Textile Quota Negotiations With China Break Down

In an initial round of negotiations, US and Chinese government officials failed to reach agreement
on the US government’s decision to re-impose import quotas on three textile and apparel product
categories that the US contends are creating market disruption. The Chinese negotiators reportedly
contend that the US governments action is illegal, and say it has failed to demonstrate market

The negotiations were undertaken Jan. 12-13 after the US government acted under the so-called
safeguard mechanism in the US/China bilateral agreement that allows the US to impose import quotas
where it can be demonstrated that imports are causing or threatening to cause market disruption.
The products involved are knit fabrics, robes and dressing gowns and brassieres, where imports have
surged since they were removed from quota control over a year ago. The US requested consultations
with China, but in the meantime announced it unilaterally was imposing quotas that will permit only
7.5-percent growth in imports of those products in 2004.

US textile manufacturers had hoped that the safeguard negotiations could be expanded into a
comprehensive bi-lateral quota agreement in view of the fact that all quotas are due to be phased
out by the end of this year.

Further talks aimed at establishing mutually agreed upon quotas are planned, but no date has
been set. If no agreement is reached, the unilateral quotas will remain in place unless the World
Trade Organization should rule them to be illegal. US importers of textiles and apparel agree with
the Chinese that the US has failed to demonstrate market disruption, and they certainly do not see
any need for a broader comprehensive agreement.

January 2004