By Auggie Tantillo
The American Manufacturing Trade Action Coalition (AMTAC) had a productive and busy year in 2004. The organization doubled in size and expanded its website, www.amtacdc.org.
End of an era
2004 marked the end of era for the world’s textile industry. At the stroke of midnight on January 1, 2005, quotas expired worldwide for all members of the World Trade Organization, including the United States. More than $60 billion worth of U.S. import market share was affected.
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Competing in a quota-free environment represents the greatest challenge ever faced by United States textile manufacturers, because if left unchecked, China’s heavily subsidized textile and apparel industry will monopolize the U.S. market. When importers and retailers were polled at the Cotton Sourcing Summit in Miami in February 2004 as to what percentage of the U.S. market China would capture in a quota-free environment, 43 percent said China would seize 50 to 75 percent, while 44 percent responded with 75 to 90 percent.
Calm before the storm
By the numbers, 2004 was another difficult year for the U.S. textile and apparel industry. About 29,900 U.S. textile and apparel manufacturing jobs disappeared. World imports to the United States were up 10.68 percent and imports from China climbed more than 43 percent. U.S. imports of textiles and apparel in 2004 are expected to total nearly $83 billion, with Chinese imports approaching $15 billion.
The Federal Reserve reported that seasonally adjusted output at U.S. textile firms fell by 3.4 percent for 2004. From 1995 to 2004, a time when domestic demand for textile products has shown strong growth, U.S. textile production fell by an unprecedented 25.5 percent. This contrasts remarkably with the 10-year period ending in 1994, when U.S. textile production increased by 32.2 percent.
The apparel industry experienced a similar decline in output, according to the Federal Reserve. Seasonally adjusted output at U.S. apparel manufacturing firms dropped by 4.3 for 2004 and plummeted by an unprecedented 55.4 percent between 1995 and 2004, also a period of strong growth in U.S. consumer demand for apparel products. In contrast, apparel production increased slightly from 1985 to 1994.
The results of the decline in production are grim. Imported goods captured all growth in U.S. demand for textile and apparel products during the 1995-2004 time frame as well as displacing nearly 26 percent of existing U.S. production of textiles and 46 percent of apparel.
Finally, the Federal Reserve observed that U.S. textile mills closed 4 percent of their capacity in 2004, ending December using only 74.7 percent of their productive capacity. Apparel manufacturers shuttered 12.5 percent of their capacity and were utilizing only 72 percent of their remaining capacity in December 2004.
These numbers suggest that, despite a sharp reduction in the productive capacity of textile and apparel firms in recent years and the loss of a very substantial number of jobs, further major reductions in industry capacity and jobs should be expected over the coming months.
Legislative activities
The textile industry’s unity forged in 2003 continued to pay dividends in 2004. The industry succeeded in obtaining a safeguard on sock imports from China, in addition to the safeguards imposed on brassieres, dressing gowns and knit fabric in 2003. Also, the industry persuaded the Bush Administration to consider imposing threat-based safeguards against Chinese imports of trousers, shirts, underwear and other products. Since October 2004, the industry has filed nine new threat-based safeguard petitions and reapplications on the brassiere, dressing gown and knit fabric safeguards that expired at the end of 2004.
Approval of threat-based special textile China safeguard petitions is imperative if the U.S. textile industry is to survive the onslaught of low-priced Chinese imports fueled by widespread use of unfair trade practices such as currency manipulation, export tax rebates, non-performing loans and other subsidies.
On December 30, the U.S. Court of International Trade issued a temporary injunction prohibiting the U.S. government from considering the threat-based petitions filed by AMTAC and others. The U.S. government is expected to appeal this ruling early this year.
Moreover, AMTAC believes that the petitions filed by the U.S. textile industry are so strong, that it will be difficult for the U.S. government to reject them if the courts allow their consideration.
In addition to the threat-based petitions already filed, AMTAC expects to file other safeguard petitions against China based on actual damage as the year progresses.
On the trade policy front, the U.S. government continued to sign highly damaging trade deals that cost the U.S. textile industry domestic market share.
Congress passed free trade agreements with Chile and Singapore that contained substantial tariff preference levels (TPLs) and extended and expanded existing TPLs in the African Growth and Opportunity Act (AGOA).
The United States also signed a Central American Free Trade Agreement (CAFTA) but did not submit its implementing legislation to Congress in 2004 due to fierce opposition from the textile sector, sugar industry and organized labor.
The CAFTA’s job-destroying loopholes include a 100 million square meter TPL for Nicaragua, a 500,000 square meter TPL for Costa Rica for wool products, cumulation provisions allowing for Mexican and Canadian yarn and fabric to be substituted in place of American inputs, and single-step transformation for boxers, brassieres and pajamas. Industry analysis predicts that these provisions will force the closure of a minimum of 10 to 15 textile mills and ship 500 to 700 million square meters of textile production offshore.
AMTAC will muster every resource at its disposal to prevent passage of CAFTA. If early indications prove true, the White House will have a difficult time ramming CAFTA through Congress, as the coalition that stopped CAFTA in 2004 remains united for 2005.
The U.S. government also struggled to move the Doha Round of WTO talks forward. AMTAC was pleased at the lack of substantial progress of the talks, because a successful round would likely result in the reduction or elimination of U.S. textile tariffs.
Finally, AMTAC supported the efforts of House Armed Services Committee Chairman Duncan Hunter (R-CA) to preserve the Berry Amendment and strengthen the military’s Buy American programs. AMTAC will work closely with Chairman Hunter and other manufacturing sectors to expand Buy American in the 2005 appropriations process.
Coalition building
On top of all of our domestic activities, 2004 proved to be a watershed year for the U.S. textile industry internationally. In March, AMTAC and the American Textile Manufacturers Institute met with Turkish textile industry and signed a joint set of principles, known as the Istanbul Declaration, that called for an emergency meeting of the World Trade Organization (WTO) to postpone the expiration of textile and apparel quotas.
The Istanbul Declaration sparked an international movement culminating in the formation of the Global Alliance for Fair Textile Trade (GAFTT), a coalition of 96 trade associations representing 54 countries that succeeded in forcing the WTO to take the unprecedented action of considering an issue not on its agenda, namely addressing the economic impact of the expiration of quotas.
GAFTT fought and won a tough battle to preserve governments’ right of action on the textile issue for 2005. India, Pakistan and especially China pulled out all the stops in a failed effort to force the WTO into killing the textile issue in late 2004. With actual damage already occurring on a significant scale, it could well be extremely difficult for the WTO not to take up textiles in 2005.
Hopefully, dozens of governments will impose safeguards on China, providing the breathing space necessary to give the WTO sufficient time to come up with a long-term solution to the textile problem.
Conclusion
If the U.S. textile industry remains united and works hard, significant policy accomplishments can be achieved in 2005. If this happens, prospects will brighten considerably for a revived U.S. textile industry in the years beyond.
Auggie Tantillo is the executive director of the American manufacturing Trade Action Coalition (AMTAC), Washington, DC. He can be reached at atantillo@amtacdc.org.
