Highlights of Annual Statistical Report on Imports of Textiles and Apparel: 1996

On January 1, 1995, the Uruguay Round Agreement on Textiles and Clothing (ATC) entered into force as part of the World Trade Organization (WTO) agreements, and it replaced the Multifiber Arrangement (MFA). The MFA, which had governed world textile and apparel trade since 1974, permitted the use of quotas without compensation, which is contrary to the general prohibition against their use under the General Agreement on Tariffs and Trade (GATT).

Under the ATC, textiles and apparel will be gradually "integrated" into the GATT regime, that is, be brought under GATT discipline and be subject to the same rules as goods of other sectors. As WTO countries integrate their textile and apparel trade into the GATT regime, they are obligated to eliminate quotas on imports of such items from other WTO countries.

The GATT integration process will occur over a 10-year period in three stages. The first stage began on January 1, 1995, when WTO countries were obligated to integrate at least 16 percent of their sector trade into the GATT regime, based on 1990 import volume, and to increase the annual growth rates for quotas still in place with major suppliers by 16 percent.[1] The second stage begins in 1998, when at least another 17 percent of the trade is to be integrated, followed by at least an additional 18 percent in 2002. The rest of the trade is to be integrated at the end of the 10-year period. None of the products integrated by the United States in the first stage was under quota, and most of the goods scheduled for integration in the second and third stages either were not under quota or had underutilized quotas.[2]

[1] The acceleration of quota growth rates is based on the rates specified in the bilateral MFA agreements in place on December 31, 1994. In the second and third stages of GATT integration, quota growth for major suppliers is to be increased by another 25 and 27 percent, respectively. For small suppliers (those accounting for 1.2 percent or less of an importing country's total quotas as of December 31, 1991), quota growth was advanced by one stage, that is, growth rates were increased by 25 percent in the first stage.

[2] The Statement of Administrative Action (SAA) accompanying the U.S. Uruguay Round Agreements implementing legislation states that the Committee for the Implementation of Textile Agreements (CITA), in drawing up the lists of products, was to defer the integration of the most sensitive goods until the end of the 10-year period. See SAA at 115; see also CITA, "Final List of Products for Second, Third and Final Phase Integration of Textile and Apparel Products into GATT 1994," published in the Federal Register of May 1, 1995 (60 F.R. 21075).

The United States has quotas on textiles and apparel of cotton, other vegetable fibers, wool, manmade fibers, and silk blends (hereafter referred to as MFA products) from 46 countries (table 1). Of these countries, 37 are WTO members whose shipments are subject to the terms of the ATC. For Mexico, a WTO member, the North American Free-Trade Agreement (NAFTA) provides for the elimination of limits on "nonoriginating" textiles and apparel by 2004. Imports of MFA products from non-WTO members are subject to section 204 of the Agricultural Act of 1956.

U.S. Imports

U.S. imports of MFA products in 1996 reached a record 19.1 billion equivalent square meters (SMEs) valued at $45.9 billion, representing a gain of 4.1 percent, or 757 million SMEs, over the 1995 level (tables 2-5). The increase was less than that in 1995, when imports grew by 6.0 percent, or by 1.0 billion SMEs. Much of the 1996 slowdown occurred in apparel imports, which rose by 4.4 percent, or by 404 million SMEs, to 9.7 billion SMEs valued at $36.4 billion, following 1995 growth of 9.9 percent, or 834 million SMEs. Apparel accounted for 51 percent of the total quantity but for 79 percent of the total value of U.S. imports of MFA products in 1996. Textile imports grew by 3.9 percent, or by 353 million SMEs, to 9.4 billion SMEs valued at $9.5 billion. Among the major textile products, yarn imports rose by 13.3 percent to 1.9 billion SMEs and imports of made-up articles and miscellaneous textiles increased by 3.2 percent to 3.3 billion SMEs. Fabric imports, which fell by 5.4 percent in 1995, rose by less than 1 percent in 1996 to about 4.2 billion SMEs.

Import Sources

The ongoing shift in U.S. textile and apparel imports continued in 1996, with countries benefiting from preferential market access, namely NAFTA partners Mexico and Canada, and the Caribbean Basin Initiative (CBI) countries, assuming a growing role. U.S. imports of MFA goods from Mexico grew by 42 percent to 2.2 billion SMEs valued at $4.2 billion in 1996, and have tripled since the enactment of NAFTA in 1994. As a result, Mexico has surpassed the Republic of Korea, Hong Kong, Taiwan, Canada, and China to become the largest supplier by quantity (11.6 percent of the total) and the second-largest by value (9.2 percent) after China. The majority of Mexico's shipments in 1996 comprised apparel (1.1 billion SMEs valued at $3.6 billion), for which it was the largest supplier by quantity and the third-largest by value after Hong Kong ($3.9 billion) and China ($3.8 billion).

