China, US hold talks to solve textile disputes
By Chris Buckley (International Herald Tribune)
Updated: 2005-06-18 09:18

China and the United States have discussed settling their feud over U.S. moves to limit China's surging garment exports, amid growing Chinese concern that uncertainty over Washington's stance is deterring new business.

Trade officials in Washington and Beijing used a video link on Thursday evening (Washington time) to discuss proposed U.S. limits on seven categories of textile and garment exports from China, said Richard Mills, the U.S. trade representative's spokesman.

A female worker works in a textile factory in Chizhou, East China's Anhui Province in this picture taken on May 30, 2005. [newsphoto]

The 30-day period that World Trade Organization rules require for consultations over those proposed restrictions ends next week.

The Bush administration applied for the limits to counter the surge in Chinese garment exports to the United States, which followed the Jan. 1 expiration of a global quota system. In the first four months of this year, Chinese garment exports to the United States climbed 70 percent, and in some categories the rise was 1,500 percent.

The two sides' video encounter seems anticlimactic after the compromise that the European Union trade commissioner, Peter Mandelson, and the Chinese commerce minister, Bo Xilai, signed in Shanghai in the early hours last Saturday. That deal limits Chinese garment export growth to Europe by 8 percent to 12.5 percent a year until 2007.

Mills would not provide details of the outcome of the U.S.-China talks.

But the United States is likely to ultimately accept a deal like the one signed between China and the Europe, said Ronald Sorini, a former U.S. chief textile trade negotiator who is now senior vice president of Sadler, Travis & Rosenberg, a Chicago-based law firm.

"I know there's an interest on the U.S. government and U.S. business side in a similar deal," he said, "and I would think the odds are high that the U.S. will conclude a similar agreement."

The U.S. Department of Commerce is reviewing the EU-China agreement, but declined to comment on it, a spokeswoman said.

Chinese trade negotiators are also likely to accept a system of voluntary limits on garment exports to the United States, with Chinese trade associations monitoring exports and companies tendering for quota shares, said Zhou Shijian, who advises the Ministry of Commerce in Beijing.

"These agreements with Europe and the U.S. will extend the time their textile sectors have for structural adjustment," he told a Chinese-language newspaper, Private Economy News.

"We'll give them a little extra time to carry out euthanasia."

As much as the present quotas, uncertainty about the scope of any future limits from Washington was undermining U.S. retailers' willingness to place orders with Chinese suppliers, American and Chinese observers said.

"At this stage, the uncertainty is the most important factor," Sorini said. "If it continues, then buyers and retailers face total chaos."

William Wong, a sales manager with Honeycomb Garment, a Hong Kong-based company that makes T-shirts in China, said his and other companies were afraid of being left with unwanted goods if customers pulled out of orders or quotas filled up.

"If we make the goods and the customer suddenly cancels, we're the ones who suffer," he said.

Beyond general agreement that uncertainty is damaging the marketplace, however, the Chinese and U.S. sides remain at loggerheads over many aspects, observers said.

U.S. textile manufacturers maintain that the EU agreement is not comprehensive enough, and they want even tighter safeguards on the flow of Chinese clothes, which last until 2008, said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, which opposes unfettered Chinese exports.

"The vast majority of categories should be covered by an initial agreement," said Tantillo, who formerly served as a Department of Commerce official in charge of textiles. "The Chinese clearly have the ability to dominate any new product category."

Chinese trade officials have said they hoped that the United States would accept an agreement similar to the EU one.

But they have also criticized aspects of the agreement and might be unwilling to make similar compromises with Washington, which they saw as more aggressive and vulnerable to pressure from the domestic textile manufacturers.

Also, China may not be interested in signing an agreement with the United States until the current surge in exports tails off, said Sue Field, a Chicago-based consultant with A.T. Kearney, a management consultancy. Because any limits will be calculated on top of the previous months of trade, it made sense for China to build on its current surge, she said.

"They've basically been buying market share in safeguard categories," she said.

Kenny Chan, a manager with the Action Garment Factory in Hong Kong, said that some Chinese companies are already shipping clothing to the United States via third countries, like the Philippines and Middle Eastern states, to avoid U.S. quotas. His company, too, had begun shifting orders to other countries, including Singapore, he said.

"When the quota system was canceled, a lot of new Chinese factories did not play the game fairly." he said. "But it would be better to impose real quotas and remove the uncertainty."

(By courtesy of International Herald Tribune)

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