Bridges Weekly Trade News Digest • Volume 9 • Number 2 • 26th January 2005

Post-Quota Textile Trade Starts To Take Shape

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In response to the elimination of quotas on textile and clothing at the end of 2004, Turkey and Argentina moved this month to protect domestic textile manufacturers by imposing limits on Chinese textile imports. US textile importers managed to receive a court injunction against the imposition of similar measures by the US government. Meanwhile, the WTO Secretariat received Members’ authorisation to prepare a report on how least developed countries (LDCs) can improve their competitiveness in the textiles and clothing sector.

Turkey, Argentina impose quotas on Chinese imports

On 14 January, Turkey started implementing measures aimed at limiting to 7.5 percent the rate of increased imports from China of 42 categories of textiles. The Turkish government had published its decision to use this ‘China textile safeguard,’ provided for in China’s WTO accession agreements on 23 December 2004 (for more information about the safeguard, see BRIDGES Weekly, 13 October 2004). The Turkish foreign trade department had said that booming imports from China threatened fair trade, squeezing out local manufacturers and driving down prices.

The Chinese government reacted strongly and vocally to the Turkish import restrictions. "We are shocked and strongly oppose this wrongful decision," Chong Quang, spokesperson for the Chinese trade ministry, said. "We can solve the textile trade issue through dialogue and co-operation rather than impeding bilateral economic and trade relations." The Chinese government has argued that the China textile safeguard can only be legitimately invoked after actual market disruption has taken place, and has previously threatened to challenge safeguards imposed merely because of the threat of such disruption at the WTO’s Dispute Settlement Body.

Turkish textiles and apparel exports amount to some USD 20 billion a year and the government’s action has, according to EU officials, led to pressure for the EU to do the same. EU trade officials and politicians were meeting on 26 January to consider whether to follow Turkey’s lead.

As per two 16 December presidential decrees, on 1 January 2005 Argentina started imposing product quotas that limit imports of certain Chinese textile and garment products into Argentina. Like the Turkish quotas, Argentina is using the China textile safeguard to limit the growth of these imports to 7.5 percent per year.

US court rules against safeguards

US textile and clothing importers received a court injunction at the end of 2004 against attempts by the US Commerce Department to consider at least 11 controversial petitions from textile manufacturers to block Chinese textiles and clothing products on the basis of the threat of import surges. The importers, represented by the US Association of Importers of Textiles and Apparel (USA-ITA), have for now foiled attempts by the American Manufacturing Trade Action Coalition (AMTAC), which represents US-based manufacturers, to have quotas imposed on Chinese imports.

WTO Secretariat to study LDC textile competitiveness

At a meeting of the WTO sub-committee for least-developed countries on 20 January, WTO Members agreed to ask the WTO Secretariat to prepare a report on how least developed countries can improve their competitiveness in the textiles and clothing sector. The move followed an October 2004 request by the LDCs that the Secretariat prepare a report suggesting ways to maintain LDC market share in the sector, to ensure a smooth transition after the expiry of quotas (see BRIDGES Weekly, 3 November 2004). The final mandate for the Secretariat study is considerably watered down from the LDCs’ original request, and focuses on coherence programs of the IMF and World Bank, rules of origin, and technical cooperation as means to enhance LDC competitiveness in textiles and clothing.

First impacts of quota expiry felt

Some of the fears about the quota expiry resulting in job losses in smaller, less competitive developing countries appeared to be borne out in recent weeks when six textile factories closed in Lesotho after their foreign owners (from Taiwan, China, Mauritius and Malaysia) left the country, leaving some 6,650 workers jobless. Similarly, Esquel, a Hong Kong-based multinational, recently closed its factory in Mauritius and relocated to Vietnam.

Nonetheless, the fear of trade wars — over safeguards, export duties and WTO actions — appears to be inhibiting any drastic shifts in trade flows. Some industry sources have said that orders are little changed from last year because importers are placing their orders cautiously and not putting "all their eggs in one basket."

In China, fifty major textile exporters agreed at the end of December to set up bodies that will establish fixed price floors for six important categories of textiles to ensure quantities do not increase too rapidly. In combination with the decision of the Chinese government in December to put an export tax on certain textile exports, these measures signal that the Chinese are attempting to reduce the chances of trade frictions with importing countries.

ICTSD reporting; "WTO Committee Agrees to Launch Study On Improving Competitiveness in Textiles," WTO REPORTER, 24 January 2005; "China’s textile rivals await outcome of ‘terrible prophecies’," FINANCIAL TIMES, 21 January 2005; "Turkish Curbs On China Textiles Up Pressure For EU Action," DOW JONES, 14 January 2005; "USA: US government barred from limiting Chinese clothing and textile imports," FIBRE2FASHION, 3 January 2005; "USA: AMTAC decries USCIT ruling - fears textile and apparel manufacturing job losses," AMTAC, 1 January 2005; "Panels to watch textile export orders," CHINA DAILY, 30 December 2004;"Turkey asked not to set import quotas on textiles," CHINA DAILY, 26 December 2004; "Turkey sets quotas against Chinese textile imports," REUTERS, 26 December 2004; "Argentina : Sanctions on Chinese textile imports ordered by Prez Nestor Kirchner," FIBRE2FASHION, 18 December 2004.