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China's Textile Market Gains with End to Trade Quotas


Three months after the end of a quota system that regulated the world textile and apparel trade, there is evidence that, as expected, China is grabbing a bigger share of world textile exports. The United States is now moving to hold back a flood of imports from China.

The Bush administration is initiating action that will likely result in temporary limits on the growth of U.S. apparel imports from China.

Commerce Secretary Carlos Gutierrez says the administration is committed to providing assistance to the domestic textile and apparel industry. The industry trade association says that since January, 17 U.S. textile mills have closed, costing the jobs of 17,000 workers.

Commerce department data suggest that so far this year U.S. imports of Chinese cotton trousers and knit shirts have increased by over one thousand percent compared to the same period a year earlier.

Gary Hufbauer, a researcher at Washington's Institute for International Economics, says the likely U.S. restrictions are permitted under a safeguard provision agreed to by China.

"So we will see a fair number of safeguards. Now these safeguards will not roll back Chinese exports to the levels they were in 2004,” said Mr. Hufbauer. “Not at all. What they will do is cap the growth of these exports over the rest of the year to something like seven to eight percent."

As severe as the Chinese import shock has been for the U.S. textile industry, Mr. Hufbauer believes it is even more punishing to other developing country exporters in Asia, Africa and Latin America.

"The competitors of China have probably taken two-thirds of the loss, in market,” he said. “And U.S. firms about one third. This seems to be the pattern in earlier episodes when China was still controlled by quotas. And I would guess it is probably going to hold this year as well."

When the textile and apparel quota system was ended there were predictions that as a low cost but efficient producer, China would be the principal beneficiary of freer trade. Recent data suggest that that pattern of trade is occurring.

While the American textile industry is pleased with the Bush administration action, some trade groups are dismayed. One consumer group complains that new quotas will lead to higher prices, imposing a hidden tax on consumers. The 25 countries of the European Union are expected to follow the U.S. lead in imposing temporary safeguards on textile imports from China.