Chesnutt Proposes Program To Address Chinese Trade Practices

At a hearing conducted last week by the US-China Economic and Security Review Commission in North
Carolina, James Chesnutt, former chairman of the National Council of Textile Organiztions (NCTO)
and CEO of National Spinning Inc., called for a nine-point program to address what, according to
the NCTO, is “a threat posed by China to the US textile and apparel industry.”

Created by Congress, the commission is mandated to monitor, investigate and submit an annual
report on the national security implications of trade and other relationships with China.

“The central issue is not what policies or practices the central government in Beijing has
undertaken, rather the central issue is how our own government has responded, or more accurately,
has failed to respond to China’s deliberate economic intervention on behalf of its citizens and its
industry,” said Chesnutt, testifying at the hearing.

As part of his testimony, Chesnutt released a NCTO analysis that shows the Chinese government
offers its textile manufacturers 73 subsidies, and he said the US government has failed to develop
any such comprehensive list of Chinese subsidies.

In order to address what he sees as problems with Chinese trade, Chesnutt proposed a
nine-step program that he said would lead to a “revitalization of the US textile industry.” The
program calls for:

• Congress to pass legislation that would address China’s currency manipulation;

• extension or replacement of the current China textile import safeguards, designed to
address market disruption;

• creation of a “Comprehensive Subsidy Database” for use by US manufacturers;

• an increase in anti-dumping and countervailing duty assistance to small and medium-sized US

• increased enforcement efforts by the US Trade Representative and the Department of Commerce
to deal with illegal trade;

• a review of the Chinese government’s support for its state-owned industries, including
textiles, and penalization of illegal transactions;

• an increase in Customs enforcement efforts, with particular emphasis on China;

• development of a more effective enforcement system that holds US importers responsible for
illegal imports and provides stronger penalties for violations; and

• imposition of penalties on companies that import products made by Chinese companies that
pollute the environment.

Chesnutt concluded that US textile companies cannot survive “when they are pitted against the
Chinese government.”

In a related development, as the US Department of Labor issued its August employment data
showing the loss of 4,000 jobs nationally and a total of 215,000 jobs in the past 12 months, the
American Manufacturing Trade Action Coalition (AMTAC) renewed its appeal for Congress to enact
legislation addressing the currency manipulation issue and problems resulting from the value-added
taxes imposed by other countries.

“It is imperative for Congress to level the playing field for US manufacturers expeditiously
by passing legislation that would address the massive disadvantage to US producers caused by
foreign value-added taxes and manipulated currencies,” said Auggie Tantillo, executive director,

He added that foreign border taxes such as value-added taxes placed US manufacturers at a
disadvantage estimated at $294 billion in 2005, and that figure continues to increase.

September 11, 2007