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Textile quota lifting: Bane or boon?
By Miao Yingchun (China Daily)
Updated: 2004-11-12 08:42

With global quotas on textiles and garments set to be phased out on January 1, 2005, the world textile market is likely to see dramatic restructuring.

With that in mind, escalating trade conflicts between China and the United States over textile products becomes an important benchmark of trade relations between developing and the developed countries.

On October 29, the US Government announced it will consider a request by its textile industry to maintain caps on shipments of Chinese-made cotton trousers to the United States.

One week earlier, the US Committee for Implementation of Textile Agreements said Chinese socks were "disrupting the US market" and requested imposing a quota on them.

Besides these, US$1.96 billion of Chinese textile products, including knit underwear, jeans, shirts and blouses, were subject to similar accusation from US textile manufacturers.

Along with EU countries, Canada and other developed countries, the United States is to lift all limits on the number of textile they import.

This is good news for developing countries which have competitive advantages in labour-intensive industries like textile. It is a great opportunity for them to stimulate their foreign trade as well as boost domestic job markets.

Yet, developed countries, which are supposed to lift their quotas, are reluctant to do so because developing countries have a much larger share of the global textile market.

The latest statistics from the World Trade Organization show that developing countries take 55 per cent of the world's total textile exports, which stood at US$1.369 trillion, in 2003. They also exported 71 per cent of the clothing around the world in the same year.

Therefore, the governments in developed countries are facing tremendous political pressure from within, despite the fact that eliminating the quota could boost the welfare of people around the world.

Given the significant position of the textile industry in the United States, the Bush administration is unlikely to give way to the pleas of developing countries.

The United States is a large consumer of textile and clothing. It imported US$76.5 billion worth of textile and clothing in 2002, US$82.8 billion in 2003 and US$58.2 billion in the first eight months of 2004.

The increasing textile and clothing imports not only contributed to the country's tremendous trade deficit, but also put great pressure on its textile and clothing industry.

The US textile and clothing industries employ 2 million workers and produce an output of at least US$50 billion every year.

The latest numbers from the Bureau of Labour Statistics under the US Department of Labour show that the US textile industry only added 700 new jobs in September while the clothing industry lost 1,700 jobs in the same month.

At the same time, the textile and clothing industry have an equal, or even more significant, position in China's economic development.

China's textile exports were US$80.5 billion and the clothing exports were US$52.1 billion last year, altogether accounting for 30.23 per cent in the country's total exports.

Workers employed in textile and clothing industries amounted to 180 million last year, making the two sectors the biggest employers in all industries in the country.

Workers in the sectors related to textile and clothing are as high as 90 million, which indicates the vital connection between the development of textile and clothing and the employment situation in China.

The prosperity of the textile and clothing industry in China has also created a demand on the international market.

China imported US$15.59 billion worth of textile and clothing products, and US$16.36 billion worth of natural and chemical fibre, textile equipment and other raw materials last year.

The growth in shipments of textile products made in China caused concerns for US textile manufacturers.

They claimed that if the government did not initiate special safeguarding measures against Chinese textile products, more than 50 per cent or even 70 per cent of the US textile market would be snatched by Chinese producers, the US textile industry would be endangered and the ordered development of trade would be threatened.

They even went so far as to say that the Chinese textile industry could cause a flux on the world market, taking away the jobs of textile workers around the world.

Their demands were met last November when Washington slapped an annual growth ceiling of 7.5 per cent on Chinese brassieres, dressing gowns and knit fabrics, calling it a special safeguard measure.

After that, the growth of the three categories became much lower than in the same time last year.

Such "safeguards"could protect the interests of the US textile manufacturers for a while.

But they cause substantial harm to the interests of retailers, textile importers and textile equipment exporters.

As Laura E. Jones of the US Association of Importers of Textiles and Apparel points out, limiting trade may help score political points, but does not prepare the US manufacturers for competition.

The China Chamber of Commerce for Import and Export of Textiles said in a statement on October 28 that the growth in the export of Chinese made socks to the US was a choice made by US importers, retailers and the consumers. Trade barriers on socks exports would not only hurt employment in China, but also the interests of all related parties.

As a matter of fact, lifting the textile quota will not have an influence as serious as some imagined.

Daniel J. Ikenson, a trade policy analyst with the Cato Institute in the United States, thought that the diversification of the US economy would cushion the shock posed by lifting the textile quota.

He also said that the number of jobs in textile industries may decrease, but the demand for high-end textiles and apparel or those with special uses would grow after textile exporters gear up to produce more commodities.

To sum up, we should hold an optimistic attitude on textile trade relations between China and the United States.

Capping quotas may help maximize the national interests of the US for a while as it tries to ease the shock to the US economy posed by the globalized textile trade with special safeguards. But it will definitely have a negative effect on industrial restructuring in the long run.

Therefore, it is a good choice for the US Government to face challenges with an open mind to realize the long-term interests of the textile and apparel industry at the cost of short-term shocks.

(The author is a researcher with the School of Business, Wuhan University)

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