When a U.S. textile company goes up against a foreign competitor, chances are the competitor isn't just another company. More likely, the competitor will have the full weight of its government on its side, American textile industry officials have charged repeatedly in recent years.
If the foreign competitors were simply companies, "a case could be made that the American firms were simply not up to the challenge and have not earned the right to ask for relief," the American Textile Manufacturers Institute contends.
It is one of the sticking points in the current debate over special trade legislation for the textile/apparel industry.
There can never be free trade as long as foreign textile companies receive preferential loans, grants, tax breaks and other subsidies from their governments in support of centrally planned economies, say U.S. textile industry spokesmen.
Trade experts describe subsidies as government assistance given to exporters to promote shipment of goods. Such trade practices are illegal unless it can be proved that imports do not harm an industry of a country receiving the goods.
The ATMI has filed at least 17 cases since 1981, alleging unfair trade practices involving the use of foreign subsidies. In cases where subsidies were proved, penalty duties were applied. Nevertheless, many foreign manufacturers continue to receive subsidies, provoking stronger allegations in this country of unfair competition from abroad.
Commerce Department officials concede that subsidies are a bigger problem than fraud, but they add that the violations are very sophisticated and probably haven't been studied adequately.
Centrally planned economies are substantial shippers of textiles and apparel to the United States, but it is "almost impossible under our current law to prove subsidy activities in those countries," said Walter A. Lenahan, deputy assistant secretary of commerce for textile trade. Lenahan said subsidies are "an area to which we ought to devote more attention."
The ATMI says it knows that some countries try to lure textile companies with the promise of rebates to manufacturers, exchange rate subsidies, special low-rate government financing and government payments.
"Our lawyers estimate that if we had pursued all of the cases we filed alleging the use of illegal subsidies , it would have cost us $50 million," said Carlos Moore, the ATMI's executive vice president.
Among those cases, said Moore, the ATMI alleged that:
*Peru paid subsidies to companies if they produced goods in Lima and offered bigger grants if products were manufactured outside the city in more economically depressed areas.
*China offered an exchange-rate subsidy. "If you earned dollars for exporting, you got a higher exchange rate when you converted the dollars" to Chinese currency, Moore explained.
*Indonesia, Turkey, Thailand and Argentina provided financing for textile and apparel manufacturers in those countries at preferential rates.
The ATMI's success in showing the existence of subsidies "acted as a deterrent," Moore said, but proving it now has become an expensive and time-consuming process.
Before 1979, it was only necessary to show that subsidies were being paid and the amount. The United States, however, later agreed to accept another criterion for proof: that the import of certain products cause injury to an industry. Thus, a country is subject to a so-called injury test if they are found to be using subsidies to enhance their competitive positions in the global marketplace.