Have Chinese exports to the US reached their peak?
US clothing imports from China were 14.6% lower in volume during the first six months of 2006 than in the corresponding period of the previous year. So does this mean the Chinese export boom may be over - at least in the US market?
Safeguard quotas are believed to be the main cause of the import slowdown. These were first imposed in late 2003 and subsequently on a piecemeal basis until late 2005.
However, as a report in the latest issue of Textile Outlook International points out, a more comprehensive agreement was reached in November 2005 under which quotas were imposed on 22 categories of textiles and apparel.
These quotas will remain in force until the end of 2008.
Imports of cotton underwear from China (Category 352) fell by 83% in the first half of 2006, after soaring by 383% in 2005. A similar pattern is evident in manmade fibre underwear (Category 652) where imports declined by 82% after rising by 170% in 2005.
Both categories were restricted by safeguard quotas between 23 May 2005 and 31 December 2005, and both became subject to quotas at the beginning of 2006 under the US-China Memorandum of Understanding.
Further analysis shows similar reversals in other categories which became subject to quotas.
The idea that quotas are to blame is lent even more weight when imports of items not restricted by quotas are examined.
In most of the major unrestricted categories, imports from China grew at double or triple digit rates in the first half of 2006. That said, growth rates were somewhat lower than they had been in 2005 - even in the case of products which are not subject to the new quotas.
This suggests that the mere threat of quotas and associated uncertainties - as well as the quotas themselves - deterred US retailers from renewing some of their orders with Chinese suppliers for 2006.
Another result of the new quotas has been a rise in added value. Quotas create a scarcity value, and can turn a buyers' market into a sellers' market.
Not surprisingly, Chinese exporters have taken advantage of the scarcity by raising their unit values in a number of categories restricted by quotas.
Overall, unit prices of US apparel imports in the first half of 2006 were 2% higher than in the corresponding period a year earlier. But in categories restricted by quotas, rises in the average prices of imports from China were much steeper.
For example, the average import price of men's cotton knit shirts increased by 94% to US$9.41 per sme (square metres equivalent). Similarly, the average import price in the case of cotton sweaters rose by 32.3% to around US$3.52 per sme.
By contrast, unit prices fell in the case of several items whose imports are not regulated by quotas - although the reduction was not as strong as had been witnessed between 2004 and 2005.
Poor country beneficiaries
The new quotas on China shipments appear to have benefited a number of poorer countries in Asia. Notable among these is Cambodia, which raised its apparel exports to the USA by 31.2% in volume terms in the first six months of 2006 compared with the corresponding period of 2005.
Vietnam, Indonesia and Bangladesh were also among those countries which benefited.
Surprisingly, India was less successful in the US market-even though it was predicted by many forecasters to benefit the most from the phase-out of quotas on international trade. Nonetheless, growth in US apparel imports from India was still a comfortable 13.7%.
Encouragingly, thanks to the quota restrictions on Chinese goods, many of these countries also managed to raise their prices, as well as stepping up their volumes.
The rise in unit values is bad news for Western consumers - who have enjoyed unprecedented price cuts in recent years. But it is good news for apparel manufacturers worldwide who have been struggling to make profits in a world of rising costs and tumbling prices.
The question that remains, however, is whether the rise in price can be sustained - especially after Chinese quotas have been eliminated at the end of 2008.
For more information on Textile Outlook International, click here
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