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U.S. Opens Challenge to Chinese Textiles

Shipments Soar After Lapse of Quota System

By Paul Blustein
Washington Post Staff Writer
Tuesday, April 5, 2005; Page A15

The Bush administration took a giant step yesterday toward imposing new caps on imports of Chinese clothing, responding to complaints that China's export juggernaut is starting to dominate the worldwide apparel market since the system governing the global industry was changed on Jan. 1.

A U.S. interagency panel said it will initiate proceedings to determine whether new limits should be slapped on imports from China of underwear, cotton trousers, and cotton knit shirts and blouses. In a statement, Commerce Secretary Carlos M. Gutierrez said the administration is committed "to providing assistance to our domestic textile and apparel industry consistent with our international rights and obligations."

U.S. textile manufacturers fear that China's efficient and low-cost garment factories, like this one in Jiaxin, will inundate the U.S. market. (AP)

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The move makes it highly likely that a much-anticipated flood of Chinese clothing into the U.S. and world markets will be deferred for a while -- at least for this year, and possibly several more.

At year-end 2004, a three-decade-old system of quotas on international textile and apparel shipments expired, arousing widespread predictions that China's enormously efficient and low-cost clothing makers would devastate rival producers once limits were eliminated on individual countries' shipments.

But under the terms of its entry into the World Trade Organization, Beijing agreed to allow the United States and other nations to impose "safeguard" caps on imports of Chinese textiles and apparel in the event that such imports rose so quickly as to "disrupt" those markets. The safeguards can limit the annual growth in Chinese imports to as little as 7.5 percent, and they can be used until 2008.

Yesterday's announcement came as a huge relief to the U.S. textile industry, which has already suffered massive job losses in recent years, in part because of competition from low-cost manufacturing countries. It has beseeched the administration to take action as quickly as possible against the new threat posed by the Chinese. But the decision angered importers and retailers, who said consumers will miss out on the chance to get lower prices. The European Union, another major market for clothing, is considering similar measures.

The U.S. textile industry filed petitions last year seeking safeguards in a number of clothing categories, but those petitions have been tied up in court because they were based only on the potential menace that Chinese imports posed rather than clear evidence of an import surge. In yesterday's move, the administration "self-initiated" the safeguard process, citing preliminary data released last week that showed very sharp increases in many categories of Chinese imported clothing during the first quarter of 2005. Imports of Chinese-made cotton trousers, for example, soared about 1,500 percent, and imports of cotton knit tops rose 1,250 percent.

Karl Spilhaus, president of the National Textile Association, said the administration's move "is very welcomed by American textile manufacturers who are struggling against a flood of imports from China." In a statement, he noted that "self-initiation sends a signal that the U.S. government is willing to proactively do something about the crisis in the textile industry."

Yesterday's action does not guarantee that new limits will be imposed; it triggers a 30-day period during which interested parties may submit comments, followed by another 60-day period, which can be extended, for the government to determine whether safeguards are warranted. Under the process, however, the government essentially acts as both prosecutor and judge, and textile industry officials said the only real question is how fast the administration will make its decision.

"It is critical that the U.S. government undertake a thorough investigation as quickly as possible," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, another textile industry group, noting that under the rules the administration could render its decision very soon after the 30-day comment period. "The U.S. textile industry cannot afford to wait 60 days for a decision." He added that the industry will soon file new cases in additional textile and apparel categories, although the three covered by yesterday's action are the biggest and most important to U.S. producers.

Importers blasted the decision, noting that China's quota-limited share of the U.S. market was low to start with. They also said the administration was trying to garner support for the Central American Free Trade Agreement (CAFTA) from textile-state lawmakers who have been lukewarm or opposed to the deal. The trade pact is facing stiff resistance in the House.

"There is no reason to believe that imports of these products from China are causing market disruption," said Laura E. Jones, executive director of the U.S. Association of Importers of Textiles and Apparel. "The data [the panel] is supposedly relying upon shows only that February was a peak month for imports. The imports are down in March by comparison."

Dan Nelson, the Commerce Department press secretary, denied that CAFTA played a role in the decision, saying it was "based on the extraordinary and unprecedented growth in imports from China during the first quarter of this year."

A Chinese embassy spokesman did not return a phone message.

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