Nearly three-fourths of the 1996 imports from Mexico, or $3.1 billion, entered under the 9802 tariff provision, which provides a duty exemption for U.S.-made components returned to the United States as parts of articles assembled abroad (table 6). In general, duty is assessed on the value added abroad and not on the value of the U.S. parts sent offshore for assembly. These parts must be exported ready for assembly and can be of either U.S. or foreign fabric so long as the cloth is cut to shape in the United States. Under NAFTA, however, apparel and other textile articles assembled in Mexico from fabric both made and cut in the United States may enter free of duty. As such, the vast majority of the 9802 textile and apparel imports from Mexico (87 percent in 1996) enters free of duties and quotas.

U.S. imports of MFA goods from Canada rose by 15 percent in 1996, and by 179 percent since 1989, when the United States-Canada Free Trade Agreement (CFTA) went into effect.[3] With 1996 shipments of 1.8 billion SMEs valued at $2.0 billion, Canada is the second-largest supplier by quantity but the sixth-largest by value. All but a small part of the import quantity from Canada consisted of textiles such as yarn and fabric. Canada remained the largest supplier of textiles by quantity (1.7 billion SMEs) and the second-largest by value ($1.0 billion) after China ($1.1 billion). A major portion of U.S. textile trade with Canada is intrafirm trade (i.e., cross-border trade between separate operations of individual firms). Apparel imports from Canada are also growing in importance; in 1996, they rose by 14 percent to 140 million SMEs valued at $948 million.

[3] The duty phaseout schedule of the CFTA was incorporated and continued under NAFTA.

U.S. imports of MFA goods from CBI countries grew by 10 percent in 1996, to 2.4 billion SMEs valued at $6.1 billion (table 6). The increase was the smallest since 1990 and had followed growth of 22 percent in 1995 and 15 percent in 1994. Although most CBI countries individually are small suppliers of MFA goods, as a group they are the largest source, with 12.5 percent of the total quantity and with 13.3 percent of the total value in 1996. The CBI shipments consist almost entirely of apparel, most of which enters under the 9802 tariff provision. Under a special access program set up for CBI countries within the framework of the 9802 provision, apparel assembled in participating countries from U.S.-made and -cut fabric is eligible to enter under preferential quotas known as guaranteed access levels (GALs). However, whereas garments assembled in Mexico from U.S.-made and -cut fabric enter free of duty under NAFTA, similar CBI goods are still subject to duty on the value added offshore.[4] Moreover, the 50-percent devaluation of the Mexican peso during December 1994-January 1995 further affected the competitive balance between Mexico and CBI countries by effectively reducing dollar prices of Mexican goods in the U.S. market.

[4] For every $10 in f.o.b. value, a typical CBI garment entered under the 9802 provision contains $6.40 in duty-free U.S. components and $3.60 in dutiable, foreign value-added. Applying the 1996 trade-weighted tariff for apparel classifiable in chapters 61 and 62 of the Harmonized Tariff Schedule of the United States of 16.7 percent to the foreign value-added, yields an average duty of $0.60, or an ad valorem equivalent of 6 percent. For further discussion of 9802 apparel trade, see USITC, Production Sharing: Use of U.S. Components and Materials in Foreign Assembly Operations, 1992-1995 (investigation No. 332-237), USITC publication 3032, Apr. 1997, p. 3-1.

U.S. imports of MFA products from Asia (including Oceania) declined slightly again in 1996, by less than 1 percent, to 10.3 billion SMEs valued at $27 billion (table 4). Asia supplied 54 percent of the total quantity of U.S. MFA-product imports in 1996, down from 57 percent in 1995 and 63 percent in 1993. The relative decline of Asia in recent years has mainly reflected smaller shipments from the four largest suppliers, China and the traditional Big Three Asian sources Hong Kong, Taiwan, and the Republic of Korea. In addition, declines were posted in 1996 shipments from several ASEAN (Association of South East Asian Nations) countries, which had benefited from a shift in trade from the Big Three suppliers during the past decade.

China remained the largest foreign supplier of MFA goods by value in 1996, though the volume of its shipments fell for the third consecutive year, by 7.2 percent, to 1.6 billion SMEs valued at $4.9 billion. China's share of U.S. MFA-product imports fell to 8.6 percent in 1996 from 9.7 percent in 1995 and from 13.3 percent in 1993. The decline partly reflected limited quota growth. Under the 1994 bilateral textile pact with China, allowable quota growth was zero in 1994 and 1 percent on average in 1995 and 1996.[5] In February 1997, the United States reached agreement with China on a new textile pact that generally extends current quota arrangements in Chinese textile and apparel exports to the United States for 4 years, but reduces quotas in areas of repeated transshipment violations.[6]

[5] A separate agreement with China signed in 1994 brought chiefly silk apparel under quota for the first time.

