CHINA DOORS STILL CLOSED, DESPITE THAW
Byline: Jim Ostroff
WASHINGTON — A keystone of President Clinton’s rapprochement with China might be strengthening bilateral trading, but it appears trade is likely to remain a one-way street for U.S. apparel and textile makers well into the 21st century.
The White House has used Chinese President Jiang Zemin’s state visit and whirlwind tour of historic American sites to dribble out news of deals to enhance the two nations’ bilateral trade, such as Tuesday’s announcement of an arrangement that enhances the ability of financial news services to do business in China.
Clinton, in an address last week, said it is vital for U.S. firms to sell products and services in China, given its emergence as one of the world’s fastest-growing economies and its potential to be among the world’s top five.
Jiang’s itinerary is big on big business, with stops at IBM, AT&T, Lucent Technologies and the New York Stock Exchange. China’s leader has made no secret that he wants such corporate titans to invest billions of dollars in Chinese production and infrastructure.
But selling trousers, blouses, shirts and skirts to China’s billion-plus citizens is another matter for American-based makers. In short, it appears little is on the horizon that will change the enormous balance of trade with China. For the year ending in August, China shipped more than $6 billion worth of apparel and textiles to the U.S., while receiving less than $100 million of those products from this country.
“In the immediate future, we are focusing on doing business in Mexico and then Central and South America and have nothing planned for China,” said Terry Geremski, senior vice president and chief financial officer with Guilford Mills. The Greensboro, N.C.-based firm was one of the first U.S. makers to set up large-scale operations in Mexico following creation of the North American Free Trade Agreement in 1994.
Geremski, who has extensive world trading experience, explained that China “is using its [textile-apparel] production for internal use, or to export to the U.S. and North America.”
Consequently, he said, it may be 10 years before “there may be opportunities to sell higher-priced, value-added apparel in China, as well as specialty, automotive fabrics.”
Norman Fryman, executive vice president of Bayer Industries, New York, a former American Apparel Manufacturers Association chairman, said that while China is a “burgeoning, virgin marketplace for goods that are produced or designed in America,” real sales opportunities there will have to await an increase in the living standards of its citizens.
The latest available data shows average annual per-capita income for Chinese in urban areas was $466 in 1995, according to the China State Statistical Bureau. The World Bank reports per-capita income is $5,000 annually in four coastal economic zones created by China’s government.
However, various studies have found that among relatively affluent Chinese, the lion’s share of disposable income is being spent on hard goods such as televisions and cellular telephones. Apparel, particularly global brands, eventually may be in demand by Chinese, but U.S. makers have little reason to catch the next jet to Beijing seeking deals, said Peter Harding, a Kurt Salmon Associates vice president and textile-apparel trade analyst.
For the foreseeable future, Harding said, China might be a good market for “industrial fabrics and some velvets, while the affluent classes might be able to afford high-priced western jeans, though this market could become a significant one down the road.”
But Harding says even these scenarios come with a big caveat.
“There are real concerns about licensing, trademark and brand-name ownership, as well as intellectual property protection,” he said. “There is a lot of counterfeit product out there right now, including apparel.”
The New York-based analyst said these qualms likely won’t be assuaged until China joins the World Trade Organization, which would require it to address those problems and other allegations, such as permitting illegal transshipping. Some analysts have speculated China may not join the WTO until well after 2000.
In addition, several analysts, who spoke on condition of anonymity, said they remain concerned that China still retains various non-tariff barriers that make it nearly impossible to export textiles and apparel there that compete with state-owned industries.
China agreed to drop certain import barriers in the new bilateral textile pact it concluded with the U.S. in February. China has not signed the agreement — reportedly because it is awaiting concessions it says U.S. chief textile negotiator Rita Hayes promised during the talks but never delivered.
Fryman said even if China were wide open, it would take more than a hot number to crack it.
“Nobody can just jump on an airplane and do a deal there,” said Fryman, who has traveled to China often on business.
“You have to consider the price-value relationship and maybe, more importantly, you must build substantial relationships there and practice patience,” he said. “One of the biggest difficulties many find is learning how to negotiate with the Chinese. It does take time. Often, a lot of time.”