U.S. imports of socks from China will be strictly limited next year, the Bush administration announced yesterday -- a decision that could herald similar action against other types of Chinese-made clothing that have the potential to dominate world markets.
An interagency committee found that Chinese sock imports should be capped because they have caused "both disruption and a threat of disruption" in the U.S. market, James J. Jochum, assistant secretary of commerce for import administration, said in a conference call.
The sock case is the first of a series of decisions the administration is facing concerning how to deal with a momentous change looming in the global textile and apparel industry. A system that has governed international trade in clothing and fabric for three decades is set to expire Jan. 1, which will deprive scores of developing countries of the quotas that have assured them a certain amount of access to U.S. and European markets. Many industry experts predict that once apparel companies are free to import from wherever they choose, China will bulldoze producers in Latin America, Africa and other Asian countries because of its low costs and high efficiency.
U.S. textile makers, who fear that their beleaguered industry will suffer further losses, are asking Washington to take action that would effectively extend the quotas for a while longer. They are requesting "safeguard" measures designed to stop devastating surges of Chinese fabric and clothing by capping the growth of Chinese imports at about 7.5 percent a year. Beijing agreed to the safeguard system as part of the price of its entry to the World Trade Organization, with the proviso that the safeguards can be used only until 2008.
The issue heated up last week when the industry and its main labor union filed petitions with the Commerce Department seeking safeguard limits on many imported textile products from China, including trousers, shirts and sheets. Those petitions argued that even though surges of Chinese imports have not yet materialized in those categories, the threat is clear enough to justify safeguards because in markets where quotas have been eliminated, Chinese producers have captured the lion's share of the business.
The government's ruling yesterday on the U.S. sock industry's petition, which was filed in June, could have important implications for the other markets at stake by indicating how officials will decide the other cases. The administration last year imposed safeguard limits on imported Chinese brassieres, dressing gowns and knit fabric -- all categories where quotas had already been lifted -- but the socks case is the first in which the "threat of disruption" is being used to bolster the argument for such an action.
In part, Jochum said, the decision was based on evidence showing that "imports have surged dramatically." In 2001, Chinese sock imports totaled $8.8 million, and in the most recent 12 months, they reached $170 million, making China the leading source of imported socks. Chinese producers cut the prices of their socks from $11.54 per dozen pairs in 2001 to $5.11 per dozen pairs in 2003. Although China accounted for only about 7 percent of the U.S. market, that has had a "significant impact on the U.S. industry," Jochum said, helping to drive about one-quarter of all U.S. sock manufacturers out of business and reducing the market share of the domestic industry from 83 percent in 2001 to 68 percent last year.
But Julia K. Hughes, the chief trade lobbyist for the U.S. association representing apparel importers, complained that the decision was reached by lumping together socks made from wool and man-made fiber -- where quotas have been lifted, and Chinese imports have risen sharply -- with cotton socks, where only the threat of a surge exists.
"This sets a very negative precedent for future decisions on products of far greater importance to American consumers -- the tops and the pants," Hughes said. "Based on this, you'd have to conclude that no request [for safeguards] will ever be rejected."
The industry shrewdly used political leverage by filing its petition in June so that the administration would be required to issue its ruling shortly before the Nov. 2 election, Hughes said. The sock industry is concentrated in Alabama and Georgia, which are expected to go solidly for President Bush, but the White House cares about congressional elections in those states, Hughes said.
Jochum said the decision was based on a "solid record of facts presented by the industry," adding that it didn't necessarily establish a precedent. "We will look at each individual petition based on the facts, on the merits," he said.
The administration has 90 days to negotiate caps with the Chinese, and if an agreement can't be reached, next year's growth in imports can be limited to 7.5 percent for socks made of cotton and man-made fiber and 6 percent for wool socks, Jochum said.
The decision isn't expected to have much of an impact on sock prices, according to Hughes, because low-cost imports can be found in other countries.
An official at the Chinese Embassy in Washington did not return phone calls seeking comment.