By and  on June 14, 2005

WASHINGTON — Now that the European Union has struck a deal with China allowing more apparel and textile imports than under safeguard quotas, the U.S. industry is handicapping whether the Bush administration will follow the EU's lead.

Most feel the EU's decision to allow China more leeway is indicative of its approach to trade and politics, while the U.S.'s more steadfast strategy is reflective of American policy.

The EU and China agreed on Friday to limit the growth of Chinese apparel and textile imports in 10 categories to between 8 and 12.5 percent until the end of 2007. China agreed to safeguard quotas — if a country determined its industry was being harmed — that limit growth to 7.5 percent and are renewable annually until the end of 2008, when it joined the World Trade Organization in 2001.

Europe and the U.S. have taken different approaches to applying safeguards since the WTO stopped regulating global trade though quotas in January. The EU moved to impose quotas on just two categories, T-shirts and flax yarn, and managed relatively quickly to hammer out a deal with the Chinese; the U.S. last month imposed safeguards on $1.31 billion worth of annual imports in seven categories of goods.

"History suggests that Europe, in general, is more comfortable with what I call 'managed trade' than the U.S. has typically been," said Kimberly Elliott, a research fellow at the Institute for International Economics.

Elliott also said the timing of the implementation of safeguards last month indicates they were tied to the Bush administration's effort to get a reluctant Congress to approve the Central American Free Trade Agreement.

There is also a perception difference between the U.S. and the EU approach.

"The U.S. approach, from the Chinese perspective, seems to have been one of shoot first and ask questions later," said Stephen Lamar, senior vice president of the American Apparel & Footwear Association, compared with the Europeans' "let's talk" approach.

Ultimately, the administration might do whatever gets the most traction in Congress, said Erik Autor, vice president and international trade counsel at the National Retail Federation.

"With CAFTA and trying to show they're tough on the Chinese, maybe they get more bang for their buck on the safeguards," he said.Representatives of the domestic textile industry and U.S. importers said they would want better terms than the Europeans got.

"We're not supportive of doing a deal unless it has a higher growth rate than what the European and the Chinese agreed to," said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel.

A spokesman for the American Manufacturing Trade Action Coalition, which brought petitions that led to the safeguards, said, "It looks like the Chinese did very well vis-a-vis the Europeans. Basically, we could probably do better just filing individual safeguard cases than this deal right here."

Missy Branson, senior vice president of the National Council of Textile Organizations, said, "There certainly seems to be an interest and a willingness to engage in such a proposal. Obviously, the devil's in the details and we'd have to see what growth is provided for."

In general, importers would like anything that brought more predictability to the complicated sourcing process.

"[The deal] looks like it provides the EU with continuity," said Joe McConnell, vice president of strategic sourcing at Kellwood Co. "It gives them planned growth versus what we've done. We're going to have to deal with the safeguards year to year and try to determine what categories are going to get hit."

Safeguards, while anticipated, are a frustration for many vendors, especially since it was known for a decade that the quotas were ending.

"There is absolutely no reason why the U.S. cannot do an appropriate deal," said Liz Claiborne Inc. senior vice president Bob Zane. "It's been a great disappointment to me that after all this time, they've been unable to reach a deal."

Meanwhile, the European political fallout from the deal began as the European Apparel & Textile Organization took issue with the accord on Monday.

Euratex President Filiep Libeert said what might appear at first sight "a good deal" for industry was less so in the light of the methodology used to calculate the volumes for the rest of 2005, 2006 and 2007. The methodology, he said, "resulted in quantities for those periods much in excess of what the industry would have wished."The accord struck in Shanghai is subject to approval by EU member states, but a senior EU official said Monday he was confident the pact would be approved.

Libeert said Euratex would like to underline that the "conclusion of this agreement does not in itself resolve Chinese unfair trade practices and Euratex requests that the [European] Commission and China continue to work jointly to overcome this serious difficulty."

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