U.S. Firms Seek Quotas on China Textiles

Domestic textile manufacturers battered by the retail slowdown and a surge in cheap imports filed a petition Thursday with the U.S. government seeking temporary restrictions on imports of knitted fabric and apparel from China, which is fast becoming a center for global manufacturing.

After China joined the World Trade Organization last year, the U.S. lifted the quotas on some Chinese apparel and textile products. That led to a sharp increase in Chinese textile imports--up 119% in the first six months of this year--and a collapse in prices, according to the American Textile Manufacturers Institute, a Washington trade group, which filed the petition. In one case, imports of Chinese knit fabric ballooned 22,000% from the same period the previous year and the price per kilogram dropped from $12.66 to $5.03.

“We always knew China would increase rapidly but people are stunned by the size of the increase,” said Cass Johnson, a spokesman for the institute, which is asking for quotas to be temporarily reimposed on knitted material, gloves, bras, nightgowns and fabric luggage.

But Southern California textile and apparel makers oppose the measure, saying they are more likely to be hurt than helped by measures that could spark a protectionist backlash from U.S. trading partners. This split exposes a growing divide between the large Southern textile makers that compete against low-cost foreign producers and California’s smaller trade-dependent firms that have carved out a niche serving higher-end, fashion-oriented customers.

“They are trying to protect what is left of their commodity-based industry and we want open access to foreign markets,” said Ilse Metchek, executive director of the California Fashion Assn., a trade group representing textile and apparel makers. “If that means opening our doors to imports, so be it.”

Already under fire from its trading partners for recent actions to protect steelmakers and farmers, the U.S. is in the awkward situation of responding to yet another controversial request for support from a politically powerful industry. Taking such a step also would make it more difficult for the U.S. to pressure China to open up its economy to U.S. farmers and high-tech firms and strengthens the position of those within China who opposed the decision to join the WTO, explained Nicholas Lardy, a China expert at the Brookings Institution.

Lardy predicts that this will be the first of many battles over China’s growing domination of the U.S. textile and apparel market, a reflection of that country’s low wages and increasingly efficient manufacturing base. Most of China’s gain in the U.S. market has come at the expense of other developing countries.

But U.S. firms have not escaped unscathed, as the increase in low-cost goods from China has pushed down prices for everyone. The U.S. textile and apparel industry has been losing ground against low-cost imports for decades, but China’s recent expansion came at a particularly bad time because of the overall slowdown in the U.S. economy. Textile institute spokesman Johnson called 2001 the “worst year since the Great Depression,” with the closure of 116 textile mills and a loss of 67,000 jobs, including 1,000 in Los Angeles County.

China’s share of the global market is expected to increase as the U.S. and other countries complete a total phase-out of global textile and apparel tariffs by 2005. But under pressure from U.S. negotiators, China agreed when it joined the WTO to allow other WTO members to apply temporary quotas if a surge of Chinese imports disrupted the market. That restriction will remain in place until 2008.

The domestic manufacturers filed their petition with the U.S. Committee for the Implementation of Textile Agreements, an interagency group responsible for overseeing regulation of textile and apparel trade. If the petition is approved, there will be a 60-day period for the U.S. and China to negotiate the size of the quotas, which would be in place for one year.

Given the political strength of the Southern textile lobby and the upcoming elections, the U.S. government may find it “politically expedient” to approve the quotas, said Brenda Jacobs, counsel for the U.S. Assn. of Importers of Textiles & Apparel.

She said the importing community is disappointed but not surprised by the action and most firms have taken steps to diversify their suppliers in case of a restriction on China trade.