KARACHI, July 11: Is China a threat to Pakistan’s industry? It is a question which many businessmen have started to ponder when they found all sort of consumer items from China have flooded Pakistan’s market. Not only this, Pakistani goods face tough competition from Chinese goods in foreign markets also.

A local garment manufacturer recently went on a market exploration visit to Dubai—a free market and a test case for open competition that would emerge globally after 2005. He wanted to sell his product at 95 cents. To his amazement, he found similar Chinese textile product being sold at 65 cents. Even same product from India, Bangladesh and Indonesia were cheaper than Pakistan in Dubai.

In this scenario of fears and doubts, on the situation that would emerge after 2005, has come a report that China has made a big headway in US market during 2002 in import of 29 apparel categories that were removed from quota control. Prices have been cut down drastically in respect of each of these 29 apparel categories and import went up higher against all the competing countries in the US.

American Textile Manufacturers Institute (ATMI), a private body has dispatched a set of papers on theme “China: How big a threat” to a few selected top textile exporters and government organizations in Pakistan including the Export Promotion Bureau.

But none of them, a few top textile exporters and senior officials of the Export Promotion Bureau, have any knowledge of the whereabouts of the ATMI. Exporters in Karachi consider it a campaign by South Korean and a few other Asian countries in collaboration with American textile dealers to counter China’s trade onslaught after 2005 when WTO regime becomes operational. The issues raised in the set of papers and pleading made to the recipients are quite interesting.

For example, the ATMI estimates Chinese currency yuan to be under valued by 40 per cent that gives Chinese exporters “an enormous artificial cost advantage” over the competitors.

Then it points out that over 50 per cent of China’s textile sector and 25 per cent of apparel is “state owned and subsidised.”

And of course China has an unlimited labour supply from the rural areas. “China needs to find jobs for 15 million new workers every year.” It implies that abundance labour supply justify low wages and hence low production cost.

Now the ATMI wants the recipients of this set of papers to “urge your governments and the US government to force China to float its currency” and suggest exploring WTO, IMF and bilateral avenues. Local businessmen recall long trade war between US and Japan particularly when Japanese automobiles swarmed American market the only pressure on Tokyo was to increase yen value.

To counter the other cost cutting measures by way of subsidy and low wages to the rural emigrant labour the ATMI wants the businessmen and trade bodies to invoke WTO textile safeguards.

The ATMI analyzed Chinese growth into US market in all 29 apparel categories removed from quota control on January 1, 2001 and found a key point. “First time China is competing head-to-head without quotas with everyone else—Vietnam, Bangladesh, India, Mexico......”.

Under quota control China offered an average price of 5.79 dollars per square meter but drastically brought it down by 44 per cent to 3.24 dollars a meter in the year 2002 when it was out of quota control.

Other competing countries offered 3.55 dollars a meter when these apparel categories were in quota control and could bring down by hardly two per cent to 3.47 dollars a meter in the year 2002.

With this drastic price cutting, Chinese import went up to 554 million square meters in the 2002 up by 412 as compared to 142 square meters import in 2001.

But those of other competing countries the imports came down to 1.23 billion meters in 2002 from 1.43 billion square meters in 2001. China earned almost a billion dollars more (1.79 billion dollars from 29 apparel categories only) in 2002 as against a loss of 801 million dollars suffered by the other competing countries.

In August 2001, the ATMI requested WTO safeguards actions against sensitive categories but found no response. It assessed an average of 600 per cent rise in each category over the past year. For example the import of dressing gowns from China went up by 557 per cent as against a decline of 14 per cent from neighbouring and NAFTA partner Mexico, 42 per cent decline from Thailand.

“Imports from China increased more last year than from every other country in the world,” is the observation of the ATMI that calculated 2.8 billion square meters increase in total textile imports from China that included 90 per cent in the de- controlled categories.

“China wins if we don’t do something?” is the message of ATMI that has kept Pakistani businessmen indecisive and somewhat puzzled. “We cannot and should not confront China,” a top businessman having close business relations with China remarked.

China is not dumping goods in Pakistan market as is being alleged by many including the automobile assemblers in Pakistan. Bulk of Chinese goods — stationery items, footwear, battery cells, and large variety of consumer goods — are being smuggled and not imported.