A 'win-win' textile deal - especially for
the US By Emad Mekay
WASHINGTON - The broad textile trade deal
reached by the United States and China on November
8 is a compromise that will at least allow stable
development of the industry through 2008 after
Washington complained of surging Chinese imports,
officials from both nations said.
"We
sought an agreement that achieves the stability
and predictability sought by our retailers and
textile producers, who understandably found it
hard to plan in the face of unpredictable
safeguards," said US Trade Representative Robert
Portman.
Chinese Commerce Minister Bo
Xilai expressed similar sentiments: "The result of
the negotiations actually have provided
a
stable environment for the industries both in
China and the United States, and in this sense
[the agreement] is a win-win result," the Chinese
minister said at a joint press conference. The two
countries clashed over the issue after the
Multi-Fiber Agreement regulating global textile
exports expired at the beginning of the year.
The National Council of Textile
Organizations, a US industry group, says that
Chinese exports of apparel to the United States
have increased by over 800 million garments in
just the first five months of the year. It blamed
China, in part, for an acceleration of US textile
and apparel job losses, with 26,000 jobs lost and
19 textile plants closed. The US textile industry
has charged that the intense collaboration between
the Chinese government and its textile and apparel
sector enables Chinese exporters to under-price
competitors like Bangladesh and India, which pay
lower wages.
US lawmakers have complained
that China created an unbalanced trade climate,
and repeatedly threatened retaliation. They said
that China's manufacturing subsidies amount to
unfair trade practices that harm US workers, that
its agricultural and services sectors remain too
difficult for foreigners to penetrate, and that
violations of intellectual property rights remain
commonplace. Last year, the US-China trade deficit
hit a record high of US$162 billion, sending the
administration, lawmakers and economists searching
for ways to narrow the deficit. The textile
question has been particularly thorny, and the
deal signed November 8 eased some of the tensions
between the two countries over trade.
"We
don't expect that this single achievement can help
us to solve all the conflicts or problems between
us, but we don't want to see such a small trade
obstacle impede the overall trade and economic
cooperation between the two countries," Bo Xilai
said through a translator. One of the reasons the
issue has been problematic is that the textile
industry directly employs 1.9 million people in
China and some 20 million people in related
fields, and is seen as highly sensitive by the
Chinese government. Most of these workers come
from low-income families, giving the issue a
strong social dimension in the Asian nation.
Under the new deal, exports of most
Chinese clothing and textiles to the United States
will rise between eight and 10% in the first year,
by 12.5% in 2007, and by 15 to 16% in 2008. Those
rates are a clear win for US manufacturers. For
the categories covered by the agreement,
year-to-date imports from China have soared 115%
by volume compared to 2004, 185% for apparel and
44% for textiles. Some categories, such as cotton
trousers, cotton knit shirts and synthetic
fabrics, have even seen growth in excess of
1,000%. The deal also covers more than 30
individual products and sets quotas that begin at
low levels.
The agreement came after three
months of intense negotiations, and followed a
similar deal earlier this month on a new quota for
US imports of Chinese-made socks. The agreement
also gives the US the right to impose tighter
limits on Chinese exports of "core" apparel
products than any quotas that could have been
imposed under the China World Trade Organization
safeguard in 2006, which gives Washington the
right to restrict certain Chinese imports but only
after formal complaints from the local US
industry. Products classified as "core" apparel
include cotton knit shirts, man-made fiber knit
shirts, woven shirts, cotton trousers, trousers,
brassieres, and underwear.
A fact sheet by
the US Trade Representative says that the
agreement's broad coverage and three-year lifespan
will allow all private sector companies in China
and the United States and elsewhere in the world -
including African producers - to operate in a more
stable environment. China can now borrow small
amounts of its quota from future years to cover
over-shipments. In addition, the agreement's
January 1, 2006 start date will allow importers
and retailers to prepare for changes.
But
the Chinese say that the deal could have been
better given the fact that there is a huge
economic discrepancy between the United States and
China, and that the US gross domestic product
(GDP) per capita is still 40 times greater than
China's. "If the Chinese government cannot
maintain or secure the export interests of the
textile workers, then lots of people will lose
their jobs and this will have a greater impact,
much greater than [the impact on] the US," the
Chinese minister said. "We know that Ambassador
Portman has shown some flexibility at the end of
the day, but I don't think that's enough; actually
that's still a far cry from our original
expectations."
As reaction emerged from
the textile industry, it became clear that,
although the deal was broadly welcomed on both
sides of the Pacific, the reception was more tepid
in China, reflecting the fact that the agreed-upon
increases were substantially less than Chinese
exporters could have achieved in a free-trade
environment.
"Frankly speaking, this is a
very good agreement for the American worker,"
Portman said. Industry representative Augustine
Tantillo, executive director of the American
Manufacturing Trade Action Coalition, commented,
"US textile and apparel manufacturing workers and
their communities are [the] big winners today ...
This bilateral agreement represents a necessary
and welcome step towards addressing China's unfair
trade practices and highly disruptive levels of
textile trade."
James Chesnutt, president
of the National Spinning Company of Washington,
North Carolina, and chairman of the National
Council of Textile Organizations, noted: "Under
this new agreement, the US industry will know with
certainty that China will not be able to flood the
US market during the next three years." But
Chesnutt also acknowledged, "the threat from China
is not eliminated by this agreement, only
delayed." Academic expert Peter Kilduff, a
professor at the University of North Carolina at
Greensboro who specializes in the textile
industry, also pointed to the transitory effects
of the deal, saying: "There's a balloon effect.
You squeeze in one place, and the pressure just
gets transferred someplace else."
Indeed,
many Chinese textile producers have already said
that they plan to shift production to Southeast
Asian countries to avoid the new quota limits.
"We've mostly remained outside the limits. We've
been using other countries in Southeast Asia to
transfer shipments," said a sales manager at Aotin
Enterprise, a clothes exporter in the southern
province of Guangdong.
Among
many in the Chinese industry, a sense of
uncertainty remained as to the actual effects of
the agreement. "The deal is good for us, because
it removes uncertainty for buyers," said Zuo
Quntao, a manager at export shirt maker Weida
Garments in Zhejiang province. But
Zuo added that Weida and other exporters had not
seen the details: "For real buyer confidence, we
need to know the details of how quotas will be
allocated." And Fan Dabiao, a general manager at
Soho International, a clothes exporter in eastern
China, said he was worried about future
restrictions. "The US promised only to exercise
restraint, so who knows what the variables may be
in the future," he told the International Business
Daily.
Still, Chinese observers
acknowledged the alleviation of uncertainty: "As
for enterprises, the worst [aspect of the dispute
was] uncertainty in policy. The Sino-US deal
achieved acceptable results for Chinese producers
and exporters [with regard to] the major issues of
base number and growth rate," said Yang Shuncheng,
a senior official with Hongdou Group based in Jiangsu province.
