Basketball footwear a sizeable challenge

After every basketball season wraps up, Randy Nills, president of Nills Brothers Sporting Goods in Kansas City, thinks about getting out of the basketball shoe category. And he’s certainly not alone.

“It’s a nightmare,” says Ron Blacker, president of Gulf Coast Athletic Supply in Sugar Land, TX. “Selling basketball shoes to schools is the biggest headache, because whenever you’re dealing with name brand shoes, getting exchanges is difficult. Getting kids sized up right is always a challenge. And then you have bad years when some of them blow up and tear up, and trying to find a replacement in season is another problem.”

In fact, many dealers no longer bother with the category. Others are getting out of it.

“Nike was always banging us for more and more, the kids were going to Eastbay and getting their number and name embroidered on the shoe, and coaches didn’t want to deal with collecting the money,” lamented one dealer who recently stopped selling basketball footwear and declined to be identified. “You’d book a couple hundred pairs of new balance walking shoes for plantar fasciitis and then try to go back to look for a size 10 and Nike wouldn’t have any. In the team business, if you can’t come up with two pairs of shoes, you might as well not sell them. It’s not like a retailer where if you run out of a couple of sizes–you cannot sell them. Coming up with 13 out of 15 pairs for a team really doesn’t do you any good.”

Despite the challenges, many dealers continue to see a benefit to selling basketball shoes. It can be a particularly lucrative category and a strong motivator for a team roadman. According to several dealers, if you don’t sell basketball shoes, you’ll likely miss sales in other basketball categories. In particular, taking care of all basketball needs keeps upstart team competitors away as well as sales from going to big-box stores.

“I’ll do anything to keep my competitors away from my customers,” says Nills.

But Nills, like others, also admits that there’s money to be made in basketball footwear, “After totaling up all the sales and chasing down all those RMAs (return merchandise authorizations), we do pretty well. But I still don’t know if it’s worth it.”

Indeed, the challenges in selling basketball shoes begins well before the season, as catalogs from vendors start arriving in March and dealers have to decide what will be the hottest shoe for the upcoming season that is still months away. More so than all other team categories, basketball footwear is said to the most fashion-driven. The risk for fashion surprise is compounded by the fact that team captains and players are frequently the ones picking the extra wide womens shoes for bunions . These 17-to-19 year-olds tend to look for a shoe that closely embodies what their favorite NBA stars are wearing, but generally tend to be highly unpredictable overall at that age.

“Baseball and football are very traditional,” notes Mark Steele, a sales rep for Grogan-Marciano Sporting Goods in Mansfield, MA. “What they’re doing today still closely matches the styles of the seventies and it’s all black or white. But in basketball, it is style and it’s difficult to stock purple or orange. You can’t do a rainbow of colors.”

And the fashion side of basketball isn’t exactly on fire.

“Basketball as a fashion category continues to wither,” says Matt Powell, senior retail analyst at The SportsOneSource Group. “If it does not have Jordan on it, the fashion customer is taking a pass. We estimate the team basketball market in the U.S. to be about $400 million at retail. Under Armour will likely enter the category in 2010, having even more brands chasing a shrinking market.”

For dealers, it’s particularly hard to predict the next hot style given the time lag. Although a few schools are able to order basketball shoes before the dealer has to place the order to the vendor, many wait as late as six weeks to a month before the season begins. That leads to a lot of speculation in figuring out the models that might be in demand.

“They change the styles every year, so if you miss-shoot or you over-order, you’re going to take it in the shorts and you’re going to end up selling far too few,” says Todd Dunaway, VP at Sport & Cycle in Fortuna, CA. “But that’s just part of the shoe game.”

Dealers also have to acknowledge that in nearly all places, the players (or parents) are buying the shoes. Although some schools can afford the over $100 model, most dealers try to make most orders at a more affordable price – between $65 and $75.

“Half of the kids can afford the $110 shoe and half of them can’t,” says Mick Montgomery, president at Denver Athletic. “You have to get one that’s going to appease all of them.”

The next chore involves sizing all the players. One particular challenge here is girls, who, as a group, tend to claim their feet are smaller than they actually are. The dealers then have to scramble to find fillins for any sizes missing in stock, hopefully quickly through the vendor. Given the economy, however, school orders are being placed later and later, often a week or two before the season starts.

After the season starts, the returns start coming in. Much more so than baseball and football cleats, basketball shoe “blowouts” are fairly common. Signs of a defective model typically show up when college players start hitting the court in September. For dealers, this means not only replacing the shoes, but collecting all of the defective models in order to be properly credited for returns. In season, dealers also spend a great deal of time swapping sizes or finding replacements to fill requests during the year. A continuing frustration is finding a vendor’s warehouse out of stock on a particular shoe size.

Finally, after the season is over, all the leftover shoes have to be liquidated. This presents particular challenges to dealers without retail stores.

Meanwhile, national catalogs such as Eastbay have taken a bigger chunk of the team basketball shoe business. Many coaches – frustrated with having to collect money from their players as well as the routine headache of dealing with a backorder in a team-dealer sale – often let the players buy the shoes themselves at retail. Some only request their players buy the same color.

Nonetheless, some still see basketball footwear as a potentially sizeable revenue generator given the number of leagues at the school, AAU, CYO and recreational levels. (Many still supply colleges with footwear although vendors directly supply the top schools under endorsement deals.) More so than football, basketball shoes are noticeable on the court, and having them match continues to be a high priority across all levels. Dealers also say that whether or not the footwear business is worthwhile, it supports other sales.

“If we can get a team into shoes, then most likely we’re going to sell them warm-ups and bags and maybe a set of custom uniforms,” says Dunaway. “So, we look at it as a tool to get business in other areas. If we’re not selling everything, then we’re going to miss opportunities. It’s kind of a necessary evil.”

Jim Esneault, president of Grundmann’s Athletic in Metairie, LA, adds, “A lot of times the coach looks at the guy who’s busting his butt and taking care of his shoes with great arch support . He likes that guy. He knows that guy is giving him some service and when he needs to order his balls or new uniforms, that’s automatically the first guy he’s going to think of.”

Besides the ability to sell custom uniforms and warm-ups every few years, practice jerseys and shorts, as well as spirit packs, have been healthy categories for dealers. Incremental sales of basketballs, scoreboards, ball racks and towels can also all add up.

Many dealers have developed strategies to help manage the risks around selling basketball shoes. In forecasting trends, many try to talk with coaches or kids months beforehand to gauge what might be the hot model.

“We look at inventory levels left over from last year and we always get a couple of high school kids’ opinions,” says Mark Mellman, retail manager and footwear buyer at Deckers Sports in Mason City, IA. “Hopefully, you’re getting a good read from that.”

