China yesterday threatened to take the United States to a formal dispute proceeding at the World Trade Organization if the Bush administration...
SHANGHAI, China — China yesterday threatened to take the United States to a formal dispute proceeding at the World Trade Organization if the Bush administration persists in restricting imports of Chinese-made textiles.
It also rescinded tariffs on its own textile exports, asserting it will not limit its shipments as it offered to do last week so long as the United States and Europe impose their own restrictions.
At a news conference in Beijing, China Commerce Minister Bo Xilai unleashed the latest rhetorical volley in an intensifying trade conflict, warning that his government might formally accuse the United States of foul play if the Bush administration does not lift quotas on its textiles.
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“This is a legitimate right that China is entitled to and we will resort to this mechanism when it is time to do so,” Bo told reporters, according to Bloomberg News.
That threat came only days before Bo is scheduled to receive U.S. Commerce Secretary Carlos Gutiérrez, who is due in Beijing on Thursday to hold talks on the textile conflict and the larger issue of how to lessen China’s $160 billion trade surplus with the United States.
The growing intensity of the dispute underscores the degree to which domestic pressures now appear to be leading both sides to push hard, lest they face accusations of appeasement.
Analysts emphasized that Beijing and Washington both appear to be engaged in a show of their toughness aimed at assuaging their domestic industries and not in a genuine escalation.
“This is entirely about domestic politics in both countries,” said Andrew Rothman, China strategist at CLSA Asia-Pacific Markets in Shanghai. “They’re doing the dance that they always do. I don’t see this turning into a trade war.”
The textile dispute stems from the expiration of an old system of global quotas that for four decades limited how much clothing any single country could ship to the United States and Europe.
Since the lifting of those limits at the beginning of the year, shipments of Chinese-made clothes into the United States have leapt by more than half, according to the Commerce Department. Volumes of some goods such as cotton pants and shirts have jumped by more than 1,000 percent.
That surge has increased pressure on the Bush administration to choke the flow.
U.S. textile manufacturers and a vocal contingent in Congress have accused the administration of being soft on China, allowing a renegade trade power to inundate the market with cheap goods at the expense of American workers.
The Bush administration earlier this month slapped new quotas on several categories of Chinese clothes and textiles to limit growth to 7.5 percent this year. It has the right to impose these safeguard quotas, as they are known, under the agreement that brought China into the World Trade Organization three years ago.
China reacted with hostility, accusing the United States of violating the spirit of free trade. Officials in Beijing maintain China is simply using its advantages — an abundance of cheap labor and natural resources — to produce high-quality goods at an economical price.
China asserts it is being made a scapegoat for the inevitable decline of U.S. manufacturing.
In a bid to persuade the Bush administration to eschew safeguard quotas, China last week said it would quadruple tariffs it imposes on its textile exports. But yesterday, it said it would withdraw those tariffs altogether so long as the safeguard limits remain.
The conflict now unfolding might have been scripted. In interviews last year, Bush administration officials signaled clearly they were almost certain to impose safeguard limits once the old quota system expired.
Chinese officials and major textile-factories producers here said they expected such a move. So did major buyers of Chinese clothing, such as Wal-Mart and J.C. Penney. Many held off on shifting purchase orders from other countries to China until they saw how the political situation would be resolved.
“If the administration didn’t invoke safeguards when some of these goods are up over 1,000, when would they ever?” said Pietra Rivoli, a trade expert at Georgetown University.
China’s furious response highlights how some factories here — particularly smaller operations — may have miscalculated the likelihood of safeguard quotas and are now crying foul as they forgo shipments to the United States and Europe.
“The Chinese government has received a lot of direct and indirect pressure” from the domestic textile industry, said Sun Huaibin, deputy editor in chief of China Textile, an official trade magazine.
As the two senior-most commerce officials sit down later this week, both appear to be boxed in, unable to offer concessions lest they suffer the wrath of pressure groups at home. For China’s government, that dynamic is enhanced by a cultural and historical predisposition against bending to the demands of an outside power.
But even as Commerce Minister Bo raised the prospect of a full-blown case at the WTO — a process that takes years to unfold and usually results in settlement — he was careful to wall off the textile dispute.
He pledged that his government will not link it to other trade issues such as the ongoing Doha round of negotiations aimed at widening the scope of the global trade body.
“China does not want to link the textile issue,” Bo said. “China is a country of principle; we do not want to couple all things under one single subject to bargain with others.”
Special correspondent Eva Woo contributed to this report.