Trade Liberalization Talks Get New Life

ith the trade ministers from the 148-member World Trade Organization (WTO) scheduled to
meet in Hong Kong in December in an effort to jumpstart the Doha Round of trade liberalization
talks, textile and apparel manufacturers, importers, farmers and their governments throughout the
world are staking out their positions. Everyone involved admits it’s going to be a rough road to

The United States has been playing a leading role in promoting the Doha Round, which started
back in 2001. Government officials believe the talks must be concluded in 2006 if they are to

In a recent speech, President George W. Bush said, “The United States is ready to eliminate
tariffs, subsidies and other barriers to free flow of goods and services as other nations do the
same.” The difficulties surrounding the “do the same” and Bush’s ability to sell the US commitment
to Congress will bring global trade issues to the forefront throughout next year.

A recent analysis by the US Trade Representative (USTR) found US agriculture tariffs average
12 percent, while the global level is 62 percent. Ninety percent of imports from developing
countries enter the United States duty-free.

In the manufacturing sector, US tariffs average 3 percent, while tariffs for other WTO
members average 30 percent. In the area of non-tariff barriers, the USTR reported the United States
will seek to eliminate “market-distorting practices such as subsidies and make trade remedy
proceedings open and transparent.”

Agricultural Issues

The biggest obstacles standing in the way of success are agricultural issues where rich and
poor nations are at odds, and the US cotton industry is right in the middle of it all. The WTO
already has ruled the subsidies paid to textile mills and cotton merchants under Step 2 of the
Cotton Competitiveness Program are illegal, and they likely will be phased out at the end of the
current marketing year.

As USTR Rob Portman has promised sharp cuts in US farm subsidies to inject new life into the
Doha Round, the National Cotton Council (NCC), Memphis, Tenn., is insisting the United States
shouldn’t agree to dramatic cuts in domestic supports unless there are assurances the United States
will achieve “significant market access” for farm products in return.

The NCC also said US textile and apparel exports should enjoy the same market access
textile-exporting countries enjoy in the US market.

Textile And Apparel Issues

Textile and apparel manufacturers have a vital stake in the outcome of the Doha Round. Major
issues are reciprocal tariff reductions, reduction or elimination of non-tariff barriers, and how
to address market disruption stemming from what developed countries contend are illegal trade
practices. The emergence of China as a dominant exporter following the abolition of import quotas
at the beginning of this year has sent shock waves throughout the world’s textile manufacturing
nations. As the Doha Round negotiations move forward, US textile manufacturers are seeking
reciprocity in tariff reductions. They point out that while US textile and apparel tariffs average
14 percent, many countries have higher tariffs and more restrictive non-tariff barriers. Domestic
manufacturers want tariffs in other countries brought down before the United States makes further

The three-year bilateral agreement with China imposing quotas on 34 “sensitive” product
categories will likely have a significant restraining effect on the growth of Chinese imports in
those categories, and while importers do not like quotas, they say in this case the bilateral is
preferable to the uncertainty resulting from the extensive use of safeguard quotas. However, the
door is left open for using the safeguard procedure to impose additional quotas on Chinese imports,
and US textile and apparel manufacturers will continue to pursue a permanent safeguard mechanism in
the Doha Round that could be used against any country’s imports when it can be demonstrated that
they are disrupting or threatening to disrupt markets.

With the current safeguard authority that has been used extensively by the US government due
to expire in 2008, domestic textile manufacturers want something else in place, because proposed
tariff cuts would make the US market more vulnerable than ever.

The US industry says the WTO needs to look at non-tariff barriers as well, identifying the
worst offenders and taking measures to open their markets to imports. In addition, US textile
manufacturers are strongly opposed to anything that would weaken its ability to use antidumping and
countervailing duty laws to remedy the impact of imports.

As negotiations move forward, a coalition of US and more than 90 textile and apparel trade
groups from 55 countries is pressing for sectoral negotiations that would have textile issues
addressed apart from other products. They fear that without sectoral negotiations, textiles and
apparel could become a bargaining chit traded for concessions in other areas.

At a recent meeting, the 97 members of the Global Alliance for Fair Textile Trade (GAFTT)
called on governments around the world to insist that textile issues be addressed in what it called
a Special Textile Sectoral (STS). The GAFTT members said a STS would allow WTO members to deal with
tariffs, non-tariff barriers and other concerns in a “comprehensive manner” in order to achieve
what they called “an orderly and fair long-term development of trade in this critical sector.” They
also said the elimination of quotas earlier this year caused a “shock to the world trading system
that must not be ignored at a time when new textile trade rules are being negotiated in the Doha

Textile Importers

The National Retail Federation (NRF), Washington, has a broad agenda for the Doha Round that
calls for liberalization with regard to farm products, services and manufactured consumer goods.
With respect to textiles and apparel, the federation wants to see “substantial cuts” in duties and
elimination of non-tariff barriers here and abroad.

Retailers are opposed to any effort by US textile manufacturers to reimpose quotas, and they
believe there is little WTO membership support for quotas.

Eric Autor, NRF’s vice president and international trade counsel, said quotas would roll
back the very trade liberalization that the Doha negotiations are all about. NRF sees a need for
harmonizing customs rules in order to create freer market access, and it wants more freedom to open
establishments overseas. The federation also would like to see changes in antidumping and
countervailing procedures that would permit retailers and other consumers to have standing in the
procedures, something that is denied to them at present.

The US Association of Importers of Textiles and Apparel (USAITA), New York City, supports
tariff reductions – to zero for the lower tariffs, and meaningful reductions in the higher ones –
and is strongly opposed to any effort to reinstate quotas. USAITA’s International Trade Vice
President Julia Hughes said she cannot see any consensus in favor of any continuation of quotas.
With respect to tariffs, she pointed out that while some tariffs need to be reduced across the
board, elimination of tariffs would negate the advantages enjoyed by countries that currently have
free trade agreements with the United States. She said her members are interested in
“trade-facilitation efforts” under consideration in the Doha Round. These efforts are designed to
harmonize customs regulations in overseas countries that today restrict and complicate market

In addition, USAITA members are opposed to sectoral negotiations. They say that in the past,
these negotiations resulted in special treatment for textile trade that can no longer be justified.

Pointing out that US-branded textiles, apparel and footwear are often kept out of markets by
high tariffs and persistent non-tariff barriers, Kevin Burke, president of the Arlington, Va.-based
American Apparel and Footwear Association, sees the Doha Round as “the best shot to get harmful
trade practices reduced and eliminated.”

Kevin Burke, president, AAFA

Congress’s Role

A final complicating factor is where Congress will eventually come down on whatever is
negotiated. Until 2007, the president has Trade Promotion Authority, whereby Congress can only
approve or reject trade agreements without amending them.

The highly sensitive agricultural issues, the recent close call on the passage of the
Dominican Republic-Central American Free Trade Agreement and China’s emergence as a dominant trade
force in a number of industrial and consumer areas make the outlook for final approval of any Doha
Round agreements cloudy at best.

November/December 2005