel imports and importing quotas were imposed on certain countries.As a result, foreign manufacturers had to offshore production to other low cost countries.

Based on these factors, I believe a free trade market for American t-shirts would change the linkages from WIP to finished goods by significantly shifting the current locations of apparel manufacturing and effectively removing U. S. market share from current countries that have access because of the Chinese restrictions.

The intent of these quotas was to preserve the U. S. apparel manufacturing industry, but the reality was that global technological innovations were reducing the jobs, not foreign imports.The positive side effect of the quotas was significant development in several low cost countries to due restriction on how much could be imported by the larger countries such as China. By establishing a free trade market and removing the quotas imposed on China, the low cost behemoth would drastically increase its market share of the U. S. apparel consumer market, force out countries that were only granted access due to the Chinese quotas, and significantly damage the unintentional American t-shirt free trade market created, excluding China.

In summary, I believe that the protectionism currently utilized by the U. S. apparel would have the following result if a free trade market for t-shirts were established: no significant changes would be realized in the inputs of raw materials and the linkages to WIP. Dynamic changes in the linkages to the finished goods phase would ultimately result in a more restricted trade market with fewer countries having access to the U. S. apparel market.

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