29 December 2004
Countries Expect Bumpy Transition to New Textiles Trade System
China, as dominant exporter, viewed with concern
Washington -- World Trade Organization (WTO) countries are bracing for dramatic shifts in trade of textiles and apparel as industries across the globe try to adjust to a more open trade regime after the current quota system expires December 31.
Large textiles/apparel importing countries and smaller exporting nations are concerned that exports from China and India will surge once the quotas are removed, with devastating impact on millions of jobs in producing nations with less potent and competitive textiles/apparel industries.
The Multifiber Agreement reached in 1974 as part of the General Agreement on Tariffs and Trade (GATT) and its successor, the Agreement on Textiles and Clothing, scheduled to expire by the end of 2004, have governed trade in textiles and clothing through a system of import quotas set on a country-by-country basis.
The U.S. International Trade Commission (USITC) said in a February report that China is poised to become a dominant player in the U.S. textile and apparel market under the new regime because Chinese producers have the ability to make almost any type of textile and apparel product at any quality level at a competitive price. A 2004 WTO study said that China's share of global trade in textiles and clothing could more than double from 25 percent in 2002 to 50 percent after quotas are lifted.
Many developing countries, such as Bangladesh, Egypt, Madagascar, Sri Lanka and Uganda, worry that their products will be crowded out of large developed markets by rising Chinese and Indian imports.
A group of 10 developing nations led by Mauritius asked the WTO to assess the impact of the quota phase-out on individual countries. The group also asked the WTO for advice on how to manage the transition to the more open trade regime, according to an October 7 WTO news release.
But informal consultations among WTO members failed to produce any formal agreement on any form of help to more vulnerable producers. China, India and some other exporting nations argued that such producers should seek improved preferential treatment from the largest textiles-importing countries and assistance from multilateral financial institutions rather than relief from the WTO.
In a related development, producers from 51 developing countries have backed a petition filed in October by the U.S. textiles industry to limit U.S. imports of Chinese textiles and apparel in nine categories including socks, cotton and synthetic trousers, wool trousers, cotton and synthetic knit shirts, and underwear.
The Bush administration, citing market disruption concerns, decided October 22 to impose quotas for up to one year on sock imports from China, and by December 6 it had accepted for consideration requests in all nine categories.
In the 1980s, similar U.S. safeguard actions against imports of machine tools and automobiles from Japan led to voluntary export restraints by Japanese producers.
The U.S. interagency Committee for the Implementation of Textile Agreements (CITA) also agreed to consider the U.S. textiles industry's request for a re-application of quotas imposed in December 2003 on fabric and clothing imports from China in three other categories.
Such quotas can be levied under safeguards approved as part of the 2001 U.S.-China bilateral trade agreement, the pact under which the United States approved China's entry into the World Trade Organization (WTO).
But U.S. clothing retailers and importers, who have welcomed the quota-free system, argue that the administration has approved the requests for safeguards based on the mere threat of market disruption due to expected import surges, rather than on evidence of actual market disruption as required by law. Consequently, they filed suit December 2 to bar the Bush administration from imposing new quotas. Some retailers said that the threat of such an action has already disrupted their plans to import goods from China in 2005 and that the action itself would restrict expected benefits for consumers, according to news reports.
China indirectly acknowledged that the transition to the new trade regime might be bumpy when it announced December 12 that it will begin January 1, 2005, taxing its textiles and clothing exports to "ensure a smooth transition for textile integration following the end of the quota system."
The announcement has been received with caution by the Bush administration and the European Council, the governing body of the European Union (EU), because the announcement did not provide details on the magnitude of export duties China intends to impose.
The Bush administration decided to consider re-imposition of quotas on imports from China after the Chinese announcement. The EU agreed December 22 to make it easier for European textiles firms to file complaints against the dumping of textiles imports from China on European markets.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
