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Washington Outlook Archive
James A. Morrissey, Washington Correspondent

Trade Agency Predicts Chinese Import Surge

James A. Morrissey, Washington Correspondent

T he US International Trade Commission (ITC) has issued a sweeping report that concludes China will become the supplier of choice for major US textile and apparel importers and retailers after import quotas are removed in January 2005. The study, requested by the US Trade Representative (USTR), confirms what domestic textile manufacturers and importers have been saying all along. ITC says China can make “almost any type of textile and apparel product at any quality level at a competitive cost.” This conclusion has sent shock waves through the textile manufacturing and importing communities.

To avoid the risk of a complete takeover by China, the report says, importers are looking to develop trade relations with low-cost country alternatives to China such as India, which has a large manufacturing base for textiles and apparel and a large supply of relatively low-cost skilled labor. The report also mentions Bangladesh and Pakistan as possible alternative sources. ITC says Vietnam and Indonesia also could be players, but it notes Vietnam is not a member of the World Trade Organization (WTO) and has a quota agreement with the United States. Indonesia is considered “ somewhat risky because of its political and social unrest.”

ITC also raises the concept of what it calls second-tier suppliers, which could share in niche markets or those markets in which quick turnarounds are important. The report says that as US retailers and textile importers strive to balance cost, flexibility, speed and risk in their sourcing strategies, Mexico and nations in the Caribbean Basin and Central America could become important suppliers. However, the degree of success, the report says, is dependent upon whether there are Central American and hemispheric free trade agreements that permit use of third-country fabrics. ITC believes manufacturers in those areas could service US retailers’ needs for quick turnarounds as a result of fashion changes or mid-season orders. US textile manufacturers can benefit from the regional preferential agreements as long as they have a yarn-forward rule of origin that requires yarn and fabric used in apparel to be made in the participating countries.

Another factor that could temper a complete Chinese takeover is the uncertainty about how and whether the United States and other developed countries will attempt to use the safeguard mechanism that permits countries to impose quotas on Chinese imports if it can be demonstrated that they threaten to disrupt markets.

Urge To Merge Hits Industry Unions, Labor Associations

Reflecting the downsizing and consolidations that have been taking place in the textile and apparel industries, manufacturing associations and labor unions have announced plans to create new organizations that they hope will strengthen their positions in Washington and elsewhere. Leaders of the American Textile Manufacturers Institute (ATMI) and the American Yarn Spinners Association have formed a new coalition called the National Council of Textile Organizations (NCTO), whose primary focus will be on lobbying the federal government on international trade and regulatory issues. The new organization will result in the demise of ATMI, which for more than 50 years has been the major voice for the textile industry in Washington. ATMI has fallen on hard times in recent years as a result of the defection of some of its key members over policy differences, and the downsizing of the industry. These defections and industry downsizing led to an erosion of its income. While ATMI at one time had a staff of more than 40 professionals addressing a broad range of industry issues, its staff had shrunk to six people at the time the formation of NCTO was announced. ATMI representatives Cass Johnson, an international trade expert, and Robert Dupree, a highly respected textile lobbyist, will be at the core of the NCTO staff.

Allen E. Gant Jr., who has been named NCTO chairman, said the new organization should help strengthen the textile industry’s lobbying efforts because its membership will include a complete range of textile manufacturers, fiber producers, machinery manufacturers and other industry suppliers. He said the weight of all segments of the industry will be brought to bear on “focused, unified efforts” to deal with what many consider life or death issues facing the industry. Gant believes this unified voice will be “good for the industry and good for its supporters on Capitol Hill.”

The urge to merge also has hit textile and apparel organized labor. In July, the Union of Needletrades, Industrial & Textile Employees (UNITE) and the Hotel Employees & Restaurant Employees (HERE) will merge into what will be known as UNITE HERE. The combined membership of the new union will be 440,000 compared with the present UNITE membership of 180,000.

Bruce Raynor, who will be general president of the new union, says the merger “substantially increases our ability to fight for the rights of our members and tens of thousands of new members that we will represent in the future.” He said the union will be stronger at bargaining tables, on shop floors, in city halls, in state capitols and in Washington. While Raynor said the merged union will deal with a number of labor/management issues, he told Textile World it will continue to “lead the fight” to save textile and apparel and other manufacturing jobs that he said are being threatened by the Bush administration’s liberal international trade policies.

Textile Industry, AFL-CIO To Seek Trade Sanctions

The US textile industry has a powerful new ally in its efforts to stem the growth of imports from China. In what is believed to be an unprecedented action, the American Federation of Labor - Congress of Industrial Organizations (AFL-CIO) is appealing to the government to invoke sanctions on Chinese imports under Section 301 of the Trade act of 1974. While Section 301 petitions have been used widely by manufacturers, including textiles, in the past, this is believed to be the first time such an action has been taken by a labor union. The petition charges China with a long list of labor rights and working conditions abuses. Among other things, the 13 million-member union charges that China uses enforced labor to hold down its manufacturing costs, and as a result, it competes unfairly with American-made products. The petition calls for tariffs to be levied on its exports of manufactured goods until China reforms its labor practices.

In a related development, the Coalition for Fair Currency, of which ATMI is a founding member, is filing a Section 301 petition based on China’s alleged currency manipulation. ATMI contends China maintains an artificially pegged currency value that amounts to as much as a 40-percent subsidy for its exports to the United States. The coalition, which includes some 20 manufacturing and agricultural associations, will seek sanctions on a wide range of products, including textiles and apparel. The initial Chinese reaction to the petitions is that imposing the sanctions would be a violation of WTO rules. The Bush administration has 45 days to respond to the petitions.

Textile Associations Seek Extension Of Quotas

US textile trade associations have launched a campaign to convince WTO members to extend until January 2007 textile and apparel quotas that are due to expire in January 2005. Textile trade associations in Turkey and Mexico were the first to come on board, and they will seek further support in scores of countries that are likely to lose out when the long-standing quota system is dismantled. The effort is designed to prevent what many officials inside and outside of governments see as a takeover of much of the textile and apparel trade by China and a handful of other countries if quotas are allowed to expire in 2005. The textile associations contend that “ circumstances associated with the textile and clothing quota phase-out process have changed dramatically” since the adoption of the phase-out process was agreed to in 1995. Ziya Sukun of the Turkish textile and apparel association said, “[T]he creation of a monopoly position by a very few countries will be disastrous to many developing economies.”

Meanwhile, USTR Robert B. Zoellick was headed in another direction as he wrote to the WTO officially notifying it that the US government continues to support the phase-out. The action was hailed by the United States Association of Importers of Textiles and Apparel, whose executive director, Laura E. Jones, said, “This should put an end to any speculation — there is no turning back now.”

While textile trade associations may press for continuation of the quotas, it is a contentious issue, and the governments involved will have a hard time backing off their commitments.

April 2004