The quota agreement negotiated by Washington and Beijing in 2005 expires at the end of December, reminding U.S. about the increased competition from cheap Chinese textiles. During 2005, US and China signed a deal to resolve issues over the import of Chinese clothing and textile products. In 2005, China’s exports of textile to US increased more than 50% and reached US $17.7 billion following the end of a global quota system. The sudden increase in textile, and apparel imports from China after 2001 led US to invoke a provision included in China’s WTO accession agreement. According to the agreement, if textiles and apparels imported from China causes a market disruption in US, the country may impose import quotas regulating the inflow of goods. The terms of agreement allow US to act unilaterally for one year, and later on should consult with China to continue the quota restrictions. This special safeguard provision for Chinese clothing and textile imports expires on December 31, 2008.
China – The Post Quota Beneficiary:
The termination of over 40 years of quotas on January 1, 2005, guided a new period for the global trade in clothing and textiles. After 10 years of transition under the World Trade Organization’s (WTO) Agreement on Textiles and Clothing (ATC), trade activities among the members of WTO were not subject to any quantity restrictions. The notion that the expiry of quotas might affect the textile and apparel trade in U.S. was subject to broad research. While some researches forecasted a shift in clothing and textile production to quota-constrained nations, there was also a disagreement on the size and pace of the production shift. Further, there was no idea of the nations that might suffer with a decline in their textile, and apparel exports at the expiry of ATC. Despite the contradictory opinions regarding the post effects of the expiry of ATC, the biggest beneficiary still remains to be China. Abundant availability of cheap and skilled labor, adequate infrastructure, and industrial capabilities would make China to have an optimum utilization of opportunities during the post quota period.
Export Constraints for China:
Despite the rosy hopes of China topping in textile and clothing exports to US, the country still faces some obstacles:
- US and other WTO members have retained the option to impose restrictions on Chinese imports, provided the imports may hamper the trade activities of the domestic markets.
- Various trade restrictions govern the international trade of textiles and clothing. If US can prove that the textile imports from China are sold in an illegal way, or below the cost, it can impose antidumping duties against China.
U.S. Clothing and Textile Trade with China:
China’s textile exports to US initially started during 2001, and accelerated during 2005. During the period, 2001-2004, textile exports of China were at a slow pace. In 2005, US imported textiles for 23 billion USD and clothing for $80 million USD, the highest as compared with any other WTO member countries. During 2006, China’s exports to US increased to 29.1% making a total of $100 million USD. China was ostensibly rising as a biggest supplier of clothing and textiles. The accession of China into WTO, and the expiry of ATC removed the trade barriers that were previously stopping them from exporting abundant clothes into US. China’s textile exports to US were 9.85% in 1997, and steadily increased to 27% in 2004, 83% in 2005, and 21% in 2006.
Due to the post quota benefits China is likely to enjoy, some US manufacturers may lose competitiveness and involve in retrenchments and layoffs. Though the recent decrease in the number of jobs is contemporaneous to the expiry of the ATC the timing and pace of the decline raises some doubts about the significance of apparent correlation. Domestic clothing production did not decrease, but actually increased after the quota elimination. Also, the year-on-year reduction in textile production occurred in 2001 which was not a year in which quotas were lifted. Added to this, while the value of U.S. clothing production continued its sharp decline since 2001, textile production nearly leveled off.
US Seeks TMP (Textile Monitoring Program):
U.S. Government has imposed safeguards on numerous categories of U.S. textile and apparel imports from China, which in turn, encouraged the United States and China to negotiate the bilateral that expires at year’s end. A few law-makers do believe that China is violating the US trade Laws. The National Council of Textile Organizations and other industry groups are concerned about the fact that China will make optimum utilization of this opportunity to dump huge quantities of high priced, heavily subsidized products into the US market.
Textile manufacturers of US seek monitoring of textile imports from China. Trade groups from 17 countries, supported by 73 members of Congress, urged the Bush administration to monitor textile and clothing imports from China for unfair pricing once quotas are removed at the end of the year. With the support of the National Cotton Council, textile associations, a labor union, and 73 U.S. Representatives led by Textile Caucus Co-Chairs Howard Coble and John Spratt sent a letter on September 26th to President Bush requesting him to extend the Textile Monitoring Program (TMP) to cover U.S. textile and apparel imports from China beginning on January 1, 2009, the very first day following the expiry of U.S.-China textile bilateral agreement signed in 2005. Under the Textile Monitoring Program, the Department of Commerce analyzes data from sensitive textile and apparel categories for possible dumping. If needed, it can even take required actions for anti-dumping duties.
Extending the monitoring program with China, after the expiry of the current regulations will empower the US Government to react quickly, if China attempts to dump its imports into the US markets thereby affecting the domestic trade activities.
References:
- http://www.clii.com.cn/english/
- http://www.fas.org
- www.forbes.com
- www.reuters.com
- http://www.aacb.com
- http://www.cotton.org (National Cotton Council of America)
- www.money.cnn.com
The National Council of Textile Organizations and other industry groups are concerned China will once again take this opportunity to illegally dump large quantities of artificially priced, heavily subsidized products into our market. Under the monitoring program, the Department of Commerce analyzes data from sensitive textile and apparel categories for possible dumping. If needed, it can open a probe that could lead to anti-dumping duties, industry officials say.
With the strong support of the National Cotton Council, textile associations and a labor union, 73 U.S. Representatives led by Textile Caucus Co-Chairs Howard Coble (R-NC) and John Spratt (D-SC) sent a letter on September 26 to President Bush urging his Administration to extend and expand the Textile Monitoring Program (TMP) to cover U.S. textile and apparel imports from China beginning on January 1, 2009, the first day following the expiration of a U.S.- China textile bilateral agreement signed in 2005. The TMP currently monitors U.S. apparel imports from Vietnam for illegal dumping. The National Cotton Council also joined 10 textile and fiber industry trade associations and the labor union UNITE HERE in a letter on September 28 to U.S. Secretary of Commerce Carlos Gutierrez and U.S. Trade Representative Susan Schwab making the same request.
"U.S. cotton is encouraged by this bipartisan congressional support for stronger trade enforcement", said NCC Chairman Larry McClendon, a Marianna, AR, producer and ginner. "Excessive textile and apparel imports disrupt the market and pose a threat to our industry."
The expiration of Chinese safeguards next year has raised grave concerns among the U.S. textile sectors and its workers, as well as the U.S. preference partners in the CAFTA and African countries that rely on domestic components.
To underscore this point, 17 international textile and apparel organizations sent letters to Secretary Gutierrez, Ambassador Schwab and the chairs and ranking members of the U.S. Senate Finance and the U.S. House Ways and Means Committees urging the extension and expansion of the TMP Concerns about dumping are not unwarranted, as the expiration of quotas in 2005 resulted in a 40 percent price drop on and a nearly 600 percent volume increase of U.S. textile and apparel imports from China, severely disrupting the market. This led the U.S. government to impose safeguards on numerous categories of U.S. textile and apparel imports from China, which in turn, encouraged the United States and China to negotiate the bilateral that expires at year's end.
References:
- http://www.clii.com.cn/english/news/show.asp?showid=27
- http://www.fas.org/sgp/crs/row/RL34106.pdf
- www.forbes.com
- www.reuters.com
- http://www.aacb.com/news/press.asp?id=4015
- http://www.cotton.org/index.cfm (National Cotton Council of America)
- www.money.cnn.com
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