US and EU quotas to force up world clothing price

The deci­sion of the Chi­nese to tax their own exports re-intro­duces the scourge of the so-called “vol­un­tary restraint” that the WTO agree­ments were sup­posed to have elim­i­nat­ed in 1995. The USA and the EU threats to use quo­tas to slash Chi­nese imports has led to a tax on every oth­er con­sumer of jeans, shirts and under­wear in the world. The Chi­nese have decid­ed to increase their cur­rent export tax­es by up to 400 per­cent on 148 cat­e­gories of gar­ments: accord­ing to the “Syd­ney Morn­ing Herald”:http://www.smh.com.au/news/World/China-averts-trade-war-with-US-Europes/2005/05/21/1116533567413.htmlthat implies a duty of between 10 and 20 per­cent ad val­orem. The Wash­ing­ton Post”: cal­cu­lates a duty of about 12 to 48 cents per gar­ment. bq. “The Chi­na Tex­tile Indus­try Coun­cil said Fri­day Chi­nese tex­tile com­pa­nies would have to ‘make sac­ri­fice’ as a result of the export tar­iff hike. Sun Huaib­in, spokesman for the Coun­cil, said that the Coun­cil under­stood the deci­sion of the gov­ern­ment as ‘it is for the pur­pose of help­ing estab­lish a new world tex­tile trade order and ease the trade fric­tion that the gov­ern­ment has made the con­ces­sion.’ ”(“Chi­na Daily(link to this excerpt)”:http://www.chinadaily.com.cn/english/doc/2005–05/20/content_444377.htm) The tax is not enough to slow demand much in mar­kets such as the USA. US con­sumers are the ones respon­si­ble for the rapid growth in demand for Chi­nese prod­ucts and they’re unlike­ly to be dis­suad­ed by this sort of price increase. So it’s unlike­ly that the Chi­nese are doing this in the hope that they’ll con­vince the US author­i­ties to with­draw the threat­ened ‘safe­guard’ action. It’s more like­ly that the Chi­nese are hop­ing to cap­ture some of the rents that the added pro­tec­tion will offer to the US indus­try when prices there start to reflect the dras­tic cut-back in the sup­ply vol­ume from Chi­na (safe­guards will cut sup­ply growth from three fig­ures to 7.5% for at least a year an prob­a­bly for three years). Left with few options in the face of the safe­guards, the Chi­nese gov­ern­ment has played a clever hand in impos­ing the export tax. When the USA pressed the Japan­ese in the 1980s to ‘vol­un­tar­i­ly restrain’ their exports of motor vehi­cles and semi-con­duc­tors, prices for those goods jumped in the USA. Friends of mine then work­ing for the US Trade Representative’s Office agreed to pay a $1200 ‘pre­mi­um’ (a lot of mon­ey in those days) to stay on the wait­ing list for a Nis­san sports car. The Japan­ese firms made a big prof­it from the GATT-ille­gal action by the USA. In effect, the Chi­nese gov­ern­ment is mak­ing sure that it gets it’s cut from the tax that the US gov­ern­ment is appar­ent­ly hap­py to impose on its own con­sumers. But a fun­da­men­tal WTO rule (Arti­cle 1 of GATT) says that the export duty has to be applied—just like an import duty—to all export mar­kets with­out dis­crim­i­na­tion. So every­one in the world just had their cloth­ing prices pushed up a bit by the threats from the USA and the EU. We are all pay­ing the price for the will­ing­ness of those two stal­warts of open mar­kets to screw the con­sumer for “no very good rea­son(link to Ben Muse’s weblog)”:http://benmuse.typepad.com/ben_muse/2005/05/what_can_the_us.html How do these two giant hyp­ocrites get away with shaft­ing their own con­sumers and the rest of the world on this? The answer is the screw-you safe­guards built into the Chi­nese Pro­to­col of acces­sion to WTO. I’ve ear­li­er pro­vid­ed details on “how these ‘safe­guards’ work”:http://www.inquit.com/article/368/barriers-go-up-to-chinese-clothing. Watch out, because there’s more to come. It’s very like­ly that the US gar­ment indus­try will back up it’s claims of ‘dis­rup­tion’ (the ill-defined trig­ger for the present safe­guards) with a set of anti-dump­ing peti­tions. The Con­gress, too, is con­sid­er­ing a bill that would hike tar­iffs on Chi­nese tex­tiles if Chi­na does not re-val­ue it’s cur­ren­cy. Note the calm deter­mi­na­tion with which the US Com­merce Depart­ment (at least) acts in the inter­ests of the US gar­ment man­u­fac­tur­ers: bq. The US Asso­ci­a­tion of Importers of Tex­tiles and Appar­el (USA-ITA) imme­di­ate­ly blast­ed the deci­sion, report­ing “all pre­tense of legit­i­mate delib­er­a­tions was clear­ly dropped” since the deci­sion was made just four days after the close of the pub­lic com­ment peri­od. Lau­ra E. Jones, exec­u­tive direc­tor of USA-ITA, said: “After a 30-day com­ment peri­od in which a large num­ber of com­pa­nies invest­ed a great deal of time and effort to explain why safe­guards would be wrong, why they won’t help the US indus­try and why prod­ucts made in Chi­na are in many cas­es items that are not made here, the gov­ern­ment takes all of four days to say that our views don’t matter.”(“Textile World”:http://www.textileworld.com/News.htm?CD=5&ID=9253)

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