An era of "free trade" was theoretically ushered into the global
textile market on January 1, 2005 as all quotas on textile products
were removed according to documents signed by member countries of
the World Trade Organization (WTO).
Lifting the quotas means a remarkable opportunity for developing
countries with rich labor resources.
Indian Minister of Textile Shri S. Vaghela expressed with
confidence that his country's textile exports would jump to US$30
billion in two years from US$13 billion last year.
Textile exports from China to the United States have grown at a
surprising rate in recent years.
The US Department of Commerce said the United States bought
clothes worth more than US$6.3 billion from China in 2000. The
figure rocketed to US$8.7 billion in 2003, according to the
Beijing-based magazine Outlook Weekly.
Since the United States is one of the world's largest markets
for textiles and garments, analyzing China's exports in this market
can provide a good idea of the situation facing the Chinese textile
trade after the quotas are removed.
There are several reasons for the surge of Chinese textiles on
the US market.
First, many US textile manufacturers have moved their factories
out of their country in recent years.
Labor costs in the United States keep rising to such an extent
that it is much more economical for producers to base their
factories overseas. For the same reason, retailers are also
increasing the proportion of commodities they buy from other
countries.
To satisfy consumer need, it is only natural for the United
States to significantly increase its imports.
In fact, it bought clothes worth US$16 billion from Central
American and Caribbean countries in 2003, a huge rise in recent
years.
The superior quality of Chinese commodities attracts importers.
As a traditional manufacturer, China has a high reputation across
the world for the stable product quality it turns out.
Thanks to modest labor costs, Chinese goods can be sold at
reasonable prices.
Still, foreign investors whose factories are based in China,
including those from the United States, are selling more and more
products to the United States.
Official statistics suggest products made by foreign-invested
factories here accounted for 32.5 percent of all such exports to
the United States in 2003, 39 percent more than the previous
year.
It is predictable that trade between China and the United States
will maintain a steady growth after the quotas are removed.
The growth is in the interests of both countries. US consumers
need Chinese products of low price and superior quality.
However, due to strong trade protectionism and a bleak
employment situation in the United States, the textile trade has
become one of the most controversial topics in Sino-US trade.
The US textile industry has pointed its finger at Chinese
products and Washington imposed growth ceilings on several
categories of Chinese products in 2003.
After the quota is removed, Chinese products are likely to face
trade barriers in different forms.
According to the agreement between China and the United States
upon China's entry to the World Trade Organization in 2001, the US
is entitled to impose special "safeguard" measures upon Chinese
textile imports.
As a matter of fact, such safeguards were imposed in 2003. The
US Government is expected to resort to them again to protect its
domestic manufacturers after the trade is free from quotas.
Since the US and many other countries do not treat China as a
"market economy," they calculate the costs of Chinese products
according to prices in a surrogate country, such as Singapore.
Product prices in these countries are usually higher than those
in China because of relatively high labor costs there.
Such calculations leave an impression that Chinese products are
sold overseas at prices lower than their cost.
Because the calculation is not realistic, Chinese products,
especially textiles and clothes, are often judged as dumping.
The United States signed an agreement with Egypt and Israel on
December 14, 2004 to facilitate exports of Egyptian textiles into
the US market.
The EU Commission removed Chinese textile products from its
Generalized System of Preference list in October 2004.
Other developing countries, such as Peru, imposed limits on
Chinese textile exports.
Without the existence of quotas, there would still be other
means to deal with trade, like the green standard for
environmentally sound products, labour standards and even customs
procedures.
Removal of quotas, one of the non-tariff measures to control
trade, agrees with the trend of economic globalization.
Strategic and structural changes for Chinese textile exports are
necessary.
In the long run, Chinese products should try to find competitive
edges other than low prices.
Actually, China has begun to collect taxes upon certain
categories of textile exports, aimed at encouraging products with
high added-value and improving the structure of textile
exports.
A series of moves should follow to upgrade China's export
structure and realize a sustained development of the textile
industry.
(China Daily January 18, 2005)