More importantly, over the years, dealers have increasingly heavily stocked all white with black trim and black with white trim models. These tend to be the most popular colors. They then encourage teams to buy these lines at a decent price, pointing out that it will be much easier to get more of the shoes or replace that style during the season.

“You try to stock one or two styles and stock them deep and then encourage the coach to order that shoe so you’ll have a chance to take care of their needs during the season,” says Blackard. “The older coaches that have been around awhile understand that this is the way to go. The younger guys don’t quite understand until they go through it for a season or two.”

Esneault has all of his shoes broken out by SKU in each color on a computer. “So if we have 10 pair on a shelf and a school orders 15, it tells us exactly which five we need to order and we can either drop-ship the ones that we don’t have, or bring them all in here and ship them complete,” he says. “That helps us keep our inventory do a minimum.”

Esneault also does a lot of trading between dealers for missing sizes. His buying group, TAG, sets up a shared e-mail network that allows dealers within a buying group to exchange sizes with one another.

“Sometimes you can deliver the ones that you have, and another TAG dealer will drop-ship the remaining portion from his warehouse quickly,” says Esneault. “That helps us come out fairly cleanly.”

John Bullthuis, Reebok’s VP of sales, says becoming an expert on each brand clearly helps.

“I think it goes back to making more of a commitment to a single brand or two and allocating more financial resources to have product on hand to deliver the at-once business,” says Bullthuis. “Communication from the manufacturer to the dealer and to the end-user is probably the most critical part of the equation.”

Jenica Bridges, assistant product manager for team sports at New Balance, says team dealers can continue to leverage their uniform business to help increase footwear sales.

“Help coaches understand that they can purchase all their equipment, uniforms, and footwear needs at one location,” says Bridges. “Team dealers can promote within their area to local high schools, middle schools, AAU teams and recreational programs. An ad in the newspaper or simply showing up at practices to hand out collateral will help to help gain visibility and drive sales to their business.”

Not surprisingly, the biggest players in team basketball are Nike and Adidas. The big shoe this year is expected to be Nike’s Hyperize, the next installment in Nike’s Hyper line which utilizes Flywire technology. Both Reebok and New Balance provide some diversity for some dealers, while Converse is said to be regaining ground in the team area. Many dealers are also eagerly awaiting Under Armour’s first basketball shoes expected for the 2010-11 season.

But many dealers are looking for more help from vendors. In particular, many wish vendors carried deeper inventories to support their in-season needs. Many factories start running out as early as October.

“I make a huge dollar commitment to bring in the minimum required amount to get the maximum discount and the whole purpose of that is so that I can be able to fill-in at the lowest price,” says Dunaway. “But as the season rods around, they don’t have any inventory. A coach may want 24 shoes but we might only be able to get 15 of them. So it’s frustrating because we made the financial commitment to be able to access fill-ins and they’re not there.”

Several dealers noted that last years hot model, Nike’s Hyperdunk, quickly sold out before the season even started.

Still stumped that vendors are not able to properly test their shoes for potential “blow ups” prior to the season, Nills says he wishes they were quicker to compensate dealers for returned, defective merchandise. “That really ties up our cash flow,” he pointed out.

Many dealers also feel the vendors are offering too many styles and colors, leading to a high probability that the wrong one will be picked prior to the season’s start.

“One of the manufacturers needs to bite the bullet and say, ‘Hey, we’re going to offer only two styles and this is it,'” says Esneault. You don’t need five different models and all those colors.”

Esneault also noted that while a ground-breaking fashion technology such as Nike Shox may warrant a new shoe, the continued updates only frustrate his ability to sell leftovers.

“They’ll take the same exact shoe, the same technology and they’ll change it cosmetically just enough to where a customer doesn’t want last year’s model,” says Esneault. “I guarantee you that we have basketball shoes sitting on the shelf here that are probably four years old and we have two pair and we can’t get rid of them. You have to sell them for $10 to somebody at a tent sale to get rid of them.”

Despite the hurdles, however, Esneault still sees basketball footwear as a viable opportunity if managed smartly.

“It’s a tough market, but it’s a big one,” says Esneault. “You have boys and girls, and at some schools I’ll have four teams because it’s a junior high and a high school. I may sell 80 pairs at one stop, and if I have a good coaching staff that’s working with me and I can get it all done in one day, that’s a nice deal. If they all bought the same shoe, it would be a dream.”

Gulf Coast’s Blacker agrees that success largely depends on a wise coach coordinating the transaction, but also consented that it’s a price to pay in the team business.

“You’ve just got to be in it. It’s expected,” says Blacker. “It’s just one of those things where you just bite your tongue and do it.”

“Do we make any money in it?” asks Tony Cardinal, owner, Cardinal’s Sports Center in Lubbock, TX, rhetorically. “If the manufacturer does a good job, then we do. But when the manufacturer doesn’t have enough stock and we have to spend hours running around exchanging and hunting down sizes, then it gets to be a fiasco.”

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High-waist bikini is early winner

High-waist bikinis were a solid bright spot in a spring-summer swimwear season bogged down by cool rainy weather that lingered into mid-June in most of the country.

While strong sales very early – in March or April – provided a cushion against the soggy May and early June, many stores expected sales gains to be in the single digits for the year. “Retailers hate to say it, but the product is so seasonal that it it’s not warm, the consumer feels no need to buy,” said Beth Elliot, swimwear buyer at Thalhimers, Richmond, Va.

As Al Engleman, assistant buyer at Younkers, Des Moines, Iowa, put it, “If there’s a break in the weather, sales should really start taking off.”

In the meantime, stores decided not to wait for hot, sunny weather to boost sales. Despite plans, they broke their clearance promotions in early June – at the same time or earlier than last year.

Lord & Taylor in Dallas cut prices 25 to 50 percent on June 4. Macy’s and Rich’s in Atlanta dropped prices 20 to 50 percent on June 7. B. Altman, Bonwit Teller and Lord & Taylor in New York advertised markdowns June 8.

In Los Angeles, the markdown season opened a full week earlier than last year, with all the major retailers taking ads on June 15 except The Broadway, which was not expected to maintain its original break date of June 6.

The sale prices excluded preview suits. Many stores agreed with Missy A. LoMonaco, vice president and director of fashion merchandising at Bonwit’s that the sale ads served to “invite the customer to come into the stores to buy our preview `90 swimwear, which is being sold at regular price.”

As of June 16, stores in the Midwest were holding onto full-price policies, despite earlier price breaks from Bloomingdale’s Chicago unit.

Throughout the country, the high-waist bikini and two-piece suits in general turned into the surprise misses’ hit of the season. The new fashion-forward constructed suits were coming on strong in many areas, and both neon and neoprene showed more strength than expected, retailers said.

