The downturn
in the U.S.
textile industry has been precipitated by a
dramatic increase in government intervention by
China
and other Asian governments in their textile
and apparel export sectors. These
trade practices, which are illegal under US trade
law and under the rules of the WTO, have allowed
these governments to set prices for world trade in
textile and apparel products at artificially low
levels and to crush free market
competition.
Because
of these trade practices, the
U.S.
textile industry has been forced to close
over 500 textile plants
in
the United
States
, including more than 30 textile plants
during the last twelve months.
Hundreds of thousands of U.S. textile workers
have lost their jobs over
the last five years.
The
losses in the textile industry reflect strains and
pressures felt by the entire
U.S.
manufacturing sector. Over the
past five years, nearly two million
manufacturing jobs in the United States have been
lost, many of them because U.S. companies cannot
compete against as much as a 40 percent price
advantage that countries such as China have gained
as a result of currency manipulation.
China
– a textbook case
In
particular,
China
is textbook case of how a foreign government has
used a network of illegal subsidies and government
interventions in order to destroy foreign
competition, both in the
United
States
as well in many other countries. These
aggressive actions on behalf of its manufacturing
export sector have gone virtually unchallenged by
the U.S.
government, despite the fact that
China’s
actions are in clear contravention of both
U.S.
trade law and WTO rules.
In
fact, China has declared its textile and
apparel sector to be a “pillar industry of the
nation” and is in the middle of its 10th
FIVE
YEAR PLAN. The
Chinese government manages and supports textile
and apparel output through a sixteen point
plan.
Anti-competitive
actions by China’s government in support of its
industry include currency manipulation (estimated
to provide as much as a 40% subsidy for Chinese
exporters), illegal direct government subsidies of
its money losing state-owned textile and apparel
sectors, illegal export tax rebates (13%) and the
deliberate extension of billions of dollars in
non-performing (“free money”) loans by China’s
central banks in order to award a competitive
advantage against foreign competition. In a vivid
example of
China’s
marriage of government power with manufacturing
output, in December 2005, the Chinese government
spent over $600 million to bail out the largest
textile company in the country (“World
Best”).
In
the case of
China,
the dramatic increase in subsidies have caused
Chinese prices to drop by an average of 58% over
the past three years in those product areas where
quotas have been removed. As a
result,
China
has gained a near monopoly share in these products
over the last 3 years, taking 74 percent of
the market.
Despite
these losses, the
U.S.
textile sector remains one of the largest
manufacturing employers in the
United
States
and the entire textile complex, including apparel,
machinery, chemicals, cotton and man-made fiber
sectors, employs nearly one million
U.S.
workers.
2005
- The Quota Phase-out and
NCTO
Response
With
the phase-out of all remaining quotas on
January
1, 2005,
China
was poised to take over a majority of the
world's
textile and apparel trade unless corrective action
is taken. If
China
had succeeded, the
US
textile and apparel sector will be decimated with
500,000 or more
U.S.
jobs being lost and 1,300
US
textile plants closing. The ramifications around
the world will be even more severe as some 30
million textile and apparel jobs will be lost to
China's
anti-competitive practices. Many of these jobs
will be lost in some of the poorest countries in
the world - workers with no safety nets and
countries with no other jobs to turn to.
Fortunately,
the U.S.
government took strong steps to head off the
Chinese flood by responding quickly to industry
petitions for safeguard relief. In late
May 2005, the
US
government began approving petitions and over the
next three months nearly all sensitive textile and
apparel categories were put back under quota. With
imports from
China
increasing by as much as 1,500 per month, the
safeguards filled quickly, some within two months,
setting the stage for intensive consultations
between
China
and the
U.S.
government on a longer term solution.
After
six rounds of negotiations, the two countries
agreed to a new bilateral agreement that would put
Chinese exports of the most sensitive US products
under strict quota control through the end of
2008, when the safeguard mechanism expires. The
agreement was hailed by the
U.S.
industry as both comprehensive and
restrictive.
The
DOHA
Round and the
China
Threat
The
new bilateral agreement between the
U.S.
and China
has only put off, not eliminated, the day of
reckoning for the world’s textile and apparel
sectors.
On January
1, 2009,
the quotas imposed on
China
under the bilateral agreed will be eliminated –
and there will be no possibility of re-imposing
them because the safeguard mechanism itself will
have expired.
In
the interim, NCTO is part of a world-wide effort
to make sure that a new safeguard mechanism is put
into place as part of the Doha Round of trade
talks.
Central to this effort is the establishment
of a textile sectoral negotiating group as part of
the Non-Agricultural Market Access (NAMA) talks.
NCTO
is also pressing the
U.S.
government to take action against
China's
many unfair trade practices. Because
China
continues to use illegal and anti-competitive
trade practices, NCTO
is working with its international partners to make
sure that a permanent
China
textile safeguard is adopted as part of the
current Doha Round negotiations of the World Trade
Organization.
For
additional information in the crisis in
U.S.
textiles, please see:
