What the textile quotas mean

The US deci­sion to impose new ‘safe­guard’ quo­tas on imports of some Chi­nese tex­tiles can only be described as a dumb move by an Admin­is­tra­tion that has appar­ent­ly not learned the les­son of the steel ‘safe­guard’ tar­iffs: they don’t pro­tect jobs or pro­mote adjust­ment. They hike costs, hurt pro­duc­tiv­i­ty and reward lazy cap­i­tal. It’s not clear that hold­ing the growth of dress­ing-gown and bra imports from Chi­na to a 7.5% annu­al growth rate (down from an “alleged(link to the Econ­o­mist Magazine)”:http://www.economist.com/agenda/displayStory.cfm?story_id=2242312 growth rate of 32% this year) will do any harm to Chi­na. Exporters could well prof­it from the firm­ing of US domes­tic prices that will like­ly fol­low the Bush deci­sion. The mean­ing of the safe­guards to oth­er exporters of tex­tiles and cloth­ing is, how­ev­er, very clear. In fact, many observers have been pre­dict­ing new US quo­tas on Chi­nese imports since the Chi­na and the USA nego­ti­at­ed Arti­cle 16 (the ‘safe­guard’ arti­cle) of the Chi­na WTO Acces­sion Pro­to­col in 2001. They have been con­vinced—right­ly it seems—that the USA would nev­er allow Chi­na to take full advan­tage of the lib­er­al­iza­tion of tex­tile mar­kets that has been slow­ly and unsteadi­ly tak­ing place over the last decade. 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’. The com­ple­tion of the WTO “Agree­ment on Tex­tiles and Clothing(link to WTO site with more information)”:http://www.wto.org/english/docs_e/legal_e/ursum_e.htm (ATC) in 13 months’ time will allow com­pe­ti­tion in the glob­al tex­tile and cloth­ing mar­ket to reflect rapid­ly chang­ing com­pet­i­tive con­di­tions on the pro­duc­tion side. Some coun­tries (e.g. Chi­na, Viet­nam) that have no his­tor­i­cal ‘shares’ in the import quo­tas that remain in the EU, Cana­da and the USA can expect to be big win­ners, gain­ing access on a non-dis­crim­i­na­to­ry ‘tar­iff only’ basis. Con­sumers in indus­tri­al­ized coun­tries are also be big win­ners from the quo­ta lib­er­al­iza­tion of the ATC. When Chi­na joined the WTO in 2001 it won imme­di­ate access to the ben­e­fits of the first sev­en years of quo­ta lib­er­al­iza­tion under the ATC. US con­sumers proved to be so hun­gry for com­pet­i­tive Chi­nese prod­ucts that US tex­tiles and cloth­ing imports from Chi­na increased by 125% in 2002 while appar­el imports increased by 60%. Any sign—such as these new ‘tem­po­rary’ quo­tas on com­pet­i­tive production—that the USA might welch on its com­mit­ment to replace its remainign 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. On the oth­er hand (there’s usu­al­ly an “oth­er hand” in trade nego­ti­a­tions) it might secret­ly please gov­ern­ments in coun­tries of Africa that rely on pref­er­en­tial access to the US tex­tiles mar­ket to remain com­pet­i­tive. And it might please exporters in regions such as Cen­tral Amer­i­ca whose cus­tomers could well turn to e.g. Chi­na once the mar­ket is opened up to all com­peti­tors. For a review of ATC lib­er­al­iza­tion issues—who wins and who might lose—see the Inter­na­tion­al Trade Center’s “Forum Magazine(link to ITC site)”:http://www.tradeforum.org/news/fullstory.php/aid/550/Textiles_and_Clothing:What_Happens_After_2005.html

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