Interview with Mr Cass Johnson

While the US textile industry is the third largest exporter of textile products in the world, certain sectors of the industry are facing difficult times. For example, US textile mills that produce yarns and fabrics for apparel saw significant shipment and employment declines last year. Other sectors, the industrial fabrics, nonwovens and specialty fabrics are doing better.

The US government took quick and decisive action to keep China from overwhelming the US textile and apparel market when it approved safeguard petitions filed by NCTO to re-impose safeguards on China in early 2005. The result was that our industry and those in other major exporting countries in the world- including India, Pakistan, Bangladesh, Turkey, Mexico, etc.- did not see their industries swept under the Chinese tidal wave. This was a tremendous help not only to our industry but to the developing world as well.

Over time, NCTO has been tracking China's progress in apparel categories where safeguards were not been applied. The results are startling and give us a taste of things to come. Within three years of quotas being removed, China's market share went from an average 21 percent US market share to a 65 percent US market share, with the runner-up (Vietnam) attaining only a 4 percent market share. Nearly every other major supplier, including powerhouses such as India, Bangladesh, Pakistan, Turkey and Mexico, lost significant amounts of market share. In volume terms, Chinese exports in these categories increased by 1.5 billion square meters while the rest of the world lost nearly 350 million square meters. I understand that the situation in Europe is almost exactly the same.

This is clearly monopolistic behavior and should give everyone pause, particularly since the remaining US safeguards on the most sensitive apparel categories will be removed on January 1, 2009. Under current WTO rules, these safeguards cannot be re-imposed. While a number of countries are working hard at the WTO to get a new safeguard-Turkey, the Western Hemisphere (CAFTA/NAFTA countries), North Africa and the Middle Eastern countries-they are being blocked by China and, oddly enough, India and Pakistan. India and Pakistan stand to lose as much as the rest of us if China is granted unrestrained access to the US and EU textile and apparel markets, but their governments are instead standing shoulder to shoulder with China in preventing safeguards from being re-applied. This is a puzzling position that they may soon come to regret. When quotas were removed on China during five months in 2005, Chinese exports increased as much as 1,500 percent in the very same product categories that India and Pakistan export in.

As you can see, the core problem of the Chinese government's continuing intervention in its textile sector (as well as the rest of manufacturing) remains to be dealt with. Our industry is encouraged that the US Congress is now taking a more active role in China policy and NCTO is part of a broad coalition of manufacturing, agricultural and union groups that are pressing for punitive tariffs against Chinese imports if China keeps uses its currency as an economic weapon. We do not know if this will happen in time but the mood in Congress has certainly sharpened where China is concerned. We expect to see a major China bill coming out of the US Congress by the end of the year.

The removal of quotas has allowed countries that heavily subsidize their textile and apparel exports to gain an unfair advantage in the global marketplace. Producers in these countries have taken market share away from the US industry's major export markets - the NAFTA and CAFTA trade preference areas - as well as other suppliers. As a result, US textile mills have lost business and have had to lay off workers.

While quotas were in place, the ability of bad actors to utilize unfair and illegal subsidies to dominate the market was held in check. With quotas either going or gone, these bad actors are now poised to take the lion's share of the world's textile and apparel trade. At NCTO, we are looking closely at how we can use US trade law and WTO rules to go after these subsidies themselves.

I am pleased to report that in recent months, the US government has taken a more aggressive stand on countries that subsidize their manufacturing sectors. Specifically, the government has agreed to self initiate dumping cases against Vietnam, if Vietnam dumps apparel in the US market. And, on a much broader and perhaps more significant level, the government recently overturned 20 years of precedent by agreeing to impose punitive tariffs because of Chinese government subsidies, including banking, tax and export subsidies, in a recent case on glossy paper. Both these actions are indicative, I think, of a rising tide of public concern in the United States about countries that don't play by the rules and use unfair trade practices to destroy American businesses and take American jobs.

In terms of overall contributions, I think the China safeguards have to stand out. If NCTO had not acted, there would be no safeguards against China and most exporters around the world would be in serious trouble today. There is little doubt that major export markets in the Asia, the Western Hemisphere and Africa markets would be in shambles if NCTO had not taken the lead.

I think most textile producers around the world understand the threat. NCTO is a founding member of The Global Alliance for Fair Trade in Textiles (GAAFT), which includes textile and apparel trade associations from more than 60 countries. The major purpose of this group is to prevent governments like China from gaining control of this vital sector.

Through its safeguard petitions, NCTO was able to prevent China from taking over the biggest product categories (such as trousers, knit shirts, woven shirts and underwear). Today, the Chinese share is only 12 percent in these categories, compared to 65 percent today in quota free categories. I think this may have created an illusion among some countries that things are OK because their major export markets have not yet had to compete head to head with China. As I noted earlier, the governments of India and Pakistan, in particular, continue to aggressively support China's position on textiles at the WTO. We are all going to have work together if our industries are not suffer enormously when the existing safeguards are removed.

NCTO is an organization that believes in the benefits of trade and knows that our textile manufacturers can compete with anyone in the world when the rules are uniformly applied and countries are required to live up to their international commitments. The problems arise, as I have laid out above, when companies are forced to compete against predatory governments that are willing to sacrifice everyone else for their own benefit. NCTO is aggressively reviewing our options within the framework of US trade law, and looks forward to continuing to work with other associations and governments to prevent a few bad actors from establishing a cartel in textile and apparel production.

As noted above, the prognosis for the sector is complicated. In the long run, the industry is doing what it needs to do in order to survive. The industry continues to invest heavily in new plants and equipment- in fact it invests 50 percent more than the other US manufacturers in new technology. And the industry continues to develop new products with more and more mills concentrating their efforts on higher value added goods.

Unfortunately, US textile mills all too often find themselves competing against foreign governments, rather than just foreign mills. That is a hard battle to win. China, for example, recently announced its eleventh Five Year Plan for its textile sector and the list of subsidies and hand outs its industry receives from the central government is a sight to behold.

A noted US economist and Nobel prize winner, Robert Samuelson, recently wrote 'It is not "protectionist"(I am a long-standing free-trader) to complain about policies that are predatory; China's are just that' and then went on to note that China's policies threaten to upend the entire post World War II trading system. So China is the wild card, not only for the textile industry in the US but for textile and apparel producers around the globe.