Less than a
year remains before the January 1, 2005 deadline for the elimination
of all textile quotas pursuant to the World Trade Organization’s
Agreement on Textiles and Clothing (“ATC”). Concern
continues to mount that U.S. and regional manufacturing will suffer
further damage once quotas are completely abolished, and with good
cause. Textile quota categories that have already integrated
under the GATT 1994 agreement have seen exponential increases in
imports from the People’s Republic of China (PRC) since that
country’s accession to the WTO in 2002. For example,
according to the American Textile Manufacturer’s Institute,
once China’s quota category 239 for baby wear was removed,
China promptly dropped prices for category 239 goods an average
of 57%, to $2.54/square meter from $5.92 per square meter.
Domestic manufacturers of baby clothing responded by dropping U.S.
prices by 8%, to $2.69 a square meter; however, they remained uncompetitive
and have steadily lost market share. See The China
Threat to World Textile and Apparel Trade, American Textile
(July 2, 2003).
advantage from China in the absence of textile quotas, U.S. firms
have begun to apply for “safeguard” quotas for certain
categories of textile goods from China before the United States
Committee for the Implementation of Textile Agreements (“CITA”).
The balance of this article provides information on the types of
safeguards currently available against Chinese textile imports,
and their status.
Safeguards Available Against
Chinese Textile Products
safeguards are provided for in two WTO documents: the Accession
of the People’s Republic of China, and the Report of
the Working Party on the Accession of China, both of November
10, 2001. The intended affect of these safeguards is to continue
market protections afforded to U.S. textile manufacturers under
the soon-to-be-abandoned system of quotas in the event of a “market
disruption” due to particularly high volumes of Chinese imports.
"Paragraph 242" Textile
and Apparel Safeguards
Section D, Subsection 11 “Textiles”, of Paragraph 242
of the Report of the Working Party on the Accession of China
by the WTO provides that if a Member believes that imports of Chinese
textiles or apparel products are, due to “market disruption,”
threatening to “impede the orderly development of trade”,
it may request “consultations” with China with a view
to easing or avoiding the market disruption. This standard
appears to be less stringent than that of “serious damage
or actual threat thereof” required for initiation of safeguards
under the current World Trade Organization Agreement on Textiles
and Clothing, which expires on January 1, 2005.
To obtain the
safeguard quotas, the requesting Member must provide China, at the
time of the request, with a detailed factual statement as to the
reasons and justifications for its request, supported by current
data showing the existence or threat of market disruption and the
role of Chinese products in that disruption.
period of consultation, China will agreed to hold its shipments
of the textile products in the categories subject to these consultations
to a level no greater than 7.5% (6% for wool product categories)
above the amount entered during the first 12 months of the most
recent 14 months preceding the month in which the request for consultations
was made. If no agreement is reached during the initial 90‑day
consultation period, consultations would continue and the requesting
Member can continue to impose the 7.5% limits.
Time Limit on Paragraph
There is a
time period for restraint limits under Paragraph 242. It begins
on the date of the request for consultations and runs through the
31st of December of the year in which consultations were
requested, or where three months or less remains in the year at
the time of the request for consultations, for the period ending
12 months after the request for consultations. No Paragraph
242 safeguards may remain in effect beyond one year without reapplication
and the agreement of China. The provisions of “Paragraph
242”, apply to trade in textiles and clothing products until
December 31, 2008.
"Article 16" Product-Specific
of the Accession of the People’s Republic of China
provides for a transitional product-specific safeguard mechanism,
which is available to all WTO members until January 1, 2014.
allows WTO members, such as the United States, to initiate restraint
levels against specific products of Chinese origin, including textiles,
if significant increases in imports produce a market disruption
to the economy of the member country. A market disruption
for the purposes of Section 16 is an increase in exports to the
member country that threatens to “impede the orderly development
of trade" in these products.
an action for Section 16 safeguards, the effected WTO member must
request consultations with China with a view to easing or avoiding
such market disruption, just as required for Paragraph 242 safeguards.
Although the Section 16 provision does not directly address textiles,
it is “product specific”, and could be used as a mechanism
for restraining Chinese textile imports after expiration of the
paragraph 242-safeguard mechanism on January 1, 2008.
Requests for Safeguards
Currently before CITA
In the summer
of 2003, CITA received three separate requests for safeguards from
domestic interested parties covering certain textile product categories
imported from China. The domestic interested parties included
the American Yarn Spinners Association, American Manufacturing Trade
Action Coalition, American Textile Manufacturers Institute and the
National Textile Association. Upon receipt of the requests
for consultations, China agreed to hold shipments of the contested
categories to the limits imposed by Paragraph 242.
Textile Categories Covered
by Current Requests
three paragraph 242 requests for safeguard quotas have been filed
with CITA. All three requests alleged that imports from China
of the textile products listed below are causing a market disruption
that threatens to impede the orderly development of trade in these
fabrics of textile category 222;
- Cotton and man-made fiber bras
of category 349/649; and
- Cotton and Man-Made Fiber Dressing
Gowns of Category 350/650.
request and that CITA seek consultations with China on imports of
these items and in December of 2003, CITA announced that the U.S.
requested bi-lateral textile consultations with the Government of
the People’s Republic of China with respect to these goods.
At the same time, CITA issued directives to Customs establishing
import limits on categories 222, 349/649 and 350/650 for the twelve-month
period of December 24, 2003 through December 23, 2004.
Interim Visa Requirements
of the U.S.-China Textile Visa Arrangement provides that if additional
categories become subject to import quotas, those categories shall
be automatically included in the coverage of the Visa Arrangement.
In January 23, 2004, U.S. began to require that shipments of Chinese
origin in categories 222, 349/649 and 350/650 be accompanied by
an export visa and Electronic Visa Information System (“ELVIS”)
transmission from the Chinese Government.
China safeguards are provided for in WTO documents, to which the
United States is a signatory, U.S. Law and regulations remain silent
as to their presence and applicability. It took CITA a full
sixteen months following the accession of China into the WTO to
publish procedures for safeguard request. So far, CITA guidelines
are the only acknowledgement by any branch of the U.S. Government
as to the validity of the safeguards as a mechanism of trade control
in the absence of textile quotas.
The three safeguard
actions currently negotiated by CITA are under paragraph 242, and
it remains to be seen how effective these applications will be.
It also remains to be seen if and how the Section 16 safeguards
will provide any relief to U.S. textile manufacturers following
the expiration of Paragraph 242 safeguards in January 2008.
What ever else is clear, it should be expected that the U.S. will
attempt to protect what remains of its is domestic textile manufacturing
base against market disruptions by China, and that importers of
textile and apparel products will not have seen the last of quota
and visas requirements despite the termination of the ATC on January
you have any questions on the issues raised in this newsletter or
any other Customs related issues, please contact George R. Tuttle,
III at (415) 288-0428 or via email at firstname.lastname@example.org.
R. Tuttle, III is an attorney with the Law Offices of George R.
Tuttle in San Francisco. The information in this article is general
in nature and is not intended to constitute legal advice or to create
an attorney-client relationship with respect to any event or occurrence,
and may not be considered as such.
© 2005 by Tuttle Law Offices.
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