WTO, CBI Trade Negotiations Heat Up

If this is the month we take those first steps across that "bridge to the next century," then the past two months fittingly have been ones full of inspecting the support beams of trade pacts touted to carry the industry into the future.

In late November and early December, landmark trade agreements and legislation were announced that undoubtedly will result in significant changes within the industry.

U.S. and China Reach Agreement

In what U.S. Trade Representative Charlene Barshefsky labeled as "a win for American export-related jobs," China and the United States reached a historic deal in late November that looks to open the door toward China's entry into the World Trade Organization (WTO). The deal calls for China to reduce both tariff and non-tariff barriers to industrial goods, eliminate export subsidies and provide distribution rights and new market access for U.S. exporters and companies in a variety of industries. Specifically related to apparel and textiles, the agreement calls for U.S. textile and apparel quotas to expire in January 2005, consistent with WTO rules, but with a special anti-surge safeguard, running until 2008, to ensure a more orderly transition to open trade with China.

The U.S. apparel importing community generally has hailed the agreement for liberalizing opportunities to source goods from China's apparel industry, and opening doors to retailers and exporters to do business in China. Industry observers are predicting that China's apparel exports to the United States could grow by one-third under the agreement, which could again place China over Mexico as the largest apparel exporter to the United States.

However, the announcement of the negotiations also has been met with vocal opposition, especially from the American Textile Manufacturers Institute (ATMI), which has been lobbying against special provisions which allow for China's "early" accession into the WTO. (Other WTO members who joined the organization in 1995 have experienced a 10-year quota phaseout period.)

As Doug Ellis, president of ATMI, stated: "We are disappointed the U.S. trade negotiators ... failed to get an agreement whereby the U.S. would continue its quotas on Chinese textile and apparel imports for 10 years. Every other WTO member has faced a 10-year phaseout period. Agreeing to China's demands for a five-year phaseout will cost the U.S. some 150,000 fiber, textile and apparel jobs and lost U.S. production in the billions of dollars."

In an interview with Bobbin, Carlos Moore, executive vice president of ATMI, pointed out that the agreement is harmful to the U.S sewn products industry on several fronts. For one, he said the deal's anti-surge safeguard measures are of little assurance because they are more difficult to implement and control than simply extending the quota phaseout. Additionally, the U.S. textile industry will already have to contend with the ramifications of other nations' WTO phaseouts effective in 2005.

In addition, Moore argued that China has a long history of breaking bilateral agreements with the United States, particularly in textiles, and he pointed out that the U.S. Customs Service has reported that China illegally transships $5 billion of textiles and apparel into the United States annually. "There are many things wrong with this agreement. And we are continuing to find out just how bad it is. For example, they [U.S. trade representatives] failed to get any disciplines in regard to subsidized products. Instead, they left it up to the WTO. This was a golden opportunity, and they missed it."

The U.S. Trade Representative's office would not comment on the textile and apparel aspects of the agreement for Bobbin as of this writing.

While the U.S.-China agreement is a crucial step toward China's accession to the WTO, several more hurdles are left to go. On the home front, the U.S. Congress must vote to give China "normal trade relations" status. Under current law, Congress performs an annual review of its trade status with China. In addition, China must conclude bilateral negotiations with a number of other WTO members, including those from the European Union. Also, multilateral negotiations on China's accession protocol must be finished. China will then have to work out its own domestic procedures for accession.

Industry, Congress Grapple over Sub-Saharan Africa, CBI Trade

Also in November, the U.S. Senate passed trade legislation that would give duty-free, quota-free treatment to apparel imported from Caribbean Basin Initiative (CBI) and Sub-Saharan Africa nations, provided the goods are made from U.S. yarn and fabric. The legislation has strong support from the ATMI, and the bill has been lauded by the U.S. textile industry as a key to competing with low-cost Asian imports.

Still, despite the Senate's passage of the bill, much more work remained to be done as of press time before the CBI and/or the Sub-Saharan regions could gain free trade benefits. At issue are two separate versions of the legislation. While the Senate is requiring the use of U.S. yarns and fabrics, the U.S. House of Representatives is favoring a CBI bill that provides the region with NAFTA parity with Mexico, the latter of which has the support of the American Apparel Manufacturers Association (AAMA). In other words, garments produced of fabrics made locally in the CBI countries could be imported duty- and quota-free. The House bill had been approved in committee, and a compromise between it and the Senate version was being worked out at press time. But all indications were that the deal would not be reconciled until early this year.

CBI legislation is not just dividing the House and Senate. In the industry, it has created some subtle as well as noticeable divisions: textile vs. apparel, contractor vs. manufacturer, and large firms vs. small firms. Universal support for the CBI and Sub-Saharan trade measures is rare, even within groups that support some form of the legislation.

Either form of the legislation could benefit many of the industry's large, multinational apparel firms by making it less expensive for them to produce or import their goods, but both forms of the legislation promise to hurt the United States' remaining apparel contractor base.

As John Campolong III, of McBee Manufacturing, who heads up the legislative committee of the Southeastern Apparel Manufacturers and Suppliers Association (SEAMS), stated: "For the American sewing contractor, CBI [enhancements] in any form or version will probably hurt them. More contractors will find it difficult to find work. They're going to have to find a niche, and they're going to have to produce quick turns. It is the only hope for them."

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