LEGISLATURE PAVING WAY FOR CHINA INTO WTO
Byline: Jim Ostroff
WASHINGTON — President Clinton’s signature Tuesday on legislation guaranteeing low import duties for products imported from China paves the way for China’s admission to the World Trade Organization and ends the annual battle over its trade status that has wreaked havoc with apparel sourcing programs for years.
Leading a White House lawn reception for the event, Clinton’s official approval of bills giving China permanent normal trade relations (PNTR) completes the process of establishing unfettered trade with China begun more than two decades ago by President Jimmy Carter.
In remarks kept short due to the president’s telephone diplomacy efforts to end the Palestinian uprising in Israel, Clinton said the trade initiative will help American companies sell more goods in China. But, it also “will help foster market reforms in China…, accelerate the removal of government” from its economy and the “lives of China’s people,” he said.
Congress approved PNTR for China earlier this year by wide margins in each chamber. The U.S. accords “normal” import duties to all nations, save for a handful, such as North Korea and Cuba, with whom virtually no trade is done anyway.
With this designation — formerly known as “most-favored-nation” trade status — Chinese imports not only receive the same relatively low duty rates accorded most nations, but need not be renewed annually.
Under the threat of revoking normal trade rates, importers have been leery to make irrevocable sourcing commitments in China. If the designation had been revoked, duties of between 60 and 100 percent would have applied to apparel, textiles, footwear and consumer electronics. With PNTR, Chinese apparel duties will continue to average 18 percent. Duties on Chinese fabrics are about 10 percent and 8 percent for yarns.
Granting China PNTR was the last missing piece in other legislation passed this year in which the U.S. and China set out terms for China’s admission to the 135-member WTO. China agreed to open its markets to thousands of U.S. products, including apparel and textiles. The U.S. agreed that China’s American apparel and textile quotas would end on Jan. 1, 2005, the same day as for other WTO-member nations.
U.S. textile firms protested to the end that China should have to go through a 10-year phaseout of these quotas, just like other nations, when the WTO began in 1995.
China also agreed that the U.S. could reimpose quotas on a single apparel or textile category product for one year, from 2005 though 2008, should the U.S. believe domestic makers were being economically injured by these Chinese imports.
With the U.S-China WTO accession pact now fully in place, and no further such agreements to sign with other countries, it could join the trade group within three to six months. This could be dragged out, however. China is balking on some of the deals already cut, claiming the U.S. and European Union are seeking even more market-opening concessions from China than already agreed to, according to sources.
Textile makers still have reservations about China’s promises, as well.
“It’s been said that perhaps China is showing signs of buyer’s remorse about opening up its markets and adhering to the rules+, but it’s unfortunate the U.S. isn’t having seller’s remorse about the same deal,” said Carlos Moore, the American Textile Manufacturers Institute’s executive vice president, which along with apparel union UNITE were among the few voices opposing China PNTR.
Moore said U.S. textile and yarn makers would relish a truly open Chinese market.
“It would attract not only U.S exports, but those from other textile-producing countries, taking some of the pressure off the U.S., one of the few really open world markets,” he said, although expressing doubt that this scenario is on the horizon. “The reality is that it’s likely that China will only let in [those foreign products] that its government and administrative bureaucracy want to let in.”
No such concerns were expressed by Larry Martin, president of the American Apparel and Footwear Association, who said that granting China PNTR means it should help speed China’s WTO accession.
“China will have to play by the same rules as the rest of us do and we look forward to the freedom to invest and market our goods in China, with its 1.2 billion people,” Martin said.
American apparel and textile companies sell relatively little of their goods in China. For the year ended in July, these combined exports to China were valued at $4.5 million, down nearly 40 percent from a year earlier. By comparison, the U.S. imported more than $1 billion worth of Chinese apparel and textiles for the first seven months of this year alone. A 20 percent increase from a year earlier, the value of Chinese apparel and textile imports exceeded the dollar value for shipments by the next three largest suppliers: Mexico, Pakistan and India.
Despite last minute jitters, few analysts think China’s WTO admission will be derailed. Steve Pfister, the National Retail Federation’s senior vice president of government relations, said retailers are pleased they won’t have to battle each year to keep China’s trade status.
Now that this has been made permanent, and China’s WTO membership apparently near, Pfister said this should permit retailers “to offer the best assortment of affordable goods for the American consumer” without politically created interruption.
Jonathan Gold, international trade policy director with the International Mass Retail Association, said the newly accorded PNTR for China “takes a load off of our companies’ shoulders, who had to worry about renewal of China’s trade status each year, at the same time they were placing orders for the holiday season.”
Julia Hughes, the U.S. Association of Importers of Textiles and Apparel’s Washington vice president, said the trade group’s members “are glad to see this administration and Congress finally have decided to support our long-held position that China should be treated the same way as other trading partners.”
Hughes said the trade designations, and China’s pending admission to the WTO, will help boost U.S. textile and apparel exports to that country, and imports, as well.