US And China Reach Agreement On Textile Imports

The US and Chinese governments have
reached a new bilateral textile trade agreement that has won the enthusiastic support of textile
state members of Congress, US textile manufacturers and even importers who see it as the lesser of
two evils.

The three-year pact, running until the end of 2008, places 34 categories of textiles and
apparel under quota control with growth levels only about 3.8-percent higher than if they were
placed under quotas using the tedious and unpredictable safeguard mechanism the US government has
employed to control a surge in Chinese imports. The new quotas, which go into effect January 1,
2006, cover 14 particularly sensitive product categories that have been under quota this year as a
result of safeguard actions. These include cotton and man-made fiber trousers, cotton and man-made
fiber knit shirts, underwear, woven shirts and brassieres. In addition, the new quotas will be
applied to 20 product categories where safeguard petitions are under consideration including socks,
sweaters, swimwear, knit fabric, wool suits, wool trousers, ramie trousers, sewing thread, combed
cotton yarn, cotton towels, polyester, filament fabric, man-made filament fabric, fiberglass
fabric, textile blinds and industrial fabrics. The new agreement would also allow the textile
industry to file petitions for additional safeguard petitions should the need arise.

Rep. Robin Hayes, one of the textile state congressmen who put pressure on the Bush
administration to come up with a good agreement, said, “I am proud to say that our government
signed a deal with the Chinese that will allow our manufacturers to operate in a climate that is
better than existed previously.” He warned, however, this agreement “is not the end of our efforts
by a long shot.” He said the next step is to ensure that the US Customs service strictly enforces
the agreement, and he added that something must be done to correct the Chinese currency imbalance
that textile manufacturers say is an unfair subsidy for their imports. Although Hayes was persona
non grata with some textile manufacturers because of his support for the Dominican Republic-Central
American Free Trade Agreement, textile lobbyists at a Capitol Hill news conference heaped praise on
Hayes for his work on the Chinese agreement, saying Hayes was instrumental in “placing the Chinese
issue squarely on the administration’s radar.”

Jim Chesnutt, chairman of the National Council of Textile Organizations (NCTO), said: “Under
this agreement, the US textile industry will know with certainty that China will not be able to
flood the US market during the next three years. It will not have to rely on an uncertain safeguard
process that would have required dozens of cases to be filed each year with no guarantees on the
outcome of each of the cases.” Like Congressman Hayes, Chesnutt pointed out the threat from China
is not eliminated by this agreement, but “only delayed.” He said China continues to subsidize its
textile and apparel industry, manipulates its currency and employs “multiple unfair trade

Although textile and apparel importers do not like any kind of quotas, they see the new pact
as an improvement over the safeguard process, which has resulted in considerable uncertainty
surrounding their overseas sourcing.

Kevin Burke, CEO of the American Apparel & Footwear Association, said that while his
organization could never support quotas, “this agreement is far more preferable to the disruptive
safeguard regime we had previously endured.” He urged the US government to publish details defining
the thresholds the textile industry will have to overcome in order to justify further safeguard
petitions. He also called in the Chinese government to put in place a “transparent and
cost-effective allocation system” so companies can make fair and efficient use of the quotas.

Eric Autor, the National Retail Federation’s trade expert, echoed those sentiments.“The
repeated imposition of safeguards and the lack of any effective monitoring or allocation system
have created an unacceptable level of unpredictability for retailers trying to do business with
China,” he said. He argues that safeguard quotas were approved for “ political reasons” without
regard for the adverse impact on retailers and consumers. He contends that safeguards drive up the
cost of clothing without helping to create or protect US jobs, saying that most of the products are
no longer manufactured in the U.S. at competitive prices or in commercial quantities.

Following is a list of the products (by Customs classification) that will be covered by the
new quotas —

Baby Socks (239 p)

Socks (332/432/632p)

Cotton Knit Shirts (338/339)

Woven Shirts Men’s and Boys’ (340/640)

Sweaters (345p/645p/646p)

Cotton Trousers (347/348)

Brassieres (349/649)

Underwear (352/652)

Swimwear (359-s/659s)

Wool Suits (443)

Wool Trousers (447)

Man-made Fiber Knit Shirts (638/639)

Man-made Fiber Trousers (647p/648p)

Silk/vegetable Fiber Trousers (847)

Home Furnishings Textiles

Thread ((200)

Knit Fabric (222)

Special Purpose Fabric (229)

Combed Cotton Yarn (301)

Cotton Towels (363)

Polyester Filament Fabric (619)

Synthetic Filament Fabric (620)

Glass Fiber Fabric (622)+

Blinds (666p)

November 2005