How will companies respond when the textile quota system comes to an end? (Part 1)
In less than three months, the quota system for textile and apparel products will end. This change in the international textile and clothing trade system is a new challenge faced by textile and clothing enterprises. The Multi-Fiber Agreement and other agreements that have restricted textile trade since 1974 have finally come to an end. However, this not only brings hope and opportunities, but also great risks.
At a forum held during the Shandong Zaozhuang Cultural T-shirt Trade Fair on September 20, the organizer specially invited Dr. Elliott from the American law firm Beckhaus to talk about the topic of international trade after the end of the textile quota system. The doctor believes that because many countries are very uncertain about the future of textile trade and many groups have a lot of worries, the quota system may remain in place for another year. He hopes that companies will be prepared for the end of the quota system and the theoretical upcoming “free trade”, but at the same time he reminds companies that the United States and the European Union will launch various trade actions against Chinese textile and clothing products, which will eventually pose a serious threat to companies. .
The end of the quota system does not mean the advent of free trade, because even if there are no formal or official restrictions, there are still many ways to restrict free trade. Many of the protectionist forces that have forced the quota system into existence for 35 years still exist. For various reasons, China is the focus of attention, especially in the United States and Europe, but also in Canada, Mexico, India, and throughout the Americas. In the U.S. market, Mexico is the number one competitor for Chinese clothing, and Canada is the number one competitor for Chinese textiles.
The following are some important facts: In 1990, Hong Kong was the largest clothing supplier in the United States, and Hong Kong clothing’s market share in the United States reached 16.1%. Mainland China followed, accounting for 14.5%. No one country or region was dominant at the time. By 2007, Chinese clothing’s market share in the United States reached 33.4%, while the market share of any other country was less than 7%.
There is a panic spreading in the United States and other countries – the end of the quota system means that Chinese products will sweep the market. U.S. companies will be unable to compete, and companies in other countries will also lose the ability to compete with Chinese companies. In the United States, the apparel industry is most fearful and is most fearful of Chinese exports.
Concerns are particularly serious about certain clothing products. For example, data from 2006 and 2007 show that China’s exports of products to the United States surged: cotton and man-made knitted women’s shirts and cotton socks far exceeded those in Mexico; socks made of man-made fibers, men’s cotton and Artificial knitted shirts, cotton women’s mid-length, long and short shorts, bras, bras made of artificial fibers, underwear made of cotton and artificial fibers, cotton cut velvet and other types of towels and bath towels, cotton cardigans within one year The market share increased from 28% to 54%; the market share of men’s cardigans made of man-made fibers and women’s cardigans made of man-made fibers increased from 38% to 51% within one year. The market share of these Chinese products has surged and some have become dominant, so they are likely to face trade protection actions.
The market share of some textile products in the United States has also grown rapidly, especially polyester fabrics. The market share increased from 10.84% to 17.16% within one year, and the market share of knitted fabrics increased from 8.38% in 2006 to 2007. 11%. In either case, legal investigations will examine who lost market share in the U.S. market. For the most part, Mexico suffered heavy losses. If it is not U.S. companies but companies from other countries that lose U.S. market share, then Chinese manufacturers will not face many threats in trade disputes. But Chinese companies should understand the vulnerabilities to which they are vulnerable.
Dr. Elliott believes that in the long term, for most products, it is doubtful that Chinese products may pose a threat. China’s production costs, especially labor costs, are rising rapidly, and manufacturers have now moved to Vietnam, Thailand, Indonesia and Bangladesh because the production costs in those areas are lower; due to the impact of increased transportation costs and the appreciation of the renminbi, the United States The shift of production to China is fading; for Chinese manufacturers, the depreciation of the dollar has made the U.S. market less attractive.
The current policy of the Chinese government is to slow down the economic growth rate, especially the growth rate of the manufacturing industry.
Now let’s look at the situation in the United States. The National Textile Association of the United States has begun to promote with great fanfare that on December 31, that is, after the end of the quota system, the number of Chinese products exported to the United States will surge and pose a threat. The American Textile Group Association united with other governments to put pressure on the US government, trying to prevent the growth of China’s exports through various means, and also tried to restrict Vietnam’s exports. A willing ally of the American Textile Group Association is Mexico. But last week, the National Textile Group Association obtained signatures from 16 countries, and they jointly sent a letter to the U.S. Congress asking Congress to support trade actions against China. Mexicans are not only worried about Chinese products flooding the Mexican market, but also worried about their U.S. market share being replaced by China.
