Textile Makers Seek Relief From Chinese Imports

US textile manufacturers have filed a series of petitions with the government seeking protection
from what they see as an impending surge of Chinese imports, a move that has triggered a major
confrontation with the Chinese government and textile and apparel importers. The US textile makers
are asking the administration to use the safeguard mechanism China agreed to when it was admitted
into the World Trade Organization (WTO). That mechanism says the US can negotiate or unilaterally
impose quotas on products where it can be demonstrated there is market disruption or a threat of
market disruption.

While the US government in 2002 did impose quotas on three product categories of textiles,
that action was based on a showing of actual market disruption. US textile manufacturers are
plowing new ground by seeking similar action based on a threat of market disruption. They are
asking for quotas on 10 categories of trousers, knit shirts, underwear, cotton sheets, synthetic
filament fabric and cotton yarn. Trade data from the US Department of Commerce show that in the
past 12 months, Chinese imports of textile and apparel amounted to $2.3 billion, a 50-percent gain
over the comparable period of 2003. The coalition is also expected to ask for a one-year extension
of the quotas placed on the three product categories in 2002.

The Chinese government and US importers of textiles and apparel have reacted sharply to the
safeguard proposal, denouncing it as baseless and misguided. Laura E. Jones said the action is a
bogus attempt to blame others for the failures of the US textile industry. Expressing their high
concern over the proposals, Chinese trade officials said the petitions are a brazen breach of WTO
rules and seriously hurt the confidence of Chinese firms in the global trade environment. Some of
the nations largest importers, who are represented by the National Retail Federation, say the
attempt to restore quotas is simply unacceptable, and they have charged that the administration has
caved into political pressure by allowing the industry to file the petitions.

Politics could enter the picture because of the timing of one of the petitions. A coalition
of US textile manufacturers filed the first petition covering imports of cotton trousers on October
8. Under the governments procedures, the Committee for the Implementation of Textile Agreements has
15 working days to determine if the petition has technical merit, and that deadline happens to fall
on election eve, November 1. Some Washington observers say the timing was not accidental.

In seeking the safeguard action, textile manufacturer said the action is justified by what
they see as a flood of Chinese imports once quotas are removed on Jan. 1, 2005. Charging that China
uses a number of illegal and unfair subsidies to drive competition out of the market place, Karl
Spilhaus, president of the National Textile Association, said “No industry playing by free-market
rules can compete with an industry allowed to sell into a free-market but not playing by
free-market rules.” Cass Johnson, president of the National Council of Textile Organizations
(NCTO), said the threat is justified by past performance and evidence of plans by the Chinese to
expand their exporting capability. “In the apparel and home textile categories released from quota
in January 2002, China exploded from less than 10 percent market share in 2001 to more than 70
percent market share in June 2004,” Johnson said.

Absent implementation of safeguards, China will capture similar market share post-2005 and
destroy the textile and apparel manufacturing complex. The petitions cover roughly $1.96 billion in
clothing and textile imports. While the numbers are relatively small, in the overall world trade
picture, retailers and other importers of textiles and apparel charge that reimposition of quotas
would force consumers to pay higher prices at a time when prices should be dropping as a result of
the end of the quota system.

October 2004