U.S. textile manufacturers are receiving help from an unexpected quarter in their fight to keep from being swamped by a tsunami of Chinese products when worldwide textile and apparel quotas are phased out in January.
In recent weeks, 71 textile manufacturing and exporting associations from 38 countries signed the Istanbul Declaration, a letter asking the World Trade Organization's director general for an emergency meeting of the WTO and a delay in the phaseout of worldwide textile and apparel quotas to 2008.
The associations aren't taking those steps out of the goodness of their heart. After years of profiting from special quotas for shipping products to the United States, the signatories fear they're about to have their ox gored.
Under the 1995 Agreement on Textiles and Clothing, WTO members have until Jan. 1, 2005, to remove quotas for textile and apparel products. But few signers anticipated the impact China would have on the world textile market when it joined the WTO in January 2002.
The chairman of the Confederation of Garments Exporters of the Philippines, one of the latest groups to sign the Istanbul Declaration, summed up the worries of many signatories on May 27: “If quotas are removed in 2005, China will unfairly control two-thirds of the world's garment and textile exports as studies indicate. China currently accounts for 40 percent of the global exports, and it is continuously growing.”
Many developing and least developed countries dependent on textile and apparel export markets face economic ruin if importers and retailers shift orders to take advantage of China's heavily subsidized textile exports.
Over the last two years, U.S. importers have increased orders from China by 830 percent in 29 apparel quotas where China was removed from quota following its WTO entry. Chinese marketshare of those products rose from 9 percent at the beginning of 2002 to 65 percent by March 2004.
“Not only will the United States lose more than 75 percent of its textile and apparel manufacturing sector,” said Auggie Tantillo of the American Manufacturing Trade Action Coalition, “but millions of the expected 30 million job losses will occur in countries on the frontline in the war on terrorism such as Bangladesh, Sri Lanka, Malaysia, Thailand, Indonesia, Morocco, Tunisia, Turkey, Jordan and Egypt.”
The Istanbul Declaration accuses China's textile sector of a number of trade-distorting practices, currency undervaluation, state subsidies and a “proliferation of non-performing loans and rebate schemes.” Such practices allowed China to drop prices for apparel and textile products by 75 percent, it noted.
AMTAC's leaders note the nominal figures for China's exports probably don't reflect reality. U.S. trade officials recently cut Vietnam's $1.8 billion textile quota by $80 million after U.S. Customs inspectors discovered products with Vietnamese labels didn't come from Vietnam.
U.S. manufacturers who criticized the granting of the $1.8 billion quota last year have said Vietnamese manufacturers are shipping Chinese products to establish export levels that would justify higher quotas for Vietnamese products.