TRALAC - Trade Law Centre

US and China Closer to Deal on Textiles

Thursday, 18 August 2005

Source: Business Report

The United States and China grew closer Wednesday to a deal to regulate rocketing volumes of Chinese textile shipments that have exacerbated trade tensions between the heavyweight rivals.

But further talks will be needed to close the deal, David Spooner, the special negotiator for textiles in the US Trade Representative's office, said as a two-day meeting wound down here.

"Both sides are, I think, eager to solve this problem. But both sides say they'd rather take a little more time to reach a good deal rather than a hasty deal," he told reporters.

At least one additional meeting is planned, most likely before the end of the month in China, Spooner said, explaining that both delegations were examining proposals tabled by the other side.

The US government says Chinese textile imports have surged 54 percent since global quotas were scrapped on January 1, swamping domestic producers in a smothering blanket of cheap Chinese garments with which they cannot compete.

The issue has inflamed trade tensions that are already simmering on a host of other fronts, including Chinese currency reform and protection of US goods from counterfeit rivals in China.

While the European Union has defused a potential trade war with China over textiles, the United States has responded to the surge in imports by slapping quotas on a range of Chinese garments including shirts, trousers and yarn.

China retorts that US companies had years to prepare for the lifting of textile quotas in January but failed to take the opportunity to restructure.

It has the support of many US retailers, whose customers appear happy to buy Chinese-made clothes at bargain prices.

Sun Jiwen, deputy director-general of the foreign trade ministry who was leading the Chinese delegation here, suggested that textile industry representatives from both countries should meet to lessen the frictions.

"If we had more communication we would have less problems," Sun told the meeting through an interpreter. "And then we would not be needed."

The US textile industry wants an agreement that limits Chinese imports in more than 19 categories of apparel to a 7.5 percent growth rate per year until 2008.

That would be tougher than a deal reached by China with the EU in June that agreed to limit the growth of 10 Chinese textile products to the 25-nation bloc to between 8.5 and 12.5 percent until the end of 2007.

The American Manufacturing Trade Action Coalition kept up fierce lobbying for strict limits on China's textiles.

"We maintain our long-standing position that while the textile industry wants a comprehensive agreement, any agreement must be in the industry's best interest," said the group's executive director, Auggie Tantillo.

"As a result, no deal is better than a bad deal."

Spooner refused to comment in detail on what the negotiations have entailed, beyond saying that the level of percentage caps that would apply to Chinese apparel imports "is certainly one of the sticking points".

But he said the United States wants any accord to last through to the end of 2008, when current US safeguards against Chinese textile imports allowed by the World Trade Organisation are due to expire.

"Our entire private-sector stakeholders ... cotton growers up to retailers, have asked us to pursue an agreement that lasts through the end of 2008," he said.

If the EU experience is mirrored in the United States, an overarching deal with China on textiles may backfire.

German Economy Minister Wolfgang Clement Wednesday urged the EU executive to act quickly to solve problems caused by restrictions on Chinese textile imports that have left thousands of items of clothing blocked by customs.