“There has been a huge success of the two-piece suit,” said Tracy Rasmussen, national swimwear buyer for J.C. lot of that is due to the higher waists and longer tops. A lot of customers who wouldn’t ordinarily wear a two-piece will wear the two-piece that provides a little more coverage.”

At Marshall Field’s, Chicago, bikinis account for 15 percent of total swimwear sales, compared with 12 percent last year. At Altman’s, “Bikinis used to generate 3 percent of our swimsuit business, but this year they are running at 10 percent,” said Ellen Kamowitz, divisional merchandise manager.

“The biggest surprise is the trend of the two-piece suit; it has been much stronger than originally planned,” said Paul Roth, senior vice president for merchandising at Macy’s South/Bullock’s in Atlanta. Two-piece suits, planned at 20 percent of the total, were 30 percent by early June.

“The two-piece business is now 21 percent of our total sales, which is remarkable since we are a traditional department store. That classification was more like 3 percent when I started, eight years ago,” said Elliot at Thalhimers.

At Bonwit’s, “bikinis were selling at the same rate as tanks, and they’re usually behind tanks,” LoMonaco said. “We purchased more bikinis this year, including several new resources like Half Moon.”

She stressed that the bikinis are selling to women older than the junior customer, noting, “Our tank business was big last summer, but even then we saw the bikini body guide business starting to take off.”

Nancy Pressman, swimwear buyer for Barneys New York, said she bought more bikinis than one-piece suits, with bikinis selling better at the beginning of the season and one-piece models catching up toward the end.

“Suits have gotten very sexy,” Pressman said. “Designers are using more sheer fabrics, and there is a lot more skin showing.”

Barneys was one of the stores that planned to hold off price promotions until early July. Pressman said she planned to do the most swimwear business in June, and planned to do it at full price.

With the exception of the English Liza Bruce line, all of Barneys’ swimwear comes from domestic sources. Pressman had to reorder from Bruce due to the popularity of the designer’s three-piece crinkle and lace bikini and skirt which, at $140, is the store’s most expensive.

But the season’s best-selling model was a windowpane tank from Body Glove. By the first week of June, 80 units had sold at $65, which was shaping up as the average price of the store’s suits this season. The store has also done well with Keiko, which Pressman described as “romantic, toned-down and not as sexy as some of the others,” and suits by Ellen Ann Dobrovir, especially a sexy one-piece halter loincloth in poppy.

Best-selling price points at Altman’s range from upper-moderate to better, but Kamowitz said the customer is giving less weight to price and more to whether a suit looks right, to its newness and it degree of prettiness.

The customer buying bikinis, Kamowitz said, is not a junior, but someone in her 30s or 40s. This same age range is also buying shape-builder suits from resources such as Robby Len and Jantzen. Other top-selling suits overall were La Blanca and Gottex.

At Bullock’s, Los Angeles, bikinis were about one-third of misses’ sales. The Broadway, Los Angeles,bikinis went from 21 percent of misses’ sales in 1988 to approximately 26 percent this year.

“Figure enhancement and camouflage was the name of the game this year,” commented Anne Eberhardt, misses’ swimwear buyer at The Broadway. “Anything with a tummy control panel or a soft cup did well.” She said the best gains have been with updated suits and moderate-price misses’ suits that enhance the figure.

Eberhardt narrowed her resource structure, intensifying with 16 vendors; the biggest volume line was Catalina. The fastest-turning line in misses’ was Too Hot Brazil.

The Broadway planned to hold off on price breaks until July 6. “Our feeling on breaking price is that it doesn’t do any good to have the sale if it isn’t summer weather yet, and that doesn’t come until late in the season,” said Eberhardt. “It doesn’t matter if you put a $4.99 price on all the suits if it’s 50 degrees and raining.”

Business at Bullock’s was dominated by the underwire suit in bikini and one-piece styles. Other important silhouettes were tank suits, bandeaus, the sarong and skirted suits. Ruffling at the hip and cummerbund treatments were also good sellers. Neoprene has jumped into misses’ as an accent and neon colors have been important in misses’. In juniors, suits in mango papaya have been explosive.

Bullock’s junior customer, a spokeswoman said, is buying two suits: a sparse, often high-cut suit for tanning and a second suit – often with a crop top and little pants – for beach volleyball or aerobics. In shape builders, Esther Williams had a successful debut.

At Splash & Flash, a four-store chain in Los Angeles, two-piece suits have been dominant, with Take SlimSuit, Too Hot Brazil and La Blanca all having good seasons, said Jean Zalkins, owner.

In the Southeast, volume was coming from the high-waist bikini and the updated constructed suit, with most suits retailing at $40 to $60.

At Macy’s South, said Roth, top performers are Cole, Rose Marie Reid, Catalina, Jantzen and Bill Blass.

Because they offer more coverage and represent a trend toward more fashion styling, the two-piece suits have made a “decent” showing with more mature customers, Roth said.

At Rich’s, Carol Greer, general merchandise manager of women’s ready-to-wear, called the season “tough for two reasons: one – we’ve had no warm summer weather normal to Atlanta [through mid-June], and two – there hasn’t been a new silhouette.

“The skirted bikini has been good and we’ve done well with the figure-flattering constructed suit, but overall there’s been no hot breakthrough item. Cotton-Lycra [spandex] has been very disappointing,” she said.

She cited Catalina, La Blanca, Rose Marie Reid and Anne Cole as top vendors, with intense brights, florals and dots the hot color stories.

At Hess’s, Allentown, Pa., the “one-piece was leading the pack,” said Cindy Schneider, general merchandise manager of women’s ready-to-wear.

“We do unbelievable business in swimwear,” she said. “The two-piece is stronger than it was last year and it currently represents about 27 percent of our business.”

Schneider said cotton-Lycra was holding its own against its extraordinary growth last year. She named Rose Marie Reid, Jantzen, Mainstream, La Blanca and Bill Blass as strong resources, while black accented with neons and brights was making the strongest color impression.

At McRae’s, Jackson, Miss., “The key silhouette has been the bikini, with the new St. Tropez styling – a short tank top – being a real strong item for us,” said Pat Priebe, director of fashion information.

“The customer seems to be reacting to the newsness and excitement in the updated silhouettes in the body-shaping suits as well,” Priebe said.

The constructed suit, she said, was selling well to a wide age range of women. McRae’s is doing best with Catalina, La Blanca and Bill Blass, with blacks, brights and neons hot.

At Thalhimers, Elliot attributed the growth of high-waist bikini sales to 30- to 35-year-old women who look better and feel better about themselves than their counterparts from a few years ago. Top vendors include Jantzen, Rose Marie Reid, La Blanca, Catalina and Mainstream.

“We’ve definitely seen growth in structured suits. About 31 percent of our business is constructed suits and 35 percent is unconstructed,” Priebe said.

