By  on June 1, 2005

WASHINGTON — Saber-rattling aside, the scramble is on as U.S. firms react to the latest squaring off between the Bush administration and China over textile imports.

As reported, the administration moved last week to protect the U.S. textile industry by instituting safeguard quotas on seven categories of goods from China. The effort to protect the domestic industry, and perhaps bolster Congressional support for the stalled Central American Free Trade Agreement, has the Chinese crying foul. China hit back at the imposition of safeguards by the U.S. and by the European Union (on two product categories) by canceling export tariffs on 81 categories of goods.

The safeguards have set off a rush by U.S. importers and vendors to ensure their orders for the products are filled in the months ahead. Embargoes on some products could come as early as mid-July, while vendors already are switching production from China to low-cost nations such as Hong Kong and India to ensure there is no disruption to shipments.

"We have to make corresponding policy adjustments since the EU and the U.S. have set controls on Chinese textile exports," said Chinese Minister of Commerce Bo Xilai at a press conference Monday in Beijing, according to the Chinese embassy's Web site. "We must be fair to Chinese producers."

Xilai said China would look to resolve the issue through consultations, but reserve its right to bring a case disputing the safeguards to the WTO. China agreed to the possibility of such restrictions when it joined the global trade body in 2001, but has said the quotas could have been phased out more gradually, avoiding the sudden rise in imports.

"We do not want to see a trade war," said Xilai. "I do not believe retaliation to be the only way [forward] for us. A healthy trade relationship is good for both sides."

Meanwhile, importers and retailers are trying to gauge the impact of the administration's move. The safeguards bind imports in the seven categories to increases of only 7.5 percent. In all, the U.S. restricted $1.31 billion worth of Chinese imports in the seven categories of goods, including knit shirts, trousers and underwear, all in cotton.

The quotas in principle were expected by the industry, though their reality has turned out to be harsher than some anticipated. Should Chinese imports of cotton trousers, for instance, keep up their pace for the first four months of the year, an embargo would go into effect by July 18. (See the full list of projected fill rates on this page.) Many anticipate imports to surge even more as vendors rush to get their goods out of China, causing quotas to fill even quicker.

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