Textile pact cannot protect US jobs
Paul  Updated: 2005-11-09 15:56

The U.S. textile industry got its heart's desire on November 8 in London -- an agreement limiting the amounts of shirts, trousers, underwear, fabric and other textile products that Chinese companies can ship to the United States over the next three years.

No sooner had the deal been announced by U.S. Trade Representative Rob Portman and Chinese Commerce Minister Bo Xilai than the U.S. textile industry began praising it.
"US textile and apparel manufacturing workers and their communities are big winners today," Augustine Tantillo, executive director of the American Manufacturing Trade Action Coalition, said in a statement.

But it is far from clear that the agreement will do much to halt the steady erosion of jobs in the battered U.S. sector, much of which is concentrated in the Southeast U.S. According to some trade and industry experts, the deal could even hasten the industry's decline, by giving China's export machine greater incentives to move into the higher end of the market, on which U.S. companies have staked their futures, the Washington Post said in an analysis.

"This is going to backfire," said Grant Aldonas, who until earlier this year was undersecretary of commerce for international trade and the Bush administration's lead negotiator with the Chinese on the issue. "It's the orthodoxy in certain industries that protectionism is the answer, and it is just shortsighted in the extreme."
For U.S. consumers who have become accustomed to "Made in China" labels on the clothes they buy, the agreement will at least slow that phenomenon for a while. Imports of Chinese textiles and apparel will be allowed to rise at annual rates ranging from 8 percent to 17 percent, depending on the product and year, beginning on Jan. 1, 2006, and lasting until the end of 2008.

Winning such an accord with Beijing has been the top goal of the U.S. textile industry since the demise of a decades-old system of global quotas restricting the amount of clothing that individual countries could export. Once that system disappeared on December 31, 2004 -- freeing countries in Asia, Africa and Latin America to ship as many sweaters, bras and bed-sheets as the market would bear -- China's network of factories, with its bottomless reserve of low-cost workers, looked to dominate global markets.

But while the agreement will prevent the Chinese from dominating their competitors with the swiftness many had feared, the deal's three-year duration means that a day of reckoning still looms. And after the pact ends, Washington will no longer have the leverage it has exercised over Beijing in recent months: the right to impose annual caps, known as "safeguards," on Chinese textile and apparel imports. Beijing agreed to such restraints until 2008 as part of the price of its entry into the World Trade Organization.

"Under this new agreement, the U.S. industry will know with certainty that China will not be able to flood the U.S. market during the next three years," said James Chesnutt, president of National Spinning Co. of Washington, N.C., and chairman of the National Council of Textile Organizations. But, he acknowledged, "the threat from China is not eliminated by this agreement, only delayed."

Furthermore, instead of shifting production to the United States, whose manufacturers generally do not compete directly with the Chinese, the agreement could mean that other Asian countries get more orders from U.S. retailers at China's expense, some analysts predict.

"There's a balloon effect. You squeeze in one place, and the pressure just gets transferred someplace else," said Peter Kilduff, a professor at the University of North Carolina at Greensboro who specializes in the textile industry.
Imports of clothing from China surged 71 percent over the past year, to $8.2 billion. Imports from India have risen 34 percent, to $2.7 billion; Bangladesh's shipments have increased 24 percent, to $2.23 billion; Indonesia's have risen nearly 17 percent, to $2.7 billion; and Sri Lanka's have increased nearly 18 percent, to $1.7 billion. Those countries' sales to the United States are likely to increase even faster now that China's are limited.

Chinese trade minister Bo acknowledged that the figures were "a far cry from our original expectations." He said China could take comfort in that a three-year negotiated agreement affords greater predictability to its exporters than does the system of annual caps.

But Aldonas, who is now in private legal practice, asserted that U.S. manufacturers would eventually regret pushing the administration for comprehensive caps on imports. With the Chinese compelled to limit their exports, "they'll move up the value chain, ceding the lower value stuff to the Pakistans and others," he said. "Those are the longer-term effects I'm worried about."

The U.S. industry lost jobs at a terrible clip even when the global quota system was in effect, noted Edward Gresser, a trade expert at the Progressive Policy Institute. Employment in U.S. textile mills has fallen from about 1 million when the quota system was established in 1974 to about 400,000 when it ended last year. The number of jobs in garment factories has plunged even more steeply.

Since worldwide quotas failed to stem job losses, Gresser said, "I'm skeptical that a quota on China alone will be more successful."

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