W
ith the January 1, 2005, deadline for eliminating all textile and apparel quotas drawing
nearer and nearer, textile manufacturers and government officials in both developed and
less-developed nations are taking a hard look at the future. What they see is a textile trade
landscape littered with land mines and booby traps. The land mines are the explosive growth of
Chinese exports as products are freed from quotas, and the booby traps are the myriad of hidden
barriers to free trade that exist throughout the world.

At a “Future of Textiles and Clothing After 2005” conference sponsored by the European Union
Commission, textile trade officials deplored the fact that so many countries are failing to live up
to their commitments to liberalize trade. They contend that countless markets remain closed to
imports due to excessive tariffs, a “multiplicity” of non-tariff barriers and currency
manipulations, which they say amount to unfair and maybe even illegal subsidies.

While expressing widespread concern, officials concluded it will be difficult to eliminate
those barriers and subsidies because the countries involved like them and are not very inclined to
give them up. For example, US and European anti-dumping measures were attacked by a number of
less-developed country representatives, who see them as major non-tariff barriers, but anti-dumping
is stoutly defended in the United States and Europe. Speaker after speaker emphasized the need to
reduce tariffs, eliminate non-tariff barriers and promote “ethical work standards” in the
less-developed countries. While most delegates feel these are laudable goals, they agreed that they
will not easily be reached.

For example, US Textile Negotiator David Spooner reiterated the United States’ position that
countries should eliminate all of their tariffs by 2015, but that idea was summarily dismissed by
Kipkorir Aly Azad Rana, deputy director general, WTO, who said it is “intellectual theory, but not
realistic.”

Much of the conference was dominated by concerns over Chinese trade and the threat it poses
to both developed and developing countries. ATMI and the National Textile Association made
presentations deploring the tremendous growth of Chinese textile and apparel exports where quotas
were recently removed, and warned that this will be multiplied when all quotas are removed. They
said this is a threat not only to the United States, but also to other countries that currently
have a share of the US market.

Free trade with China is viewed as a particular threat to preferential trade agreements such
as the North American Free Trade Agreement (NAFTA), the Caribbean Basin agreements and the proposed
Free Trade Area of the Americas (FTAA). US textile industry representatives at the conference said
the US government must not enter into any agreements permitting further access to the US market
without “fully reciprocal and balanced concessions” from all trading nations. With so many
contentious issues on the agenda, textile manufacturers are pressing for sectoral negotiations,
whereby textiles and apparel would be considered separately from other commodities, so that textile
and apparel concessions cannot be used as trading chits.

Asian Currency Problem Remains Major Concern

Concerned that the Bush administration is ignoring what they see as the “most important issue
facing manufacturing today,” US textile and other industry lobbyists are calling on members of
Congress to pressure the administration into taking actions to combat what they claim are illegal
currency manipulations by Asian countries. In recent congressional testimony, ATMI Senior Vice
President Cass Johnson said currency manipulations are inflicting “terrible damage” on textiles and
other troubled industries. He said Asian governments have spent more than $1 trillion to keep their
currencies undervalued and their exports to the United States strong.

Charging that the US trade representative (USTR) and the secretary of the treasury are
ignoring the problem, Johnson said the US government must “take strong enough action that China is
compelled, for its own sake, to do the right thing.” However, no one seriously expects China to do
anything on its own because it benefits from the current situation.

There are a number of things the US government could do if or when it decides the problem is
serious enough. Where textiles are concerned, it could employ the safeguard mechanism in the
US-China bilateral agreement and impose restrictions on Chinese imports that are disrupting
markets. Because WTO regulations prohibit using currency manipulation to gain an unfair advantage,
the issue could be brought before the dispute settlement body of the WTO. In addition,
International Monetary Fund regulations permit sanctions where it can be shown that subsidies are
denying market access for imports.

Since the administration at the present time is not likely to do any of the above, the
industry hopes it can prevail on its supporters and allies of other industries in Congress to bring
sufficient pressure on the administration to force it to act.

Congressmen Seek Textile Rule Of Origin Support

As the Bush administration continues to pursue more and more free trade agreements, two of the
US textile industry’s strongest supporters are seeking congressional pressure for a yarn-forward
rule of origin to be included in all future pacts. In addition to working on a FTAA, USTR Robert B.
Zoellick now is laying the groundwork for a US-Middle East Free Trade Area. Representatives Cass
Ballenger (R-N.C.) and Sue Myrick (R-N.C.) have called on their colleagues in the House to support
the yarn-forward rule of origin. That rule was incorporated into the NAFTA and Caribbean Basin free
trade agreements, as well as the recently signed trade agreement with Singapore. However, it was
strongly opposed by retailers and other importers of textiles and apparel, who are playing an
increasing role in Washington. While Congress does not have control over such agreements, it can
bring pressure to bear on government trade negotiators.

Expanded Lobbying Group Calls On Bush For Help

A broad-based coalition of 14 fiber and textile manufacturers associations has called on
President Bush to reaffirm his commitments to the textile industry and take “strong and specific
actions” to address what they see as an “ enormous threat” to the future of the industry. Textile
lobbyists fear the administration may be backing off of its frequent statements that it will
safeguard the health of the industry. In view of this, the trade associations signed a letter to
the president calling on his administration to move immediately to self-initiate the special China
textile safeguard mechanism and impose import quotas on sensitive textile and apparel product
categories where Chinese imports are surging; reject any tariff preference levels in future
bilateral or regional trade agreements that would grant benefits to China; and reject a proposal
before the World Trade Organization (WTO) that would grant zero tariffs to China and other
countries.

Concurrent with the letter, the American Textile Manufacturers Institute (ATMI) issued a
22-page report, “The China Threat to World Textile and Apparel Trade,” which warns that absent
action by the US government, China’s share of the US market will grow to more than two-thirds
within 24 months. If this occurs, the report claims, the largest wave of job losses and plant
closures in history will occur and “likely result in the elimination of textiles and apparel as a
major manufacturing employer in the United States.” The report is available on ATMI’s website,
www.atmi.org.

August 2003