Most Recent Articles In Textiles
Latest Textiles Articles
- Paris Textile Fairs Get Ready for 2017
- Milano Unica Firms Brace for China Slowdown
- Paul Charron Joins Board of Unifi Inc.
More Articles By
WASHINGTON — U.S. sourcing executives saw the move by China on Friday to place higher tariffs on its apparel and textile exports as more symbolic than substantive and an action that won’t change manufacturing strategies.
It is symbolism, though, that might help China lessen tensions with the U.S. and Europe after a surge of imports from the country following the elimination of quotas this year among World Trade Organization members.
This story first appeared in the May 23, 2005 issue of WWD. Subscribe Today.
China will increase export tariffs on 74 types of apparel and textile products on June 1, according to a report on the official state news service Friday. For most of the categories, the duty would rise to 12 cents from 2.4 cents per item. Complete details were unavailable, but exceptions include women’s cotton overcoats, which will be levied with a 48-cent tariff, up from 3.6 cents.
The move puts more bite into tariffs China first imposed on its own exports on Jan. 1 and comes on the heels of two calls within a week for new quotas by the Bush administration, meant to limit surging Chinese imports into the country.
The rising tariffs indicate to the U.S. and other countries that China is not trying to absorb the entire apparel and textile industry, said Peter McGrath, chairman of purchasing for J.C. Penney Purchasing Corp., noting, however, that the tariffs were not “extraordinarily punitive.”
“This, in my mind, is going to be their method of export control,” said McGrath, adding the Chinese can raise them again to slow exports.
The U.S. is seeking to restrict imports from China through the safeguard quotas it said it would imposed this month, which would limit growth in seven categories of goods, such as man-made fiber trousers and cotton shirts and blouses, to a 7.5 percent annual increase, calculated from the 12 months ended Feb. 28.
Together, the seven petitions for quotas, four filed by domestic manufacturers and three initiated by the administration, sought to slow the growth of imports of those seven categories, worth $1.31 billion. Those restrictions go into place when consultations with the Chinese are officially requested later this month.
Chinese apparel and textile imports shot up 60.5 percent to $4.77 billion during the first three months of the year, according to the Commerce Department.
Commerce is evaluating a list of the export tariffs from China and will go ahead with the consultations on the surging imports, triggering safeguard quotas on the seven categories, a spokesman for the department said.
“These consultations will be undertaken by the end of May,” the spokesman said, “and will represent an opportunity for discussion with the Chinese government on the measure just announced.”
Other petitions for safeguards are still under consideration by the U.S. government and the groups representing domestic manufacturers have vowed to file more such requests. The European Union has also moved to restrain Chinese imports.
The quotas pack more of a punch and are more disruptive to trade than the stepped-up tariffs, said Rick Darling, president of Li & Fung USA’s Global Brand Business Group.
“In the scheme of things, it’s not going to have much impact certainly on the flow of trade,” he said of the rising duties. “It is an effort on China’s part to some cooperative effort. They’re trying to stem the flow of negativism coming out of Washington.”
Wilbur Ross, chairman of International Textile Group, said the country raised its tariffs “to give them a better position in the consultations” with the U.S. on safeguard quotas.
The first round of tariffs on 148 export categories, which went into effect on Jan. 1, was for a token amount of just 1 or 2 cents per garment, said Ross.
“It will be interesting to see whether this is a meaningful amount or more of a token to fend off the retaliatory moves by the U.S. and Europe,” he said.
The tariffs take effect quickly for an industry that works on lead times that can exceed eight months.
“I don’t know if anyone expects this to affect short-to-medium term sourcing patterns when it’s being imposed with a 10-day notice,” said Stephen Lamar, senior vice president of the American Apparel & Footwear Association. “Those decisions have been made long ago.”
Should the increase in prices ultimately be passed along to consumers, Lamar said it would in effect be a tax by the Chinese government on the American consumer.
Paul Charron, chairman and chief executive officer of Liz Claiborne Inc., said at the firm’s annual meeting Thursday that he had heard speculation that China would raise its export tariffs, and noted the recent quota calls.
“All these possibilities have been incorporated into our allocation plans for the balance of this year,” Charron said. “Importantly, our sourcing configuration offers us significant flexibility to continue to effectively source product during this uncertain time.”
Tariffs are also a revenue stream for the Chinese government and a way of nudging its textile and apparel manufacturing base toward more expensive goods, as per-item tariffs have a greater impact on low-cost products.
“[China] would like to do something to ease tension, it’s not interested in sort of sniping back and forth with the U.S.,” said Andrew Bernard, professor of international economics at the Tuck School of Business at Dartmouth. “China wants to appear sensitive to the concerns of the U.S. constituencies, but it’s not going to play necessarily by U.S. rules. This is the obvious place for it to try to signal that it’s not insensitive.”
Looming larger for China than textiles is the issue of its currency, the yuan, which U.S. lawmakers and manufacturers maintain is undervalued, lowering the price of exports by as much as 40 percent and giving the country an unfair trade advantage.
The yuan has been pegged to the dollar at a rate of 8.28 to one for the last decade, and the Treasury Department last week turned up the heat on China for reforms. China had a trade surplus with the U.S. of $162 million last year.
If China doesn’t move to further reform its monetary polices, Treasury Secretary John Snow said the country could be labeled a manipulator of its currency, which would lead to WTO involvement and ultimately economic sanctions.
Dan Griswold, director of the center for trade policy studies at the Cato Institute, a libertarian think tank, said the tariff rise was “a move to diffuse protectionist pressures in the U.S.,” but one that might not succeed.
“It’s a-lesser-of-evils gesture,” he said. “It’s bad economics, and I don’t expect it will prove to be any better of a political move. Why shouldn’t purchasers of apparel and related products be able to enjoy global prices and global competition?”