Blog: Is China gaming the system?
Leonie Barrie | 11 October 2005
An AT Kearney report released last month estimates that even under current safeguard restraints, China’s share of the US cotton-trouser market could jump to anywhere between 36 per cent and 64 per cent in 2007, from only 1.5 per cent in 2004. The report argues that China has successfully “gamed” the system, buying market share by intentionally targeting off-quota categories where it does not already have a significant stake in the market.
It says China is working within the WTO rules to outmanoeuvre the US government – but that the United States is partly to blame “because it failed to nail down a solid definition for market disruption.” Does it mean excessively high growth in a category even when market share is low? Does it mean the largest market share gains? Does it mean the biggest SME cost declines? Does it mean demonstrated job losses in apparel or textile manufacturing? Does it mean who lobbies the loudest? Did China and the US define this term upfront? It is doubtful.
The report also refers to a “rack check” carried out by AT Kearney in Canada to find out what free trade looks like. Department and discount stores are, it seems, taking advantage of their ability to source freely from countries with the most competitive offerings – rather than focusing on quotas. Interestingly, Wal-Mart Canada sources just 31 per cent of its garments from China versus an industry average of 39 per cent. Which makes you wonder what all the fuss is about.
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