Business Intelligence on Retailing, Franchising, and Consumerism in China

US Retailers Hope China Trade Agreement Will Restore Predictability

The US-based National Retail Federation today welcomed the signing of a bilateral trade agreement on textile and apparel trade with China, but expressed concern about issues not resolved by the agreement.

"We are opposed to restrictions on imports, but this agreement appears to offer an improvement over the current system of safeguard quotas being imposed for political reasons without regard to the adverse impact on U.S. retailers and consumers or whether they would actually do anything to create or protect U.S. jobs," NRF Vice President and International Trade Counsel Erik Autor said.

Autor called on U.S. officials to release details of the agreement as soon as possible, and said a number of issues need to be clarified. While the agreement appears to bar future safeguards quotas on product categories that it covers, it is believed to say only that the United States must "exercise restraint" when considering safeguards on other products.

NRF has argued for a trigger mechanism that would limit the use of future safeguards unless the merchandise in question accounts for a significant and growing share of the domestic market, overall U.S. imports have increased substantially, China accounts for a large portion of those imports, and prices have dropped.

Autor also said the Chinese government should be establish a fair system for allocating quotas among Chinese manufacturers and to track exports before they leave the country. Without such a tracking system, manufacturers are left in a "race for the border," with importers often uncertain whether merchandise will be allowed into the United States, he said.

The United States and China yesterday announced that they had ended three months of negotiations and signed a bilateral agreement to limit imports of Chinese clothing and textiles into the United States. The agreement will take effect January 1, 2006 and will set limits for growth in 34 clothing and textile categories. Annual growth of 8-10 percent will be allowed during 2006 depending on product category, 12.5 percent in 2007 and 15-16 percent in 2008, according to the Office of the U.S. Trade Representative.

Under World Trade Organization rules, the worldwide system of textile and apparel quotas ended on January 1, 2005, leaving China and other WTO member countries free to export an unlimited amount of goods. But U.S. textile manufacturers successfully petitioned the Bush Administration for temporary safeguards quotas on a wide variety of basic apparel items from China.

The safeguards mechanism is unique to China and was one of the conditions China agreed to in joining the WTO. Safeguards quotas limit increases in imports to approximately 7.5 percent above the previous year's levels and can be imposed one year at a time for up to two years. The mechanism ends after 2008.

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