WASHINGTON, DC — Representatives from the Global Alliance for Fair Trade in Textiles (GAFTT) and government officials from 25 countries met here Jan. 26 to discuss a coordinated international response to the crisis associated with the worldwide expiration of quotas on textiles and clothing. Private briefings for U.S. government officials and the U.S. Congress also took place that afternoon and the next morning.
GAFTT represents 96 trade groups from 54 countries that exported more than $170 billion in textile and apparel products in 2003.
“By allowing worldwide quotas on textiles and clothing to expire without adequate measures in place to prevent the rapid monopolization of the market by a small number of countries through the use of unfair trade practices, the World Trade Organization (WTO) has allowed global trade in textiles and clothing to become severely disrupted,” the group issued in a communiqué. “Absent immediate and responsible action by individual governments, up to 30 million jobs around the world will be lost to China and the continued development of a fair and beneficial trading system for this vital sector will be strangled.”
Because of the extraordinary threat that world trade in textiles and apparel faces today, the GAFTT called for the following actions:
• Governments, especially those of the United States, European Union and Canada, should immediately and effectively implement the WTO special China textile safeguards to prevent China from monopolizing worldwide textile and apparel trade;
• The WTO must undertake an urgent review of the impact of the quota phaseout and of how market distorting trade practices threaten to monopolize trade in this vital sector in the hands of one or two countries;
• The WTO must develop new permanent instruments as part of the Doha Round to prevent the textile and clothing sector from being monopolized in the future;
• As a part of the development of new permanent WTO instruments to prevent a small number of countries from monopolizing global trade in textiles and clothing, GAFTT urges other governments to support WTO paper 496 submitted by several developing countries that calls for the WTO to actively monitor and address the economic impact of the quota phaseout and to support WTO paper 497 submitted by the Republic of Turkey that calls for a permanent, global safeguard mechanism. GAFTT believes that it is critical that the WTO Council on Trade in Goods give fair and extensive consideration to these papers during formal meetings in 2005;
• Governments whose textile and clothing industrial sectors export to the United States, European Union, Canada and other countries must let those countries know that they support immediate and effective use of the China textile safeguard. This means that safeguards should be invoked on threat of market disruption rather than waiting for actual market disruption to occur;
• Governments must move aggressively at the WTO and within their own trade regimes to attack unfair trade practices employed by countries that seek to dominate world trade in textiles and apparel. These practices, which are illegal under the WTO, include currency manipulation, industrial subsidization of state-owned companies, the extension of “free” capital by central banks and illegal export tax rebates; and
• GAFTT recognizes the importance of an active policy of access to markets, especially on the part of countries that are the major beneficiaries of the quota phaseout, such as India, by achieving acceptable levels tariffs together with the elimination of non-tariff barriers.
GAFTT also noted that Vietnam has applied to become a WTO member and that as a non-market economy, it has been able and willing to mirror many of unfair practices used by China to monopolize key sectors of the global textile and clothing market.
Consequently, GAFTT called for the WTO to include safeguards or other specific provisions that would prevent Vietnam from using unfair trade practices to monopolize segments of global trade in textiles and clothing, such as the $82 billion U.S. import market, as a part of any accession agreement allowing Vietnam to become a member of the WTO.
GAFTT announced that its efforts over the next 12 months would be focused on ensuring that safeguard actions are implemented in key markets and that unfair monopolistic trade practices are attacked. GAFTT said it will also focus on persuading the WTO to introduce new permanent safeguards for textile and apparel products into the current round of worldwide trade talks.
GAFTT review
The now expired worldwide quota system for textiles and clothing was arguably one of the most successful economic aid packages for developing countries in history, GAFTT said. The system allowed virtually every developing country access to key global markets by preventing any single country from monopolizing the market, the group said.
In 2003, 41 countries exported more than $1 billion in textile and clothing products annually, creating desperately needed jobs and generating invaluable foreign earnings for some of the poorest countries on earth.
However, since China joined the WTO at the end of 2001, it has engaged in a highly damaging and systematic effort to monopolize world trade in textiles and clothing by undercutting free market prices through a complex scheme of industrial subsidization and currency manipulation, according to the GAFTT.
In the clothing categories removed from quota in 2002, China dropped its prices by an average of 53 percent in a successful effort to dominate world trade in the U.S. market in these product areas, the group said.
Not a single competitor was able to match China’s artificially low prices. By
November 2004, the next largest supplier of these products to the U.S. market was Thailand, with 3 percent. Also, GAFTT noted that China’s average export prices for trousers, underwear and woven and knit shirts are 58 percent below the average prices charged by other countries.
Moreover, China already controls a combined 40 percent share of world exports for cotton and manmade fiber trousers, men’s woven shirts, cotton and manmade fiber knit shirts and underwear.
When U.S. and E.U. exports are excluded in these categories, China’s world export market share rises to 57 percent, GAFTT said.
Finally, in these same categories, China already controls an 88 percent market share of the lucrative Japanese and Australian markets.
China has used and continues to use the following unfair trade practices to artificially undercut the prices every other country in the world, according to GAFTT:
• currency manipulation (as much as a 40 percent advantage);
• export subsidies (rebate of export taxes: 13 percent);
• free capital (U.S. government reports that up to 50 percent of government loans to Chinese business are never repaid);
• direct state subsidies to textile industry (50 percent is still owned by the Chinese government); and
• many others, including tax holidays, land giveaways, power and freight subsidization.
These trade practices undeniably have severely disrupted world trade in textile and clothing, GAFTT said.
In the critical $82 billion U.S. import market, China’s market share in the clothing and home textile products categories removed from quota in 2002 surged from less than 10 percent in 2001 to more than 73 percent as of November 2004.
Every player in the world trading community lost market share to China, even countries with geographic proximity and preferential trade agreements, the coalition said.
China saw substantial growth in its market share in Europe as well, capturing anywhere from 30 percent to more than 50 percent market share in several key categories.
