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China and US fail to reach agreement on textile quotas

China and US fail to reach agreement on textile quotas
By Richard McGregor in Beijing and Edward Alden in Washington
Published: October 14 2005 03:00 | Last updated: October 14 2005 03:00

China faces an extended period of tight restrictions on textile and clothing sales to the US after the two sides failed yesterday to strike a deal to ease the unilateral quotas imposed by the US.

The breakdown of the latest round of talks was a surprise, as officials had raised expectations of a deal similar to June's agreement with the European Union.

US criticism of China's bilateral trade surplus and pressure to allow its currency to rise had also been expected to help force a deal in the Beijing talks. The US reported yesterday that its trade deficit widened to $59bn in August, up $1bn on the previous month. The deterioration was mainly due to costlier oil imports, but the deficit with China also rose $800m to $18.5bn.

"Many in the retailing and importing community are probably bewildered" at Beijing's failure to settle, said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. US importers had hoped for a deal providing for predictable increases, but now the US can continue to impose quotas unilaterally on Chinese clothing imports.

The safeguards currently in place and additional cases filed by the US industry now cover 43 per cent of China's textile and apparel exports to the US - worth $15.4bn in the first eight months of this year. But the safeguard actions have done little to stem the growth of Chinese clothing exports to the US, which are up by $6bn over last year. In contrast, US imports from the rest of the world fell slightly this year.

The safeguard clause, included in China's accession agreement to the World Trade Organisation, lasts until 2008, after which all trade in textiles should in theory be free of quotas.

The main sticking point in the latest talks was the increase in exports for 21 clothing categories demanded by China for 2007 and 2008, of about 20 and 30 per cent respectively, officials say.

This was well above the final US offer of 12.5 and 14 per cent, and the two sides were unable to bridge the difference. China rejected the US offer, even though it was slightly better than the final agreement between Beijing and Brussels for 2007.

The breakdown means China will probably be restricted to annual increases of just 7.5 per cent for the next three years in 19 clothing categories already under safeguard restraints, much lower than the US offer.


LINK: http://news.ft.com/cms/s/70e7979e-3c54-11da-94fb-00000e2511c8.html