Critical Decisions This Week On Textile Trade Issues

With trade officials scheduled to
make critical decisions this week on a framework for the Doha Round of trade liberalization
negotiations, US textile industry lobbyists are stepping up their pressure for special sectoral
negotiations for textiles and apparel. Sectoral negotiations would reduce the possibility that
textile trade concessions would be made in exchange for concessions in other areas. In addition,
the US industry also would hope to get a safeguard mechanism that would prevent countries such as
China and Vietnam from disrupting the US market.

Some 40 trade ministers, including US Trade Representative Susan Schwab, are meeting in
Geneva this week in the hope of reaching agreement on the so-called “modalities” that would
determine the course of tariff cuts and other trade liberalization proposals being considered by
the 149 members of the World Trade Organization (WTO). While textile interests in the United States
and several other developed countries have been pressing the US government and their respective
governments to support textile sectorals, US importing interests oppose the sectorals, feeling they
would not be in the best interest of freeing up trade.

Agreement on modalities, already three months behind schedule, will have to be reached soon
if the WTO negotiations will have any chance of being completed by year’s end — a target that has
been set in view of the fact that President George W. Bush’s trade promotion authority (TPA)
expires next year. Most trade officials in this country feel it would be extremely difficult, if
not impossible, to get congressional approval of a trade agreement unless it is considered under
TPA procedures that require an agreement to be voted up or down without any amendments.

On the eve of the modalities negotiations, Cass Johnson, president of the Washington-based
National Council of Textile Organizations (NCTO), cited US trade with China as a prime
justification for a special textile sectoral. He said China has now overtaken half of the US import
market for apparel in product categories where quotas have been removed, and he pointed out the
worldwide share of the US import market has fallen off. In those product categories still under
quotas, imports have grown to only 8 percent of the US market.

“[Based on] the apparel categories that have been quota-free the longest — since 2002, the
results are grim,” Johnson said. “Every major supplier except India and Vietnam has lost large
amounts of the market share in the United States to China. Other developed countries’ figures are
similar. China’s share of the Japanese and Australian apparel markets is now over 75 percent. In
the European Union, in apparel categories where quotas have been removed since 2002, China’s share
is now 74 percent.

Noting the Doha Round talks are approaching a “critical juncture,” Johnson said: “A key
question is whether the WTO will adopt a sectoral or whether it will decide to hand world textile
and apparel markets over to China. By adopting a sectoral, the WTO will be sending a message that
it will defend textile and apparel jobs worldwide from China’s predatory pricing, currency
manipulation and vast government subsidies.”

June 27, 2006