The U.S. is supposed to have been phasing out a set of quotas on imports of clothes and textiles during the last 10 years, under the Agreement on Textiles and Clothing (ATC) . The phase-out period will end December 31, this year. (for details on the ATC see the WTO web site: "Textiles Monitoring Body (TMB). The Agreement on Textiles and Clothing") However, we didn't take advantage of the time we were given. We've waited until the last minute to do the "heavy lifting."
How we procrastinated
Under the ATC the U.S., Canada, Norway, and the E.U. maintained import quotas for individual products, like work gloves and cotton pants, from specific countries. The products covered by the ATC were listed in the agreement.
The countries involved agreed to gradually dismantle their quota systems product by product, and to gradually increase the size of the quotas for goods that remained under quota.
But they have procrastinated in every possible way that they can. The history of the process is described by Hildegunn Nordå³ in Section III of the WTO publication "The Global Textile and Clothing Industry post the Agreement on Textiles and Clothing".
The ATC set out four target dates by which products accounting for stated percentages of the volume of a country's 1990 imports of listed products were to come out from under the quotas. All products were to be out from under the quotas (more accurately brought within the trade rules of the General Agreement on Tariffs and Trade (GATT) ) by the end of 2004. Countries had considerable freedom to select the products they wanted to bring out from under the quotas for each of the four target deadlines.
Countries with clothing and textile quotas under this agreement have complied fully with it, but have managed to avoid serious de-quotafication.
The listed product count was inflated by including products that had not been subject to quotas under the predecessor Multi-fibre Agreement (MFA). Let trade analyst Hildegunn Nordå³ pick up the story:
"The products to be included in the agreement are listed in the Annex to the ATC. This Annex includes, however, items that were not restricted under the MFA and the list therefore served to inflate the basis from which liberalization was calculated...
Turning to the integration process , it is fair to say that progress has been limited. Stage 1 brought the integration of one single restricted product by one country into the GATT ? Canada integrated work gloves. Nevertheless, all the restricting countries complied with their first stage commitments. This was possible because of the extension of the list of products in the Annex to ATC, as mentioned above. The opportunity to integrate non-restricted products had not been exhausted during step 1, so step 2 saw more of the same ? it was the unrestricted products that were integrated first. When the third stage was reached, the opportunity to integrate products that previously had not been restricted under the MFA had been exhausted. However, the Textiles Monitoring Body observed that there was a tendency to integrate products where quota utilization was particularly low... in the United States, out of 43 specific constraints to be eliminated, 21 had utilization rates below 50 per cent and of these the utilization rate was zero for three quotas... The number of constraints does not reflect the value or volume of imports, and it is important to stress that the Members...have fully complied with their obligations under the ATC. Nevertheless, the large number of constraints left to the fourth stage
Dan Ikenson provides another description of the procrastinatory process in the 2003 CATO Institute report "Threadbare Excuses. The Textile Industry?s Campaign to Preserve Import Restraints".
"The ATC includes a detailed list of products?well over one thousand specific tariff provisions?to which its rules apply. Each importing country is required to integrate (remove from quota restraints) products from the list covered by the ATC in compliance with the following schedule:
By January 1, 1995?Products that accounted for at least 16 percent of the country?s
1990 import volume
By January 1, 1998?Products that accounted for at least an additional 17 percent of the country?s 1990 import volume
By January 1, 2002?Products that accounted for at least an additional 18 percent of the country?s 1990 import volume
By January 1, 2005?All remaining products ...
The ATC allowed the importing countries to decide which products would be integrated
at each stage, with the condition that the list at each stage should include products from four subgroups: tops (unspun fibers) and yarns, fabrics, made-up textile products, and clothing.
In implementing the ATC, each of the importing countries took full advantage of thediscretion afforded them. The list of products to be integrated under the ATC was included as the annex to the agreement. It included a substantial number of products that were never even restricted under the MFA [the agreement which was replaced by the ATC - Ben]. According to estimates in a 1994 Journal of World Trade article, previously unrestricted products accounted for 37 percent of U.S. total annex import volume in 1990 (the base year for integration considerations). For the EU, previously unrestricted imports accounted for 34 percent of the annex, and for Canada the figure was 47 percent. Each of those members included previously unrestricted products in their respective integration schedules for the first three stages of the ATC, thus enabling them to claim compliance without really liberalizing the quotas for many products.
Exercising more discretion, the importing countries chose to integrate primarily products in the tops and yarns, fabrics, and made-up textile categories in the earlier stages, pushing off most clothing categories to the final stage. Of course, developing countries have the greatest comparative advantage in labor-intensive clothing production. Clothing has also been more heavily restricted than the other groups of products."
Ikenson describes several other strategies used to avoid compliancewith the spirit of the ATC.
Domestic political response to the looming deadline
And now, here we are. The ATC is going to expire. There are no more opportunities to procrastinate. Like a student who has put off the semester's work until the last week, we have a lot to do in a short time.
