By  on May 24, 2005

GENEVA — Trade experts here are divided over whether China will appeal the recent safeguard quota calls from the U.S. and European Union to the World Trade Organization, and if so, whether any appeal would succeed.

The Bush administration last week invoked a new batch of safeguards quotas, allowed under China's entry agreement to the WTO in 2001, 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 of them filed by domestic manufacturers and three initiated by the administration — sought to slow the growth of imports in those seven categories, worth $1.31 billion. Those restrictions will go into place when consultations with the Chinese are officially requested later this month. The EU is reviewing several categories as well.

Some Western analysts feel China will try to defuse the issue by placating some of the demands of the U.S. and the EU, citing China's decision on Friday to hike export taxes by as much as 400 percent on 74 categories as a calculated diplomatic move.

But Asian trade officials close to Beijing said China is seriously considering taking the safeguards issue to the WTO Dispute Panel.

The safeguard provision, in place until Dec. 31, 2008, allows a WTO member to invoke new quotas if it believes imports of textiles and apparel from China were "due to market disruption, threatening to impede the orderly development of trade in these products." A 30-day consultation period follows with China, in which levels and timing of the quotas are discussed, before they go into effect.

After imports are imposed, China must limit export growth levels in the categories in question to 7.5 percent (6 percent for wool categories) above the amount entered during the previous 12 months.

As a WTO member, China has the right to contest to the global trade body any measures it feels violates its rights, including the safeguard provision, trade experts agreed.

However, as long as the U.S., the EU or any other WTO member adheres to the guidelines of the safeguard mechanism, it would be difficult for China to convince a trade panel to rule the safeguards constitute a breach of global rules, said a European trade attorney who spoke on the condition of anonymity. Brazil and Turkey have also invoked safeguard quotas.Munir Ahmad, executive director of the International Textiles and Clothing Bureau, the umbrella group for 24 exporting developing countries, which includes China, said: "Politics is mixing up with trade relations."

Ahmad said he believes that if China decided to initiate a WTO dispute settlement procedure, it "would have a very good case to carry."

Similarly, an Asian trade diplomat said if a panel were to examine a complaint by China, it would have to analyze the market share of China in total imports and how it affected domestic industry. As a case in point, the diplomat cited U.S. imports of Chinese combed cotton yarn from January to March, which increased 119.6 percent in volume but accounted for only a 3.1 percent share of the category's imports.

In the same period, U.S. imports of combed yarn grew 154 percent from Pakistan, 130 percent from Canada and 362 percent from South Korea. Overall 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.

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