NEW YORK — The expiration of the quota system that has regulated the world’s apparel and textile trade for more than three decades will be an epoch-making event.
Since the early Seventies, apparel importers’ decisions about what they can buy, where they can buy it and how much of it they can get have been influenced by the quota regulations. The quotas created a world in which the apparel supply chain remained highly fragmented, with few nations’ industries holding a dominant position in any given category.
The nations of the World Trade Organization have been phasing out those quotas since 1995, with the goal of encouraging free trade in a category of business that’s served as an important first step up the economic development ladder for dozens of nations.
While executives in the U.S. and abroad have known for years about the looming change, there is still significant uncertainty surrounding just how the early months of 2005 will play out, as well as how the end of quotas will affect the apparel industry in the long run.
The immediate concerns revolve around China: That nation’s massive apparel industry makes it a prime contender to consolidate its position as the U.S.’ leading supplier of imported textiles and apparel. But China is also the only one of the 147 WTO nations that could still be subject to quotas next year.
When China joined the WTO in 2001, the quota phase-out period was already more than halfway complete. To ease smaller nations’ objections that China’s quick entry into the WTO would give it an unfair advantage in the apparel world, China agreed to a measure called safeguard quotas. The safeguard measures allow nations to impose temporary import limits on select categories of Chinese merchandise for up to three years.
Most industry executives said they expect the first months of 2005 to bring a massive surge in Chinese exports that will likely continue until the U.S. imposes safeguards. That would repeat a pattern that played out in 2002 and 2003, after quotas were lifted on categories including bras, robes and knit fabrics and safeguards were imposed in November 2003.
Peter McGrath, president of purchasing for J.C. Penney Co. Inc., based in Plano, Tex., said early 2005 will likely be “a period of uncertainty, particularly as it relates to safeguards on China by the U.S.…smart sourcing people are going to be really cautious until we see things settle down.”
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