At Penney’s, prices range from $20 to $62, and major resources are Wior Corp., Catalina, A&H Sportswear, Daffy Beach Patrol and Jantzen. The largest percentage of Penney’s swimwear is private label, Rasmussen said.

Along with the high-waist bikini, a private label tank suit in eight colors, retailing for $20, is popular. “Anything with zipper treatment has also been phenomenal,” she added.

In the misses’ market, she said, “Whether it is inner paneling or shirring or underwire bras, customers are looking for something to enhance the figure. We’re even starting to see inner paneling in some high-waist bikinis.”

Neon lime, hot pink, orange and lemon punched up the palette this season, but there was still a market for popped-up pastels and basic solids like black, royal and purple, she said.

In fabrics, “the whole Body Glove influence, with Lycra combined with neoprene, created a real surfer type of look that was strong.”

Ron McCullars, president of Just Add Water, Dallas, planned his price break for the July 4 weekend. “June is our best month at regular price,” he said. “Unfortunately, some stupid competitors started too early. But breaking their prices early doesn’t hurt our business at all.”

The bikini, which rang up 15 percent more sales this summer, is the best-selling category in his eight specialty stores, he said. High-waist styles are particularly important.

“An awful lot of women have gone from the unconstructed maillot into the high-waist bikini in the last couple of years,” he said. The average price of a bikini is $50, and major resources include La Blanca, Half Moon and Body Glove.

Classic maillots and T-back tanks, with an average price of $50, still have strong appeal. Bestsellers include suits by La Blanca, Too Hot Brazil and YSL.

Shape-builder suits gained in sales, primarily because manufacturers offered more styles, said McCullars. Catalina, Sirena and Rose Marie Reid are major resources for the constructed suits.

At Sakowitz, Houston, unconstructed silhouettes with higher-cut legs did better this year, while the market for constructed suits diminished, said Donna Keeney, buyer of weekend leisure apparel.

“I think the reason is primarily the remodeling of our flagship store. Swimwear now hangs in the contemporary sportswear department, and probably has a more contemporary customer than when it was upstairs in an area that catered to the more conservative, traditional customer.”

Suits by Gottex, YSL and Cole in the $55 to $75 price range were bestsellers.

Bikini sales jumped 7 percent over last year. Prices range from $45 to $75 from resources such as Hot Coles, La Blanca and Ann Coles.

In the Midwest, one-piece suits that camouflaged problem areas were early winners while the two-piece waist-riders attracted baby boomers looking for extra coverage. Best-selling colors included bright colorblocks, florals, polkadots and basic black.

At Field’s, waist-rider bikinis were fueling strong two-piece sales. Mariella Holoubek, buyer, said, “Skimpy bikinis don’t sell well. This is the Midwest. The customer wants the feel of a two-piece suit, but wants the coverage.”

Prices range from $39 to $80 with suits around $50 selling best.

At Halls Swansons in Kansas City, Barb Elcock, vice president and merchandise manager, said, “We reanalyzed our vendor structure this year and brought in more mature suits for the average customer base. A lot of our growth is due to that.”

One of the retailer’s new resources, Body I.D., has been a strong seller, with some styles getting a 53 percent sell-through. “The suits have a 4-by-6 inch hang-tag that says what type of body looks good in that suit,” Elcock said. “The customer finds it easy to shop that way.”

Other top-volume vendors include Bill Blass, Sun Club and Catalina. Adrienne Vittadini suits at $60 to $70 also had a high sell-through.

Popular styles include two-piece “tankinis” while brights on black are hot colors. Prices averaged between $50 and $55.

“We had a better bikini business this year,” Elcock said. “Last year everything was French cut. The tankini made that volume grow again.”

Two-piece suits account for 35 percent of swimwear sales this year, up from 20 percent a year ago.

At the Dayton Hudson Department Store Co., Minneapolis, trends driving designer swimwear include florals and dots, said Valerie Mathison, buyer. Lemon-lime was the best-selling color early in the season, followed by fuchsia and mango.

Sales of two-piece high-waist suits have more than tripled since last year, Mathison said, with tank bottoms and bandeau tops the bestsellers. “Bikinis remained constant with last year, while tanks took somewhat of a dip,” she added. “And the cutouts are virtually nonexistent this year.”

Dayton Hudson planned to break price on July 6, its first sales promotion this year.

At Younkers, according to Engleman, constructed one-piece suits sold best, followed by high-waistbikinis, polkadot suits by Jantzen, colorblocking and black. Best-selling resources included Catalina, Robby Len and Mainstream with $40 to $45 the most popular prices.

More than leniency

The recent fall in U.S. interest rates afforded a measure of relief to Third World debtors. The debt service burden on their economies has eased.

But Henry Kauffman, the Wall Street oracle of interest rates, has predicted they will soon spurt upward. What then? Probably a series of Argentine standoffs between the debtors and their creditors. Buenos Aires recently reached a new accord with the International Monetary Fund (that will clear the way for $4.2-billion in new loans from Western banks), but not before the Argentines had once more threatened to leap from the precipice of payment arrears into the abyss of insolvency.

The international financial system has thus far been able to handle these recurrent crises on a case by case basis rather than resort to comprehensive relief for all debtors. For the West to subsidize interest repayment across the board would reward equally the responsible Third World nations which have taken painful steps to improve their economies and the irresponsible ones which have refused to face the music.

Nevertheless, as Globe publisher Roy Megarry noted in a recent article, if the West fails to devise a collective solution for the debtors, it may one day face a collective act of defiance by the debtors. The idea of a debtors’ cartel, which began in Peru, may not stop there. Unlike OPEC, a deadbeats’ cartel would mobilize the economic weakness rather than the economic power of its members. But a conjuncture of apprehended defaults could tax the stamina of Western bankers in a way that the sequential development of such threats has not.

As Mr. Megarry adds, however, the debt problem requires more than lenders’ leniency. “The most constructive long- term contribution we can make is improving the terms of trade with underdeveloped countries so they can earn the foreign exchange to service and repay their debts. Trade is the only way they can do it.” Indeed, much of the austerity medicine the debtors are told to swallow by the IMF is prescribed on the assumption that it will improve their export performance. Currency devaluations and wage restraint are supposed to make their products more competitive abroad.

But the same Western nations which exhort the Third World debtors to follow these painful remedies often seek to insulate themselves by protectionist policies from the patients’ recovery. Brazil, for example, has been forced to reduce its exports of steel to the United States as a result of trade barriers. Chile has been forced to reduce its copper exports to the United States for the same reason. Canada continues to impose quotas on apparel and footwear from the most competitive Third World producers.

While the harm such barriers inflict on Third World incomes is obvious, their detrimental impact on Western prosperity is less apparent – but nonetheless real. Canada sells 12 per cent of its merchandise exports to underdeveloped countries. The United States sells almost 40 per cent; Australia, 44 per cent. When debtor nations are unable to export to the West, they are forced to buy less from the West. The North-South Institute calculates that Canada may have lost 135,000 jobs in the past three years for this reason.

