New Way Found in China-America Textile Relations

"Lossing way in the great mountains and cross rivers, if is great happy to find a new village throughthe trees shadows and bright flowers." this is a famous poem by Lu You, a famous Chinese poet wholived around 1000 years before in Song Dynasfy but if is quite available to describe the current traderelations belween China and America.

After seven rounds of talks, China and the United States of America on November 8 signed a three-year communique on textile trade, imposing quotas on Chinese textile products but clearing a majorobstacle to bilateral trade.

After the signing of the communique, China's Ministry of Commerce said on its website that theagreement is in line with the common interests of companies in both countries.

"The solution of the textile dispute isin line with the common interests of com-panies in both China and United States,which will benefit and boost the stabledevelopment of the bilateral traderelationship," the Ministry of Commercesaid in an online statement.

A total of 21 types of clothing andtextiles had been placed under the importrestrictions, including cotton trousers.

The agreement provides for a pro-gressive increase in imports of major tex-tile and apparel products from China-by 10 to 15% in 2006, 12.5 to 16% in 2007, and 15 to 17% in 2008.

Imports from the previous year wouldbe used as the base number to calculatethe growth rate, the ministry said.

China's Minister: a Win-Win resultreached

"This is a Win-Win result."Bo Xilai,Minister of Commerce gave his com-ments in the press conference after thesigning.

Bo said that trade disputes could be along-term issue, but the agreementreached between China and America ontextile and garment indicates that anytrade disputes can be resolved on the baseof equality and mutual benefits.

The textile negotiation has lasted forfive months and seven rounds. The suc-cessful result has created a predictable andstable trade environment for the textileindustries of both the two sides. AlthoughChina's conditions are quite differentfrom America, we are mutually importanttrade partners, the two countries will faceup with more and more trade problemsin the coming days. Both sides shouldseek mutual profits in tackling the tradedisputes, basing on the spirit of carm, rea-son and equality.Bo said.

With 6 to 7 billion US dollars of ex-port involved in, this round of textile dis-pute is the largest trade dispute in recentyears. We do not hope that all of the tradeconflicts can be resolved by means ofonce successful negotiation, but on theother hand, we do not want to see thatone trade dispute will block the overallprocess of trade cooperation. Bo said.

Reached under a circumstances ofequality and pragmatic, the agreementwith America, together with the agree-ment reached with EU, has establishedtwo successful samples for resolving the

international trade disputes.Bo said.

Bo recalled that the sixth and seventhround negotiations were very complicatedand very difficulty, and even were on theedge of failure for several times. Withregard to the pressure on the textileindustry, in America, only several hun-dred thousand of workers' employmentwill be affected.

Bo said that as a developing country,China's textile industry cultivated duringthe past 20 years still belongs to middle and low-end industry, on which 20 mil-lion workers' lives rely. China hopes thatthe international society could give anefficient understood and support to China's textile industry under the frame-work of international free trade.

"However, we know that there is avery big gap between Chinese economesand American economies, the GDP percapita and the individual income percapita of America are 30 times more thanChina, hence, if China cannot realize areasonable export, the number of unem-ployed workers will very much surpasswhich of America." Bo said.

Bo praised Mr. Rob Portman, USTrade Representative that he had shownsome flexibile attitude at the final phaseof the negotiation, Bo stressed in themeantime that it was far from enough.

Reasonably, China's textile shouldenjoy a treatment of globalized textileintegration after January 1. Of cource, weknow that we must abide by the WTOregulations, but the developed countriesshould be aware that the globalized tradeintegration is the mainstrean, the quan-tity limits do not adapt to the current age.Bo said.

Bo stressed that China signed theagreement because China is a member ofWorld Trade Organization(WTO) includ-ing Paragraph 242 and other internationaltrade agreements, this indicates that Chinais a faithful member in the internationaltrade family.

American textile industry excitedfor the agreement

Bo's comments were responded byPortman, he said that the agreement isequal for both America and China.

It indicates that the two sides are ablein resolving any difficult trade disputes.The agreement is in line with the com-mon benefits of the two countries and willbe helpful in promoting the stable devel-opment of the bilateral relations.Portmansaid.

"This is the most and the only activedevelopment in the recent 10 years !" theAmerican Textile and Trade Organizationsaid.

Johnson, Chairman of American Tex-tile Organization Committee said: "theagreement is very favorable for us, theday is a good day for American textileindustry".

