How much more disruption can the U.S. textile industry withstand before it collapses under the weight of a rising tide of imported fabric and apparel from the People's Republic of China?
That's the question 14 fiber and textile organizations asked the Bush administration in a letter requesting that it begin initiating the safeguard provisions that were included in the accession agreement allowing China to enter the World Trade Organization
“The safeguard action our coalition is seeking is authorized if Chinese-origin textile or apparel products disrupt markets and threaten to impede the orderly development of trade,” said Mark Lange, president and CEO of the National Cotton Council, one of the coalition members.
“Members of the coalition unanimously agree that markets are being disrupted as evidenced by reduced U.S. mill cotton consumption, textile mill bankruptcies and closings and job losses in that sector. This turmoil explains the request for the administration to self-initiate the action.”
Coalition members said they are seeking the safeguard action because of the enormous surge of Chinese exports into the U.S. market following the removal of quotas on 29 categories of textile products in 2002. During the first 15 months following quota removal, China increased its share of the U.S. market for these products from 9 percent to 45 percent.
“This market penetration not only is devastating to the U.S. cotton and textile industries, but to all other U.S. trading partners, including those with whom free trade agreements already have been forged — Mexico, Canada, Central America, the Andean Countries and Sub-Saharan Africa,” Lange said.
Some of the highest import growth rates were in eight cotton-containing categories, where the average rate of increase in 2002 was more than 640 percent, said Gaylon Booker, a National Cotton Council consultant who has been working closely with the coalition.
“This huge increase was spurred by an average price reduction across the eight categories exceeding 70 percent,” Booker said. “We fully expect the same enormous increase to occur in all textile categories when quotas are removed from the remaining textile products by Jan. 1, 2005, unless countermeasures are taken.”
“China starts with a huge cost advantage due to its internal, non-market monetary policy,” said Lange. “The Chinese yuan is estimated to be undervalued by 40 percent and pegged to the dollar, meaning this huge advantage is locked in, and the international community has not mustered the will to force China to float its currency.”
While Chinese textile exports to the U.S. market are skyrocketing, China has failed to meet its WTO accession commitment with respect to imported raw cotton, the Cotton Council officials said.
China agreed to allow up to 3.75 million bales of imported cotton annually to enter its markets duty-free. One-third of the imported cotton would be reserved for state-owned enterprises and the other two-thirds was to receive national treatment, meaning treated no differently than domestically grown cotton.
“National treatment, though, has not occurred,” said NCC Chairman Bobby Greene, a cotton ginner from Courtland, Ala. “Prospective Chinese buyers of imported cotton have been required to certify that the resulting product will be exported before they are permitted to import the cotton.
“The failure of China to meet its WTO commitment, on the one hand, while reaping the benefits of dramatically increasing exports of textile and apparel products into the U.S. market on the other, have dealt a crippling blow to the U.S. cotton and textile industries. U.S. mill cotton consumption already has fallen from 11.4 million bales in 1997 to a current (2003) annualized rate of 6.8 million bales.”
Greene said it is important for the administration to act quickly to stop the resulting bankruptcies and job losses in the textile/fiber complex.
“Even with the publicity about textile plant closings and job losses, the U.S. fiber and textile industries remain among the nation's largest employers,” Greene said, “and it's not like further loss of jobs and economic activity in our sector will be offset by gains in other sectors. Manufacturing and service jobs are leaving the U.S. in droves. The administration can shore up losses in our sector by simply exercising U.S rights granted under WTO rules.”
Aside from the safeguard action that can provide short-term relief, the coalition is urging the administration to take two other actions that can provide longer-term benefits to the U.S. and its trading partners:
- Maintain U.S. textile tariffs under the WTO until other nations reduce their tariff rates to U.S. levels;
- Refuse to accept tariff preference levels (TPLs) in the Central American Free Trade Agreement (CAFTA) and similar agreements.
Including TPLs in the CAFTA and similar trade agreements would permit China and other third countries to transship their textile components through signatory countries into the U.S. market duty free.
“Benefits of CAFTA and other regional and bilateral agreements should be restricted to signatory countries and not be extended to third countries that make no reciprocal concessions,” Greene said.
The United States is entitled to take the safeguard action without approval by a WTO review panel. While the United States is obligated to consult with China on the issue, the decision about whether or not to take action will be made by the Committee for the Implementation of Textile Agreements (CITA), a body comprised of representatives from five federal agencies.