[6] Office of the United States Trade Representative, "U.S. and China Reach Four-Year Textile Trade Agreement U.S. Gains Market Access in China and Targets Areas of Transshipment Violations for Cutbacks," press release No. 97-07, Feb. 2, 1997, found at Internet http://www.ustr.gov/releases/1997/02/97-07.html.

The traditional Big Three Asian suppliers of textiles and apparel continued to decline in relative importance, reflecting rising operating costs, labor shortages, and growing competition from lower cost countries. U.S. imports of MFA goods from the Big Three fell by 4.4 percent in 1996, to 2.8 billion SMEs valued at $8.8 billion. The Big Three supplied 14.8 percent of the total quantity of U.S. MFA-product imports in 1996, down from 16.1 percent a year earlier and from 32 percent 10 years ago.

U.S. imports of MFA goods from the ASEAN countries Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam together rose by less than 1 percent in 1996, to 2.2 billion SMEs valued at $5.7 billion. Among the major ASEAN suppliers, imports from Indonesia grew by 12 percent, to 605 million SMEs, and those from the Philippines rose by 2 percent, to 622 million SMEs. By contrast, declines occurred in imports from Malaysia of 8.8 percent, to 229 million SMEs; Thailand of 5.1 percent, to 631 million; and Singapore of about 15 percent, to 72 million SMEs.

One area of Asia showing significant growth in textile and apparel shipments to the United States is South Asia, led by India, Pakistan, Bangladesh, and Sri Lanka. U.S. imports of MFA products from these 4 countries, which are among the lowest cost suppliers in Asia, grew by a combined 9.4 percent in 1996, to 2.7 billion SMEs valued at $5.1 billion. The increase, however, was down from gains of 15 percent in 1995 and 11 percent in 1994, owing to slower growth in shipments from all but India. U.S. imports of MFA goods from India, after rising by 11 percent in 1995, grew by 16 percent in 1996 to 870 million SMEs valued at $1.7 billion, making it the sixth-largest volume supplier. Imports from Pakistan, the seventh-largest volume supplier, increased by 8.8 percent in 1996, down from a 10-percent gain a year earlier, to 815 million SMEs valued at $1.0 billion. The growth in imports from Bangladesh and Sri Lanka slowed considerably in 1996, to 3.6 and 7.3 percent, respectively, from slightly more than 20 percent in 1995.

One area of Asia showing significant growth in textile and apparel shipments to the United States is South Asia, led by India, Pakistan, Bangladesh, and Sri Lanka. U.S. imports of MFA products from these 4 countries, which are among the lowest cost suppliers in Asia, grew by a combined 9.4 percent in 1996, to 2.7 billion SMEs valued at $5.1 billion. The increase, however, was down from gains of 15 percent in 1995 and 11 percent in 1994, owing to slower growth in shipments from all but India. U.S. imports of MFA goods from India, after rising by 11 percent in 1995, grew by 16 percent in 1996 to 870 million SMEs valued at $1.7 billion, making it the sixth-largest volume supplier. Imports from Pakistan, the seventh-largest volume supplier, increased by 8.8 percent in 1996, down from a 10-percent gain a year earlier, to 815 million SMEs valued at $1.0 billion. The growth in imports from Bangladesh and Sri Lanka slowed considerably in 1996, to 3.6 and 7.3 percent, respectively, from slightly more than 20 percent in 1995.

U.S. imports of MFA goods from Europe in 1996 fell for the second consecutive year, by 7.6 percent, to 1.8 billion SMEs valued at $5.0 billion. Imports from the European Union declined by 5.3 percent, to 1.2 billion SMEs valued at about $3.5 billion, and those from the rest of Europe decreased by 11.9 percent, to 577 million SMEs valued at $1.5 billion.

Africa also experienced a decline in textile and apparel shipments to the United States in 1996, by 20 percent, to 300 million SMEs valued at $754 million (table 4). The decline in African shipments resulted mainly from smaller shipments from Egypt, the largest supplier on the continent. Imports from sub-Saharan Africa fell again in 1996, by 9.2 percent, to 132 million SMEs valued at $383 million. They had fallen by 1.3 percent in 1995. Legislation similar to that introduced in the U.S. Congress in September 1996 which would increase U.S. market access for textiles and apparel from sub-Saharan Africa is expected to be reintroduced in the 105th Congress.[7]

[7] See letter from Bill Archer, Chairman, Committee on Ways and Means, U.S. House of Representatives, to the U.S. International Trade Commission of January 13, 1997. The letter also requested that the Commission conduct an investigation and prepare a report under section 332(g) of the Tariff Act of 1930 regarding the likely impact on U.S. textile and apparel production and trade of H.R. 4198, "African Growth and Opportunity: The End of Dependency Act of 1996." The Commission is scheduled to provide its report on investigation No. 332-379, Likely Impact of Providing Quota-Free and Duty-Free Entry to Textiles and Apparel from Sub-Saharan Africa, by September 2, 1997 (see the Commission's notice in the Federal Register of February 21, 1997 (62 F.R. 8036).