Johnson said that Portman hadnmade any concessions in the agreement."The agreement is very favorable forAmerican textile, because of the smallyearly growth rate and wide coverage ofthe goods range, in the meantime, the timewill be extended to 2008, the textile in-dustry has maintained the right of goingon applying for the special protection."Johnson said.

Chins Chamber of Textile Import ＆Export welcomes the agreement

China Chamber of Textile Import &Export regards the agreement as favorablefor the stability of the textile trade envi-ronment and be coordinate to the inter-ests of both sides, according to a statementreleased on the website of the Chamber.

According to the agreement, we thinkthat Chinese Government has protectedthe interests of China's textile and garmententerprises' interests. The agreementreached after a half year and seven roundsof negotiations efficiently shows the faith-fulness of Chinese Government in solv-ing the disputes. The statement said.

The agreement will definitely createa stable and predictable trade environmentfor China and American textile trade, itwill strengthen the confidence and deci-sion of both Chinese enterprises andAmerican importers in orders and promotethe bilateral trade in healthy and sustain-able development.The statement said.

China's major textile provincehails the agreement

"Our anxiety has been focused onChina-America textile for a half year! Theresult will lead to a good fortune to boththe domestic textile production enterprisesand the export enterprises !" Mr. Wang, ahead of a textile import & export com-pany in Henan province said.

From January. 1, China's textile tradebegan to enjoy a non-quotas free tradeperiod. However, due to the dispute be-tween China and America and EU,China's textile hasn't been developed aswhat people have predicted. For instance,in Henan province, in the first five months,the textile export were totaled to US$262million, for a growth of 8.3%, much lessthan the growth rate of 41.6% in general.The textile dispute, especially the limitsset by America and other countries haveled to very great negative consequencesto the domestic textile industry, Wangsaid.

However, the agreement reached af-ter seven rounds of negotiations betweenChina and America will no doubt bring arare opportunity to the major domestictextile export provinces such as Henan,Wang said.

Thanks to the limits set by America,domestic textile enterprises have to com-pete in export, 4 of the 7 kinds of prod-ucts on which America set limits were outof quotas in the first half years. Hence,the textile enterprises will enjoy the agree-ment at first.

The successful negotiation is also pos-sible to bring new opportunities to thedomestic textile industry. For instance, thebrand textile enterprises in the coastal cit-ies will aim at Henan province where theland price and labor costs are low, theenergy sources are efficient and the infra-structure of textile industry are reliable.

The cotton farmers will enjoy the suc-cessful negotiation as well.

"Henan textile industry must seize therare opportunity! By means of improvingthe added value, we should change thecurrent situation of mainly relying on the

export of primary products." said LiXiuming, Secretary in Chief, Henan Tex-tile Information Association.

"As one of China's six major textileindustry bases, Henan textile has attainedNo.3 in the country in the output.However, due to the low products classand low value-added products and lack ofstrong brand and core competition, thewhole textile industry are weak in inter-national competition." Li said.

"The textile enterprises shouldstrengthen the deep processing and in-crease the added value so as to improvethe international competitiveness." Lisaid.

What can be learnt from the result?

Mei Xinyu, Postdoctor, ResearchingInstitute, Ministry of Commerce gave hiscomments after the agreement: The seven-round China-America textile dispute hasended on the eve of President Bush's visitto China. Although the detailed clauses ofthe agreement have not been revealed, thecontent is in line with China's interests inthe three major basic issues, including thecoverage of the products range, the basenumber and the growth rate of China'eexport. In addition, America has promisedto restrain the use of Paragraph 242 andgive green light to the Chinese goodsblocked in customs.

However, the agreement does notmean that the China-America textile tradewill be OK in everything, disputes arepossible to take place yet, for instance,anti-dumping, transmissional guarantee-ing measures and technological tradebarriers.Mei said.

Besides, thanks to the limits on ex-port of China's textile products to Americain the coming 3 years, as for the Ameri-can importers, the profits rate of smug-gling China's textile will rise, the illegaltransferred trade will be encouraged.Meisaid.

In the meantime, the labours' rights,intellectual property rights and some otherissues will arouse troubles in the China-America textile trade.

In the international economic andtrade development, trade disputes alwaystake place. As for the domestic textileenterprises, the biggest instruction is China has lowered the trade dispute crisisbefore the event, and has tried to gain anideal result.

