U.S. and Chinese trade representatives have announced a three-year agreement aimed at reining in U.S. imports of Chinese textile and apparel products in all or parts of 34 sensitive categories.
Ambassador Rob Portman, the U.S. Trade Representative, and Chinese Commerce Minister Bo Xilai signed the pact in London where they were attending a meeting of World Trade Organization members Nov. 8.
The agreement, the result of nearly two months of negotiations, could help stop surges in Chinese textile and apparel imports that have occurred routinely since Multi-Fiber-Arrangement quotas ended on Jan. 1, allowing China to ship virtually unlimited quantities of those products to the United States.
Spokesmen for U.S. textile manufacturing organizations hailed the agreement and thanked the USTR for refusing to give into Chinese demands for weaker import rules. They said the tougher restrictions should mean no more safeguard filings for the industry in the 34 sensitive categories.
“Today’s agreement vindicates the U.S. textile industry’s decision in 2003 to aggressively use the safeguard process to persuade all parties of the need for a comprehensive arrangement,” said National Textile Association President Karl Spilhaus.
The NTA and other organizations such as the American Manufacturing Trade Action Coalition filed a number of safeguard petitions in 2004 and 2005. The petitions, allowed under China’s 2002 accession agreement to the WTO, limit the growth in imports to 7.5 percent from year to year.
“This is the most important textile agreement in 10 years, “ said AMTAC Executive Director Auggie Tantillo, comparing it to the 1995 Multi-Fiber Arrangement that began the process of phasing out textile quotas worldwide.
“This bilateral agreement represents a necessary and welcome step towards addressing China’s unfair trade practices and highly disruptive levels of textile trade. The value of this agreement is clear: U.S. imports from China in the categories covered by this deal total more than $5 billion in 2005 alone.”
They said much of the credit for the agreement was due to the persistence of congressmen like Rep. Robin Hayes, R-N.C., who received administration assurances that it would do more to reduce the surge of Chinese imports in exchange for his vote for the Central American Free Trade Agreement in July.
“We want to thank Ambassador Portman, Commerce Secretary Carlos Gutierrez, Chief Textile Negotiator David Spooner, Deputy Assistant Secretary for Textiles, Apparel and Consumer Goods Jim Leonard, and the Committee for the Implementation of Textile Agreements for their hard work to make this deal a reality,” said Spilhaus.
“We also are deeply appreciative of the strong support demonstrated by the Textile Caucus members in the U.S. House and U.S. Senate. Without the dogged determination of those public servants, this deal would not have been possible.”
The U.S. Trade Representative’s Office said specific growth rates vary slightly from category to category, but in general the agreement sets growth rates for apparel categories at 10 percent in 2006, 12.5 percent in 2007, and 15 percent in 2008. For textile products, the rates are 12.5 percent in 2006 and 2007 and 16 percent in 2008. That’s compared to growth rates of more than 1,000 percent in some categories in the first eight months of 2005 vs. the same period in 2004 when the Multi-Fiber Arrangement quotas were still in effect.
“When compared to China’s growth so far, the agreement has undeniable benefits,” said Tantillo. “For the categories covered by the agreement, year-to-date August 2005 imports from China have soared 115 percent by volume compared to 2004, 185 percent for apparel and 44 percent for textiles. Some categories, such as cotton trousers, cotton knit shirts and synthetic filament fabric, have even seen growth in excess of 1,000 percent.”
The effective growth rate is below the rates stated above because the base levels agreed upon are generally lower than what they would have been for 2006 under the normal safeguard renewal process. Example: For the categories where safeguards are currently in place, China gets just an additional 4 percent growth over the life of the agreement than what they would have gotten provided that safeguard reapplications were approved on Jan. 1 of each year.
The agreement guarantees the reapplication of quotas each year through 2008 for all categories covered by the deal. “Under the normal safeguard process, quotas must be reapplied for each year, and approval was uncertain,” said Tantillo.
“The importance of locking in future safeguards was clearly demonstrated by the numerous delays, such as those encountered as a result of the lawsuit filed by the U.S. Association of Importers of Textiles and Apparel, which stalled the implementation of safeguards in 2004 and 2005 and allowed the 115 percent growth cited above.”
The injunction issued in the USA-ITA case may have been a plus for the textile manufacturers, however.
“We told the government last summer that you need to have the safeguards in place in January or see 1,000-percent increases in imports,” said Tantillo. “Instead, you saw 1,200- and 1,300-percent increases. It showed that China could and would dominate the market if given the opportunity.”
While the vast majority of categories of interest to the U.S. textile industry are covered, he said, the industry might want to file additional safeguard cases should problems arise in the future.
“While the agreement contains language that expresses that the U.S. should show restraint with future use of the safeguard, it does not undermine the industry’s future rights to file cases and have them approved if they are meritorious,” said Spilhaus.
Tantillo said the agreement also buys time for the U.S. textile industry to seek provisions in the Doha Round WTO negotiations that will prevent China from monopolizing the world textile and apparel market when the U.S.-China Bilateral Agreement expires.
“We’re not saying we’re trying to create Fortress America,” he said. “What we are saying is while we’re doing what is necessary to invest in industry to make us cutting edge, we have to have a reasonable trading environment so that people who don’t play by the rules are limited in their ability to damage the market and displace our work force.”
He said that U.S. yarn manufacturers are the most modern producers in the world compared to China or anyone else. “This is a function of investment, and the fact this is a highly capital intensive and high tech sector. As a result, we can compete way into the future as long as the trading rules allow people who have a competitive advantage to prosper.
“China has been using its natural advantages – unlimited cheap labor – in combination with unfair trade practices,” he noted. “If we don’t get relief, we’re going to get wiped out and that will be a travesty.”
“Ten years form now we could see world where China controls textile and apparel trade,” said Cass Johnson, president of the National Council of Textile Organizations. “Will the rest of the world allow China to do that or come together and force China to remove some of these unfair trade practices? If we don’t see, we will see one major player – China – and very little else.”
The textile manufacturers say the combined value of total U.S. imports in the categories covered by the agreement is $33.4 billion for year-to-date 2005, with imports from China accounting for almost $5.1 billion of that total.
The value of the Chinese imports covered by the petitions amounts to approximately 33 percent of the $15.4 billion in textile and apparel imports from China and 8.5 percent of the $59.3 billion in imports from the world (including China) in 2005.
In terms of the $153 billion in total U.S. imports of all goods from China in 2005, these petitions affect only 3.3 percent of that trade.
In the past 12 months (year-ending August 2005), the United States imported $88.2 billion in textile and apparel products from the rest of the world, including $20.6 billion from China. $49.3 billion of those total imports, including $6.25 billion in imports from China, are covered in this deal.