THE United States signed an accord with China in London on November 8, 2005, placing quotas on Chinese textile exports to the US over the next three years. During the stipulated period, China’s exports to USA would remain within limits as mutually agreed and would not have completely free access to the American market.
Earlier in June 2005, China had concluded a similar agreement with the European Union (EU) in Shanghai, limiting its shipments of clothing and apparel to the EU. After the conclusion of the aforesaid agreement, it was expected that similar accord with the US was now only a matter of time.
The Chinese officials are reported to have strongly denounced the limits imposed on their textile exports as protectionism. But, it is understood that the US and other countries had allowed China to join WTO in November 2001, only after China agreed that other WTO members would be authorized to restrict Chinese textile and apparel exports up to 2008, if these exports registered an extra-ordinary increase and threatened to disrupt their domestic markets.
When the textile quota regime finally came to an end on December 31, 2004, Chinese textile exports reportedly soared in many categories, showing a ten-fold increase in some cases. Textile manufacturers and labour unions in America strongly complained to their government regarding adverse effect of unlimited textile imports from China on the local industry, leading to job losses. The Bush Administration had, therefore, imposed emergency safeguard measures on a series of products over the past year that limited import growth to 7.5 per cent annually.
Under the November 8, agreement textile imports from China would be allowed to grow by 10 per cent in 2006, by 12.5 per cent in 2007 and by 15-16 per cent in 2008. The new terms reportedly apply to more than 30 products.
The accord envisages import of larger volumes of clothing into the US from China as compared to the previous arrangement. However, the new accord imposes limits on those volumes and includes a wider range of products than those which were subject to restrictions earlier.
The accord would also, address the problem with regard to clothing piled up at American ports. To avoid stockpiles at ports, China would be able to adjust the same against the quotas for the following years. However, if this could not be done because those quotas were also exhausted, then the customs authorities could still decide to lift the restriction in order to resolve the issue.
From the US point of view, this is a timely agreement as it resolves an outstanding issue between the US and China merely a fortnight before the US President’s planned visit to China. The agreement also provides a mechanism for resolving future trade disputes between the two countries. Finally, the agreement meets the demand of the local textile industry by keeping the textile imports from China within certain limits up to 2008 and, also, that of US retailers and consumers by ending the prevailing uncertainty and allowing the imports to grow year after year in line with the growth in consumer-demand.
China also hailed the accord as a success after five months of negotiations and seven rounds of talks. However, China’s commerce minister Bo Xilai was critical about the quotas and called upon the developed countries to show more consideration and understanding of China’s need to develop through free trade. He had said that the textile industry in China would suffer more with the quotas than the textile industry in the US would have suffered without the quotas.
It is obvious that, as a result of limitations imposed on China’s textile exports to the US and the EU, the textile industry in China would not be able now to maximize its production. The Chinese policy has so far been to boost production and exports to the highest possible level in order to address the problems of unemployment, urbanization and poverty. Trade restrictions imposed by a country interfere with the aforesaid plan of China.
Will the limitations placed on Chinese textile exports to the US and the EU create an opportunity for Pakistan to increase its textile exports to the aforesaid markets? Textile manufacturers and exporters in Pakistan should carefully study the matter and lose no time in availing themselves of any possible opportunity in this regard.
It may be recalled that in the very beginning of the year, China had offered to set up joint ventures with Pakistan for the manufacturing of clothing, apparel and other textiles. Now that China’s textile exports to the US and the EU have been subjected to quotas, this is the best time to set up such joint ventures since both the countries would benefit from such ventures.
Pakistan can learn a lot from China’s experience and can make an effort to bring about further refinement in our textile products with Chinese help. On the other hand, China would be able to carry on its productive activities in full swing in spite of the quotas placed on its textile exports to the US and the EU.
Together, these two countries may try to export their textile products (clothing, apparel and ready-made garments etc.) to markets in Central Asia, Middle East, Africa and Latin America etc. Both the countries have valuable experience in the field of textile manufacturing and they can make use of this experience to improve the living standards of their people.
