Market Disruption Relief Sought Through Safeguard Petitions

MEMPHIS - U.S. textile and apparel manufacturers, with the support of the labor unions and U.S. cotton and man-made fiber industries, are seeking protection from the clear threat of market disruption as set out in the Chinese World Trade Organization (WTO) accession agreement.

Signed by China in 2001, the agreement contemplates safeguard action based on the threat of disruption of orderly market development by the U.S. and other countries specifically associated with the elimination of textile and apparel quotas. Petitions for safeguard actions covering categories 347/348, men’s and boys’ and women’s and girl’s cotton trousers were filed Friday, October 8 with the Committee on Implementation of Textile Agreements (CITA). More petitions on man-made fiber trousers, wool trousers, and other categories are expected to be filed in the near future.

“The U.S. textile and apparel manufacturers have been assured a fair hearing in the administrative process considering the petitions,” National Cotton Council Chairman Woody Anderson said.

Department of Commerce Under Secretary Grant Aldonas said that CITA, an interagency group chaired by Commerce, can consider petitions based on threat without altering any established procedures.

“The categories named in the filed petitions and those expected in the near future are vitally important to maintaining a minimum critical mass for continued textile and apparel manufacturing in the U.S.,” said NCC Vice President G. Stephen Felker, a Georgia textile manufacturer. “The experience of the U.S. sector since 2002 when selected categories of textile and apparel products had quotas eliminated demonstrates the tremendous potential for surges in imports from China.”

Felker said imports from China in some categories with quota elimination soared by 600 percent in the first 12 months with associated price declines of 53 percent. Imports from China in all categories with quota elimination have risen 1009 percent since 2001.

“This surge in Chinese imports directly reduced U.S. production as well as imports from our hemispheric trading partners that often contained U.S.-manufactured components,” Felker said.

U.S. textile and apparel manufacturers are using 1.4 million tons of U.S.-grown cotton in their facilities and 3.5 million tons of U.S. manufactured chemical fibers. The most recent estimates by the Bureau of Labor Statistics show employment in the textile and apparel manufacturing sector at 600,000. This remains an important economic engine in many communities.

NCC President/CEO Mark Lange said the safeguard actions previously taken by the administration were “a response to observed import behavior.”

Lange noted that the United States currently manufactures about 45 million dozen cotton trousers annually but imports 63 million dozen from NAFTA and the CBI, mostly made with U.S. components. Due to quotas, China exports 2.8 million dozen cotton trousers to the United States. Based on the U.S. experience in 2002, without safeguard action, Chinese imports of cotton trousers will rise to 19.6 million dozen.

“This will come at the direct expense of U.S. manufacturers and hemispheric partners using U.S. components,” Lange said. “There is no need to wait for economic damage of this magnitude to occur. The agreement permits action based on the threat of market disruption.”

The U.S. industries supporting these petitions are quite concerned about commercial practices in China. However, safeguard action is available without regard to the factors underpinning the surge in Chinese imports and the resulting disruption of orderly market development.

The NCC officials pointed out that: 1) China’s textile mill consumption of cotton has climbed by 75 percent in seven years while man-made fiber use in Chinese textile mills almost tripled in the same period, 2) virtually all of this added production is intended for the export market as domestic Chinese retail markets only recently have demonstrated any meaningful growth, 3) the Chinese apparel industry has expanded even faster than yarn and textile manufacturing thus requiring increasing imports of yarn and fabric; 4) the most recent data from China show year-on-year increases of 39 percent in machinery investment in spinning, weaving and apparel manufacturing; and 5) Chinese currency and lending practices have given their manufacturers extraordinary pricing flexibility.

“The least developed countries of the world have acknowledged the devastating impact on their economies associated with market loss as their products are displaced by the massive surges from China,” Anderson stated. “This is a major reason why textile associations representing 38 countries met in Geneva with the WTO ministers and examined the debilitating effects on development due to market disruption as quotas are eliminated.”

Regarding safeguards, Anderson noted that they: 1) provide for moderate growth in current trade and safeguard actions are very product specific; 2) do not rollback or curtail trade with China; 3) may last no longer than one year when the petitioners will be required to reapply for safeguard action; 4) have a definite end of 2008 as established in the agreement; and 5) are consistent with WTO disciplines -- so any U.S. application of safeguards provides no legal authority for any retaliatory action by China.