At first, China's textile and other sen-sitive industries with high export growthrate should try to avoid any irrationalgroup activities so as to lower the risks oftrade disputes. We owe the China-Americadispute in some extent to theoverinvestment which has led to the pro-duction surplus, for instance, from Janu-ary to July, 2004, the growth rate of theinfrastructure investment in textile indus-try were even 132.7%, the number of thetextile and garment enterprises has in-creased to 38400, for 27.8% growth withinonly one year.

The overheated investment has notonly led to the downrun of the export prices, but also triggered the trade disputes, and has caused heavy strike tothe domestic textile enterprises as well.

In the meantime, the overheated in-

vestment has exposed the leaks ofChina's macro control. The macro con-trol has limited domestic investment buthas encouraged the fo reign investment,it has limited the development of state-owned enterprises, but has created spaceof development for the privateenterprises.

Also important to stress here is thatwe need enough patience in dealing withthe trade disputes, any impatient activi-ties will provide opportunities to the coun-terparts to blackmail us. In the CantonFairs in October, some enterprises eveninsisted in reaching an unsatisfactoryagreement with America because onlyvery few contracts were signed withAmerican enterprises. We know that thisanxious attitude will not lead to the cur-rent successful result.

As for the domestic enterprises, thebiggest instruction is we need patience indealing with the dispute, any anxciousactivities will give the counterpartchances to blackmail. According to theWTO rules, the limits should be conductedafter the failure of negotiations, butAmerica set limits before the negotiations.Now that we will not loss too much, whywe hurry up to reach any unfavorableagreements and hence to grant legal sta-tus to the counterpart's illegal activities?

The second instruction Chinese enter-prises should learn is that we should avoidirrational group activities and hence tolower the crisis of dispute. After the dis-pute took place, some people owed thedispute to the overinvestment of the tex-tile industry and the surplus ofproductivity. The overinvestment belongsto a kind of irrational group activity, theenterprises should draw a lesson from it.

During the period of the llth Five-year Plan, China's tie with the worldeconomy will be deep and tightened, thetrade protectionism will be shown in newforms. But it is sure that no fight nofriend. The economic relations alwaysdevelop in zigzag. Basing on the prin-ciple of mutual benefits and win-win, anytrade disputes will become a ring ofdevelopment.

Zhou Shijian, Standing Director of China American Academy says that ac-cording to the communiqué, both the twosides have made concessions. AlthoughChina's request of 20% of growth rate inlimits in 2007, 30% in 2008 hasn't beenreached, the successful settlement in thebasic quantity will provide great space ofdevelopment for Chinese enterprises.

Li Zhongyi, Vice General Manager ofTianjin Beifang Group reveals that only from January to August of this year, theexport quantity has been equal to the levelof last year, hence, the basic quantity issatisfactory. "I am full of confidence inarranging the orders of next year."26% ofthe Beijing products are exported toAmerica.

The final solution of China-Americatextile dispute is benefit for both China andAmerica. Zhou Shijian says that in the threedisputes including RMB exchange rate, in-tellectual property rights protection and tex-

tile trade, China is in the most disadvantagein textile trade. The communiqué reachedwill be helpful in promoting the economicand trade relations between the twocountries.

A new way found in China-America textile relations

Zhao Yumin, an analyst from theministry's trade and economic coopera-tion institute, said that the agreement wasa result of compromises on both sides.Zhao said that China made the compro-mise mainly on the durationof the importlimit, allowing the US to impose restric-tions till year 2008, instead of 2007, whichis preferred by China.

"But on the issue of the increase rateand the base number of the increase, the U.S. has made more compromises," saidZhao.

As part of the agreement, the UnitedStates committed to grant customs clear-ance to all Chinese textile products cur-rently blocked at the American ports. Inthe meantime, the US also agreed to re-frain from limits on textile products notcovered by the agreement.

Calling the agreement a "hard-wonone," Sun Huaibin, spokesman for China National Textile and Apparel Council, saidthe Chinese firms will have a more pre-dictable future for textile trade with theUnited States, which is a good result.

"Though the firms still have to sufferfrom the quotas, it's better than the previ-ous restrictions imposed by the U.S.unilaterally," said Sun.

Calling the deal "not satisfactory" but"acceptable" to his company, YuanJianzhong, manager of Shanghai Shanyuan Knitting Co.Ltd. in east China,said that his company will focus on in-creasing the added value of products inthe future.