The US Commerce Department announced the
introduction of special safeguard measures on November 18. Ever
since, the move has attracted much attention both at home and
abroad for it imposes quota restrictions on certain textile
products from China. Knitted fabrics, bras and dressing gowns have
been targeted. Dr Hu Jiangyun, an assistant researcher with the State Council Development
Research Center offers an expert opinion on the problems quotas
will bring.
1. Reasons given for the quotas.
The US government has advised that it is bringing
in the quotas in response to the needs of the US textile industry.
The regulations governing China's entry into the World Trade
Organization (WTO) include provisions under which the US (and other
WTO members) may set temporary quotas on Chinese textile products
should such imports from China give rise to disruption in domestic
markets.
According to the explanation offered by the US
Committee for the Implementation of Textile Agreements (CITA),
imports of certain textiles and clothing from China saw such rapid
growth that US markets have been de-stabilized (see table)
Year-on-year growth in imports from China in the
nine months to Sept 2003
|
|
% growth in imports shipped
|
% growth in import value
|
|
Knitted fabrics
|
39.21
|
32.07
|
|
Cotton bras
|
52.95
|
31.77
|
|
Man-made fiber bras
|
77.76
|
75.68
|
|
Cotton gowns and robes
|
140.69
|
96.22
|
|
Man-made fiber gowns
|
84.55
|
57.80
|
Source: US Commerce Department: see
http://otexa.ita.doc.gov
2. Effects of the quotas.
Regardless of whether or not the US quotas on Chinese textile
products are reasonable and/or tenable, they will certainly make
their influence felt.
Impact within China:
Quotas will lead inexorably to unemployment in China's textile
industry during a time of economic transition. China is a
developing country with a huge population. Jobs are important and
unemployment brings very real difficulties. Textiles play a key
role in China not least because this is a labor-intensive industry.
Quotas on China's textiles were removed following WTO entry. This
led to a time of rapid growth in the industry with many new job
opportunities. The return of quotas will mean the return of the
scourge of unemployment for some textile workers.
Quotas will be detrimental to the restructuring of China's
textile industry. The country implemented industrial restructuring
in the late 1990s and the improvements are now apparent. When it
was necessary to lessen the impact of the Asian financial crisis,
China brought in government compensation schemes and reduced its
textile production. The imposition of quotas on Chinese textile
products is sure to damage the restructuring of the textile
industry. It will upset the balance between supply and demand.
Those other industries that depend in one way or another upon the
textile industry will also be affected to a greater or lesser
extent.
Quotas set a bad precedent. China's textile exports may now be
more likely to encounter frictions over trade with other countries.
Other WTO trading partners may follow the US lead and invoke the
regulations, further squeezing the overseas market access available
to Chinese textile products.
Impact on the US economy:
Protectionism will lead to higher prices of domestic textile
products as they find themselves cushioned for a while against the
realities of lower labor costs elsewhere.
Protectionism is detrimental to the development and revival of
the US economy. Textiles are consumer goods and price increases are
reflected in overall consumer spending. Such a protectionist
approach can hardly enhance the competitiveness of the domestic
industry. It may lead instead to a vicious circle that puts
obstacles in the path of economic development and revival.
Protectionism may well bring hardship to the US. An overly
zealous recourse to WTO regulations in a multilateral trade context
could provide an example for other WTO members to follow and see
reprisal follow reprisal. At the end of the day the US may see
protectionism come home to roost.
Protectionism will be detrimental to the development of healthy
trade relations between China and the United States, which overall
is China's second biggest trading partner. The US is China's
biggest export market while China is the fourth biggest export
market for the US, now lying behind only Canada, Mexico and Japan.
More investment has come to China from the US than from any other
country. The quotas will affect US textile enterprises operating in
China.
3. Behind the headlines
US trade protectionism
The grounds given for the introduction of US textile quotas are
not well founded and China's Foreign Ministry
and the Ministry of
Commerce have both called in representatives from the US
embassy to register their complaints.
The ministries made clear their view that the quotas do not
actually conform to CITA procedures on special safeguards with
respect to Chinese textiles and clothing. In addition they are at
variance with the pledges contained in the working group's report
on China's accession to the WTO.
The distortion and misuse of limitation measures do not have a
sound legal basis. The quotas are at odds with the documentation
relating to China's entry into the WTO for they go against the
principles of free trade, transparency and non-discrimination.
What's more they also send the wrong signals to US industry and
other WTO members.
Other countries have actually been experiencing much higher
growth rates in their textile exports to the US in the affected
categories. They are members of the North American Free Trade Area
or have other agreements with the US and they have not seen quotas
imposed.
The underlying reasons behind the textile quotas are to be found
in domestic economic and political pressures in the United States.
The cycle of economic recovery has been slow in the US and the
dollar has weakened. Stagnation in the US textile industry comes as
a result of a lackluster domestic economy. The large trade deficit
with China is due in no small measure to the United States' own
actions in limiting high tech exports to China where they would
find a ready market.
The upcoming 2004 presidential and congressional elections
coupled with a worsening situation in Iraq have given rise to the
pressures in the United States that have led to the wrong decision
being made on quotas.
Back in early 2002, the United States went ahead with the 201
Steel Case only to be on the receiving end of a negative judgment
from the WTO. The textile quotas are just another case of trade
protectionism.
Resolving the dispute
Sino-US trade relationships have now entered a sensitive stage.
This is a time to keep a cool head and work carefully to bring
about a settlement to these present difficulties:
Good mutual communication is necessary to spell out the
disadvantages to both sides resulting from the imposition of
quotas. Stagnation in the US textile industry does not result from
imports from China.
During multilateral trade negotiations, China should press the
case that as a new WTO member, it should enjoy those rights
appropriate to a developing country and a new member of the
WTO.
As the issue develops we may see various avenues being followed.
Those US enterprises, organizations and transnational corporations
whose interests in China are disadvantaged may well chose to lobby
the US Congress. There could be recourse to WTO dispute resolution
mechanisms. Then there would be the option to adopt retaliatory
measures.
(China.org.cn translated by Li Xiao, December 5, 2003)