Trade Meeting Will Have Major Impact On Textiles

A make-or-break round of World Trade
Organization (WTO) trade negotiations is underway in Hong Kong this week, with much at stake for US
textile and apparel manufacturers and importers. Trade ministers from the 148-member nation WTO are
working on a framework for trade liberalization negotiations that government officials believe must
conclude in 2006. The basic goals for the negotiations are to knock down tariffs and other trade
barriers and create greater market access for agricultural, industrial and consumer products. The
WTO also is attempting to protect the interests of developing and less-developed countries that run
the risk of being overwhelmed in the growing trend toward globalization.

At this stage of the game, US textile lobbyists are zeroing in on two areas. They want
special sectoral negotiations for textiles and apparel and they are attempting to block an attempt
to grant less-developed countries duty-free and quota-free access to the US market. Down the road,
they will be opposing what they see as one-sided tariff reductions and they will be seeking greater
access to overseas markets that today, in some cases, are virtually closed to US exports.

As the talks got underway, US textile manufacturers were lining up support from members of
Congress and the countries where the United States has free trade agreements. In a letter to
President Bush, 24 members of Congress warned that a European Union-led effort to eliminate tariffs
for less-developed countries would divert textile trade from Western Hemisphere producers and
others who have free trade agreements with the United States and open the doors to products from
less-developed countries that use components from China.

Addressing the question of less-developed country duty elimination, the members of Congress
said: “Such a proposal would eviscerate existing preferential arrangements maintained with Central
America, Africa and Mexico. Countries with enormous and highly developed apparel sectors would have
the right to ship garments duty-free to the United States even though these garments are made from
yarns and fabrics produced in third countries such as China.”

The members of Congress also joined US textile manufacturers and those in countries where
the United States has free trade agreements, urging US negotiators to support the idea of special
textile and apparel sectoral negotiations. The congressional letter to President Bush said textiles
and apparel need to be placed in a Special Textile Sectoral “where the unique and sensitive aspects
of the textile and apparel trade can be addressed in a comprehensive manner and preserve the
foundation of our bilateral and regional free trade agreement and preferential trading programs.”

Those same sentiments were echoed by 13 trade groups in 11 North American Free Trade
Agreement, Dominican Republic-Central American Free Trade Agreement and Andean region Latin
American countries, as well as US textile manufacturing trade associations.

US importers of textile and apparel, however, support the idea of granting special duty
concessions to the less-developed countries. They say US consumers are paying $27 billion in duties
each year while developing countries are finding it difficult to compete in today’s quota-free
environment. Robert Zane, chairman of the board of the US Association of Importers of Textiles and
Apparel, said, “It is ironic that the quota program led the US importers to search out new
suppliers, and often in less-developed countries, but now that the quotas are gone, the
manufacturers in less-developed countries are having a harder time competing because they aren’t as
efficient and don’t have the ability to offer one-stop shopping for US importers and retailers.
Now, to be competitive, they really need a duty advantage.”

Importers also are opposed to sectoral negotiations, because they believe in the past they
led to unwarranted preferential treatment for textiles and apparel.

At the Hong Kong meeting, the National Retail Federation and EuroCommerce, representing
retailers and wholesalers in the United States and Europe, presented a joint statement calling for
substantial reductions and eventual elimination of all tariffs on agriculture, consumer and
industrial goods, including textiles and apparel. The organizations said such actions would benefit
both developing countries and domestic consumers, who, they said, had “for far too long borne a
disproportionate share of the cost of protecting politically powerful domestic industries.” They
also called for rejection of any new permanent safeguard mechanism to impose import quotas and any “
special formula” for textiles and apparel that would result in smaller tariff cuts than those made
for other products, i.e. special sectoral negotiations.

December 2005