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Brandon: China’s checkmate strategy

Made in Mongolia. Alliterative though that may be, it’s what you may soon be seeing on the labels of textile products.

It’s yet another nail in the rapidly-being-buried coffin of the U.S. textile industry, and one more example of how trade rules can be sidestepped.

While Mongolia is a beneficiary of new textile business, the instigator and middleman is — no surprise — China.

When textile quotas were scrapped Jan. 1 this year, fears of the U.S. industry that an even larger flood of Chinese imports would hit the American market very quickly became reality.

U.S. imports of Chinese textiles topped $10 billion last year, thoroughly swamping sales of domestic products and resulting in more plant closures and more lost jobs. In the first quarter of 2005, textile imports from China rose a whopping 29 percent over the prior-year period. Within that increase, imports of Chinese-made cotton trousers were up 1,500 percent and cotton knit tops 1,250 percent.

Job losses in the U.S. textile industry since the passage of the North American Free Trade Agreement are now just shy of 1 million — nearly 20,000 of them since Jan. 1 — with no end in sight.

The European Union’s 2.5 million textile-related jobs are also being pressured by Chinese imports, which have risen there nearly 30 percent since quotas were lifted.

The Bush administration, under pressure from the U.S. industry, recently put into effect emergency restrictions on several categories of Chinese textile imports, in essence reimposing quotas for the next three years. The European Union is considering similar action.

The Chinese protest that the U.S. action is “sheer protectionism” and say they’re being made a scapegoat for America’s inability to cope with its own internal problems.

Which brings us back to Mongolia, about as remote a spot as one could conjure on this earth. But it’s next-door to China, and Chinese textile companies, faced with the loss of business as a result of the U.S. import curbs, have begun moving production to countries that aren’t affected by the restrictions.

Mongolian factories, which had been built by the Chinese in the 1990s to escape the quota rules, and which were expected to shut down when the quotas ended, are instead flush with new business from China. Old factories are bustling again, and new plants are being constructed as fast as possible. A fairly limited pool of available Mongolian workers is enjoying something of a bidding war for their services, with packages that include significantly higher salaries and food/transportation — although the $100 to $125 per month being offered is a pittance compared to similar jobs in the United States.

And the flood of Chinese textiles into the United States continues apace, but hey, they don’t count, because, wink-wink, nudge-nudge, they’re from Mongolia, not China. Such are the intricacies and loopholes of world trade.

And a touch of irony: Though U.S. and EU textile industries have taken it on the chin from Chinese competition, American and European manufacturers of textile equipment are realizing a bonanza from sales of machinery to China. U.S. textile equipment exports were up 28 percent in 2004, totaling nearly $700 million.


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