Trade War Fears Grow Over U.S. Quotas on Chinese Imports

China turned up the volume of protests to the Bush administration's plan to impose safeguard quotas on certain categories of Chinese imports.

WASHINGTON — The retaliation begins.

This story first appeared in the November 21, 2003 issue of WWD.  Subscribe Today.

The fallout from the Bush administration’s decision to impose safeguard quotas on select categories of Chinese imports continued Thursday. In Beijing, Chinese authorities turned up the volume of their protestations, while in Geneva, trade representatives of other developing nations fretted about the possibility of a broader U.S. crackdown on imports in 2005, when the World Trade Organization is set to drop all quotas on textiles and apparel.

In a sign that the safeguard issue could become linked to a broader could become linked to a broader trade dispute, Chinese authorities threatened to impose new tariffs on U.S. products if the U.S. does not lift steel tariffs that have been deemed illegal by the World Trade Organization. Chinese authorities did not make clear what products they are targeting.

The official Chinese state news agency, Xinhua, quoted Vice Minister of Commerce Ma Xiuhong as expressing “deep regret and firm opposition to the U.S. decision to impose import quota” on $600 million worth of bras, dressing gowns, robes and knit fabric.

The Chinese government summoned U.S. Ambassador Clark Randt Thursday for an emergency meeting to discuss the safeguard decision.

The safeguard measure contained in the U.S.-China bilateral trade deal that cleared the way for China’s WTO admission allows the U.S. to impose one year of quotas on imports in categories that have seen market disruption. The four categories in question are among the few to have seen quotas lifted under a 10-year phaseout process set to end on Jan. 1, 2005. The U.S. and China have 90 days to work out an agreement. If they fail, the U.S. can unilaterally impose quotas limiting the growth of China’s imports in these categories to 7.5 percent above the previous year’s level.

In Geneva, trade ambassadors to the WTO expressed concerns about where the safeguard decision might lead.

Referring to the planned end of quotas, Indian WTO ambassador K.M. Chandrasekhar said, “On 2005, we have great apprehensions.”

He said concerns about a crackdown on imports had prompted developing nations in the WTO to call for a two-year moratorium on antidumping actions, starting in 2005. Representatives of the U.S. and European Union have turned down the proposal.

After China, India is seen as the country best positioned to grow its share of the U.S. apparel market in 2005.

At the International Textiles and Clothing Bureau, a group of 24 apparel-exporting nations including China, Pakistan, India and Indonesia, executive director Munir Ahmed complained that the safeguard decision was a sign of hypocrisy in U.S. trade policy.

“This is basically a symptom of a broader problem of contradictions in U.S. trade policy, which is finding its reflection in a whole host of issues from safeguards on steel to textiles and subsidies for cotton and of course the long-term protection of the U.S. textiles industry,” Ahmed said.

Other WTO ambassadors, who spoke on the condition of anonymity, offered varying assessments of the dispute, with some contending that China was being unfairly targeted and others urging China to show restraint in responding to Washington.

China’s entry into the steel-tariffs dispute, which had primarily involved the U.S. and EU, could complicate matters for the Bush administration. The White House has been discussing a plan with steel makers that would accelerate the phaseout of the tariffs, but the EU has rejected that proposal.

The EU is threatening to slap retaliatory tariffs on over $2 billion worth of U.S. products if the steel tariffs are not lifted.

In light of the dispute — and with the memory of the collapse of trade talks in Cancún earlier this year after a dispute regarding U.S. cotton subsidies — WTO officials called for calm.

“It’s understandable that there would be strong reactions on both sides concerning this particular matter,” said a WTO spokesman, in regards to the safeguard quotas. “What is most important is that at this sensitive time cool heads prevail.”

In London, where he was conducting a state visit, President Bush told reporters that he stood by his decision on the safeguard quotas.

“Free-trade agreements require people honoring the agreements,” he said, according to a transcript of his remarks provided by the White House. “There are market disruptions involved with certain Chinese textiles. We’re addressing those disruptions. And we look forward to visiting with our Chinese counterparts on this particular matter….And as I have been saying publicly, that free trade also requires a level playing field for trade.”

Separately, Federal Reserve Chairman Alan Greenspan said Thursday he’s concerned about “creeping protectionism” in international trade that could impede the economy.

In a speech before a monetary policy conference at the Cato Institute, Greenspan made no specific mention of the safeguard move. But Greenspan was clearly reacting to the controversial trade decision and warned that curbs placed on international trade hinder “international flexibility” to keep two-way trade moving and global economies humming. He said, “Consequently, it is imperative that creeping protectionism be thwarted and reversed.”