After months of remonstration, US textile manufacturers were this week claiming victory over the decision by the Bush administration to limit some Chinese fabric and clothing imports. But is this the start of rising US protectionism or a clever ploy to generate votes in the run-up to the 2004 presidential elections? asks Leonie Barrie.

The Bush administration's move to reinstate quotas onto Chinese knit fabric, dressing gowns and bras will see Chinese textile shipments capped at an annual level 7.5 per cent above their running rate at the end of August 2003.

But while ailing US fibre and textile firms are rejoicing at the decision to stem soaring Chinese imports with new quotas less than two years after the old ones were removed, there are also fears that this is a first step by the US to renege on its 2005 commitment to phase out all remaining textile categories on January 1, 2005.

The evidence, however, suggests that this couldn't be further from the truth. Although products covered by the industry's China safeguard petitions were worth a total of $497 million in the nine months to September 2003, they account for just 4.67 per cent of total Chinese textile and apparel exports to the United States in dollar terms.

And, if the decision is ratified, US imports from China will be frozen at levels many times higher - and in one case three hundred times higher - than they were before quotas were lifted at the end of 2001.

Safeguard petition
The step to invoke the so-called "safeguard" petition was made by the Committee for the Implementation of Textile Agreements (CITA) and followed a vociferous campaign by the US textile industry to halt surging imports of low-cost Chinese-made garments.

Specifically, it covers knit fabric (category 222), cotton brassieres (349), manmade fibre brassieres (649), cotton dressing gowns (350) and manmade fibre dressing gowns (650).

American lobbyists say China more than doubled its imports to the United States in 2002 and is in the process of doing the same in 2003. They argue these are in turn threatening an already-fragile US production base and are directly responsible for a slew of American plant-closures and job losses. 316,000 US textile and apparel manufacturing jobs have been lost since January 2001 - 30 per cent of all US textile and apparel manufacturing jobs - and more than 250 US plants have shut down since 1997.

But while the safeguard clause was specifically negotiated as part of Beijing's agreement to join the World Trade Organisation (WTO) on 1 January 1 2002, the US and China still have to schedule a meeting to discuss the new quotas before they become 'permanent' - in this case meaning the new quota holds for the next 12 months.

To many observers, this timeframe is a crucial part of the deal since they believe the textile safeguard measure is simply part of a wider political agenda. After all, with the 2004 Presidential elections fast approaching, Bush has been under pressure to pay back Republicans - particularly those in textile heartlands like South Carolina and Georgia - for their support in past trade legislation.

Likewise, votes are critical, and textile leaders have made no secret of the fact that they would not support Bush's re-election bid unless he took take steps to protect the industry.

Speaking last month Jim Chesnutt, CEO of the National Spinning Co and vice chairman of American Textile Manufacturers Institute (ATMI), remarked: "If we don't get the actions we need from our own government, I would expect that the American textile industry, which has embarked on a massive voter registration drive to get our workers to the polls, will be looking for new leadership."

And this is where the one-year clause conveniently comes in. The safeguard mechanism which the US administration has invoked formed an explicit part of the agreement under which China joined the WTO and is completely in line with all America's commitments to its trading partners.

It also eases the pressure Bush is also facing from other quarters. This includes a rocky trading relationship with the EU over the US's illegal steel tariffs, and demands from US businesses over China's foreign exchange policy, which they say keeps the yuan unfairly low against the dollar, making Chinese exports especially cheap.

Presidential elections
Nor can it be an accident that the new quotas lapse after the 2004 presidential elections.

As Clothesource's Mike Flanagan points out: "Some US voters and lobbyists may not notice the relevance of this, but the European Commission and the Chinese government certainly will. The timing of this announcement is a clear message to Peking: 'We need to be seen to be acting. When we discuss this with you again, we won't have an election hanging over us. The new limits will quietly disappear.'

"The decision is effective only for a year. It affects no-one but China. It is, to the letter, in line with agreements made with China when China joined the WTO. It is also, to the letter, in line with agreements made with the WTO. And its timing is a clear signal to China that the new quota will not be around next year.

"To the EU the message is 'We're prepared to take the flak for this. If you want to do the same, it'll be a lot easier for you'."

Under the terms of China's accession to the WTO, the EU also has the right to make use of either a special textile safeguard clause, or to invoke a more general safeguard provision. According to figures from the European Commission, EU imports of Chinese clothing and textiles have risen by between 91 and 135 per cent from 1995 to 2002, depending on the category.

But in a statement on Thursday Filiep Libeert, president of the Brussels-based European Apparel and Textile Organisation (Euratex) said that while the US was justified in taking this action, Euratex will simply continue to monitor trade flows. "We need to ensure that EU industry does not suffer as a result of trade measures taken by countries outside Europe."

Backtracking rejected
Mike Flanagan also believes it's naive to see this as the first sign of the US backtracking on its commitment to remove quotas entirely at the end of 2004. Many traders around the world believe the US and EU will find some device for avoiding, or managing, their agreement to remove all remaining textile quotas on December 31, 2004.

"Neither the US or the EU have any serious long-term interest in the survival of a major domestic apparel or textile industry - but both have strong interests in selling high-tech goods to China and India," he says.

In 2005, China will be the world's largest importer of hi-tech products such as commercial aircraft, and telecommunications equipment; as well as services such as banking, insurance, technical consultancy. The two major exporters of these products are the EU and the US.

On the flip side of the coin, in 2005 when quotas are scheduled to be phased out, China is poised to sweep the board with garment exports to its two main customers: the EU and the US.

So, although the textile and garment industries are important to both the US and EU, it's unlikely that either trading bloc would favour long-term protectionist measures to protect these sectors. To do so would put so much more than clothing at stake.

As Mike Flanagan adds: "We believe [the decision to re-impose quotas] is actually a victory for China. One that Southern Congressmen, for all their victory chants, don't seem to be smart enough to spot. But one that China is far too smart to point out."

US trade with China in the 9 months to September 2003

  • The US trade deficit in textiles and apparel is $51.2 billion.
  • Textile and apparel imports from China total $10.650 billion.
  • The US trade deficit with China in textiles and apparel totals $10.487 billion.
  • The US trade deficit with China in textiles and apparel is up 32.6 per cent as compared to 13.5 per cent for the world as a whole.
  • Products covered by the industry's China safeguard petitions account for 4.67 per cent of total Chinese textile and apparel exports to the United States in dollar terms.
  • In dollar terms, 41.65 per cent of textile and apparel imports from China are in quota-free categories.
  • The categories on which the safeguard petitions were filed account for 11.2 per cent of China's quota-free imports in dollar terms.
  • Imports from China of knit fabric (category 222) = $31.3 million, an increase of 32.1 per cent.
  • Imports from China of cotton brassieres (349) = $69.4 million, an increase of 31.8 per cent.
  • Imports from China of manmade fibre brassieres (649) = $259.4 million, an increase of 75.7 per cent.
  • Imports from China of cotton dressing gowns (350) = $82.1 million, an increase of 96.2 per cent.
  • Imports of manmade fibre dressing gowns (650) = $54.8 million, an increase of 57.8 per cent.
  • Imports from China in all safeguard petition categories total $497.0 million.