This is the bottom line of interdependence. Third World austerity contracts Western economies. Third World recovery can fuel Western expansion. A vicious circle can become a virtuous one.

A Bit Out Of Step With Style

Dear Diary: Sometimes, I look around the current fashion scene, and think I must be quite out of step with the times. Or perhaps it’s a sign of my incipient old age, but there are so many looks and fashions I find singularly unappealing, even downright insulting to the intelligence, even as my peers laud them to the skies and swoon with apparent delight.

Take, for example, Stephen Sprouse, whose Sixties-derived designs have inspired press adulation and spawned rivers of ecstatic prose. He’s been hailed as “prophetic,” “directional,” “influential” – the man of the moment, according to most members of the Fourth Estate.

The two-time cancellation of his New York shows has left many journalists in abject despair, deprived of the opportunity for further overblown praise of their current darling.

As far as I’m concerned, Dear Diary, as one who survived the mercifully short-lived Sixties styles, I can only look back on the thigh-high tunic dresses and psychedelic hose, the chalky lips, bouffant hairdos and tarantula eyelashes, and heave a giant sigh of relief. Researching the Sixties (essentially what Sprouse does) represents no great feat of design inventiveness. The Sixties weren’t that attractive the first time around.

As for the teens and 20s who haven’t lived through them, who might possibly find Sprouse’s graffiti-splashed minis and Courreges look-alikes amusing or novel, they’re most unlikely to be able to afford Sprouse’s overpriced styles – and the well-over 30s, who can afford them and have swallowed the hype wholesale, had best take a good, long look in the mirror.

Nor, Dear Diary, do I find the “Madonna” look charming. As a publicity shtick, it’s all very well for a rock star, but assorted bits and pieces of flesh, more or less covered with snippets of grungy lace, black leather, net and mesh; mixmaster hairdos plus perpetual pouts, sleepy eyelids and provocative poses do not add up to cute or titillating, especially on pre-pubescents.

And I find the current wave of spiked, peroxide-tipped, overgrown brush-cut hairdos sported by so many young men and women frankly hideous. Don’t they see how ugly they look? Does nobody want to look pretty any more? And, Dear Diary, I dread to think of this coming fall. Those stirrup ski pants that turned up on every runway, that somehow looked awkward on even the lithe, rail-thin models, are likely to be quite appalling on the vast majority of women, since they accentuate every figure problem. What’s more, you just know they’re going to be worn with all the wrong things, with high heels and contrast hose, for example. Tucked into sleek, flat bootlets for sport or leisure occasions only, they’re quite passable but, sure as death and taxes, they’re bound to be worn all wrong.

I also hate, loathe and abhor ankle socks with high heels, especially with skirts. Few combinations look more ungainly, yet I see them even in leading fashion magazines. Where is everyone’s taste? And where did they dredge up those pointy-toed, lace-up ankle boots that make everybody mince? Safely hidden under a Victorian ball gown, tucked under lacy pantaloons, they may have been all right, but with contemporary clothing and, horrors of horrors, ankle socks and miniskirts, they are truly grotesque. Nor do the other footwear alternatives represent my shoe of choice. Construction boots and orthopedic track shoes are hardly flattering options and they do very little for most fashions.

As for the recently introduced skirts for men, I confess to considerable skepticism and dismay. I like my men elegant, distinguished and authoritative and it’s a safe bet they’ll achieve none of those things wearing skirts. Besides, women have been trying to liberate themselves from those same skirts for centuries, because they are restrictive and limit freedom of movement. And since men haven’t had the benefit of generations of training in the fine art of navigating discreetly in skirts, they’re going to look pretty foolish showing off their hairy shanks, ankle socks and clumpy shoes.

As for graffiti makeup, beaten and bruised cosmetic effects, tattoos, diamonds embedded in teeth or fingernails, flotillas of ear studs, neon- dyed hanks of hair and symbols or motifs, landscaped or shaved into hairdos, the less said, the better.

And, several seasons after their introduction, neon colors in large doses still set my teeth on edge. Sadly, they’re not likely to go away in the near future. So, Dear Diary, we’ll just have to grit our teeth for the duration. But don’t the neon- lovers notice what terrible things vitriol green and bile yellow do to their complexions? Traditionally, men and women have tried to make the most of whatever assets we were blessed with, and done our level best to camouflage our flaws. It has to do with elementary esthetics, personal pride and a certain subtle form of good manners.

I’ve always liked pretty clothes, appealing colors, amusing accessories and enjoyed the purely feminine pleasure of getting dressed up and wearing makeup. Most of the men I know enjoy their role and take pleasure in looking fashionable. That’s why, Dear Diary, I’m puzzled by so many currently trendy looks which, with all due respect, make most people look needlessly unattractive.

Perhaps I’m an anachronism.

Imports to Canada from Europe spurred by currency slide

Silent but powerful, a Gulf Stream of Canadian cash is wending its way eastward across the Atlantic to take advantage of European bargains.

For Canadian exporters, the European market has been languishing behind the eruption of interest in a new trade deal with the United States and the tantalizing potentials of the Far East.

But importers have not missed the sharp slide in the value of European currencies against both the U.S. and Canadian dollars, and have been snapping up bargains at a record pace.

In 1984, exports to Canada from the member-states of the European Community jumped 38 per cent over those of a year earlier, an increase of $2.3-billion.

Although Canadian exports rose slightly, they remained below their 1982 levels, pushing Canada into a $1.3-billion trade deficit, the first time Canada has failed to report a surplus in its trade with Europe since the Second World War.

Such a dramatic turnaround has not been without its problems. The past year has seen well-publicized disputes over trade in major products including newsprint, footwear, beef, fish and liquor.

Diplomats on both sides insist that with $15-billion in two-way trade, such irritants are inevitable and what is important is that they be resolved.

And that indeed is what has been happening. The squabble over newsprint, created when the EC changed its quotas after Scandinavian countries gained duty-free access to its market, was resolved in December when Canada agreed to a new duty-free quota of 600,000 tonnes a year.

That month, Canada kicked off a new controversy when it responded to surging imports of beef by slapping on quotas that squeezed European exporters hardest, knocking them back to a small fraction of total imports.

The Europeans were already upset by Canada’s extension of footwear quotas until November, 1985, and decided to retaliate by raising duties on $170-million worth of Canadian exports unless a deal was worked out.

At the last minute, Canadian and European negotiators agreed to a deal under which Canada could keep its footwear quotas in place, but lower its import duties on $150- million worth of other European goods, a concession expected to cost the Canadian Treasury about $7.7-million this year.

