The Economics and Politics of Socks

NPR did a fascinating two-part story on the globalization of the sock industry. Here's a snippet I found particularly interesting:

Baker tells me he can make a sock core just as cheaply as anyone in China or Honduras. The machine costs the same. So does the yarn. There's hardly any labor.

The big cost, and the reason more than 100 Fort Payne mills have shut down recently, comes in the next step.

"Generally, the biggest difference is the closing of the toes or the seaming of the sock," Baker said.

Take your shoe off. Look at your sock. That little line near your toes, that seam — it is what's killing the U.S. sock industry.

The really ironic thing is that under the Central America Free Trade Agreement (passed in 2005) the old tariff on imported socks will be reinstated. So, the American sock industry will be saved, people in Honduran sock factories will lose their jobs, and American consumers will have to pay more for socks. Kudos to our legislators. You can check out the full story here:

World Sock Capital Suffers From Duty-Free Imports