U.S. to Probe Imports of Chinese Goods

Facing a crush of Chinese textiles and apparel since global quotas were lifted Jan. 1, the Bush administration Monday took the first step toward reimposing limits on purchases of certain clothing from that Asian nation.

The move, which is expected to escalate trade tensions between Washington and Beijing, came after intense pressure on the White House from politically powerful American textile interests that have lost 17 mills and more than 7,000 jobs this year.

The Commerce Department’s Committee for the Implementation of Textile Agreements said Monday that it was launching an investigation to determine whether imports of Chinese-made cotton shirts, cotton trousers and cotton and man-made fiber underwear were disrupting the U.S. market.

If the investigation finds such disruption, as expected, it could lead to the imposition of new import limits within the next two to three months. The Bush administration already has imposed limits on Chinese-made dressing gowns, brassieres, knit fabric and socks. Critics, however, say the White House hasn’t done enough to crack down on allegedly unfair Chinese trade practices.

Commerce Secretary Carlos M. Gutierrez said in announcing the investigation that “this administration is committed to enforcing our trade agreements and to providing assistance to our domestic textile and apparel industry, consistent with our international rights and obligations.”

Textile industry leaders applauded but also urged the government to include other goods hit hard by double- and sometimes quadruple-digit increases in Chinese imports. Imports of Chinese-made cotton trousers, for example, jumped 1,500% in the first three months of this year from the year-earlier period.

“We hope this doesn’t mean this is just a symbolic gesture,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, which has led the campaign to restrain Chinese imports. “We believe there needs to be a comprehensive approach to a China problem that would mean covering practically every one of their categories.”

Faced with growing opposition from the U.S. and Europe, China has agreed to monitor its industry more closely and has imposed a tax and licensing system designed to discourage production of inexpensive commodity goods. Still, partly because of such measures and expectations that new limits may crimp sales later in the year, Chinese exporters may have accelerated their exports in the first quarter.

A spokesman for the China National Textile and Apparel Council, a trade group in Beijing, said Monday that the burst of exports in the first quarter was expected and wouldn’t last long. He appealed to the Bush administration to reconsider its move toward setting quotas.

“By doing that, it will harm American importers and customers,” the spokesman said, adding that it also would threaten the livelihoods of some of the 19 million Chinese who work in the clothing manufacturing industry.

Retailers and other American apparel importers, which benefit from low-cost goods, also condemned the Bush administration’s decision. They said the latest wave of Chinese imports was simply a continuation of a long-standing outsourcing trend.

Laura Jones, executive director of the U.S. Assn. of Importers of Textiles and Apparel, said China’s exports to the U.S. surged because its production had been artificially restrained by the decades-old global quota system that disappeared at the beginning of the year. That system allocated market shares to China and other countries.

She pointed out that even with a 1,257% increase in U.S. imports of Chinese-made cotton shirts, the Asian country remains far behind Honduras, Mexico and Guatemala in sales to the United States.

Importers and retailers said quotas on China cost them and their customers billions of dollars each year and would not save U.S. jobs because the orders would go to other low-cost countries.

“China is just an excuse for more protection,” said Jones, whose group includes such giant retailers as J.C. Penney Co. and Wal-Mart Stores Inc.

Mark Jaeger, senior vice president of Jockey International Inc., said Monday’s announcement would not cause a huge disruption in the marketplace because Jockey and other large apparel firms had diversified their sourcing to protect themselves.

When China joined the World Trade Organization in 2001, it agreed to allow other countries to impose temporary limits, called safeguards, if their markets were disrupted by Chinese imports. Under that provision, which expires in 2008, the Bush administration is required to try to negotiate a solution with China. If that fails, the U.S. can impose a quota equal to 7.5% more than the amount of goods imported in the previous 12 months.

Gary Hufbauer, a trade expert with the Institute for International Economics in Washington, said he believed Monday’s announcement was a “sophisticated” move aimed at getting the textile groups to support a proposed free-trade agreement with Central America. That agreement, called CAFTA, faces fierce opposition in Congress.

“It’s part of the price the administration will pay to get CAFTA ratified,” he said.

Textile industry leaders denied that they had cut any deals with the Bush administration linking the China restraints to support for CAFTA.

But Cass Johnson, president of the National Council of Textile Organizations, the nation’s largest textile trade group, confirmed last week that his organization had discussed with U.S. officials steps to address the group’s concerns about the Central American accord. U.S. firms are particularly worried about a provision that allows Central American firms to use fabric or other materials from Mexico and Canada and still get duty-free access to the U.S.

Central America and Mexico could benefit from limits on China because they are big competitors in areas where China has gained ground since quotas were removed.

Mexican clothing shipments to the U.S. have declined this year in category after category, ranging from a nearly 20% drop in brassieres to a 5.2% slide in cotton trousers, the nation’s single most important apparel export. Meanwhile, China has gained in almost every segment in which Mexico has stumbled.

Mexico was one of several dozen countries whose textile and apparel industries petitioned the WTO for a delay in the Jan. 1 quota expiration. Mexico warned that China would quickly dominate global apparel markets, helped by government subsidies, an undervalued currency and other alleged unfair trade advantages.

“I’m thrilled,” said Ernesto Moguel, president of the Puebla-Tlaxcala chapter of Mexico’s National Apparel Chamber, about the U.S. decision to investigate China’s rapid gains. “We have been pointing out all along the cheating that China is doing.... It’s outrageous.”

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Iritani reported from Los Angeles, Dickerson from Mexico City and Lee from Shanghai.