Similarly, with the threat of retaliatory duties on another $70-million worth of Canadian exports hanging over their heads, the diplomats eventually struck a deal on the beef issue by raising the European quota substantially.

Before that dust had settled, the EC had demanded international arbitration over the pricing practices of provincial liquor boards, which add much higher mark-ups to imported wine and liquor than they do to domestic brands.

That one is stalled over the selection of members and the terms of reference for the arbitration panel, partly because it raises the interesting but touchy issue of whether provinces can be bound to follow international agreements signed by the federal Government on matters solely within provincial jurisdiction.

Then came the stories of overfishing by European vessels and the use of bribes to get Canadianfisheries officers to look the other way. Fish has been a particularly touchy subject ever since Europe banned the import of Canadian seal pelts.

Specialists may handle the negotiations for each dispute, but there is plenty of work for the 20 people in the EC’s Ottawa delegation and the 14 foreign service officers who look after Canadian interests at EC headquarters in Brussels.

Even the beef and footwear issues have only been resolved for 1985. “What happens next year remains to be seen,” said one Canadian official. “There won’t be any shortage of issues, but the mechanisms and the will are there to try and resolve them.” In the meantime, Prime Minister Brian Mulroney, Trade Minister James Kelleher, Industry Minister Sinclair Stevens and Treasury Board president Robert Rene de Cotret have all been to Europe, pushing the message that Canada will eagerly welcome European investors even if it has doubts about some of the community’s goods.

That welcome mat is already being put to the test, with the proposed purchase by British Telecommunications PLC of a 51 per cent interest in Mitel Corp. of Kanata, Ont.

But if nationalists are worried about the fate of domestic jobs and technology, Canadian companies are out shopping for European technology, and Canadian trade officials are putting an increased emphasis on industrial co-operation. “Europe is one of the few sources of high technology that is reasonably accessible,” said one official.

On the other side of the Atlantic, one of the biggest concerns of European officials is Canada’s relationship with the United States. They are watching carefully as Canada ponders a major bilateral trade deal, and their worries go beyond the basic fear that such a pact might create a North American trade fortress, with barriers raised high against all outsiders.

Dietrich Hammer, head of the permanent EC delegation in Ottawa, said he thinks Canada might lose interest in pushing for more liberal international trade rules if it can solve most of its own trade problems with a single deal with the United States.

Trade with the United States makes up three-quarters of Canada’s total. “There is at least a danger that if you go bilateral, the multilateral approach will lose its attractiveness.” The EC’s top trading partners include such diverse countries as the United States, the Soviet Union, Saudi Arabia andJapan, and as a result, it is more interested in reaching a multilateral trade deal.

Ireland learns to adjust to reduced EC benefits

The Irish are beginning to find out that they are not, perhaps, as good Europeans as they thought they were. In the first 10 years after membership in 1973, funds from the European Community rolled in, especially to the agricultural sector, giving a substantial boost to the economy and transforming rural life.

This phase is now over, with Irish farm prices adjusted to EC levels and the effects of the stricter attitude to agricultural spending becoming all too obvious. In retrospect, the 1984 negotiations on curbing milk production may be seen as a turning-point when Ireland came uncomfortably of age as a community member.

Milk is more important to the Irish economy than that of any other member-state, accounting for 15 per cent of gross domestic product, and Prime Minister Garret FitzGerald was determined that Ireland should not bear a disportionate economic loss by accepting the same production quotas as other countries.

Even though Mr. FitzGerald is an old European hand, it still took a walkout before the other leaders would agree to special treatment for Ireland. The Irish won that battle but realized that they had used a lot of ammunition and that life was going to be tougher in the future than in the past.

One senior opposition politician went so far as to suggest that Ireland should consider associate membership in the community. His remarks were not taken up because most people know there is no alternative to full membership, but Ray McSharry, as a member of the European Parliament and a former agriculture spokesman, knows better than most that in the long term, the proportion of community spending going to agriculture is likely to decline.

Irish Foreign Minister Peter Barry sounded a different warning recently, when talking about moves to integrate the EC into something more like the founding fathers’ ideal of European union. He said that such a development could not be countenanced within the present financial resources of the community.

Ireland benefits more from EC membership, proportionately, than any other member-state, so Irish concern is understandable. It is estimated that transfers from the community represented over 10 per cent of gross national product in 1978-79 mostly to agriculture. The proportion has declined since then but still represents about 6 per cent of GNP.

Irish membership in the community has also contributed substantially to the influx of foreign industry, which is so marked a feature of the economy. Foreign firms, mostly from the United States, now account for roughly a third of manufacturing employment and two- thirds of manufactured exports. The Irish must compete for such investment with other EC states but very few of these firms would have located in Ireland if the republic were not a member.

Over-all numbers employed in manufacturing have declined since membership and a new problem has emerged. The fact is that the linkages between the foreign companies and the national economy are much less than with native firms. Ireland is in the peculiar position of recording spectacular growth in exports (averaging 11 per cent per year in recent years) and industrial output (up 70 per cent since membership) while having a general decline in employment.

Analysts increasingly separate out the foreign firms when examining the Irish economy and find that the indigenous sector has not coped well with EC membership. It displays poor productivity, indifferent marketing and export sales, and an over-all decline in output and employment. Government polices are turning more toward the correction of these problems, rather than luring ever more high- technology foreign companies, although the latter will never be turned away.

Over-optimism about the prospects for the Irish economy may have been one of the reasons governments in the 1970s engaged in the spate of foreign borrowing which is now causing such problems for Ireland. The heavy debt repayments now amount to over 1 per cent of gross national product. The combination of debt repayments and a rising population means that living standards have been stagnant for the past three years, while unemployment has risen steadily and to 17 per cent of the work force. It is estimated that the Irish labor force is growing by about 4 per cent a year, a situation which is unique in the EC.

The economy has been growing, by an estimated 3.8 per cent last year and an expected 4 per cent this year. However, when debt servicing and the repatriation of profits by foreign firms are taken into account, these figures fall to 1.7 per cent and 2.7 per cent increases, respectively, in GNP. This level of growth is not sufficient to give rising living standards or reduced unemployment to a growing Irish population.

The outlook is for little change. Net investment is expected to rise by a little under 4 per cent this year but this hides sharp falls in some sectors with the highest labor content, particularly construction. Consumer spending shows a marked reluctance to grow, despite the hopes of economists that people might start spending again after three years of recession.

The high taxation imposed on incomes and goods in an attempt to correct the public finances has undoubtedly dampened retail spending. Finance Minister Alan Dukes reduced some rates of value added tax in the January budget and abolished the top rate of 35 per cent. This was partly to reduce cross-border purchases in Northern Ireland and partly to boost the economy, but the net effect of the budget was still mildly deflationary.

