World Textile Industry Prepares
For A Day Of Reckoning
The U.S. textile industry is reeling from a surge of cheap imports from China, but it is preparing for an even greater disaster looming on the horizon. With China's admittance into the World Trade Organization, current import quotas on textiles will be eliminated at the end of this year. "The exodus of jobs really begins with the removal of quotas scheduled January 1, 2005," says Evans Tindal, director of operations for Cheraw Yarns Mills in Cheraw, S.C. "If nothing is done before then, I fear our community will be affected so significantly and so quickly we will all be helpless to save it."
When China was admitted into the WTO in 2002, it was allowed to join the phase-out plan for quotas on textiles for low-wage countries that was already in progress. "This meant China received significant quota-free access to U.S. markets immediately upon its admittance to the WTO," says Normal Chapman, president of Inman Mills. "At the time the quota phase out was negotiated, China was not a member of the WTO and the addition of countries with non-market economies was not contemplated."
A World Bank study concluded that if the quotas expire at the end of the year as planned, China will take over as much as one-half of the world trade in apparel, says Smyth McKissick, CEO of Alice Manufacturing Co. That would represent about $200 billion a year in trade, displacing 30 million textile workers worldwide, many of whom are in developing nations. "This will be one of the biggest short-term shifts of wealth in history," says McKissick, whose 94-year-old South Carolina company has 750 employees. "And there is no apparent U.S. government response or concern to the enormously destabilizing effect that a China takeover of this manufacturing sector will cause."
McKissick does not blame the Chinese for this situation. He blames the U.S. government. "When is our government going to stick up for us?" he asks. "When will our government insist that China cease manipulating its currency and when will our government insist that China stop subsidizing its textile manufacturers?"
With little response from the U.S. government, the U.S. industry is courting other countries that could be even more impacted by the quota phase out. In working with the Turkish textile industry, the American Manufacturing Trade Action Coalition is leading a worldwide crusade to require the World Trade Organization to postpone the phase out of textile and apparel quotas. As of April 14, associations from 31 countries have endorsed a letter sent to WTO director general Supachai Panitchpakdi calling for an emergency meeting on the issue.
"If quotas are removed on January 1, 2005, global textile and clothing trade will be monopolized by a few countries such as China," says the letter. "It is evident that trade in this sector has been compromised by the use of trade distorting practices in a few dominant countries."
Even if the quotas are extended beyond 2005, the textile industry would only receive a temporary reprieve. "This is not at all solving the problem," says Tindal of Cheraw Yarns Mills. It only "buys us time [so] that it can be solved."
The U.S. government's rule that makes it impossible for Alice Manufacturing Co. to ask for trade action against Chinese subsidies because China is considered a non-market economy. This is "ridiculous," says McKissick. "How can our government allow things like this to happen? Our government is letting us down. It's letting our families down and it's letting our communities down."
In return for allowing China into the WTO, the U.S. industry was provided "safeguard" protection from Chinese dumping. "While the trade-off sounds great in theory, the reality has been a disaster for the U.S. textile industry," says Inman Mills president Chapman. "The U.S. government has failed to implement the safeguard in a timely and effective manner."
The federal government agreed to the safeguard six years ago, but it took until May 2003 -- five years -- to publish the procedures. The U.S. textile industry asked the federal government to invoke the procedures for protection in several textile categories but was told to wait until the procedures were published. The industry filed its first safeguard petitions in July of last year. They were approved by the federal government in November. The entire process represented an "inexcusable delay" that has resulted in "enormous damage to the U.S. textile industry and its workers," says Chapman.
Chinese exports of textiles to the United States increased by 320 percent between January 2002 and November 2003. Prices of Chinese textiles and apparel declined by 55 percent. During that same period, the U.S. industry, one of the most technologically advanced in the world, shed tens of thousands of jobs. Now, the remaining 630,000 textile workers in the United States are in jeopardy of losing their jobs.
With the January 2005 deadline looming, the industry is in dormant state. U.S. textile companies seeking capital have been flatly refused by bankers. Even companies that are profitable can't secure funding. "This is a massive dislocation of entire industries at light speed," says Harris Raynor, international vice president of the Union of Needletrades Industrial and Textile Employees (UNITE). "This is not some gradual thing that's happening or that's been happening over the years."
Adds McKissick: "The threat we face today from unrelenting and massive surges of unfairly traded imported textile products, particularly from China, makes the Great Depression pale by comparison."
The threat of the January deadline goes beyond textiles, adds Richard Dillard, director of public affairs at Milliken & Co. "Were we to sacrifice all of our manufacturing jobs to China, they could theoretically absorb all 14 million of them in a few short years," he says. "We would be left with no manufacturing and China would still have the need to create one million jobs per month in perpetuity."
Organizations from 31 countries have endorsed the "Istanbul Declaration" seeking an emergency meeting of the WTO to postpone the elimination of quotas on Chinese apparel and textiles. They include:
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