Textile companies face new obstacles
By Jiang Wei (China Daily)
Updated: 2004-10-25 08:44

Experts reminded textile enterprises to be prepared for potential obstacles in the global marketplace after quota restrictions on textile products and garments in January 2005 are removed.

New protectionism obstacles may be initiated against the Chinese textile industry in 2005, said Cao Xinyu, vice-chairman of China Chamber of Commerce for Import and Export of Textile.

Under the Agreement on Textiles and Clothing, all quotas restricting textiles and clothing trade between World Trade Organization (WTO) members will be eliminated by December 31.

That has made some enterprises so sanguine that investments are repeatedly pouring into similar projects in this sector.

"The removal means not only more opportunities but also more challenges," said Cao.

Skirmishes first may come from the rivals who enjoy geographic advantages and free trade zone membership, such as Turkey and Mexico.

According to statistics from the US customs, Mexico was second largest supplier of textile and apparel, accounting for 10.5 per cent in the first half of the year, while China took up 16.6 per cent.

In the EU market, in the first quarter of this year, Turkey was the second largest exporter of textile and apparel with its export volume accounting for 13.8 per cent of EU's imports, while China took 17.5 per cent.

He explained that it takes at least 10 days for Chinese products to be transported to the United States and European Union while it takes less than one day from Mexico and Turkey to their target market, saving time and costs for the retailers.

And thanks to Mexico's membership of North American Free Trade Zone (NAFTA), the second largest FTA in the world, enterprises in the country enjoys transaction costs much lower than those of Chinese firms, which just counteracts their higher labour costs.

China's non-market economy status is also likely to bring about some uncertainties to textile exports next year, and textile enterprises are urged to be cautious about the possible anti-dumping charges and protectionism against China.

Many Chinese companies have lost their anti-dumping cases because countries with higher costs were taken as substitutes in calculating the value of Chinese products.

"Domestic enterprises' reluctance to respond to the charges is another reason that has resulted in their failure," said Cao.

Meanwhile special safeguarding measures may be launched against Chinese products by foreign governments, when Chinese products are regarded as disturbing target markets.

"Acknowledged of the uncertainties, some large foreign enterprises have begun to add appendixes to their contracts with Chinese enterprises, adding that the Chinese part shall be partially or even fully responsible for losses," he said.

In order to cope with possible protectionism, Cao suggested domestic companies exploit products with higher added values to develop new consumers, as well as enhancing their services to satisfy original customers.

"Some Chinese enterprises, such as the Guangdong-based Silique, have done pretty well in promoting their brands overseas," he said.

Concentrating on manufacturing and exports of silk products, Silique has become high-quality brand in foreign markets.

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