Bridges Weekly Trade News Digest • Volume 9 • Number 18 • 25th May 2005
Textiles Debate Heats Up; China Imposes New Export Duties
The Chinese government on 20 May attempted to ease trade tensions with the US and the EU by raising export tariffs on textiles to up to five times their previous levels, although it said that these restrictions would not apply to categories subject to import restrictions. Nonetheless, on 23 May the US government imposed safeguard import quotas on three categories of imports from China, as it had announced it would ten days before (see BRIDGES Weekly, 18 May 2005). The EU decided on 25 May to request formal consultations with China at the WTO on 31 May unless a settlement was reached by that time, a process that could culminate in further import restrictions on Chinese textile exports.
China’s terms of accession to the WTO include a ‘textile specific safeguard clause’ that allow WTO Members to impose quantitative restrictions on imports of Chinese textiles and clothing products if they are found to disrupt markets. Under the safeguard, Members can limit specific products to an increase of 7.5 percent above the preceding year’s import levels.
The Chinese decision to raise export tariffs on 74 types of textile and apparel products to Rmb 1 (USD 0.48) per item of clothing as of 1 June comes in response to widespread criticism that the export duties it introduced in December 2004 have been ineffective in curtailing substantial increases in exports of Chinese textiles and clothing products. The maximum level for the taxes had previously been Rmb 0.3 per unit. "China made the concession in a bid to establish a stable trade order and to ease current trade frictions," Sun Huaibin, spokesperson for the China Textile Industry Council, said. However, on 21 May a Commerce Ministry spokesperson warned that "textiles items that are under de facto export restrictions will be removed from the categories that are subject to export tariffs."
In addition to the three import categories for which it has now implemented import restrictions, the US Committee for the Implementation of Textile Agreements (CITA), an interagency US government group chaired by the Department of Commerce, has approved the imposition of safeguards on four additional products based solely on the ‘threat’ that they might lead to market disruption. Trade sources suggest that formal consultations will be announced, and the safeguard quotas actually imposed, by the end of 27 May.
In spite of "constructive" talks between EU Trade Commissioner Peter Mandelson and China Chief Trade Negotiator Gao Hucheng in Brussels on 24 May, the EU decided the following day that it will allow for informal talks to continue until 31 May. If talks fail to produce a solution by that time, the EU will formally request consultations with China on trade in t-shirts and flax yarn. Under the EU process, the Chinese would then have 15 days to impose export quotas restraining exports to the EU in the two categories. Should they fail to do so, and the consultations fail to bear fruit, the EU will then be able to impose safeguards. In a recent meeting of the EU textiles committee, EU Members overwhelmingly backed the move to hold consultations to contain Chinese export surges.
Brazil is also considering restrictions on Chinese imports based upon data showing that imports increased by 58 percent in the first quarter compared to a year earlier. The Brazilian trade ministry reports that the government will issue two sets of rules, one for Chinese textiles and another for all other Chinese goods.
At the same time, WTO Deputy Director-General Kipkorir Aly Azad Rana has spoken out against bilateral import restrictions. He said in Beijing on 24 May that it is "still too early, too premature" to assess the impact of the growth in Chinese textile exports since the global quota system was dismantled on January 1 this year. He urged WTO Members to wait for the publication of a WTO study based upon six months of data before acting to restrict imports (see BRIDGES Weekly, 26 January 2005). "The US and the EU are important, big members and when they take action, others will follow and this can create the notion of bringing back quotas," he warned.
Similarly, in a new report released 23 May, the International Monetary Fund (IMF) exhorted governments to resist protectionist pressures. The study says that China’s total textile export growth in the first quarter of 2005 was roughly equal to that for the same period last year, while India’s exports have also grown rapidly. In addition, the IMF said China’s increased market share had mainly affected middle-income countries as opposed to poorer countries, partly because some importers are staying with low-cost suppliers to guard against the possibility of the US or the EU imposing bilateral quotas on China. The report further indicated that textile exports to the US from developing countries in Asia including Bangladesh, Cambodia, Sri Lanka and Vietnam had increased by 17 percent on average in the first quarter. It also warned, however, that textile and clothing prices were falling and the 12 percent drop in prices of all apparel imports from China to the US would eventually hurt poorer Asian nations.
The IMF report, "Asia’s economic outlook is bright, but risks loom," is available at http://www.imf.org/external/pubs/ft/survey/2005/052305.pdf.
"Committee For The Implementation Of Textile Agreements (CITA) Announces That It Will Invoke Safeguards On Textile Imports From China," US COMMERCE DEPT PRESS RELEASE, 18 May 2005; " Announcement of Request for Bilateral Textile Consultations with the Government of the People’s Republic of China and the Establishment of Import Limits," US FEDERAL REGISTER, VOL 70 NO 99, 24 May 2005; "Beijing raises taxes on textile exports to head off import curbs," FINANCIAL TIMES, 21 May 2005; "China May Drop Export Taxes on Textiles With Quotas," BLOOMBERG, 21 May 2005; "EU states back China textile move," EU OBSERVER, 24 May 2005; "EU Trade Chief Addresses China Textile Row," AP, 24 May 2005; "IMF warns against textile protectionist pressures," REUTERS, 23 May 2005; "US Initiates Apparel Import Restrictions, Requests Talks with China," WTO REPORTER, 24 May 2005; "US, EU moves to curb Chinese textiles premature, counterproductive - WTO," AFX, 24 May 2005; "EU Gives China Until May 31 to Resolve Spat on Textile Exports," BLOOMBERG, 25 May 2005.