US and China Sign Pact on Quotas; Industry Pushes for other Restrictions

Written off as dead, the American textile industry demonstrated last month that it still has clout when it turned up on the winning side of the long-fought battle over imports from China.

Moving to control surging imports of clothes from Asia, the United States signed an agreement with China in November that placed quotas on items including cheap shirts and trousers over the next three years.

Since the end of a global quota system on January 1, China's exports of clothing and textile products to the United States jumped more than 50 percent in the first eight months of 2005 to nearly $17.7 billion. In response, U.S. textile groups and manufacturers lobbied hard for and won protection under the so-called “safeguard” provision of China's 2001 entry into the World Trade Organization. That measure allows WTO members to restrict the growth in imports from China to 7.5 percent annually when there is a market-disrupting surge. But because the curbs have to be renewed annually, textile groups further pushed for a comprehensive agreement that would limit imports through 2008, when the safeguard provision expires.

Under the new agreement, clothing imports would be allowed to grow 10 percent in 2006, 12.5 percent in 2007 and 15 or 16 percent in 2008. The new terms apply to more than 30 products, a wider range of goods than those already subject to restrictions.

The US imposition this year of limits on many categories of garments, and the threat of limits on further categories, have prompted companies like Wal-Mart to be wary of placing large orders with Chinese manufacturers, fearing that shipments would be stopped at ports. That uncertainty turned many in China's textile and apparel industry into unlikely supporters of a deal between the United States and China, even a deal that would limit Chinese exports.

In China, the deal sparked a flurry of official statements, with the Chinese press stressing that both sides made major concessions in reaching the agreement. An announcement issued by Sun Huaibin, spokesman for the China National Textile and Apparel Council, noted that, “both the US and China have compromised in reaching this textile pact.” He further went on to say that while Chinese textile-makers will face quantitative restrictions on their trade under the deal with the US, working under the new pact will still be better than being subject to “protectionist, unilateral safeguards and will increase certainty for the industry.”

In the United States, news of the agreement seemed to breathe new life into the American textile industry. Those in the pro-quota camp view the deal as a way to buy more time for individual mills to develop strategies that may help them adjust to China's ability to produce massive quantities of low-cost goods. Others say that in the short run at least, it also saves jobs in an industry that has seen steady and growing losses for years.

But others voice a different opinion: they note that it doesn’t solve the overall problem, it simply pushes the danger from China farther off. "All quota restrictions since the 1950s have been about buying time," said Peter Kilduff, a textile and apparel expert in an interview with The News and Record. "In some ways, this agreement is no different." Moreover, there is fear that the new agreement could actually hasten the industry's decline by encouraging China to make more high-end apparel, a category where the United States now has an advantage.

As for jobs, the anti-quota camp firmly believes that what once was, can never be again, given globalization. "In the end, in the real world, no jobs are coming back here as a result of this deal," said Laura E. Jones, executive director of the U.S. Association of Importers of Textiles and Apparel. "Efforts to control China will only benefit the textile trade in other countries, not the United States. Jobs may go to India, Bangladesh, Pakistan, Sri Lanka, you name it, but not here.”

Whether or not the industry can or should be saved is a debate that will likely continue well into the life of the new agreement. But with a deal on quotas firmly in place, textile groups are now shifting the emphasis to other trade-related areas to bolster their chance for survival. Some of their activities currently underway include getting Washington to crack down on Beijing because of its illegal trade practices, currency manipulation, government subsidies and loans that don't have to be repaid. Those so-called advantages, coupled with China's low-cost labor, allows it to underprice its competitors and drive them out of business, the groups allege.

In addition, industry leaders will attempt to head off an international effort to reduce or eliminate tariffs, or taxes, on imported textiles and apparel. Importers and retailers say tariffs cost U.S. consumers $27 billion a year, but textile and apparel manufacturers contend they are another way to curb imports and save jobs. Tariffs currently average 15 percent for apparel and 9 percent for textiles.

UniformMarket will continue to track the industry’s activities and report its progress in future editions.