TRALAC - Trade Law Centre

Textiles: China Voluntarily Cuts Back Exports to South Africa

Friday, 20 January 2006

Source: Business Report

South Africa's beleaguered clothing and textile industry was thrown a potential lifeline yesterday when China announced it would voluntarily curb the exports of its textiles and clothing to South Africa.

"China will voluntarily limit the export of garments and some textile items to South Africa," said the Chinese ambassador to South Africa, Liu Guijin. Liu was presenting China's Africa policy to African diplomats, international analysts and the media in Pretoria.

The department of trade and industry has been in protracted talks with its Chinese counterparts to try to persuade Beijing to curb the flow of clothing and textile exports, which is putting some local firms out of business and killing thousands of jobs. Liu's remarks were the first concrete indication of some success in this endeavour.

He said the Chinese government was also committed to retraining South African textile and clothing workers and to forming partnerships with local firms to make the industry more competitive.

The deputy director-general of trade and industry, Lionel October, said in an interview afterwards that talks with the Chinese were continuing. He confirmed China had offered to help with training in the clothing and textile industries.

Asked about Liu's announcement of voluntary cuts in exports, October said China understood the impact exports were having "and this is the general Chinese policy, which is to be welcomed".

The announcement by Liu received a guarded reception from the Southern African Clothing and Textile Workers' Union (Sactwu), which lost close to 60 000 jobs between January 2003 and November 2005.

"The crucial issue is to reach agreement on the terms of any voluntary restraint. It has to be at levels so as to reverse the massive job losses we've had in the industry," said Sactwu general secretary Ebrahim Patel.

Sactwu has criticised the government for not placing its own curbs on the import of cheap Chinese goods.

Patel said Chinese competitiveness was based on a number of factors, including a "seriously and deliberately undervalued currency", generous government subsidies for factories to modernise and a lack of worker rights, models that could not be adopted wholesale in South Africa.

Liu said China had had to revamp its clothing and textile industry before joining the World Trade Organisation, after a government analysis revealed outdated machinery and low production levels.

This had forced China to close down thousands of textile factories and retrain 200 000 workers for jobs in other industries. "In the long term, for any country to be competitive it has to reform certain sectors," he said.

- Independent Foreign Service

A follow up aricle appeared in South Africa's Business Day newspaper on 23 January 2006:

South African clothing and textile industry has responded favourably to an announcement that China is to voluntarily reduce its clothing and textile exports to SA.

A reduction in Chinese imports would help revive the domestic industry, said Aaron Searll, CEO of SA’s biggest clothing and textile manufacturer, Seardell Investment Holdings, on Friday.

He said that clothing imports from China had risen 40% in the past nine months. “It cannot be allowed to continue like this, it is overwhelming,” Searll said.

China’s ambassador to SA, Liu Guijin, said on Thursday his country would limit export of garments and some textile items to SA.

Searll said more clarification was required on the form the limitations would take, and whether they would mean a percentage cap on the volume of imports, as promoted by the World Trade Organisation (WTO).

“The industry also needs to know how long is it to be enforced for and who will enforce it,” he said.

The import of high-quality textiles and clothing to the South African market by China has put increasing strain on the domestic manufacturing industry, leading to the demise of a number of companies, including KwaZulu-Natal’s largest textile manufacturer, Whiteheads.

The company, which closed its doors at the end of 2004, blamed cheap imports from India, China, Pakistan and Indonesia for a R200m loss in turnover in the last two years that it operated.

Clothing company Rex Trueform said in its annual report last year that highly competitive trading conditions in the industry resulted in larger-than-expected losses in manufacturing, which in turn resulted in retrenchments at all levels.

Despite the massive job losses, which Searll put at 60000 in the past four years, he said the curb in imports would benefit the sector.

Executive director of the Textile Federation of SA, Brian Brink, said he was not aware of the exact terms of the Chinese offer.

“I do not know what has been negotiated, although every little bit would help,” he said.

Brink said that the WTO agreement — in which members are allowed to limit Chinese textiles and clothing imports to 7,5% a year of the current level of imports until 2008 — was one possibility.

Brink said he doubted the Chinese would stick to the particular limit as it was not a binding figure.

“I feel that it was a bit of a pre-emptive move by the Chinese as the announcement was made by them instead of SA.”

The trade and industry department set up a task team in April 2004 to investigate the industry’s need for protection against Chinese imports.

The share prices of Rex Trueform, Seardell Holdings and Adonis Knitwear were unchanged at the close of the JSE on Friday.



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