Textile export quotas to the United States will be canceled starting next year, and socks exports face challenges

Textile export quotas to the United States will be canceled starting next year, and socks exports will face challenges

The Ministry of Commerce recently announced that starting from January 1, 2019, the quantity and license management of textile exports to the United States and the management of textile export licenses to Europe will no longer be implemented. This also means that from next year, China’s textile exports will no longer be subject to quota restrictions.
In the context of the current economic downturn and declining exports, this is very important for Zhuji City, a city whose exports to the United States account for one-third of the country’s total exports of socks to the United States. This is undoubtedly exciting news for one of the major socks markets.
Some companies have increased their orders, and some are stepping up their stocking up. There are various signs that many sock industries are preparing to enter the U.S. market in a big way after quotas are lifted early next year.
However, on the other side of the ocean, newly elected U.S. President Obama’s trade policy reflects a more protectionist tone. Obama claimed that he would “unwaveringly oppose agreements that may weaken U.S. economic security (such as affecting U.S. jobs),” and in a letter to the National Textile Industry Association of the United States on October 29, he made it clear that at the end of this year, China’s textile export quotas to the U.S. After expiration, his administration will closely monitor textiles from China and promised that if the textile industry encounters unfair competition from abroad, the United States will take legal measures to protect its domestic industry.
This is obviously not a good sign for ambitious sock companies.
Quotas
Quotas are quantitative restrictions taken by importing countries to protect their own products from imported goods. They can also be called trade barriers. In 2005, according to the WTO accession agreement, China’s textile exports were no longer subject to quota restrictions, and a large number of textile products were cleared in the first half of that year. According to “Paragraph 242” of China’s report on China’s accession to the World Trade Organization, until December 31, 2019, importers may re-examine products for which quota restrictions have been lifted by China only if they determine that China’s exports of textiles have caused “market disruption.” Quantitative restrictions. In other words, before this regulation expires on January 1, 2019, WTO members including the United States, once they have disputes with China in the textile field, will adopt a quota system to impose sanctions on China instead of anti-dumping investigations. Since then, the United States, the European Union, South Korea, Japan, Canada, India and other countries have enacted domestic legislation based on this clause to impose quantitative restrictions on the number of textiles imported from China. Starting from January 1, 2019, the “paragraph 242 clause” will be cancelled. This means that quota restrictions on Chinese textile exports to European and American countries will be lifted.
Data from the Municipal Foreign Trade and Economic Cooperation Bureau shows that from January to September this year, China exported more than 65 million dozen socks to the United States, of which 98 Zhuji socks companies or trading companies exported 22.93 million dozen socks to the U.S. market. Accounting for about 35% of the total socks exported to the United States, a year-on-year increase of about 4%, the export value reached 101.26 million US dollars, a year-on-year increase of 22%. It is estimated that Zhuji will export more than 26 million dozen socks to the United States throughout the year.
It is understood that Zhuji City socks export companies have received or are in contact with a large increase in U.S. orders: Danjia Group in the first quarter of next year U.S. orders have more than tripled compared with the first quarter of this year; Tai Rong Knitting Group’s orders in the first quarter of next year will increase by more than 2 million dozen; An existing U.S. merchant from Anli Industry and Trade has requested an increase of more than 5 million dozen production and processing orders next year. . There are also some companies that are working overtime to produce, preparing to enter the United States in a big way early next year.
Order surge
On the morning of October 17th, Zhejiang Shanat Socks Co., Ltd. seemed quite busy. Three or four groups of American customers came to place orders in one morning. One of the customers Proposed to place an order of 6 million socks for next year to the company.
Relevant people from the Municipal Socks Industry Association analyzed that various factors have caused the surge in total sock exports. The United States is Zhuji’s traditional socks export market. Under the current favorable situation of the cancellation of socks export quotas to the United States, American merchants have seen the phenomenon of “stable old customers and an increase in new customers”, and their order output has increased. At the same time, orders from neighboring countries returning to Zhuji increased.
It is understood that due to U.S. quota restrictions, in recent years most Korean and Japanese middlemen and U.S. buyers have moved to Turkey, Pakistan, Indonesia, Cambodia and other countries to place orders. Although some of these countries have The processing costs or export prices are lower than those in our country. However, the production volume, specifications, varieties, and delivery times of sock manufacturers in these countries cannot meet the requirements. The demands of American merchants and the quality of services in all aspects cannot be compared with those of Chinese sock production and processing enterprises. Therefore, once the U.S. quota was canceled in 2019, a large number of merchants chose Datang Socks Industry, which has outstanding industrial cluster advantages, without hesitation. It is estimated that US orders transferred from abroad to Zhuji next year will exceed 30 million dozen.
