COMMENT: Pressure mounts for new textile trade barriers

14 October 2008 | Source: just-style.com

With the Western recession likely to get a lot worse, and import quotas on Chinese clothing and textile imports into the US due to expire at the end of this year, it's a safe bet there'll be many more calls for trade barriers. US lawmakers are already upping the ante but will be forced to follow the rule book, as Mike Flanagan explains.

Every couple of months I remind people that you can't predict what Western governments are going to do about import duties and the like.

Most government proposals get opposed and no-one can ever know the outcome of the wheeler-dealing needed to get laws more or less passed.

Just look at the problems President Bush has just had getting his $700bn bank rescue package through Congress.

The most powerful man in the world, with the support of both candidates pitching to replace him and the leaders of the two US political parties, claimed the package was essential to saving the world from complete economic collapse.

Yet he still struggled to get the lawmakers to agree. So how can you forecast the outcome of any political decision?

Well, the President's difficulties with Congress show you can always predict the hoops Western politicians have to go through to get laws passed.

They're precisely defined hoops, pretty much the same on both sides of the Atlantic - and apply to the textile industry's campaigns for restricting Chinese imports just as much as to trillion-dollar bailouts for banks.

Temporary quotas
The temporary quotas the US imposed on Chinese clothing and textile exports in 2005, like the EU's monitoring programme, expire at the end of this year.

After that, US rules - just like the EU's - say the industry may petition for duties against Chinese companies if it is unfairly damaged by a Chinese export surge.

But only if:
• A quarter or so of the industry concerned can show it's been damaged;

• The industry damaged is the one making the request: if cotton blouse imports are the problem, 25% of EU or US cotton blouse makers have to invest the necessary time, legal fees and effort to sue for extra duties. Not suppliers of cotton fabric;

• A time-consuming process is gone through. Recent US duties on wire hangers took over a year from the first petition to implement.

• The petitioners demonstrate unfair practices really have caused whatever damage they're complaining about. A recent US case petered out when a tribunal couldn't accept that the US paper industry could really blame the Chinese for its problems.
 
These principles are set out in US and EU law, on the basis of international treaties.

If anyone tries short-circuiting them, any new import duties may be thrown out by the courts - and the offended country has the right to impose equally damaging sanctions.

So if the US shortens the process for anti-dumping cases, China can slap higher import duty on Boeing aircraft than on Airbuses.

Some certainty on import restrictions
So we ought to be pretty certain about Western import restrictions on Chinese clothes over the next year.

There'll be all sorts of moans about growing imports (whether they're growing or not), and demands for something to be done.

But if anything is done, it'll take a year for due process to be gone through, so importers will have a year to adjust their buying, unless they're so dozy they don't spot the threat.

Which is great news for readers of this column, because reading just-style means you're one of the un-dozy ones who's better prepared than your competitors.

But can we be certain the rules will be followed? Absolutely. Every single trade restriction the EU or US has operated in the past 20 years has scrupulously followed the rules.

Ah, but will the rules be changed? Not if recent events are any guide.

At the end of last month, 70 Congressmen asked for US law to be changed to allow "the extension of the Textile Monitoring Program", currently in place against imports from Vietnam, to imports from China.

They weren't just asking for more data: they wanted a temporary measure, which is legal against Vietnam under the special circumstances of its joining the World Trade Organization (WTO), to be extended against China.

This request allowed the US government to start - and pay for - legal proceedings for investigating the case for anti-dumping duty. Right now, aggrieved US businesses have to pay lawyers to demonstrate there's a problem.

The Congressmen, in other words, were asking the US taxpayer to fork out so that US shoppers could pay higher taxes.

With a really severe recession looming, you'd expect overwhelming support for a bit more protectionism. But all they got was more monitoring.

More data, faster
Then, on 8 October, the Chairman of the US House of Representatives' Ways and Means Committee told the public servants at the US International Trade Commission on to produce more data, faster.

But no new powers. If American manufacturers want more taxes on Chinese blouses, they're going to have to organise and pay for the case themselves - and wait a long time while it goes through the courts. 

Similarly, when in September the EU debated extending duties against Chinese shoes, no-one proposed changing the rules, or breaking them.

With retail clothing sales looking worse every day, a change in the political complexion of the US Administration looking increasingly likely, and a new woman - British politician Catherine Aston - running the EU's Trade Commission, the arguments in Washington and Brussels about protection from imports are certain to get louder and less predictable.

But they'll be conducted along very predictable lines.

What's really unpredictable isn't the rules: it's the effect the last year's turmoil is having on different supplier countries.

With India no longer in the top five apparel exporters to the US, and inflation possibly out of control in Cambodia and Vietnam, the crucial thing is to understand where the really competitive suppliers are now.

Not invent government actions that just aren't going to happen. 

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