Americans believe that Chinese workers’ wages are low and their work intensity is too high; for the same reason, China’s environment cannot be protected. As exports grow, these criticisms�It is whether the enterprise is found to have engaged in dumping behavior. When handling cases from non-market economy countries, the U.S. Department of Commerce has great room to manipulate third-country values, so companies from non-market economy countries can easily be ruled as dumping.
Subsidies
When a government is found to have provided illegal subsidies to companies, these companies will be levied countervailing duties. But not all subsidies are illegal and face countervailing duties. WTO rules already identify which subsidies are not subject to countervailing duties, so social programs can be tailored to make them compliant with WTO regulations. Unfortunately, the Chinese government has so far failed to take WTO compliance into account when designing government programs.
It was not until the past two years that the United States began to apply the subsidy law to China. The theoretical basis of countervailing is that when the government provides financial support to a certain enterprise or industry, it will affect the normal development of the market, because the principle requires that the market operates without government interference. The purpose of government subsidies may be to occupy a certain foreign market, to help a certain domestic industry, or for a broader and more legitimate social policy. In some cases, the government may consider that a certain industry has a significant impact on the national economy and people’s livelihood, so subsidies should be provided to ensure the healthy development and success of this industry. The textile industry has long been regarded as an important industry in China and has been mentioned in national, provincial and local plans. But as mentioned before, why is not the key. The key is whether the company obtains financial benefits from the government.
The United States has launched 12 countervailing investigations against China. Each time, the U.S. Department of Commerce determined that the Chinese government had provided improper subsidies. So far, the Chinese government has not appealed any of the case rulings in U.S. courts, but has decided to use the WTO dispute settlement mechanism. Chinese companies appealed three cases in U.S. courts, but the Chinese government took no action. We believe that the absence of the Chinese government poses a problem, because how these cases will be decided and what kind of precedent will be set are fraught with risks.
Companies respond proactively
Face trade safeguard measures head-on
It is difficult for companies to prevent trade safeguard investigations from occurring, but finding allies to avoid this investigation is not an easy task. It’s a difficult thing and allies are key here, importers and sellers can provide testimony. U.S. companies should prove that the industrial damage was entirely caused by Chinese companies, but proving this is a heavy burden. Even if the ITC determines that an industry is harmed, other government agencies must agree with that determination. Even if industrial damage exists, determining relief methods is an independent process, which also provides a second chance for foreign companies to avoid serious negative consequences. However, the process is moving quickly. A more appropriate approach would be to avoid accusations of a surge in exports through self-regulation rather than hoping to thwart accusations of industrial harm.
Only U.S. companies that produce the same products and compete with foreign companies can request a trade remedy investigation. These regulations are complex, and businesses can seek the help of attorneys to deal with this issue more effectively. But there are some basic responses businesses can take.
First, companies can ask their U.S. importers and sellers to find out whether there are American companies that produce the same products as themselves. Companies should know these things about their competitors: What products do they make that are the same as yours? Do they sell for less than what you sell for? How dependent are these companies on a certain product? Use this to infer whether they are willing to invest in submitting a complaint requesting trade remedies against your product.
Second, when direct competition exists, companies can consider highlighting the characteristics of your product to make it appear different from competitors’ products, or obtain a new tariff number for the product. Perhaps you can find what makes your product unique and patent it. Companies can also trial-produce different products to avoid direct competition.
Assuming that the products produced by U.S. companies directly compete with the company’s products, companies can take measures to deal with possible export surge charges. The company found the export growth data of the company’s products in the past three years, and with the help of industry associations, classified the data according to customs numbers or by product type. Where possible, reach agreements to gradually increase exports and avoid a legal surge in exports. Enterprises can ask relevant lawyers to help review the data and determine the high limit for export growth. Complainants seeking trade safeguard measures must prove the existence of a surge in exports. Companies can take planned actions on different products one by one. When these actions are implemented, potential complainants will lose the opportunity to submit export surge accusations. AAGFHTRYKUYIU7OUP
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