US tightens quota noose on textile products
Cotton trousers, shirts and underwear from China are the latest textile products facing new import restrictions in the United States.
The restrictions kicked in on Monday -- about a week earlier than expected and follow a surge in Chinese exports since the beginning of the year.
The new limits or "safeguards" have capped the import growth of these products at 7.5 per cent and came into being after the United States requested consultations with China claiming market disruption.
Also on Monday, the EU Textile Committee, which brings together EU member states, and the European Commission showed their support for the proposal to launch formal consultations with China on two categories of textile products -- T-shirts and flax yarn.
The latest US quotas add to uncertainty in an industry rocked not only by limits on imports to the United States but also by new export taxes imposed by the Chinese Government last week which take effect at the end of this month.
"We're all in limbo. The quotas... affect the things I deal with," said Howard Sarmiento, a buyer for US company Point Zero who has already placed an order for 150,000 pairs of pants. "Suppliers are pushing to ship out early."
Since the United States fills its import quota on a first come first served basis, importers will not know until the very last minute whether their products will be allowed in. In other words, products are counted as they arrive and when the limits are reached the borders are shut down regardless of when an order was placed.
In real terms, the quotas mean that 56.4 million cotton knit tops will be allowed in, 51.6 million pairs of trousers and 60 million sets of underwear. The limits will be lifted on December 31.
"Once the quota is reached, the goods embargo is enforced and you cannot ship any more goods," Janet Labuda, US Customs' director of textile enforcement and operations, told a group of buyers and producers in Hangzhou yesterday during a buying trip organized by a US-based company.
"There are going to be many people who are unsure because they don't know what their competitors are shipping. Until the embargo happens, nobody knows what is going on," Labuda said.
"Some people have come up to me, some importers, and they think that within one or two months it will be filled," she said.
The US move to impose growth limit on China's textile and garment imports means the retailers have to shift to products in other countries with higher prices, and the US consumers will be the final victim.
Although all quotas were officially removed at the beginning of the year as a result of a World Trade Organization deal reached in 1994, China is subject to safeguard measures agreed upon during its negotiation.
Countries that feel their markets have been impacted by Chinese production or can prove the country is a threat to the market can request consultations, automatically limiting imports to 7.5 per cent.
According to China's WTO commitments, consultations begin within 30 days of notification of the request and the two countries have 90 days to reach a resolution.
If the two sides fail to reach a resolution, the United States can unilaterally impose quotas for one year, limiting the growth of China's exports of the specified items to 7.5 per cent.
These commitments on safeguard measures come to an end in 2008.
"There has to be an increase in trade and the potential to disrupt or actual disruption of the market," Labuda said.