Textile Tariff Issues Heating Up

As government leaders throughout the
world are ratcheting up their efforts to lay the groundwork for a successful Doha Round of trade
liberalization negotiations, textile and apparel manufacturers and importers are zeroing in on
tariff issues. With the elimination of textile and apparel quotas – with the exception of China –
textile manufacturers see tariffs as their last remaining safety net, and importers view them as a
no longer needed barrier to trade.

With respect to the Doha Round, US textile manufacturers have been pressing for sectoral
negotiations that would put textiles and apparel in a separate category thereby reducing the
possibility that their tariffs could be traded off for concessions in other areas. The US
government is believed to be leaning in that direction. The Global Alliance for Fair Textile Trade
(GAFTT), comprising 97 trade groups from 55 countries, has joined US manufacturers in pressing for
sectoral negotiations. In a statement released from Geneva, Switzerland, GAFTT said, “Since
textiles and clothing represent a disproportionate share of exports from developing countries, and
less developed countries, and since that trade is threatened by the unfair trading practices of a
small number of non-market economies, GAFTT believes that textiles and clothing must receive
specialized treatment from the World Trade Organization if WTO is to fulfill its Doha Development
Round of commitments.

Meanwhile, US textile manufacturers and importers are locked in a battle over the issue of
extending tariff concessions to developing and less-developed countries. A US government program
instituted in 1976 (GSP) that grants duty-free treatment to goods imported from developing and less
developed countries is due to expire next year. From the outset, textiles and apparel were exempt
from the GSP program, because imports were regulated with quotas, but with the removal of quotas,
importers now are pressing for textiles and apparel to be granted the special duty-free treatment.

In testimony before the Trade Policy Staff Committee, the US Association of Importers of
Textiles and Apparel (USA-ITA) said now that textiles and clothing are quota-free, they should be
part of a duty-free program for developing country imports. “To help less-developed countries
compete in a quota-free environment and move up the development ladder, textiles and apparel must
be part of the Generalized System of Preferences,” said USA-ITA Chairman Robert Zane, senior vice
president of the Liz Claiborne Corp. “It is ironic the quota program led the US importers to search
out new suppliers, often in less-developed countries, but now that the quotas are gone, the
manufacturers in less-developed countries are having a harder time competing, because they aren’t
efficient and don’t have the ability to offer one-stop shopping for US importers and retailers.
Now, to be competitive, they really need a duty advantage,” he added.

On the other hand, US textile manufacturers are strongly opposed to changing the GSP program
to include textiles and clothing, contending that to do so would undercut regional preference
programs such as the North American Free Trade Agreement, Dominican Republic-Central American Free
Trade Agreement and Caribbean Basin and Africa agreements. Missy Branson, senior vice president of
the National Council of Textile Organizations (NCTO), said in a letter to US Traded Representative
Rob Portman that with the expiration of quotas this past January. “the domestic textile and apparel
industry is more vulnerable than it has ever been in the past and the historical reasons for
excluding these products from the GSP program remain.”

NCTO charges that removal of tariffs would open the door to imports from countries such as
India and Pakistan, which have highly developed textile manufacturing industries, and “can hardly
be considered less developed countries.” The NCTO letter added: “The United States currently offers
preferential access for textile and apparel imports from more than 70 developing and least
developed countries. If the GSP is expanded to include textiles and apparel, the benefits afforded
to these countries will be mostly negated, and a few countries with well-developed industries will
quickly move to dominate the market.”

The current GSP program is due to expire on December 31, 2006, and will have to be
re-authorized by Congress.

November 2005