Though the quotas were originally designed to protect rich county producers, with hindsight it is clear that their most striking effect was as foreign aid for smaller developing countries. Because the quotas constrained imports from the large competitive producers such as India and China, the quotas preserved a share of the US and European markets for smaller countries such as Sri Lanka and Mauritius. And by preserving a piece of the market for these countries, the quotas contributed to economic development. That said, the quotas were also quite distorting, and worked against poor countries in aggregate. In summary, the quotas enhanced the fortunes of smaller developing countries, constrained the fortunes of China and India, and did little to protect the US and European industries.

Well, first of all the U.S. industry is not in as bad shape as many say it is. Of course there have been significant job losses, particularly in apparel sewing, and this can largely be attributed to the American wage rates. Textile and apparel jobs in the US have been reduced by about 75% since shortly after World War II. But even though employment has been falling more or less continuously, for many of these years production was growing rapidly because of advances in automation and technology. Even in recent years, production of textiles in the US has been quite steady.

At the same time, however, we continue to have plant closings and consolidations. American firms face challenges not only in competing with other countries wage rates but also in accessing capital. The US financial markets have not been kind to the textile industry.

The subsidies have certainly been beneficial to the US farmers, but at substantial cost to American taxpayers. The cost of subsides to US cotton farmers has been about $4 billion per year recently. Of course, these subsidies are at the center of discussion right now at the WTO, where the US is charged with violating trade rules through these subsidies. And it was cotton subsidies more than any other factor that led to the breakdown of world trade talks in Cancun in 2003.

While the subsidies certainly put a lot of money in the American growers' pockets, the effects on poor country producers are not that clear because the majority of the subsides have been "delinked" from production. In other words, the farmers receive the subsidies even when they do not produce cotton. As a result, the effects of the subsidies on world production is a matter of some debate. Another factor is that much US government financial support goes to plant biology research at US universities, and the results of this research ultimately benefits growers everywhere.

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