The Government has had most success in bringing down inflation and the balance of payments deficit. Inflation this year should be about 6 per cent, having reached 20 per cent just three years ago. Ireland showed a record trading surplus in the month of April and, even when debt payments are included, the balance of payments deficit should be about 500 million punt or less than 4 per cent of GNP.

This combination of economic circumstances has made it difficult to produce any marked improvement in the public finances.

Italy wins commendation for handling of presidency

Italy is now two- thirds of the way through its six-month- long presidency of the European Community’s Council of Ministers, a position which rotates among all the community’s members. Already the Government of Prime Minister Bettino Craxi has won high marks for its successful handling of some highly contentious issues.

In some ways it is appropriate that it should be Italy that solves the EC’s problems over the admission of Spain and Portugal to the community, and the latest emanation of the controversy over the budget. Not only is Italy probably the major EC country with the fewest reservations about being a member of the community, but it is also a country that is riding high in Europe at the moment in terms of economic growth, success of Italian industrial companies and political calm.

Italy is not a country that doubts for a moment that it ought to be in the community. The political parties vie with each other to be the most European of all, and it has a strong commitment to the somewhat nebulous goal of European unity. The leaders of Italy in the early postwar period were convinced that only in a wider entity such as the EC could Italy’s serious internal political differences and the great disparities of wealth between north and south be overcome.

They also hoped that the community would bring them financial resources and economic advantages that they would otherwise lose – a hope that has on the whole been justified.

Yet despite this commitment to the ideals of the community, Italy’s membership has been characterized by the ambiguity so common to things Italian. As Francesco Forte, Italy’s Minister for European Affairs, said at the start of the Italian presidency: “Most of our politicians and bureaucrats think and operate in a basically un-European way.” The fact is that alongside its commitment to the aims of the community Italy has sturdily protected its own interests – in some cases claiming that to enforce community regulations may be impossible, either for political or bureaucratic reasons.

Lately, however, Italy has been on its best behavior. Shortly before it assumed the presidency of the EC it accepted a community policy on wine production that hardly squares with its interests since it is the community’s biggest wine producer. It also backed down from the nit- picking interpretation of import regulations that were holding up the import of Scotch whisky into Italy at a time when Italians are gradually moving away from a preference for national brandies toward the British product.

Partly, no doubt, the change of attitude was politically necessary if Italy was to carry any conviction as president of the EC. Partly, however, it seemed to reflect a more orderly attitude to relations with other EC partners, a clearer view of what Italy ought to be able to obtain from them and of the concessions it ought to be prepared to make. One reason for this was the arrival at the head of the Foreign Ministry of Renato Ruggiero, a civil servant with an unusually broad grasp of Italy’s needs in economic relations and the drive to get the sluggish Italian bureaucratic machine to go for it.

If the Italians are now getting their act together better, as reflected in the skilful handling of the presidency, it may reflect a greater self- confidence in the country as a whole. Italy has since the Second World War been a country of political stability – the same Christian Democrat Party has been in power all that time – but of governmental instability: more than 40 governments over that period.

But for the past 21 months Italy has had the same Government, led by Mr. Craxi, the country’s first Socialist prime minister. It has tackled some serious problems, thought about other ones and provided a degree of continuity that had not existed for years.

That continuity is complemented by the realization, both in Italy and abroad, that Italian industry is now among the most impressive in Europe. Fiat, the privately owned conglomerate, is the first or second- biggest- selling car producer in Europe. Olivetti, the data processing equipment maker, is virtually the largest European- owned company in its field, and probably the most profitable. Pirelli, the tire and cables maker, is an obvious survivor in the tire industry and a company that produces respectable though not glittering financial results. One has only to compare these companies with their European rivals to see just how far Italian industry has progressed in the past few years in rationalization, investment and labor relations. Only West Germany matches or exceeds Italy in industrial prowess and confidence.

The performance of these leading private sector Italian companies is matched by that of other concerns, including several in the state industrial sector, which is gradually being reformed and slimmed down.

Unfortunately, Italy’s industrial success does not of itself ensure that the usual indicators for the Italian economy all point in the right direction. Because of governmental instability Italy reacted very late to both the 1974 and 1979 oil shocks. Only by 1983 had the Italian authorities put their balance of payments current account back into equilibrium, thanks to stern restrictions on monetary expansion rather than to fiscal measures. Only in 1984 did inflation finally drop below 10 per cent, having been over 20 per cent at the beginning of the decade.

The Italian economy is resilient and enjoys considerable vitality, taking the form of fast spurts of growth. This is due in part to the hard- working nature and imagination of many Italians, and to the fact that many less- developed parts of the country are still catching up with the rest of Europe.

But it also suffers major defects. It is prone to balance of payments difficulties because of its near total lack of raw materials and indigenous energy supplies. Governments can rarely take unpopular economic action and the inefficiency of the civil service administration, local government and the state industrial sector means that government expenditure is always rising – far above taxation.

When the Craxi Government came to power in August, 1983, the economy was at last able to resume expansion, the balance of payments registering a current account surplus of over one trillion lire that year. Although gross domestic product declined in 1983 by 1.2 per cent, it grew by nearly 3 per cent in 1984. Bold action to cut wage indexation helped bring down inflation in 1984, which closed the year at about 8.5 per cent. The Government also managed to keep the public sector borrowing requirement to about the same level as the year before, about 93 trillion lire. This, however, is still more than 15 per cent of GDP, far above the level registered by almost all other industrial countries.

Yet 1984 closed with a current account deficit far above the original estimates – it exceeded five trillion lire. This was due in part to Italy’s traditionally high propensity to import, but also to disappointing export growth. Italy’s major European markets, led by West Germany, grew disappointingly slowly and the strength of the lira weakened Italian competitiveness. A series of setbacks prevented Italy from winning its due share of contracts in the Soviet Union, Eastern Europe, and in Algeria, a major energy supplier.

The same problems seem to be persisting this year, for which the semi- official forecasting agency Isco is predicting a current account deficit of 8.5 trillion lire and rather slower growth of about 2.3 per cent.

The same forecast also put this year’s average inflation rate at 8.5 per cent, instead of the Government’s target of 7 per cent, and with last year’s average of 10.5 per cent. The fact that inflation is no longer declining is attributed in large part to the fact that the Government is not succeeding in cutting its spending. The deficit is expected to go on rising in money terms and to continue to account for at least 15 per cent of GDP. National debt – the accumulated borrowing by the Government from the economy – will this year exceed national income.

The Government has not been able to hold down spending partly because of the sheer difficulty of finding items to trim, and partly because of the strong pre-electoral pressure for extra spending, notably a carefully timed rise in pensions. And the Government faces a further threat in June in the form of a referendum on wage indexation that could lead to a partial restoration of the cuts made last year and thus to a further boost in labor costs.

