Level the Field in Textile Trade

The elimination of textile quotas on January 1 has exacerbated trade frictions and
China and its partners are searching for solutions

By LI NING

OFF THE RACKS: A store in Berlin, Germany, sells clothes made in China just before summer ends

Globalization has proved both an opportunity and a challenge for China’s textile sector. The country exported textiles worth $61.5 billion in the first seven months of this year, growing 21.4 percent year on year, and the elimination of quotas ensured that exports to Europe and the United States also maintained fast growth. But some countries and regions have been adopting restrictive practices against Chinese products, leading to an unstable trading environment.

Restrictive Clauses

Although quotas have been eliminated as scheduled, China cannot enjoy free trade in textiles because of three clauses in the Protocol on the Accession of the People’s Republic of China.

First, the “non-market economy clause” allows for anti-dumping investigations against China. Second, the Transitional Product Specific Safeguard Mechanism places an unbridgeable gap in the development of Chinese exports. Third, there are special limits on Chinese textile exports.

Although the World Trade Organization (WTO) and European and American countries are advocating free trade, real free trade eludes China.

In 2001, a year before China began to enjoy the initial results of textile integration, Chinese textile exports were valued at $53.44 billion, up 2.4 percent year on year. In 2004, this figure stood at $95.03 billion, expanding 20.6 percent annually.

As Chinese textile trade grows, so do trade frictions. Between 1992 and 2001, only six new anti-dumping cases were filed against Chinese textiles. The most significant of these was the investigation by Japan into Chinese-made towels. After a three-year investigation ended, the case was withdrawn. During this period, the value of trade involved was small.

MADE IN CHINA: Workers of Youngor Group in Ningbo, in east China’s Zhejiang Province, are busy at the assembly lines

But since 2002, trade disputes involving Chinese textiles have risen markedly. Between 2002 and 2004, altogether 11 new anti-dumping cases were filed and three cases were reviewed. In 2004 alone, the value involved in trade disputes reached $662 million. The United States instituted special safeguards against three categories of Chinese products, Peru adopted provisional safeguards against Chinese textiles, and Venezuela and Nigeria also put in place similar measures. These cases involved significant export volumes. For example, the limits placed on 35 categories of Chinese synthetic fabrics by the European Union (EU) affected more than 900 Chinese manufacturers.

With the elimination of quotas in early 2005, trade frictions between China and other countries and regions have become even more intense. Between January and July, four anti-dumping cases were filed. The United States has put, or is planning to put, restrictions on 19 items in 36 categories. The EU is also restricting import quantities in 10 categories of Chinese textiles, while Turkey has imposed quota limits on 42 categories. Columbia has launched special investigations into Chinese textiles and imposed tariffs on socks. Other countries, such as Peru, Mexico, Brazil and South Africa, are also planning trade protection measures against Chinese-made textile products.

On June 11, China and the EU signed the Sino-EU Memorandum on Textile Trade in Shanghai, to create a stable export environment for Chinese textile companies. And on September 5, China and the EU reached an agreement on the textile disputes, under which all China-made textile products blocked in the ports of EU countries were freed up on September 14.

Responsible Partner

FREE THE CLOTHING: Blocked in European ports for two months, Chinese textile products are freed up on September 14

China’s negotiations with the EU and the United States reflect the capability of the Chinese Government to deal with problems arising from its WTO entry in late 2001.

Chinese Minister of Commerce Bo Xilai, also the chief negotiator of the Chinese Government in textile talks with the EU, said the losses from the blocked textile products at EU ports were largely borne by EU importers or retailers; however, as a responsible trade partner, China did not stand by and safeguarded the interests of long-term trade relations.

According to Bo, the negotiations focused on three areas--the trade quantities, environment and mechanism. The June 11 Shanghai Agreement and the Beijing Agreement on September 5 have led to a stable and predictable trading environment between China and the EU.

On September 16, the WTO and China Beijing 2005 International Forum was held with the theme of Strategic Options for the Development of the Chinese Textile Trade. On this occasion, Sun Jiwen, Director of the Foreign Trade Department of the Ministry of Commerce, said that as an industry with conventional comparative advantages, the Chinese textile industry owned the industrial chain and processing capabilities, as well as a large trained workforce.

China is the world’s largest textile producer and exporter, and also a large consumer. Statistics this year show that China’s imports from textile producing countries are also increasing very rapidly. From January to July, Brazilian textile exports to China increased 180 percent. Sun said the Chinese textile industry suffered from low added value, low profits and few independent brands. According to figures released by the WTO, only about 10 percent of textile products exported from China have independent brands.

According to Sun, in recent years, with the stable development of the national economy and much improvement in living standards, domestic demand for textile products for both consumption and industrial uses has been growing rapidly. After joining the WTO, China has fulfilled its commitment ahead of time, reducing the tariff on textile products to 10.4 percent from 11.3 percent in 2004. At present, except for cotton and wool, China does not impose quota on any other textile products. In line with the WTO rules, China also encouraged foreign investment in the Chinese textile market, Sun added.