What can the US and EU ask China to do about textiles?

What can the U.S. and E.U. ask China to do (under the WTO agreements) to limit its textile exports?

This Agence France Presse story explains: Outline of WTO agreements covering Chinese textiles, clothing exports (via  Channel NewsAsia , May 18).

Chinese textile and clothing exports can be restricted to 7.5% growth each year through 2008.  After that, the authority to impose the growth restrictions expires.

These quotas are a bad idea.  They'll impose costs on U.S. consumers out of proportion to the benefits they'll provide to the industry groups they benefit.  The cost of the quotas will fall relatively more heavily on poor and lower income U.S. citizens.  The quotas will increase the costs, and reduce the competitiveness of U.S. industries using textiles as inputs (furniture making, for instance).

The U.S. had ten years to gradually dismantle its clothing and textile import quotas.  Dismantling gradually would have moderated the impact on the domestic textile and clothing industries.  Instead it gamed the rules so that almost all of the impact of the  end of the quotas was delayed until this past January.

Irritating and costly as the quotas are : (a) Chinese clothing and textile exports to the U.S. would still be allowed to grow; (b) the limit on the growth has a definite expiration date; (c) the Administration may be able to trade off the imposition of the quotas for textile industry concessions on other trade issues (see below); (d) the pre-existing system of quotas on other clothing and textile exporters is not being reimposed - since January these countries can increase their exports to the U.S., and may, to some extent, offset the cost to U.S. consumers and producers of the delay in the lifting of the Chinese quotas.

With respect to the tradeoffs, Elizabeth Becker reported:

"...The fast action to reimpose quotas by the Bush administration today has saved thousands of textile jobs in this country and we are extremely grateful," said Cass Johnson, president of the National Council of Textile Organizations, a trade association.

The announcement came one day after President Bush met with the leaders of five Central American countries and the Dominican Republic to promote a trade pact with these nations that has stalled in Congress.

The textile industry has opposed the pact, the Central American Free Trade Agreement, as another threat to the American industry, but Mr. Johnson's organization broke with the other trade associations and endorsed the pact, known as Cafta, this week.

Kimberly Elliott, a trade specialist at the Institute for International Economics, said that the administration undoubtedly reached a quick decision in favor of the American textile industry in part to win more support for Cafta.

"The administration has been working the link between the safeguards and Cafta for some time, but I think they would have done this eventually even if Cafta didn't exist," Ms. Elliott said.

"If the administration is going to take a hit from China for this," she said, "it might as well get some benefit for Cafta."

via theledger.com, "U.S. Moves to Limit Imports From China ", May 14

Comments

[Peter Gallagher]

Nice article, Ben. You've summed up the impacts and prospects well.

Only one thing more: look for an increase in 'diverted' trade as importers and exporters of Chinese origin material look for other ways to get what they want. More shirts from Laos and Cambodia (with any luck).

Best wishes,

Peter