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Beijing urges Washington to reconsider the move to avoid ''casting clouds'' over US-China trade

WASHINGTON, DC - 05/14/05 - Beijing wasted no time in reacting to the Bush Administration's decision late yesterday to re-impose quotas on three categories of clothing imports from China, saying it could might retaliate by slapping increased tariffs or quotas on selected US-made exports.

"The Chinese government reserves the right to take further action within the framework of the WTO," said Chong Quan, a spokesman for the Commerce Ministry said on its website. "We urge the US to correct the wrongdoing in order to avoid casting clouds over Sino-US trade by abusing trade protection measures."

The move by Washington means that shipments in the three categories - cotton shirts, cotton trousers, and man-made fiber underwear - will be permitted to increase this year by just 7.5%, compared with shipments over a 12-month base period.

Cotton trousers, alone, compose the US' single-largest textile and apparel import category, with about $11.3 billion worth of the product imported by US retailers in 2004, according to the Department of Commerce. 

The decision was made under the terms of the so-called "safeguard measures" in the 2001 World Trade Organization agreement with China which allow members to impose limits on Chinese textile products "if a sharp rise in imports disrupts their domestic markets."

The revived quotas could take effect as early as the end of this month, sources said.

"We're in a tough situation right now with regard to textiles, and the increase in Chinese imports, I think, constitutes such a dramatic change," US Trade Representative Robert Portman told reporters a few hours before the new quotas were announced.

In a written statement released to the press, Commerce Secretary Carlos Gutierrez said that a government investigation had found that "a surge" in shipments from China since global quotas were eliminated on January 1 "was disrupting the domestic market."

The decision was made by the Committee for the Implementation of Textile Agreements [an interagency group led by the Commerce Department] and, he said, "demonstrates this Administration's commitment to leveling the playing field for US industry by enforcing our trade agreements," adding it was based on "proven market disruption and threat of market disruption."

US retailers had fought against the re-imposition of quotas on apparel produced in China, arguing that it will mean higher costs for American consumers.

Laura Jones, executive director of the United States Association of Importers of Textiles and Apparel (USAITA) in New York, said the Administration was going ahead with the action "even though the latest trade data showed that clothing and textile imports from China actually declined in March after surging in January and February. "

She said the Administration "chose to ignore" all the comments filed by US retailers arguing against the action.

"Clearly, the government did not consider the facts," she said. "To make a decision affecting billions of dollars in business less than four days after a public comment period closes only shows how little regard there is for our business."

The domestic apparel industry, she charged, is simply "trying to recreate the quota system."

US retailers that rely on apparel from China include Gap Inc.; Perry Ellis International Inc.; Target; Macy's; K-Mart; and Wal-Mart, the world's largest retailer, which, according to industry observers, had expected to save between12% and 15% on apparel costs this year with the January 1 dismantling of the decades-old quota system.

"A basic fact is that China's fairly cheap products are welcomed by US consumers and have helped lower the living costs of US families," said Chinese Commerce Minister Bo Xilai in the government-owned Beijing Youth Daily. 

On the other side of the coin, the move by the Bush Administration was praised by domestic apparel producers who had long sought curbs on Chinese-made products claiming they cost thousands of US jobs and were forcing scores of US-based apparel makers to shutter their operations.
 
"It's clear that the US government had no choice but to act," said Lloyd Wood, a spokesman for the American Manufacturing Trade Action Committee, a textile company coalition that filed a complaint last year asking for caps on Chinese imports.

Also praising the decision is the National Council of Textile Organizations (NCTO), a large apparel industry group with offices in North Carolina and Washington, DC.

"The government acted faster today than it has ever acted before," said NCTO President Cass Johnson in a prepared statement. "Six weeks ago, for the first time ever, the government released comprehensive preliminary data on Chinese imports. Three days later, the government self-initiated investigations on the biggest categories affected by this surge."

Today, said Johnson, "less than one week after the official comment period on those investigations closed, the government has imposed new quotas on Chinese imports."

Earlier last week, the NCTO announced its support for the Administration's drive to get Congress to pass the Central American Free Trade Agreement (CAFTA), covering the Dominican Republic and five Central American countries.

Critics of the CAFTA have accused the Administration of offering to re-impose quotas on Chinese textiles as a way of appeasing lawmakers from textile districts.

The Administration has said the textile cases would be decided on their merits.

Chinese Vice Premier Wu Yi urged the US to solve the textile dispute through dialogue, after holding discussions with US Ambassador Clark Randt in Beijing yesterday.

"The Chinese side always seeks to resolve trade problems through consultation and avoid mixing trade and economic issues with politics,'' Wu was quoted in the Communist Party newspaper People's Daily, before the official Commerce Ministry statement was released.

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