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Washington Outlook Archive
By James A. Morrissey

China Trade Review Raises Questions

By James A. Morrissey, Washington Correspondent

T he Bush administration’s highly touted “ top-to-bottom review” of its trade policies with China has created considerable interest among textile manufacturers and importers, and they are closely watching how the rhetoric will be translated into action. In the report, the administration used some of its strongest language in discussing trade with China, saying the United States’ bilateral trade relationship with China “ lacks equity, durability and balance.” The report, entitled “US Trade Relations: Entering a New Phase of Greater Enforcement and Accountability,” says “the time has come to readjust our trade policy with respect to China.”

The report calls for expanding the US Trade Representative’s (USTR’s) ability to monitor Chinese trade and determine whether China is living up to its obligations under the rules of international trade. In order to do that, the USTR will create a China Enforcement Task Force headed by a chief counsel for China trade enforcement. It also will add personnel to its Beijing office in order to expand its information-gathering, enforcement and negotiating capabilities. The USTR will deal with protection of intellectual property rights as well as such issues as market access, subsidies and structural problems like currency manipulation that have been bones of contention with companies and industries doing business with China. The report also promises to strengthen the executive-congressional partnership on China trade and provide congressional members and staff with regular briefings about the administration’s China trade policy.

In a letter forwarding the report to key members of Congress, USTR Rob Portman said: “We are entering a new phase in our bilateral trade relationship, and we must readjust our trade priorities and resources accordingly. China as a mature trading partner should be held accountable for its actions and required to live up to its responsibilities.”

While welcoming the report and its high-sounding rhetoric, textile lobbyists in Washington are concerned about what it all actually means in terms of concrete results. Lloyd Wood of the American Manufacturing Trade Action Coalition said the report does not have a “roadmap for actions” for the US government to correct what he sees as major problems. He said the only time anything meaningful on Chinese textile trade has come about was a result of actions such as the safeguards that resulted in an agreement to impose quotas on 34 categories of textiles and apparel. He added that China understands the stick better than the carrot, and there is “too much carrot and not enough stick in our trade relations with China.”

At a news conference discussing the report, Portman cited the textile safeguards-related agreement as an example of a “good, tough, but balanced agreement.” NCTO’s Cass Johnson voiced his concern over rhetoric versus action by saying the language was harsher than ever before, but no punitive actions were mentioned. He added he hopes the report sets the tone for “more aggressive action.”

The nation’s retailers —the largest importers of textiles and apparel — see some positive aspects of the report and nothing that appears to raise any red flags. One concern, as with textile manufacturers, is how the report will be used as a basis for taking action. Eric Autor, the Washington-based National Retail Federation’s international trade expert, sees it as a “fairly objective report” that addresses the benefits of trade with China, as well as some of the problems. He says retailers agree China should live up to its international obligations, and stronger enforcement of US and international trade laws is called for where that is not happening. However, he added, actions should not be taken unless they are appropriate and address real solutions to problems.


US Textile Makers Don't Like Korean FTA

US textile manufacturers are not at all pleased with the Bush administration’s plans to negotiate a free trade agreement (FTA) with South Korea, fearing it has a potential to lead to significant market disruption. Textile importers and a number of other industries, on the other hand, feel it can be a very good thing. At the present time, the United States has a $2 billion textiles and apparel trade deficit with South Korea, and a large portion of that is in textiles.

In an effort to gain support for the proposal, USTR Portman, along with South Korea’s minister of trade, announced plans to move forward with the FTA at a ceremony at the US Capitol attended by a number of congressional supporters. Following the ceremony, some 30 members of Congress wrote President George W. Bush citing support from agriculture, automobile, motion picture and pharmaceutical industries, which see it as an opportunity for greater market access to the world’s 10th-largest economy. At the ceremony, Portman said, “[F]ew countries better represent the promise of open markets, democracy and economic reform than Korea.”

Textile interests see the pact in an entirely different light. NCTO’s Johnson says the textile trade deficit with Korea could only get worse under a FTA. Unlike other recently negotiated FTAs, he does not see many opportunities for US textile exports because Korea has a large, competitive textile industry, partly caused by currency manipulation that discourages imports, and also because Korea subsidizes exports. He expresses the fear that Korean imports to the United States could increase substantially, and he charges that in the past, Korea — with its border with China — has been a major source of transshipments of textile products from China. As a result, he says, any pact would have to provide for tough customs enforcement.

On the Korean side of the ledger, that nation’s agriculture interests are strongly opposed to any agreement that would open markets to US farm products. With big companies with global interests supporting the legislation, and Korean farmers, textile manufacturers and others concerned about it, there could be a real battle over this one.

Importers See No Post-Quota Surge

Textile and apparel importers say that, contrary to some expectations, there has been no major surge of Chinese imports following the removal of quotas in January 2005. Laura Jones, executive director of the New York City-based United States Association of Importers of Textiles and Apparel says an analysis of 2005 trade data shows a 10-percent increase in textile and apparel imports — pretty much the same as increases under the quota system. Jones recalls there was an initial surge of clothing imports from China immediately following the removal of quotas, but she says this was the result of the Bush administration saying it was considering negotiating new quotas on particularly “sensitive” products, which it eventually did on 34 product categories of textiles and apparel. She said importers last January feared there would be new restraints within months of the new year, so many companies rushed to bring goods in early.

Jones contends that instead of a surge from China, there has been a shift among suppliers that reflects many changes in Asia rather than a major shift from other regions to China. Jones said importers are looking down the road to 2008, when all quotas on textiles and apparel from China will be removed, and she hopes warnings of an import surge will not be repeated.

Cass Johnson, president of the Washington-based National Council of Textile Organizations (NCTO), took exception to Jones’ data, saying the 10-percent increase was for all apparel imports.

He said an $8-billion increase in Chinese imports did amount to “a flood,” and, he added, “ Our industry is lucky the US imposed safeguards on China before it could be wiped out.”

He pointed out that in apparel categories where there were no safeguards, Chinese imports rose nearly 40 percent.

March/April 2006