The 97-member Global Alliance for Fair Textile Trade (GAFTT) which represents 97 trade groups from
55 countries in Europe, Asia, Central America, Mexico and the United States has blasted a European
Union-China plan to release some 83 million in textile imports that had been embargoed when China
exceeded it quotas. The EU/China agreement is expected to allow immediate entry of all of the
textiles and clothing that had been embargoed. Under the new arrangement, 50 percent of the goods
will be permitted to exceed the quota agreement and the remaining 50 percent will be charged
against 2006 quotas.

Charging that the importers caught in the embargo took a calculated business risk and got
burned, Cass Johnson, president of the National Council of Textile Organizations, a GAFTT member,
said: “The EU-China textile deal unfairly penalizes textile and clothing producers from the rest of
the world who play by the rules.”

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition,
another GAFTT member, said China contributed to the EU embargo problem by eliminating its export
licensing requirements early this year. He said granting China additional access to the EU market
simply rewards China for its own irresponsibility.

Last June, China and the European Union agreed to place import quotas with annual growths
ranging from to 8 to 15 percent on 10 product categories. The action was taken in response to an
increase in imports from China that EU officials called an unprecedented surge of imports in
several product categories.

GAFTT used the EU action to reiterate its efforts to persuade the World Trade Organization to
take actions that would prevent China, India and a handful nations from monopolizing the world
textile markets. GAFTT wants to see a permanent safeguard mechanism to protect domestic
manufacturers in countries where it can be demonstrated that imports are disrupting their markets.

September 2005

As a second round of negotiations failed to reach a US/China comprehensive agreement on textile and
apparel imports, the US government is continuing to consider and approve petitions to limit imports
using the safeguard mechanism China agreed to as a condition or its admission to the World Trade
Organization. On August 31, the Committee for the Implementation of Textile Agreements (CITA) added
two more product categories brassieres and man-made filament fabric to the list of some 30 product
categories where the safeguard mechanism is being used. Decisions on four other cases covering
sweaters, dressing gowns, wool trousers and knit fabric were delayed until October 31.

The US government in July imposed quotas on cotton trousers, cotton knit shirts and
underwear, and an embargo already has been placed on those products for the remainder of this year
as the quotas were quickly filled. If additional quotas are approved, they would extend only to the
end of this year, and the textile industry would have to submit new applications demonstrating
market disruption. In the case of petitions decided upon after October 31, the quotas would be in
effect for a full calendar year if the petitions are approved.

While the safeguard mechanism has restrained some imports and likely will do it for more, US
textile manufactures would like to have a comprehensive import limitation agreement through 2008.
Importers of textiles and apparel, while opposed in general to import quotas, would if necessary
like to see an agreement that would result in some certainty in the marketplace.

The US and Chinese governments continue to be interested in reaching agreement on a
comprehensive bilateral agreement. Following the second round of unsuccessful negotiations, Special
Textile Negotiator David Spooner said he is consulting with the Chinese on a date and place to
resume the talks and he remains optimistic that progress can be made toward resolving remaining
issues.

After the talks broke down, textile importers called for renewal of the negotiations while
cautioning that the United States should proceed cautiously and not agree to quotas that would not
necessarily bring production back to the United States. In a statement following the collapse of
the talks, Laura E. Jones, executive director of the US Association of Importers of Textiles and
Apparel, said: “We are extremely concerned by reports that the United States presented a proposal
in Beijing that was even more restrictive than what the US side presented during negotiations in
San Francisco earlier this month. If the United States really wants an agreement, it should be
moving toward a compromise, not in the opposite direction.” She said any agreement should reflect
the interests of the United States and whole including importers, retailers and consumers, as well
as textile manufacturers.

When the talks were broken off, the major textile and apparel manufacturers trade
associations praised the US negotiators for taking a strong stance on behalf of the domestic
industry. Karl Spilhaus, president of the National Textile Association, said the industry is united
in its belief that no agreement is better than a bad agreement. Cass Johnson, president of the
National Council of Textile Organizations, said that in view of the failure to reach a
comprehensive agreement, the US industry will continue to be aggressive and shortly will be filing
additional safeguard petitions.

September 2005