In this month’s local elections, voters seem to have signalled that they want the present coalition of Christian Democrats, Socialists, Republicans, Social Democrats and Liberals to continue. The opposition Communist Party lost support and the share of the vote won by the coalition rose, surpassing the results of the 1983 elections, after which it came to power.

In late June the Italian Parliament will have to elect a new president of the republic. That event and the local elections should determine whether Mr. Craxi continues as Prime Minister, or whether he gives way to a representative of the Christian Democrat Party.

Whoever governs the country will have an extraordinary advantage: a lull of three years before any more major elections are due.

Countdown on freer trade draws near

A mid all the rhetoric about freer trade and trade expansion, Canadian governments in recent years have been protectionist. Lately it has seemed sufficient for a firm merely to threaten to close a plant or to abandon a proposed new investment to trigger a protectionist government response that is costly to the public purse, or costly to consumers, or detrimental to industrial efficiency.

Among the major protectionist measures have been restrictions on imports – quotas, voluntary export restraints, orderly marketing arrangements and so on. This coming year will see the federal Government re-examining the most important quota arrangements (outside agriculture) that protect Canadian producers. These involve the automobile, footwear and textile and clothing industries. Will the Government opt for freer trade or more protection? The moment of truth is approaching.

Four years ago, Canada and the United States entered into voluntary export restraint agreements with Japan on automobiles, limiting imports from Japan to less than 20 per cent of the market. Before the U.S. agreement expired on March 31 this year, President Ronald Reagan announced that it would not be renewed. Apparently hoping to deflect growing protectionist sentiment in the United States, Japan indicated that it would continue to restrict exports to the U.S. market, but at a significantly higher level than before.

The restraint agreement between Canada and Japan also ended on March 31, but it is not clear whether Japan will continue to restrain exports to Canada and, if so, at what level. The issue is too important to be left hanging for long.

Shoe imports to Canada have been limited by quotas since 1977. The quotas are scheduled to expire in 1986. The Canadian shoe industry, however, wants them extended for five years.

Clothing and textiles have been protected for decades. Producers are protected by import quotas and orderly marketing arrangements under an international Multi-fibre Agreement due for renegotiation next year. The Canadian Textile Institute, supported by three industry unions, seeks even more restrictive global quotas.

Not suprisingly, there has long been widespread criticism of trade restrictions in Canada, including the following: Import quotas impose a heavy cost on consumers by allowing higher prices to prevail.

The protected industry often fails to take advantage of the opportunity for adjustment the quotas have brought. In the footwear industry, for example, domestic producers have generally failed to adopt the kind of new technology that will make them competitive with Third World producers. They have equally failed to adopt the kind of high styling to compete with European producers.

Import quotas lead sooner or later to international repercussions, in the form of retaliatory action or demands for compensation. (The European Community has launched proceedings against Canada for restricting footwear imports.) The repercussions are likely to injure Canadian industries that have been relatively successful in meeting international competition. This is likely to cost jobs in the long run. Thus import quotas reward inefficient firms and industries and penalize efficient ones.

With most of our manufacturing concentrated in Ontario and Quebec, import quotas have seriously divisive implications. The benefits are concentrated in one part of the country but the costs are shared across the country.

Import quotas may cancel out the intended benefits of our international aid programs. Last year, for example, Canada provided more aid to Bangladesh than it did to any other country. Bangladesh is in the process of building an efficient textile industry, but we have demanded that Bangladesh shipments of shirts to Canada be cut in half.

Despite such shortcomings, it appears to be difficult for political leaders to resist the clamor for increased protection. It is easier for politicians to adjust the quotas from time to time in response to criticism.

The Government should adopt a basic change in the ground rules. We need a policy that would make industries think twice before seeking import quotas, that would encourage good use of the breathing space provided by quotas and encourage the removal of quotas as soon as possible.

This could be done by making quotas depend on an undertaking by the industry or company involved to freeze all wages, salaries and fringe benefits and to reinvest all profits, throughout the life of the import controls.

Such a policy would have a number of clear advantages. Because employees would be reluctant to forgo wage increases and because shareholders would be reluctant to forgo their dividends, management would likely seek import quotas only as a last resort. Consumers would thus be asked to subsidize the industry only if management and the Government could see no reasonable alternative.

And once the quotas were applied, management and labor would have strong incentives to improve the competitive position of the industry. This would promote closer co-operation between labor and management and discourage aggressive labor tactics, such as resisting new technology. The prospects for survival of the industry would thus be maximized by the protection afforded from imports, the freezing of labor costs and the reinvestment of all profits to improve productivity and international competitiveness.

If the industry succeeded in turning itself around, there would be urgent demands from employees and shareholders to get rid of the import quotas and end the freeze.

If the industry did not succeed in turning itself around, but merely survived, what then? As time passed, the workers would find themselves falling further behind the national average wage level. In some cases, people would move out of the region, attracted by employment opportunities elsewhere. Some would find higher-paying jobs within the region as new employers were attracted by the low wage scale.

Ultimately, of course, if the industry was unable to retain its work force, it would disappear. But this is as it should be. The consumer would not be asked to subsidize the industry indefinitely. Efficient sectors of the Canadian economy would no longer be penalized by foreign retaliation for the import quotas.

In the long run, the surest way to make certain that we all lose is to allow quantitative trade restrictions to bring about a deterioration of the world trading system. Canada relies on world trade more than most countries and it is already gravely threatened.

Tribunal proposes end to some shoe quotas

Recommending an end to some quotas on imported footwear, the Canadian Import Tribunal says the domestic footwear industry has made “significant progress in restructuring.” The tribunal’s findings were contained in a report of its inquiry into Canada’s footwear industry.

Current quota restrictions on imported footwear are to expire Nov. 30.

Under provisions of the Export and Import Permits Act, quotas on footwear imports can be imposed only if the tribunal finds the domestic industry has been injured by imports or is threatened with injury.

Trade Minister James Kelleher said the federal Government expects to announce its footwear import policy in September.

The tribunal recommended that quotas be removed from types of footwear that are not produced in volume in Canada, such as athletic and leisure shoes.

It also proposed that quotas be removed from types of footwear with which domestic manufacturers are competitive with foreign companies. It said this category includes winter boots, ice skates, and men’s and boys’ footwear, including work boots.

The tribunal suggested that quotas also be dropped for children’s footwear and for slippers.

It proposed that quotas be continued, however, on women’s and girls’ dress and casual footwear, since some Canadian producers “remain vulnerable to competition from imports” in this area.

It called for quotas to be removed from women’s and girls’ winter boots and injection-molded plasticfootwear.

It said quotas on women’s and girls’ footwear should be phased out over the next three years by increasing the quota level 10 per cent each year and by progressive reductions in the price level above which footwear is exempt from quotas.