Bridges Weekly Trade News Digest • Volume 9 • Number 18 • 18th May 2005
US to Impost Textiles Safeguard on China
The US has decided to impose quotas on three categories of textiles and clothing imports from China. The 13 May announcement came after investigations showed that the imports were causing market disruption.
The surprisingly quick decision to restrict imports came only four days after the 9 May expiry of the public comment period for the investigations into market disruption launched at the beginning of April by the US Committee for the Implementation of Textile Agreements (CITA), an interagency US government group chaired by the Department of Commerce (see BRIDGES Weekly, 6 April 2005 ).
China’s terms of accession to the WTO include a ‘textile specific safeguard clause’ that allow WTO Members to impose quantitative restrictions on imports of Chinese textiles and clothing products if they are found to disrupt markets. Under the safeguard, Members can limit specific products to an increase of 7.5 percent above the preceding year’s import levels.
In related news, on 17 May EU Trade Commissioner Peter Mandelson asked the European Commission to accelerate the pre-safeguard procedure for t-shirts and flax yarn from China. In addition, a WTO Council for Trade in Goods meeting was adjourned on 10 May after WTO Members were unable to agree on whether to discuss a Tunisian proposal on the adjustment needs of developing countries in the wake of the end-2004 phase-out of trade quotas textiles and clothing sector.
US ‘committed to level playing field’
CITA announced on 13 May that it had found evidence of market disruption, as well as the threat of further disruption, in its investigations of cotton knit shirts and blouses, cotton trousers, and cotton and man-made fibre underwear. It claimed that imports from China increased in volume by 1,276 percent, 1,573.2 percent, and 318.24 percent for the first, second, and third categories respectively.
The investigations were launched on 4 April, partially in response to US textiles manufacturers’ demands for government intervention to protect domestic production. In its finding on 13 May, CITA confirmed both the validity of its self-initiated claim and of the claim lodged by the textiles manufacturers earlier in the year (identifying the "threat" of market disruption for the same products). This essentially validated the controversial claims by US textiles manufacturers that asked for the imposition of safeguards based solely on the "threat" of market disruption (see BRIDGES Weekly, 26 January 2005).
As per the terms of the ‘textile specific safeguard clause,’ the US will limit Chinese imports of the three kinds of textiles to 7.5 percent above the preceding year’s import levels. The restrictions will come into force as soon as CITA formally requests consultations with China on easing or avoiding market disruption. CITA said it would seek the consultations — thus triggering the imposition of quotas — by the end of May. Once triggered, the safeguards will stay in place until the two sides reach an agreement on an alternative way to dampen imports, or until the end of 2005.
Beijing reacted angrily to the measures, expressing its "strong displeasure and firm opposition" to CITA’s decision, arguing that it was based upon "short-term and inaccurate statistics." In a note presented to the US Embassy in China, the Chinese government said that the reintroduction of quotas "runs counter to the basic spirit of free trade encouraged by the WTO" and "fails to conform to relevant regulations concerning China’s accession to the WTO." Similarly, Chinese Commerce Ministry spokesperson Chong Quan added in a statement that "the Chinese government reserves the right to take further measures within the WTO framework," though he did not specify what such measures might entail.
According to US government data on textile and apparel imports for the first quarter of 2005, China’s total textile and apparel shipments to the US jumped by 47.95 percent in the first three months of this year.
Developing countries affected
At a 10 May WTO Council for Trade in Goods (CTG) meeting, WTO Members considered a proposal from Tunisia (JOB(05)/31), supported by Turkey and Jordan, calling for remedies to the problems faced by developing countries in adjusting to the post-quota textile and clothing trading environment. The proposal asked WTO Members to examine ways to stabilise market prices for foods, textiles, and clothing and to work with international financial institutions on establishing a funding mechanism to help developing and least developing countries that have benefited from preferential quota access adjust to the new reality. In particular, it proposed that adjustment-related textiles issues should be established as a permanent item on the CTG agenda.
These measures are necessary, Tunisia argued, because developing and least developed countries have been hit hardest by changes in the textile and clothing sector. "Since 1 January 2005, these countries have seen their competitive advantages in their export markets wane, and have only retained the benefit of preferential, yet limited, tariff access," Tunisia declared. Although the document had been listed on the provisional agenda by Chair Vesa Himanen of Finland, China objected to discussing the Tunisian proposal and, with support from India, Brazil and Hong Kong, refused to accept the agenda as it stood (see BRIDGES Weekly, 1 December 2005). As a result of the disagreement, Himanen suspended the CTG, saying he would hold consultations with Members "on an urgent basis."
EU launches formal consultations
On 17 May, EU Trade Commissioner Peter Mandelson asked the European Commission to launch formal consultations with China in two of nine categories of textiles and clothing imports currently under EU examination. Under EU rules, the investigations launched on 24 April can take up to 60 days, but the procedure allows for urgent consultations in cases of import surges and threat of immediate damage to EU industry. Mandelson triggered this "urgency" provision for t-shirts and flax yarn. However, the other seven categories will continue to go through the full 60-day investigation process after which the EU will move to formal consultations with China if market disruption is found.
The Commission’s investigation revealed that imports from China in the first months of this year have risen by 187 percent for T-shirts and 56 percent for flax yarn compared with the same period in 2004, resulting in drops in production in Greece, Portugal and Slovenia and also the displacement of exports from Morocco, Tunisia, Romania, Pakistan, Sri Lanka and Bangladesh.
The proposal to launch formal consultations with China for T-shirts and flax yarn will shortly be presented to the EU College of Commissioners, after which it will be discussed with EU members in the Textiles Committee. If the Committee reaches agreement, the Commission will send a letter requesting formal consultations with China. This process could be completed before the end of May. However, unlike in the US, quantitative restrictions are not imposed automatically when formal consultations are launched. Instead, the EU can impose quantitative restrictions using the textile specific safeguard clause if China does not introduce self-restrictions within 15 days of receiving the request for formal consultations (see BRIDGES Weekly, 27 April 2005).
ICTSD Reporting; "Chinese textiles imports investigation: use of the urgency procedure," EU PRESS RELEASE, 17 May 2005; "China Rejects U.S. Decision to Impose Safeguard Quotas, Hints at WTO Action," WTO REPORTER, 17 May 2005; "CITA Announces That It Will Invoke Safeguards On Textile Imports From China,"CITA PRESS RELEASE, 12 May 2005; "China expresses "strong displeasure and firm opposition" to US re-imposing of textile quota," XINHUA, 16 May 2005; "China and Turkey at loggerheads over textiles row at WTO," AFX, 10 May 2005; "China Blocks WTO Discussions On Post-Quota Textile Aid Proposal," WTO REPORTER, 11 May 2005. .