One of the consequences is that the retail price for those goods that are manufactured domestically wil go up, which will add to a slight increase in the rate of inflation. The other thing is that foreign manufacturers of cotton goods from countries not affected by the quota against China will attempt to increase their exports to the U.S. If they succeed they will price their goods slightly below what domestic manufacturers are charging, which means that the anticipated demand for domestic cotton clothing will be dampened. U.S. clothes makers will then seek protection against these competitors too. If that should happen these countries will eventually retaliate against the U.S. In the meantime, the cost of cotton clothing is this country will continue to rise.

The announcement came just three days after the administration published data showing that imports of cotton knit shirts increased 1,257 percent in the first three months of 2005 compared with the first quarter of 2004. Imports of Chinese cotton trousers jumped 1,500 percent, while imports of underwear tripled.

What that shows is that we were massively overpaying before they took out the barrier.

One of the consequences is that the retail price for those goods that are manufactured domestically will go up, which will add to a slight increase in the rate of inflation.

I'm not sure about this. If the domestically-made items were pushed off the shelves for only three months, shouldn't the producers be able to return to production as before with little change in price? Most Chinese exporters were actually American companies with Chinese factories (like Levi-Strauss). These rules were known years ago and planned by American companies. They just turned up the spigots in China on January 1, 2005. Other companies with factories from Viet Nam, etc. may jump and begin exporting more to our market. Unless they were near their quotas ... I dunna know about that.

What could happen is China can begin flooding the EU and other markets with cheap American labels. So does a pair of Levis made in China count toward our 'exports' or China's?

It's not just cotton. It's jets, and several other products Europe is trying the have tarriffed because the USofA isn't in accord with the trade agreements we've signed onto. It's Latin America finding free trade with folks who (at least for now) aren't pouring cultural hegemony all over the products like syrup on an ice cream sundae more attractive than ever. It's all the talk of diversifying reserve currencies.

I understand all that feeds into all this. Butteh interactions are more entangled than I can trace through. I just know for sure that, at least short term, it's not good.

Oddly, the trend towards "free trade" ended several years ago without significant reaction. The USA is not especially prone to breaking trade agreements; we just receive more attention because (a) the USA is usually assumed to be run by neoliberals and (b) we acout for 1.6 trillion USD in annual imports, and (c) the Uruguay Round of the GATT (that also created the WTO) favors existing industrial policies of the EU member states, Canada's, and Australia's. This is becaus eof the exemption of value-added taxes(VAT) from WTO regulations. They still restrict trade, but the WTO rules expressly disallow any regulation of VATs.

Trade has continued to grow, but "free trade" is a highly subjectively defined thing: if by lower tariffs or duties, then global trade has been almost entirely "free" since 1993. If by distortions inflicted by state policies, I would say trade is becoming less free, not more. If by tariff revenue, one can simply point out that a carefully designed tariff may reduce tariff revenue since imports of the item my decline, so tariff revenues are a notoriously unreliable measure.

If you want to be worried about something, worry about the unsustainable current account balance. EU member states want it as high as possible with their own countries, and expect us to balance it by running a moster surplus with the rest of the world. The Chinese and Japanese demand the same thing. Our own government may be powerful, but they have no influence over our trade flows and they don't seem to (sincerely) care about them.

Microeconomic theory predicts that if demand remains constant and domestic producers succeed in having quotas and/or tariffs imposed on manufacturers of imported goods then domestic producers will raise the prices of their goods to the level of the added tariffs. If, later, demand decreases then domestic producers will only lower their prices to the level that was in effect at the time quotas and tariffs were imposed on foreign products.

Domestic producers will justify their actions on the grounds that the prices they previously charged were artificially deflated due to unfair competition from foreign producers.