The prospect that Chinese exports will soon overwhelm the worldwide clothing market was thrown into doubt yesterday after Beijing announced it will tax its shipments of textiles...
The prospect that Chinese exports will soon overwhelm the worldwide clothing market was thrown into doubt yesterday after Beijing announced it will tax its shipments of textiles and apparel once the global market is liberalized Jan. 1.
The move could help defuse a looming confrontation with the Bush administration, which is considering whether to limit Chinese clothing imports because of fears China’s textile industry will swamp producers in the United States and other countries, potentially throwing millions of people out of work.
Details of the decision were scant, and its impact will depend on whether Beijing imposes export duties high enough to make some Chinese textiles less competitive, industry and government officials said.
China’s action, published on government Web sites late Sunday, comes less than three weeks before the end of a system that has restricted international trade in textiles and apparel for decades. Under that system, detailed quotas have limited the amount of clothing, towels, sheets and other textile items that each country can sell in the United States, Europe and Canada.
The end of the quota system will allow countries to sell as much clothing as they can around the world and has prompted economists and industry experts to predict China’s low-cost factories will dominate the trade.
The U.S. textile industry, battered by low-price foreign competition, is seeking to fend off Chinese imports by demanding the U.S. government impose “safeguards” limits the United States and other governments can put on imported Chinese textile or apparel items.
Beijing agreed to allow such safeguards until 2008 under the terms of its entry into the World Trade Organization.
Just as the administration had hoped, the threat of safeguards has evidently prompted China to act on its own. An article reporting the government’s decision in China Daily, an English-language newspaper, said that at a closed-door meeting in October, 70 to 80 percent of 400 Chinese textile company representatives agreed they “would support stricter industry management after quotas are lifted.”
In its announcement, the Chinese government avoided any suggestion it was bowing to foreign pressure. Chong Quan, a spokesman for the Ministry of Commerce, was quoted as saying, “This is part of a string of measures China will take to ensure a smooth transition for textile integration following the end of the quota system.”
The response from Washington was cautious. “China has yet to provide critical details of its intentions,” Mary Brown Brewer, a Commerce Department spokeswoman, said in a statement. “We will continue to work with China and other nations to facilitate an orderly transition from the textile quota system.”
That statement left open the possibility that safeguards could still be imposed. As if to drive home the point, the department announced it had agreed to consider a request by U.S. textile companies to limit imports of knit fabric from China.
U.S. textile representatives said the Chinese announcement will not blunt their efforts to obtain safeguards.
“This is in keeping with the pattern that the Chinese normally exhibit in situations like this,” said Augustine Tantillo, executive director of the American Manufacturing Trade Action Coalition. “They announce an intention to do something, and then six months later, it’s kind of hard to find whether or not they’ve actually done it.”
The Wall Street Journal’s online edition quoted U.S. industry executives saying the tariff could be six to 12 cents per garment.
Seattle garment importers called China’s move a political effort to appease U.S. garment and textile firms threatened by Chinese imports. But they said the tariff probably wouldn’t mollify anyone because it is too small to steer importers away from China.
Bill Shields, vice president of global sourcing at Pacific Trail Sportswear in Seattle, said his company is used to paying $3 to $4 in “quota charges” per garment made in China. The charges cover what factories pay for permission to export. Replacing that with a 12-cent tariff “is fairly insignificant” and wouldn’t prompt him to take any production out of China, he said.
Similarly, Stephen Ritchey, president of Seattle Pacific Industries, said the tariff would probably be multiplied a little by duties but wouldn’t deter purchasing. It would add a percentage point or two to the $8 average cost of a garment from China.
“It doesn’t affect our business decision,” he said. “There’s no wall [stopping exports from China]. You just prepare a different cost structure and get through it.”
Shields said he expects the domestic garment industry in the U.S. to continue pressing the Bush administration for measures that would temporarily slow or halt goods from China.
“I don’t think it will have an effect on stopping safeguards,” Shields said.
The European Commission, the executive arm of the European Union, gave a much warmer reception, saying in a statement that the steps should help “ensure that the expansion of textile exports from China happens progressively.”
The Chinese measure is similar to past actions by other governments, notably Japan, which in the 1980s “voluntarily” restrained exports of machine tools and autos to the U.S. in a bid to avert protective tariffs. Such export restraints have since become illegal under WTO rules, but since no WTO member would likely challenge China’s export duties, that probably won’t pose a problem.
Seattle Times business reporter Alwyn Scott provided material on Seattle garment importers’ reaction.