According to the analysis of the Municipal Socks Industry Association, based on the current orders placed by American merchants, Zhuji’s socks export orders to the United States are expected to increase by about 50 million dozen next year. If all can be successfully exported, it will double this year’s volume.
But is the situation really so optimistic?
Price��
Many companies have mixed feelings about this.
On the one hand, the cancellation of quotas has reduced corporate production costs. “In the past, we had to bid together with other companies to obtain export shares, or spend money to purchase excess quotas from other companies.” said a sock company. Manager Yang said.
On the other hand, the surge in quota export volume will inevitably lead to a decline in export prices. Because after the quotas are cancelled, direct U.S. merchants and most intermediaries will know that the cost for Chinese companies to purchase part of the quotas will be cancelled, and they will require Chinese export companies to lower their prices, which will inevitably lead to a decline in overall export prices. At the same time, after the quota is cancelled, if the state does not monitor and manage it, it will inevitably lead to disorderly competition in the export market. According to the hidden rules of Chinese enterprises participating in disorderly competition, it is speculated that most enterprises will only use low-price competition to compete for the market. , some companies will even compete at prices below cost, leading to a drop in export prices. Some companies’ predictions for next year’s export prices are that the average export price of socks next year will be more than 20% lower than this year.
The Pain of Anti-dumping
The deeper concern is the anti-dumping that is a real pain for many sock companies. The cancellation of “paragraph 242” only means the disappearance of quota restrictions. Once the export volume reaches what developed countries call “a threat to the development of related industries in the country, the employment of workers and other issues,” they will most likely take anti-dumping, countervailing and safeguard measures. Measures (referred to as “two countermeasures and one guarantee”).
It is understood that the United States is the largest sock market in the world and has always been a market that many Chinese sock export companies want to enter and occupy. The orders placed by merchants are generally large in volume and relatively single in style, which is very suitable for the production and processing of Chinese sock companies, so most companies are willing to accept orders from the US market. Once the quotas are lifted, some companies that are not familiar with U.S. policies and import regulations will blindly take orders for production and processing, which will eventually lead to a situation where many companies are competing to enter the United States.
Relevant people from the Municipal Foreign Trade and Economic Cooperation Bureau believe that if the state does not take corresponding measures, next year there will definitely be a sharp increase in export volume, a drop in export prices, a chaotic competitive landscape, and disruption to the U.S. sock sales market. Serious phenomena will directly This led to the U.S. government taking anti-dumping and countervailing measures. Once the United States takes anti-dumping and countervailing measures, many export companies will be “doomed.”
The words of a business owner represent the aspirations of many sock companies, “Actually, I feel very conflicted. Everyone hopes to have a big order from the United States, but now the country has not issued policies and measures for exporting socks to the United States next year. I ask the staff to go online and pay attention to this information every day, but they have never been able to do so, so I dare not blindly accept orders. If I place the order now, what if? If something happens next year, the company may suffer a lot.”
Policy Hopes
The large increase in orders has also made companies worry that low-quality and low-price “junk socks” will “resurgence.” It is understood that since the United States adopted quota restrictions in 2005, it has played a good role in restoring the order of the Chinese export market to the United States. Some low-quality and low-price “junk socks” entering the “flea” market in the United States have significantly reduced. Although the export efficiency of enterprises has declined, the quality and price of exported socks have steadily improved, and export enterprises have also entered a stable and healthy development track. Most enterprises have begun to get used to the “quota era.” Once the quota is liberalized, if the relevant departments in our country do not monitor it, “junk socks” will “resurgence” and it is entirely possible to disrupt the normal sales of socks in the United States. market.
After the quota is cancelled, how can Zhuji’s socks exports, which account for one-third of the total export volume, avoid falling into a state of disorderly competition and embark on the path of healthy exports? This has attracted the attention of the Provincial Economic and Trade Commission. The reporter learned that not long ago, the Provincial Economic and Trade Commission came to Zhuji to investigate this issue and discuss solutions. The Municipal Foreign Trade and Economic Cooperation Bureau also issued a request for instructions to the Provincial Department of Foreign Trade and Economic Cooperation to issue as soon as possible the ‘standardized management measures for socks enterprises exporting to the US market after the socks export quota to the US is cancelled’. The Municipal Socks Industry Association’s suggestion is to imitate the Central European textile export supervision model, quickly establish export monitoring measures, and introduce export reward and punishment measures to regulate market order.
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