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Washington Outlook Archive
James A. Morrissey, Washington Correspondent

Industry Gears Up For A Quota-Free World

James A. Morrissey, Washington Correspondent

W ith textile and apparel import quotas due to expire at the end of this month, importers and textile and apparel manufacturers are making far-ranging strategic decisions as to how they will cope with a world of textile trade that, at the moment, is fraught with considerable uncertainty. Interviews with industry leaders in both the domestic manufacturing and importing sectors highlight the fact that significant change is about to take place, and how and when it happens will shape the very future of the US textile industry. Key elements appear to be what will happen with Chinese trade, and how effectively US manufacturers can be in doing more business with Western Hemisphere apparel manufacturers. James W. Chesnutt, the highly-respected CEO of National Spinning Co. Inc., and vice chairman of the National Council of Textile Organizations (NCTO), said China will be a "force to be dealt with," and steps must be taken - including new temporary quotas - to reign in what could be eventual domination of the import market by China. He also believes that what he calls a "good" Central American Free Trade Agreement (CAFTA) would create opportunities for US manufacturers to grow their businesses and offset the threat of China and other Asian manufacturers. Proximity to market and solid partnerships are the key factors. NCTO and other textile lobbying organizations oppose the version of CAFTA pending in Congress because they feel it has too many loopholes that will permit non-participating nations, including China, to benefit from the trade preferences.

Even without CAFTA, manufacturers in countries and regions that participate in preferential trade programs, such as Mexico, the Caribbean and Canada, can benefit from the fact that there are no tariffs, which average 16 percent for non-participating countries.

The Chinese View

Chinese government officials contend the quota phase-out must take place as scheduled, and they are expected to continue opposing use of the safeguard mechanism to impose new quotas. In addition, China is not likely any time soon to address what US manufacturers see as a subsidy resulting from its not being willing to unlink the yuan from a fixed exchange rate of 8.28 to the dollar. It says the more vulnerable producers should be given assistance through programs of the World Bank and the International Monetary Fund.

The Way Importers See It

Retailers and other importers of textiles and apparel see an inevitable increase in imports, probably from fewer countries, but not necessarily a big surge. Because of the long lead time in getting products from design to market, retailers already have been scouring the world for places where they can get the best products at the best prices with quick delivery. This, of course, includes both domestic and overseas manufacturers, and increasing hemispheric trade could be an important factor.

Eric Autor, vice president and international trade counsel for the National Retail Federation, does not see any evidence of a major increase in trade with China because of a number of factors: the possibility of new quotas; congestion at the West Coast ports; and the fact that China already is taking steps to slow down its economic growth. This means retailers are looking to other areas including Central America because of proximity to market. While Autor said the pending CAFTA agreement is "at best half a loaf," he believes it is better than nothing and offers potential benefits for both retailers and US fabric makers. The problem with some of the regional trade preference agreements up to this point, he said, is that the requirements to meet the rules of origin are so complicated they have negated the tariff benefits. He said this has been a factor in driving more trade to China.

burke

Kevin Burke,  president, American Apparel and Footwear Association

Kevin Burke, president, American Apparel and Footwear Association (AAFA), said apparel manufacturers have been hamstrung by the quota system, and he believes their removal will give them more flexibility in their sourcing, as they will not have to cope with the restrictions, uncertainties and limited choices under the quota system. He sees opportunities for both textile and apparel manufacturers in increased Western Hemisphere trade. His organization has been generally supportive of the regional preference agreements, and while he said CAFTA "is not the best agreement," he believes it offers some opportunities for US textile manufacturers to sell more fabric in what is the largest apparel manufacturing area in the world. Without CAFTA, he said apparel manufacturers would have much less of an incentive to do business in the hemisphere, and they would be inclined to look elsewhere. The driving force in all textile and apparel trade, he said, is to get the best products at the best prices with speed to market, and that's where the future lies for both importers and domestic manufacturers.

Proposed Quota Renewals Enter Critical Period

The US textile industry's effort to extend quotas on several categories of Chinese imports will come to a head within the next 60 days. The interagency Committee for the Implementation of Textile Agreements (CITA) has ended its public comment period and now is engaged in the decision-making process. CITA has agreed to at least consider capping imports under the so-called safeguard mechanism related to China's accession to the World Trade Organization (WTO) agreement. That agreement contains language that permits using a threat of market disruption to impose quotas on a year-to-year basis until 2008, but the textile industry and importers disagree on when and how a threat of market disruption can be used. A coalition of fiber, textile and apparel manufacturers has asked CITA to negotiate or place unilateral quotas on socks, trousers, shirts, underwear, yarn and cotton sheets.

During the public comment period, the textile manufacturers provided evidence of what they see as a threat of a major market takeover of US markets by China when quotas are removed. They have cited how Chinese imports skyrocketed after some products were decontrolled in 2002, and they say similar market disruption can be anticipated when other product categories are removed from quota control. After a 60-day evaluation period, the US government, if it finds there is a threat of market disruption, will notify the Chinese government and ask for consultations on a negotiated quota level and growth rates. If agreement can't be reached, the United States has the authority to impose one-year quotas with a 7.5-percent growth rate.

US importers of textiles and apparel are opposed to using the safeguard mechanism. They said the quotas imposed in 2002 on the basis of actual market disruption did not have merit, and are against using the threat of market disruption. Laura E. Jones, executive director, US Association of Importers of Textiles and Apparel, said CITA's use of the safeguard petitions is "misguided." Autor said, "Based on our knowledge of apparel sourcing and the market, we see no evidence to support the finding of any threat involving these products."

Chinese government officials say the use of the threat of market disruption runs counter to the WTO's commitment to free trade, and they will strongly oppose any new quotas.

If the effort by textile manufacturers is successful in these cases, you can bet they will be filing even more petitions in the near future.

CPSC Staff Recommends Bedding Flammability Standard

A Consumer Product Safety Commission (CPSC) staff recommendation that the commission consider issuing an Advance Notice of Proposed Rulemaking is likely to get the ball rolling on a federal flammability standard covering top-of-bed textile products that would include sheets, comforters, pillows, mattress pads and other filled bedding products.

At the same time, the CPSC staff issued a draft of a proposed standard covering mattresses. The top-of-bed proposal is designed to gather information from the industry, consumer groups and others as to the need for a standard. Following the comment period, the CPSC will determine whether the next step - a proposed standard - is necessary.

California is close to announcing a top-of-bed standard, and textile officials hope CPSC action would result in just one standard, similar to the one enacted by California, that would cover the entire country.

December 2004




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