Protectionism will be costly for both sides
China Daily  Updated: 2005-08-31 05:53

The fourth round of talks on textile exports between China and the United States comes as the European Union dispute over Chinese textile imports intensifies.

Though the United States is not likely to suffer a similar problem given its diversified imports and preparations, the high costs of restrictions on trade demand attention from American negotiators.

As the world's biggest textile and garment exporter, China has been fending off threats of trade limits by the United States and European Union since global quotas on the textile trade finally ended on January 1 this year.

But a surge of textile exports, a natural result of China's comparative advantage in this labour-intensive industry, has driven many rich nations to try to prolong protection for the sake of their domestic industries.

A China-EU textile agreement was signed in June. China demonstrated its consideration of some EU countries' difficulties in quickly preparing their domestic enterprises for the surge in global textile trade.

The shift would have been predicted if the scheduled removal of global trade quotas had been taken seriously by developed countries.

Enterprises in these developed countries would have tried much harder to adapt themselves to the upcoming changes if their governments had resolved to observe the new world trade order, which will obviously be fairer in the absence of the obsolete textile quota system.

The China-EU deal, as a stopgap measure, has helped alleviate the pressure on some European textile manufacturers. But this came as a surprise to European importers and retailers as well as Chinese textile exporters.

As millions of Chinese sweaters, trousers and bras piled up in ports this month after rapidly exceeding the reinstated import quotas, European importers and retailers have found themselves being penalized for not making orders in line with newly-erected trade barriers.

European retailers' warnings that the hold-up of Chinese textile imports could lead to stores going bankrupt and shoppers facing empty shelves this autumn and winter galvanized EU trade negotiators into action to review the quota agreement reached just three months ago.

This trade fiasco demonstrates that protective measures, at best, are zero-sum games for those who resort to them. The bigger market shares domestic textile producers gain from artificial trade barriers will be largely offset by losses not only for domestic consumers but also other related domestic businesses.

Worse, protectionism is a loss-loss deal for both sides in international trade while undermining the global effort to build a free and fair trade order.

Trade protectionism has incurred huge costs for Chinese textile producers. Rising uncertainty in the global market has seriously disrupted their production. The consequences hit numerous low-wage Chinese textile workers harder than the current hold-up is affecting European retailers.

The two-day China-US trade talks on textiles, the fourth round since June, began yesterday in Beijing. The United States still threatens to slap protectionist measures on several categories of Chinese textile imports.

The US Government's decision to yield to domestic protectionists has time and again egged them on to demand more and more.

But the real cost of protectionism has not been fully taken into trade negotiators' consideration.

Even if the United States avoids supply disruptions that have recently plagued Europe by timely replacing Chinese exports with imports from other countries, consumers will have to pay more, as those in Europe will, as cheap Chinese goods are refused.

The long-term consequences of postponing necessary industrial restructuring that can maximize its competitive edge otherwise will only get more serious.

To prosper in the new world economy, the United States must fix its industrial structure problems from a domestic perspective.

(China Daily 08/31/2005 page4)

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