U.S.- China Trade Deal Could Be Imminent

Two days of U.S.-China talks this week have brought the countries closer to signing a comprehensive textile and apparel bilateral trade agreement, but first the U.S. government must find a way to satisfy divergent interests of U.S. stakeholders over how much Chinese import growth to allow.

U.S. special textiles negotiator David Spooner said yesterday that the United States and China may be able to reach an agreement after one more meeting, most likely to be held in China by the end of this month. He would not reveal any details about the proposed agreement, other than to say it likely will run through 2008 and that it could provide some relief this year for U.S. importers whose Chinese goods have been embargoed.

He said U.S. textile and apparel companies, from cotton growers to retailers, have expressed desire for a comprehensive agreement with China to run through 2008, but different players in the supply chain have "wildly different expectations."

The American Manufacturing Trade Action Coalition (AMTAC) has called for the agreement to cover all categories where safeguard petitions have been filed or approved, plus any categories that are disrupted or are facing imminent disruption from Chinese imports. AMTAC wants the agreement to limit the growth of U.S. imports of Chinese apparel and textiles very close to 7.5 percent, the level of growth allowed under safeguards.

U.S. Association of Importers of Textiles and Apparel (USA-ITA) executive director Laura Jones said growth levels of 20 percent to 30 percent would be "in the range of the acceptable," but that "is not enough really" given that quotas on Chinese imports have been "notoriously low for a very long time."

Jones said the 7.5 percent growth allowed under safeguard provisions is not realistic given U.S. demand for Chinese apparel that has driven growth of imports of Chinese goods more than 1,000 percent in some categories this year. "In China's case, it's a ridiculous number," Jones said of the 7.5 percent.

There is a lot of pressure from all parties to get an agreement done quickly, said Spooner, who works for the Office of the U.S. Trade Representative (USTR). He said the United States and China have met two to three times this year to discuss textile and apparel trade issues prior to the negotiations in San Francisco this Tuesday and Wednesday.

Frustration with the safeguard process is a factor driving the sense of urgency. Safeguard quota levels have filled for 2005 in six of eight protected categories, and a seventh category is expected to fill by Friday.

Those both for and against safeguards say the trade measures generate too much uncertainty about what level of trade will be allowed between the United States and China.

With a lack of specifics about the possible deal coming from the U.S. or Chinese governments, textile and apparel businesses in both countries are speculating on what the deal will encompass.

"I think to some degree the quota system will be put back on again," said Ronald Tseng, special assistant to the chairman at Shanghai Meroson Garment Co. Ltd. "The entire textile and apparel industry is just a victim in a trade war. Americans are simply using it as an excuse to bring down China's competitive strength in exports. We think an agreement between China and the U.S. should be reached as soon as possible. The industry is already suffering. Many manufacturing plants have been closed down and others are facing uncertainties about the coming orders."

Fang Xiaojian, general manager, Zhejiang Hongxing Sabrina Garments Co. Ltd., also said she felt certain some form of quota system will be in place for 2006. "If not, the same situation [of 2005] will be repeated again as Chinese manufacturers rush to complete their orders by April," she said. "The Chinese yuan has been revalued, which means we have in some way already lost our advantage of low cost. Americans are pointing the finger at China 's textile and apparel industry. They must have forgotten how they can easily make all that loss back just by selling one airplane to China."

As U.S. and Chinese negotiators work to hammer out an agreement that could provide some relief from the uncertainty of safeguards, they must strive to find some common ground between two primary opposing camps, including:

"No deal is better than a bad deal. Whether we will be able to support any final agreement will depend on what's in the fine print both on categories covered and growth limitations given to the Chinese," said AMTAC executive director Auggie Tantillo, one of 45 members of the USTR's Industry Trade Advisory Committee on Textiles and Clothing.

John Stubbs, spokesperson for the USTR, said the government has been in close contact with its industry advisers relative to U.S.-China trade issues. The advisory committee includes executives from a diverse range of firms and associations, including Liz Claiborne, Jockey International, Parkdale Mills, the American Apparel & Footwear Association and Invista.

In categories that have filled, the safeguards have brought the U.S.-China apparel trade to a grinding halt this year because U.S. importers cannot receive any more Chinese goods in those categories. Apparel that is arriving at U.S. ports is embargoed by the U.S. government, and must be placed into bonded warehouse storage until February 2006, shipped back to China or exported for sale in another country that is not restricting imports of Chinese goods.

KATHLEEN DESMARTEAU is editor in chief of Apparel and may be reached at 864-627-0276 or [email protected]. Shanghai-based free-lance writer JAN KOT also contributed to this report.

For More Information

To join the WTO, which it did in December 2001, China agreed that the United States and other WTO member countries could limit the importation of Chinese apparel and textiles by category if there was a market disruption threatening to impede the orderly development of trade.

Here are some Apparel articles that have tracked the safeguard subject in recent months:

Safeguards: CITA to Consult with Industry, Congress on China Trade
With safeguarded categories either capped for 2005 or filling fast, CITA delays its determination on six pending safeguard cases to investigate whether the United States should pursue a broader agreement with China.
http://www.apparelmag.com/articles/viewpoints/fyi080505.shtml

Some China Safeguard Quotas Almost Full
Like the last few grains of sand to pass through the hourglass, time is running short for Chinese imports to clear U.S. Customs in some of the fastest-filling safeguarded categories.
http://www.apparelmag.com/articles/viewpoints/fyi070805.shtml

U.S. Government to Invoke China Safeguards on 13 Products
Some of Flagged Categories Could Fill in Third Quarter
http://www.apparelmag.com/articles/features/feature051805.shtml

China Safeguards Update: Threat-based Petitions Back on the Table
An appeals court cleared the way for the U.S. government to recommence its consideration of 12 threat-based China safeguard petitions. The government also launched seven new safeguard investigations.
http://www.apparelmag.com/articles/features/feature042805.shtml

U.S. Intensifies Political Focus on Chinese Trade
Safeguard Investigations Underway, Currency-Related Bills Introduced
http://www.apparelmag.com/articles/features/feature041405.shtml

U.S. Government Self-Initiates Safeguard Investigation in Six Categories
Associations to File Safeguard Petitions in 14 More Categories
http://www.apparelmag.com/articles/features/feature040605.shtml