ATMI: A CHINA WARNING, AND CARIBBEAN WARMING
Byline: Jim Ostroff / Joanna Ramey
WASHINGTON — With trade deals simmering on two key fronts, the American Textile Manufacturing Institute last week issued a pair of studies — one warning of potential damage on U.S. industry from China’s admission into the World Trade Organization and the other detailing the benefits of liberalized trade for the Caribbean Basin apparel producers.
Both ATMI-funded studies were done by Nathan Associates, an Arlington, VA., consulting firm. Details follow.
The Threat From China
The study on China was released late Thursday just as the Clinton administration confirmed Chinese trade officials would meet here with their U.S. counterparts beginning today, in an effort to conclude an agreement on terms for China’s WTO entry.
The White House has said if the two sides can conclude a deal quickly, Clinton will immediately seek the necessary congressional approval to get China on board the WTO by Jan. 1, even though House and Senate leaders said last week that such a timetable is not realistic.
The ATMI’s major objection to the talks is that the U.S. agreed in a 1997 trade pact to give China an accelerated phaseout of quota on its textile and apparel imports once it becomes a WTO member. Under that agreement, the quota on Chinese goods would end at the same time quota ends for all other WTO members — Jan. 1, 2005. But the ATMI wants to China to be subjected to the same full 10-year phaseout that the other WTO members will have gone through.
The ATMI study says that the accelerated phaseout could eventually result in the loss of $7.6 billion worth of sales a year for U.S. made apparel and a $4 billion loss in U.S.-made textile sales. It also would cost 154,500 domestic jobs within those industries, the study claims.
The study also comes three weeks after the International Trade Commission issued its own report on the ramifications of China joining the WTO under current agreements. The ITC concluded that China’s share of the U.S. market for imported apparel will remain steady at the current 10 percent level through the end of 2004. But following Jan. 1, 2005, the ITC predicted China’s U.S. imported apparel market share that year will at least double to around 20 percent and then hit about 31 percent in 2006.
The ITC also predicted that China’s share of the U.S. imported textiles market would grow from the present 10 percent to about 11 percent by 2006.
The ATMI does not take issue with these estimates, but said the ITC failed to examine the implications of such increased market penetration by China’s makers on U.S. production.
“Given that China is already the world’s largest exporter of textiles and apparel, the U.S. cannot afford to ignore the full impact of China’s entry into the WTO,” said Carlos Moore, ATMI executive vice president.
The study does not say whether this displacement will occur immediately in 2005, or specify any year. But John Reilly, a Nathan economist in charge of the study, said in an interview that it likely would only take a “few years” before this sales loss took effect, given the “mobility of capital” in these industries.
The study concludes that with full WTO rights and no U.S. quota restrictions, the value of China’s apparel shipments to the U.S. will rise from an estimated $9.2 billion this year to about $27.5 billion annually, soon after 2005.
Neither the Nathan study, nor the ITC, take into account a safeguard provision of the 1997 bilateral pact that gives the U.S. authority to restrain any Chinese textile or apparel shipments here through the end of 2008, regardless of whether China is a WTO member. Various analysts who follow the import trade say it is difficult to believe the U.S. would allow China to triple its shipments here so quickly.
Moore, however, countered that given China’s enormous capacity such growth is possible. As far as the safeguard provision, Moore said, “We cannot project what any administration will do in terms of taking action against imports.”
The Caribbean Bonanza
The Caribbean study says that if a trade bill now before the Senate becomes law, it would eventually be an $8.8 billion annual boon for the U.S. mills. The Senate is poised to vote on the bill — which would allow apparel from the Caribbean Basin using U.S. fabric to enter the U.S. without quota limitations or tariffs — around mid-October. The measure also calls for granting duty- and quota-free treatment to apparel made in sub-Saharan Africa of U.S. textiles.
But it’s the 25-country, Caribbean Basin portion of the bill the domestic textile industry is pushing. The region, unlike Africa, already is well developed as an apparel exporter using U.S. textiles.
“Our key objective in supporting an enhanced Caribbean trading agreement is to help the United States continue its trend of displacing apparel imports from the Far East and bringing apparel production back to the Western Hemisphere,” said ATMI president Doug Ellis, who’s also chief executive officer of Southern Mills Inc., Atlanta.
The study estimates that if the bill becomes law and limits the trade breaks only to apparel made of U.S. fabric it would after its first five years in effect increase U.S. textile mill shipments by $8.8 billion yearly; $4.8 billion of that would be in knit fabrics, and $4 billion in non-knits. Over the same period, the development would also add 63,100 U.S. jobs in mills and 58,300 in textile-related industries.
But the Senate bill, if it passes, won’t be the last word on trade legislation this Congress. House leaders have starkly different ideas about how apparel trade might be expanded in the Caribbean basin, and Africa.
The main difference involves the origin of fabric. The House bill — which has yet to come up for a vote and failed two years ago — would allow the Caribbean Basin region to use textiles made there in U.S.-bound garments receiving free trade. There is also some room for permitting other foreign fabric. In Africa, fabric from anywhere could be used in apparel production. The House overwhelmingly passed its Africa bill this summer.
If the Senate trade bill passes, compromise between both sides would then be in the offing and any final package would have to be voted on by both chambers before being sent to the President. However, how far the process will go this year is clouded by the abbreviated legislative calendar, with Congress looking for adjournment by the end of October.
Meanwhile, various proposals regarding the Caribbean Basin have been floated. One compromise being suggested by the U.S. apparel, yarn spinners and cotton industries would allow knitted textiles made in the region to be used in garments receiving trade breaks, as long as the knit textiles are made of U.S. yarn. Woven textiles would have to be made in the U.S.
According to the ATMI study, such a bill after its first five years would mean an increase in annual U.S. textile shipments of only $4 billion.
Textile mill employment would increase by only 28,600, and jobs in related industries would increase by 26,500.
Reflecting the position of proponents of complete free trade for the areas, Erik Autor, vice president, international trade counsel, National Retail Federation, questioned the objectivity of the ATMI study. “I’m sure there would be retailers who would increase their business in the [Caribbean basin] with a U.S.-fabric rule, but it would be minimal,” he said. “If you have a [knit and woven] regional fabric rule, you would see a lot more business that would be good for Americans because they would benefit from lower prices.”
While these elements of the apparel and textile industries press their sides, a smaller but vocal contingent of knitwear makers and apparel contractors, together with organized labor, has been working to quash any expanded Caribbean basin or African trade. Their argument against new duty-and-quota breaks is the expected loss of U.S. apparel jobs should a bill clear Congress.
“It’s one thing for the government to say these apparel jobs will disappear in the natural course of events, but this legislation will make a few companies rich while accelerating the job-loss process,” said Seth Bodner, executive director, National Knitwear and Sportswear Association.
Ann Hoffman, legislative director, UNITE, said the effect of NAFTA on U.S. apparel and textile jobs should be enough to dissuade lawmakers from granting more trade breaks. She blames NAFTA for a large portion of the 430,000 U.S. apparel and textile jobs lost in the last five years. “The impact is clear,” said Hoffman, who argues that urban apparel hubs like Los Angeles can’t afford to lose basic wage jobs.