After long rounds of negotiations, the United States and China agreed to limit the growth of Chinese textile exports to between 10 and 17 per cent annually till 2008. The pact was signed between Chinese Commerce Minister Bo Xilai and US Trade Representative Bob Portman yesterday, bringing to a close around five months of meetings and negotiations.
Under the agreement, the exports of items under the pact, which has been hailed as 'win win' for both parties, would increase by 8 per cent to 10 per cent in 2006, 12.5 per cent in 2007 and 15 per cent to 16 per cent in 2008. After 2008, China would not face any textile and apparel export limitations that it had accepted in 2002 while joining the World Trade Organization.
The American textile industry has been lobbying for the limits ever since global quotas were pulled off in January this year. “I believe this textile agreement is an example of how the United States and China do have the ability to resolve tough trade disputes in a manner that benefits both countries,” Bob Portman said, adding that around 34 categories of textiles were covered under the pact.
Even though Bo Xilai expressed happiness at the pact, he felt that further relaxations are required for better trade relations between the two countries and for providing employment to the 20 million workers of the Chinese textile industry. “Developed countries should understand that since free trade is the final goal, quotas are inappropriate,” he said, adding, “(But) We don't want to see such a small trade obstacle impede the overall trade and economic cooperation.”
The pact comes before US President George W Bush's visit to China on November 19 after a summit in South Korea. According to sources, China was expecting growth rates of around 30 per cent, subject to two years.
The agreement has met with mixed reaction from both the American textile manufacturers and their Chinese counterparts. “I was quite disappointed with the result,” said Liu Xunzhong of China Jiangsu Textile Import & Export Group, one of the biggest textile makers of China. He said the company had invested in machinery expecting high surge in demand and would now need restructuring.
But Jiang Hua, who handles foreign trade in Jiangsu, hailed the development. “The agreement gave our enterprises a relief. Trade dispute is just like the sword of Damocles hanging over Chinese textile and apparel enterprises and made them take a wait-and-see attitude, which has eroded the textile industry at large on the Yangtze River Delta,” Hua said.
American Manufacturing Trade Action Coalition's Auggie Tantillo said the limits imposed might help the floundering American textile industry. “In essence, we had to stabilize the situation by limiting China's ability to come in and overtake the US market,” Tantillo said.
But James Chesnutt, of the National Council of Textile Organizations, felt the agreement has only delayed the Chinese threat that American manufacturers are facing. “Under this new agreement, the US industry will know with certainty that China will not be able to flood the US market during the next three years. (But) The threat from China is not eliminated by this agreement, only delayed,” he said.
Not-for-profit group Shanghai WTO Affairs Consultation Center's Yao Weiqun said the pact shows that the Chinese textile industry needs to shift focus from cheap commodities. “For American manufacturers, I think it's time for them to adjust to high value-added products and stop persisting in the manufacture of labor-intensive products,” he said.
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