The expiration is no surprise. The Progressive Policy Institute prepared a short "brief" on the expiration of the multi-fibre agreement a year ago: "America Will End Its 'Quota' System for Clothes, Yarn, and Fabric Dec. 31, 2004". I posted on it this past July: "Phasing out the textiles agreement ".
There is a widespread expectation that Chinese producers will edge out many other foreign importers, and some U.S. production as well. Textile lobbyists have filed petitions requesting some additional protection. The Bush Administration agreed Friday to consider a petition from domestic textile manufacturers to limit textile imports.
Paul Blustein of the Washington Post wrote about the filing of the petitions on October 13 he wrote about the filing of the textile petition: "Textile Makers Fight for Limits. With Caps Expiring, U.S. Industry Fears Glut of Chinese Imports".
"The petitions that the U.S. industry is filing this week, if approved by an interagency U.S. government committee, would limit the annual growth of Chinese imports in nine targeted textile and apparel categories to as little as 7.5 percent. Those limits, known as safeguards, apply only to China under the terms of the agreement that gave Beijing membership in the World Trade Organization and could continue until 2008."
Martin Crutsinger also wrote about this for the Associated Press: "Textile industry seeks protection. Flood of Chinese goods feared when quotas end". On October 22 the administration implemented safeguard quotas on socks. Blustein reports again: "U.S. Limits Chinese Sock Imports". The sock decision broke some new ground:
"The government's ruling yesterday on the U.S. sock industry's petition, which was filed in June, could have important implications for the other markets at stake by indicating how officials will decide the other cases. The administration last year imposed safeguard limits on imported Chinese brassieres, dressing gowns and knit fabric -- all categories where quotas had already been lifted -- but the socks case is the first in which the "threat of disruption" is being used to bolster the argument for such an action.
On October 30 Blustein had a story on the administration's intent to consider additional safeguard quotas: "U.S. to Consider Limiting Pants Imports From China". Again, this is a "threat-based" action that is under consideration:
"Yesterday's action was just a procedural step, in which an interagency committee accepted for consideration a petition filed by the industry seeking to impose safeguard limits on cotton trousers. But it was important because the petition was based on the "threat" that Chinese trousers would "disrupt" the U.S. market once quotas are lifted, rather than on evidence that market disruption was actually happening. Retailers and wholesalers that import Chinese clothing have objected that safeguards should be considered only after it is clear that the market is being disrupted"
Elizabeth Becker describes the impact of the loss of North Carolina textile jobs vividly in the New York Times: "Textile Quotas to End, Punishing Carolina Towns".
"Meanwhile, here in the slowly beating heart of the remaining American textile industry, workers and owners of factories still operating along a stretch of Interstate 85 from Charlotte to Greensboro see the dawning of 2005 as a death sentence. More companies, they fear, will go bankrupt. More communities will wither like Kannapolis, and thousands more workers will be desperate for training, employment and health insurance. In hopes of staving off the worst, politicians in the Southeast from both parties are taking advantage of the close outlook for the presidential election to win last-minute concessions from the White House that could slow the flood of imports from China. And, seriously weakened as it is, the American textile and apparel industry is still flexing its political muscles. [On Oct. 29, days before the election, the Bush administration accepted the industry's petition seeking relief, promising to consider special steps to limit Chinese exports.]... And lost in the swirl of anxiety are the benefits that the change will bring to tens of millions of consumers. Americans alone are expected to save an estimated $6 billion in lower-cost goods once the quotas are gone, allowing clothing makers and designers from New York to Milan the freedom to choose factories based on cost and quality rather than a complicated system of 1,300 categories for every nation. But that is little consolation to this Carolina community of 36,000, which was reduced to an economic ghost town in little more than a year once Pillowtex, Ms. Harrington's former employer, fell into bankruptcy. The residents have remained, but the factories are being dismantled and the stores and shops shuttered on Main Street after this one-industry town lost its industry... While American consumers' household budgets will benefit from lower prices for blouses and pillowcases, the shock to the affected workers and communities will be immediate and gut-wrenching..."
A cautionary note
Peter Gallagher was here before me, posting on the end of the ATC in November 2003 ("What the textile quotas mean":
"A decade ago, the United States and other industrialized countries agreed to abolish all textile and clothing quotas from 1 January 2005, replacing the quantitative barriers, which are otherwise illegal in WTO, with tariffs. It was one of the two most important agreements ever signed in WTO (the other is the 1994 Agreement on Agriculture); the pre-eminent trade policy contract between the industrialized 'north' and the industrializing 'south'...
Any sign -- such as these new 'temporary' quotas on competitive production -- that the USA might welch on its commitment to replace its remaining textile and clothing import quotas with tariffs on schedule on 1 January 2005 will deeply sour global trade relations particularly with developing country governments in parts of East Asia..."
Gallagher makes other interesting points, and has useful links.
this was interesting to read. In fact, I felt India has been doing this, unprepared. It seems there is this opinion in every country.
what could be the reason?
Posted by: D. Narasimha Reddy | May 17, 2005 at 05:59 AM