Countries Seek WTO Assistance

overnments from 30 countries have appealed to the World Trade Organization (WTO) to
undertake “an urgent review” of the impact of the quota phase-out on less-developed countries and
to seek solutions to what they see as a major crisis resulting from China’s dominance of world
trade. They have asked the WTO’s Council of Trade in Goods to place the textile trade issue on its
permanent agenda, so it would be required to address the problem at all of its meetings.

They would like the WTO to conduct a study and establish a permanent work program to deal
with problems identified in such a study. Peter Mandelson, the incoming European Union trade
commissioner, added his support, saying China is on target to take over 50 percent of the world’s
textile trade market. Admitting it is too late to reverse the decision to remove quotas, Mandelson
said steps must be taken to help less-developed countries adjust to the quota removal. He added
that China, however, is likely to resist any new quotas and said, instead, that the best way to
address the problems of less-developed countries is to enhance the assistance programs of the World
Bank and International Monetary Fund, and remove what China sees as impediments to trade found in
preferential trade agreements such as the North American Free Trade Agreement, the Caribbean Basin
Initiative and the African Growth and Opportunity Act. US manufacturers and others in the Western
Hemisphere, on the other hand, see the preferential pacts as the key to their future growth and

Administration Cites China Trade Progress

Although a growing number of manufacturing industries are expressing concern over the dominance
of China in international trade, the Bush administration has stoutly defended its policies, which
it says are producing “real results” and increasing opportunities for US workers, farmers and
companies. US Trade Representative Robert B. Zoellick has issued a fact sheet that highlights five
areas, including textile trade, where the administration is getting positive results. He said that
in the past 12 months, US exports to China grew to $33 billion, and that since President Bush took
office, the United States has exported nearly $90 billion in goods and services to China. This, he
said, has made China one of the fastest-growing export markets in US history.

Zoellick said the United States has successfully resolved numerous potential cases with China
in the WTO, opening markets for high-technology and other manufactured products, and agricultural
commodities including cotton. Zoellick added that in four years, the administration has imposed
nearly as many antidumping orders against unfair imports from China as the Clinton administration
imposed in eight years.

With respect to textile trade, Zoellick said the administration exercised its right to impose
safeguards against Chinese imports on robes, undergarments and knitted fabrics. In addition, it has
negotiated free trade pacts with 12 countries, and in most cases, they call for a yarn-forward rule
of origin — supported by US textile manufacturers — and tariff preference levels that extend the
tariff concessions in the agreements to a limited amount of products originating in
non-participating countries. That pleases US importers of textiles and apparel.

The fact sheet does not address the burgeoning imports from China and the resulting trade
deficit. In the case of textiles and apparel alone, in 2003, the United States had a $13 billion
trade deficit with China; and in the first seven months of 2004, the deficit increased by 28


Under Secretary Of Trade Grant Aldonas

Battle Looms Over Quota Extension

Look for a real donnybrook as US textile manufacturers and others in less-developed countries
seek to have restrictions placed on Chinese imports of textiles and apparel after all import quotas
are removed Jan. 1, 2005. The debate grew increasingly intense after a top US Department of
Commerce official opened the door for textile manufacturers to propose making wider use of the
so-called safeguard mechanism in China’s WTO accession agreement. US textile manufacturers want the
government to use the safeguard mechanism and impose import quotas in the face of a threat of
market disruption rather than waiting for actual market disruption to be proven, as has been the
case in the past. Without indicating what the outcome of such an approach would be in specific
cases, Under Secretary of Commerce Grant Aldonas said the industry has the right to seek relief on
the basis of a threat of market disruption.

That immediately set off a firestorm in the importing community and in China. A Chinese
Commerce Ministry official said such an approach would “brazenly breach” WTO rules and “seriously
hurt the confidence of Chinese firms and public in the global trade environment.” He said China’s
textile and apparel exports to the United States would grow “to a certain extent,” but claimed that
would be “normal” in global trade.

US textile importers, who objected earlier to quotas imposed on the basis of actual market
disruption, reacted even more sharply to the threat proposal and accused the Bush administration of
bowing to political pressure by changing the rules. They said that in the past, the interagency
Committee for the Implementation of Textile Agreements (CITA) has repeatedly said safeguard cases
could be brought only in situations where disruption of the US market already has occurred and not
on the basis of future anticipated disruption. Tracy Mullen, president, National Retail Federation,
said it is “simply unacceptable” for a government agency to change rules and policies governing
administrative procedures according to the direction of the political wind.

The question of imposing unilateral quotas or reaching a negotiated agreement faces a long,
contentious and sometimes bitter route, and it is unlikely that anything will be settled for
several months.

Under safeguard procedures, CITA determines whether there is market disruption or a threat of
market disruption. If such a determination is found, it would offer to have consultations with
China on a bilateral agreement to impose quotas. If agreement is not reached, the United States can
impose unilateral quotas for one year with a 7.5-percent growth and has the right to continue
quotas if the problem persists.

Plans For New Flammability Standard Moving Forward

Home furnishings manufacturers are concerned about and attempting to shape federal and state
regulations that for the first time would create flammability standards for top-of-bed home
furnishings. After several years of looking into the issue, California now appears to be close to
announcing a standard, and the federal Consumer Products Safety Commission (CPSC) is likely to
follow suit.

The proposed standard would affect sheets, comforters, pillows, mattress pads and other
filled bedding products.

The National Textile Association is spearheading an effort to make the standards something
the industry can live with. The industry and the California Bureau of Home Furnishings and Thermal
Insulation appear to be close to developing a standard that will provide consumer safety and not be
too much of a burden on the industry. The standard would use a weight loss test method whereby a
mock-up of a product would be subjected to an open flame and the amount of weight loss could then
be used to measure its flame resistance. In the meantime, CPSC soon is expected to issue an advance
notice of proposed rule-making, which would start the ball rolling on a federal standard.

The textile industry would like to see the federal government adopt the California standard
as a federal standard to ensure that interstate commerce is not complicated or disrupted.

It also would like to make certain the regulations would apply to imported goods as well as
those made in this country.

November 2004