Analysis on Sino-US Textile and Clothing Trade in Pre- and Post-Quotas Era
Name: Student ID：
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
Abstract: Choosing Sino-US Textile and Clothing trade as a topic is not casual, but because it’s contentious of all Chinese exports to US , especially since China’s accession to WTO, Plus the end of ATC quotas. In the paper, I manage to analyze Sino-US T&C trade in Pre- and Post-quotas era through examining the relevant statistics from 1997 to 2006. Taking insight into bilateral T&C trade from both sides, the author is expected to take a sketch of trade and to make a bit of implications to the two countries’ further development in T&C trade even in economy; in addition, the author mainly concludes that though US is more dependent on importing textiles and clothing from China than China is dependent on exporting its clothing and textiles to US, China is not threat to US textile and clothing manufacturing and US decisions largely affect Chinese development and its strategy in this sector. US should not rely on restrictions to maintain so-called loss but pursue a harmonious relationship with China.
INTRODUCTION
The termination of over 40 years of quotas on January 1, 2005, ushered in a new era for the global trade for textiles and clothing (T&C).[1] After 10 years of transition under the World Trade Organization’s (WTO) Agreement on Textile and Clothing (ATC), textiles and clothing trade among WTO members was to be no longer subject to decades of unfair quantitative restrictions. It is predicted that the end of ATC quotas, which would indeed have huge impact on Sino-US T&C trade, would in practice accelerate the pace of international exchange in T&C.
US and China are both of significance in international political and economic affairs; Sino-US trade holds extremely large share in global market. Textile and Clothing products are the most contentious of all Chinese exports to US, not only because China has enormous competitive strength in this sector but because the Multi-Fiber Arrangement (MFA) ended, which at one time severely hampered the natural flow of trade between developing countries and developed countries. (China and US involved) So, it is not surprising for us at all that there were a number of studies (In writing this paper, I also learn a lot from them) done to examine the pre- and post-quotas Sino-US T&C trade, however, precisely how the end of quotas would affect Sino-US T&C trade is still a subject under-research and full of uncertainty.
In this paper, we couldn’t yet deal with the complicated issue in global market, what we manage to do is just to get a sketch of the statistics of bilateral T&C trade from 1997 to 2006, then come to the interpretation of the effects of the end of quotas on Sino-US T&C trade. And before that we should have some basic knowledge on ATC, so the analysis will begin with a brassiere case, an influential commerce affair occurred in 2003, the turning point of the termination of ATC, which also is helpful to the whole presentation in paper.
REVIEW OF A BRASSIERE CASE
Brassieres are symbolic of many textile and clothing imports from China. Before the ending of ATC quotas, especially in 2003, Textile and clothing disputes are mostly limited to brassieres, and later on, disputes over other items (starting with socks) erupted; It is in 2005 when US and China got a bilateral agreement to resolve those disputes. With the elimination of quotas, analysts generally agreed that United States would import more of its clothing and textiles from China, ranging from one-third to two-thirds of its imports. At the same time, China might confront with restraints of larger magnitude and more and more T&C disputes would exist in various forms in the future. Thus a detailed review of the known brassiere case remains relevant and it can also help us a good understanding of the stuff being discussed in the following parts.
Table 1[2]
a. Categories 349 and 649 as indicated in the CITA petition.
b. Based on HTS Codes 50 to 63. In 2003, US textile exports to China accounted for 99 percent of total US textile and clothing exports; US clothing imports from China accounted for 72 percent of total US textile and clothing imports from China.
According to the US Commerce Department, while US production declined, China advanced from being the sixth-largest exporter in 2001 to the largest exporter in 2003. Chinese brassiere imports increased by 249 percent from $120 million in 2001 to $420 million in 2003, when they accounted for 27 percent of total US bra imports from the world (for further detail, see table1). In the face of this situation, in July 2003, three leading US textile lobbying groups negotiated with the US Committee for the Implementation of the Textile Agreements (CITA), an interagency group supervised by the US Department of Commerce (DOC); as a result, the latter invoked special safeguard provisions to limit brassieres and kindred imports from China. In November 2003, the US DOC imposed a 7.5 percent quota limit on Chinese brassieres, knit fabric, dressing gown, and robe imports on the levels extended between September 2002 and September 2003.[3] CITA and the US DOC declared that they based their decision on the data of rapidly rising brassieres imports from Chinese.
After the end of quotas in 2005, Brassiere imports from China increased by 294 percent, from $120 million to $474 million, when they accounted for 31 percent of total US brassiere imports from the world.[4] From 2000 to 2005, US T&C imports from China, mainly increased from about $8 billion to $19 billion. In the same years, China’s share of US T&C imports grew steadily from 11 to 25 percent. From here we can see that the brassiere case is in particular typical of many T&C imports from China considered an overriding fear of potential flood of Chinese textile and clothing exports even before 2005, not alone the end of quotas. You may ask why could the relevant US departments impose “safeguard” or lift quotas to China exports. Under the terms of China’s accession to the WTO, [5] WTO members can apply safeguard tariffs and quotas against any Chinese imports without applying comparable safeguards against imports from other countries; If “material injury” found, product-specific safeguard can be imposed until December 2013.[6] In the special case of T&C, safeguards can be applied almost automatically until 2008, whenever imports create “market disruption” (a lower standard than “material injury”). These provisions are contrary to the WTO’s principle of nondiscrimination, which China agreed to as a condition of accession. And in next section, we will have even more explicit comprehension about this problem.
INTERPRETING THE ATC
To get the entire truth of the Sino-US T&C trade, it is better to look back on the history of ATC including some special provisions imposed ( by US, the actual controller of WTO) on China’s WTO accession after a long time negotiation, then focus on what’s going on after the termination of ATC.
In 1974, about 40 nations united into the Multifibre Arrangement, or MFA, which replaced the Long Term Agreement Regarding International Trade in Cotton Textiles (LTA) signed under GATT in 1962.[7] Originally established as a short-term measure to foster the United States and western Europe adaptation to emerging competition from other parts of the world , the MFA expanded the range of the LTA to cover wool and man-made fibers. Concerns about domestic textiles and clothing development in both industrialized countries (including the United States) and less industrialized countries made it difficult to negotiate an end to the MFA. As a result, the agreement had been renegotiated for four times over the next 20 years, when the trade restraints on clothing and textiles still work. In 1995, the Agreement on Textiles and Clothing (ATC) replaced the MFA, starting a 10-year transition of eliminating quotas for international T&C trade. The ATC’s quota phase-out planned to eliminate quantitative restrictions on T&C trade gradually, which theoretically would grant T&C manufacturers enough time to prepare for the more competitive global market of the post-ATC era.
As part of its accession to WTO in December 2001, China agreed to special provisions that permitted other WTO members to impose two safeguard mechanisms against Chinese T&C products if the importing country believes that the Chinese imports are causing or threatening to cause domestic “market disruption.”[8] A general safeguard mechanism applies to all Chinese exports; another applies only to textile and clothing products, which is more relevant to our topic. The specific T&C safeguard mechanism can be invoked by any WTO member by requesting consultation with China. The simple act of requesting consultation could immediately brings a quota on the products equal to 6% or 7.5% more than the amount imported over the previous 12 months. Even if there is no agreement with China on the safeguard measure, the WTO members still have the options to continue to enforce the quota. There is no requirement for WTO notification; nor is there need for multilateral supervisions, and such quotas can only be imposed for one-year without China’s negotiation. [...]
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