Panels to watch textile export orders
By Dai Yan (China Daily)
Updated: 2004-12-30 08:49

About 50 major textile exporters have agreed to set up six price co-ordinating panels to keep an eye on export orders through self-discipline, as textile quotas are set to be removed on Saturday.

The six panels will oversee six categories of textiles, including knitted shirts, non-knitted shirts, trousers, underwear, cotton sheets and socks, according to an official from the China Chamber of Commerce of Import and Export for Textiles.

The six categories were chosen as they are the areas the United States is considering safeguarding for fears the domestic market could be hurt, said the official who declined to be named.

The panels will establish floor prices for such products, the official said, adding that prices will not be fixed and will be adjusted by these companies.

More than 50 companies are involved in the six groups, all members of the chamber, and others are keeping a close eye on the price co-ordination, the official said.

A number of big names are included in the panels, such as Jiangsu Sainty Co Ltd, Younger, Esquel Group, Orient International and Hongdou.

The price co-ordinating bodies, coupled with the export tax on certain textile exports, indicates the intention of major Chinese textile companies to take a more tempered rather than explosive approach to expansion into the global textile trade.

Textile quotas will be removed on January 1 for all World Trade Organization (WTO) members, according to an agreement signed a decade ago.

To ease concerns that competitive Chinese textiles will soon swamp the world market, the Chinese Government will impose an export tax on certain textile exports from Saturday. Goods subject to the tax include knitted shirts, non-knitted shirts, underwear and night clothes, overcoats, skirts and trousers.

The tariff mostly ranges from 0.2 yuan to 0.3 yuan (2.4-3.6 US cents) for every item or set.

The official said the six panels were regarded as supports for the export tax, since big companies fear that the tariff is not enough to prevent small manufacturers selling their products at lower prices after the quota is lifted.

"The impact of the export tax is not significant as we save the payment for quotas," said Wei Bensen, a manager of the Import & Export Department under the China Yeliya Garment Group.

Bill Shields, vice-president of global sourcing at Pacific Trail Sportswear, said his company is used to paying US$3-4 in quota charges per garment made in China.

Replacing that with a 2 or 3 per cent tariff is fairly insignificant and would not prompt the removal of production from China, he said.

It remains to be seen if the panels and export tax will move the US Government which is being lobbied by US-based manufacturers to cap the growth rate of Chinese textiles.

Officials from the Chinese Ministry of Commerce flew to the United States last week to discuss the textile issue with the US Department of Commerce.

The US side felt positively about China's new export tax, said an official from the Ministry of Commerce in China.

"We will stage further negotiations on the textile trade next month," the official said.

The Bush administration imposed safeguards on Chinese imports of knitted fabrics, dressing gowns and bras in November, 2003, and socks this October.

It was also considering many requests from the US textile industry to cap shipments of Chinese-made trousers, shirts, sheets and underwear.

China agreed to allow such safeguards until 2008 under the terms of its entry into the World Trade Organization (WTO).

Following the United States, Turkey and Argentina have decided to impose safeguards on Chinese textiles.

The US and European Union (EU) governments promised to lift the quotas as agreed despite pressure from domestic textile manufacturers, but they also asked the Chinese Government to keep a leash on the growth of textile exports.

The European Commission said in a statement that the steps taken by China should help "ensure the expansion of textile exports from China happens progressively."

But the Financial Times commented that the Chinese move to collect an export tax was a step backward for the world trading system and a blow to the world's consumers.

"However, it would be unfair to blame China. The fault lies with the EU and US. If some restraints were becoming inevitable, it made sense for Beijing to move first and capture the rent for itself," the newspaper said.

Some even said the Chinese measure is similar to past actions by other governments, notably Japan, which in the 1980s voluntarily restrained exports of machine tools and automobiles to the United States in a bid to avert protective tariffs. But since no WTO member would likely challenge China's export duties, it is unlikely they will pose a problem.

However, some US manufacturers are still arguing the export tax will do little to mitigate the overall competitive advantages of Chinese textile and garment exports.

"Yes, they are right. The move will not have a big impact on Chinese textile exports," said Sun Huaibin, spokesperson of the Chinese Textile Industry Association.

Even in the long run, the tax, a heavy blow to producers of low-end goods, will push companies to make more goods of high added value and help the industry become stronger, he said.

"But China has given up something it honoured by world trading rules. Those who are still unsatisfied should make improvements in their own production rather than try to stop others," he said.

Countries strong in the textile industry have prepared to cash in on the quota-free trade. India said it will seize the opportunity and double its current exports of US$13 billion in two years.

Pakistan also wants to increase its textile exports from US$7 billion to US$14 billion in four years.

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