By  on March 12, 2007

WASHINGTON — Apparel and textile imports from China shot up 23.3 percent, to 1.7 billion square meter equivalents valued at $2.8 billion, in January as reforms to the country's quota allocation system took effect.

China also removed a subsidy program that the Bush administration charged was illegal under World Trade Organization rules.

The imbalance between what the U.S. imports from China and what it exports to that nation has developed into a political issue, and some members of Congress and the administration argue that the country trades unfairly by, among other things, subsidizing its industry and restraining the value of its currency. The U.S. trade deficit in goods with China grew in January to $21.3 billion from $19 billion in December.

The Bush administration last month brought a case against China to the WTO, accusing that country of supporting its industry with nine kinds of prohibitive subsidies, not including currency. U.S. Trade Representative Susan Schwab said Friday that China ended a program that gave large exporters access to discounted loans, one of the subsidies singled out in the U.S. case.

"This is a welcome move by China," Schwab said in a statement. "We are encouraged that the calls for reform from the United States and other trading partners appear to have prompted Chinese officials to announce the end of a policy that created an unfair advantage for companies exporting into the international marketplace from China.…We hope the termination of these discounted loans signals China's willingness to withdraw other subsidy programs identified in our recent WTO action."

China's overall increase in imports was led by apparel shipments, which jumped 68 percent from a year ago, to 691 million SME; textile imports inched up 4.5 percent, to 1 billion SME.

"These are basically the fruits of China fixing their quota mess," said Nate Herman, director of international trade at the American Apparel & Footwear Association. "There was still so much quota available at the end of last year."

In November 2005, China agreed to a three-year system of quotas that restrained imports of 34 types of goods to prescribed increases through 2008. Those quotas, however, were slow to be filled at first. Once the system was set up, China allocated the quotas, but some producers who bought them during auctions were holding their allocations to use later in the year, said Herman. The Chinese government eventually took back the quotas and reallocated them, creating a rush at the end of the year.Imports of Chinese goods under quotas expanded by 65.5 percent in January.

China wasn't the only import winner in January. Imports from India increased 9.7 percent, to 243 million SME. However, exclusive of China, apparel and textile imports from the rest of the world fell 8.2 percent, to 2.6 billion SME in January.

Continuing to lose out in the import race were Canada, down 24.8 percent, to 180 million SME, and Mexico, off 10 percent, to 234 million SME.

Pakistan, which showed import growth over the first half of last year, has been on the decline lately and posted its fourth consecutive month of year-over-year declines, with a 9.7 percent drop to 272 million SME.

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