Bridges Weekly Trade News Digest • Volume 9 • Number 38 • 9th November 2005
US And China Agree To Textiles Deal
US Trade Representative Rob Portman and Chinese Minister of Commerce Bo Xilai signed a pact on 8 November that will place quotas on Chinese textile and clothing exports to the US until the end of 2008. The agreement, which will enter into force on 1 January 2006, was the result of five months and seven rounds of negotiations that finally concluded in Washington last week (see BRIDGES Weekly, 7 September 2005).
The US already has import limits in place on 19 types of Chinese textile and clothing products under the ‘textile-specific safeguard’ clause that is part of China’s terms of accession to the WTO. The clause allows countries to restrain the annual growth of textile and clothing imports from China to 7.5 percent if they are found to be causing market disruption. The new agreement covers 34 product categories, including the 19 currently subject to safeguard quotas. Furthermore, the US successfully retained the right to use the safeguard mechanism for textile and clothing categories not covered by the agreement, so long as it "exercises restraint" in doing so.
Portman said that the deal would address concerns by retailers, consumers, and producers in both countries by bringing predictability to the market, and thus avoiding the disruption that can be caused by unilateral safeguard quotas. "This agreement is a good example of where, through hard work and good faith, constructive solutions can be found to difficult trade issues," he said.
The deal broadly limits growth in Chinese clothing imports to 10 percent in 2006, 12.5 percent in 2007 and 15 percent in 2008, though the growth limits vary for different types of clothing. For textile products, the rates are 12.5 percent in 2006 and 2007 and 16 percent in 2008. The US had originally asked for the limits to be 7.5 percent for the duration of the agreement. Notably, for the 19 products currently under safeguard protection, the extent of import growth now allowed in 2006 is actually lower than the 7.5 percent increase that would have been permissible had safeguards been renewed, while for 2007 the level is about the same and for 2008 only slightly higher.
The accord provides for avoiding overshipments — a source of great confusion during the EU’s recent imposition of limits on some Chinese textile exports — by giving US retailers two months to prepare for the new quotas.
"US textile and apparel manufacturing workers and their communities are big winners today," said Auggie Tantillo, executive director of the American Trade Action Coalition (AMTAC), a US manufacturers lobby. US retailers and Chinese producers also hailed the agreement’s likely positive impact on workers, welcoming the predictability the agreement would bring to the more than USD 18 billion dollars of Chinese textile and clothing exports to the US.
However, the fact that the new limits expire at the same time as the textile-specific safeguard clause in 2008 has raised alarm bells regarding the adjustment costs in the US, and potentially around the world, three years from now. "This does not solve the problem. It only pushes the danger from China farther off," said Cass Johnson, president of US textile industry group the National Council of Textile Organisations. Tantillo told reporters that the US and other textile exporters should "come together" on the issue in the ongoing Doha Round trade talks at the WTO. Trade in textiles and clothing has come under WTO disciplines on non-agricultural market access since 1 January 2005, when trade quotas in the sector expired.
Some textiles producers in the US and elsewhere are considering lobbying their governments to seek the creation of a sectoral carveout for textiles and clothing trade from the NAMA negotiations at the Hong Kong Ministerial Conference in December. However, the sectoral approach that they seek would have textiles and clothing subject to tariff cuts lower than those required by the eventual tariff reduction formula. This would be precisely the opposite of sectoral tariff initiatives as they are generally understood in the talks, which seek expedited liberalisation for the products covered.
ICTSD reporting; "USTR Portman Announces US-China Broad Textile Agreement," USTR, 8 November 2005; "Comprehensive Deal Reached to Limit US Imports of Chinese Textiles and Clothing: Deal Addresses Concerns of US Textile Industry," AMTAC, 8 November 2005; "US textiles industry demands new WTO curbs on China," AFX, 8 November 2005; " US, China reach deal on clothing, textiles," REUTERS, 9 November 2005; "U.S., China Reach Textile Agreement; Industry Groups Praise Terms of Accord," WTO REPORTER, 9 November 2005; "Media Availability On U.S. China Textile Agreement," US EMBASSY TO THE UN, 8 NOVEMBER 2005.