The Rush to China for Cheap Labor
March 10, 2005
"Free of Quota, China Textiles Flood the U.S."
by David Barboza and Elizabeth Becker
The New York Times
Shanghai, March 9 - In the first month after the end of all quotas on textiles and apparel around the world, imports to the United States from China jumped about 75 percent, according to trade figures released by the Chinese government.
The statistics bear some of the first evidence that China's booming textile and apparel trade, unhampered by quotas, could be prepared to dominate the global textile trade and add to trade tensions around the world. The quotas came to an end on Dec. 31 as a result of
an international agreement reached in 1993.
In January, the United States imported more than $1.2 billion in textiles and apparel from China, up from about $701 million a year ago. Imports of major apparel products from China jumped 546 percent. Last January, for example, China shipped 941,000 cotton knit shirts,
which were limited by quotas; this January, it shipped 18.2 million, a 1,836 percent increase. Imports of cotton knit trousers were up 1,332 percent from a year ago.
These figures may be understated because China ships a large part of its goods through Hong Kong, and those shipments are not included.
Fears that China is going to flood the world market with cheap textile exports have already inflamed tensions between Washington and Beijing because of worries about American manufacturing plants being closed and thousands of jobs being lost.
Already, in January, the first month after global quotas were lifted, 12,200 jobs were lost in the United States apparel and textile industries, according to the Bureau of Labor Statistics. Some analysts have predicted that China could capture as much as 70 percent of
the American market in the next two years. Before the end of quotas, about 16 percent of apparel sold in the United States came from China.
Last year, the United States trade deficit with China set a record of $162 billion, making it the largest trade imbalance ever recorded by the United States with a single country. To be sure, some textile importers say this phenomenon may be a one-time surge. Companies,
for instance, may have put off shipping goods at the end of last year to avoid the quotas.
"Nobody knows if it's going to last," said Andrew Grossman, who runs GAV, a company that designs and manufactures clothes for Calvin Klein and Emanuel Ungaro. "So you're not seeing it passed on to the consumer."
Because of uncertainty over currency fluctuations and the process of lifting quotas, apparel producers like GAV have not reduced their prices to retailers. Moreover, poor countries like Bangladesh, Cambodia and Sri Lanka are pressing Washington to pass legislation giving
them lower tariffs to help support a crucial source of their livelihood. Some trade experts say that China has achieved its status over the years by providing questionable bank loans and subsidies to its industry.
Still, it is clear that efforts to move toward more open trade have freed China and other countries of many textile and apparel quotas and restrictions. And they have set the stage for China to become a global textile and apparel behemoth, lowering clothing prices for
consumers around the world but upsetting and rewriting current trade balances.
The January evidence showed blockbuster gains for Chinese textile and apparel makers - a surge that some textile experts had been predicting long before the quotas came to an end.
The 25 countries that are part of the European Union also registered big increases, importing about $1.4 billion worth of textile and apparel goods from China, up from about $975 million a year ago, a jump of 46 percent.
"This is not a surprise; it is not a revelation," said Donald Brasher, president of Global Trade Information Services in Columbia, S.C., which tracks and releases trade figures from around the world and was the first to publish China's official trade statistics.
"We're going from a quota regime to a quota-free regime. And China's one of the most competitive producers. What do you expect?"
But representatives of some of the nation's biggest textile and apparel manufacturers say the figures seem to bear out their worst fears: what they see as China's unfair dominance of the world textile trade because of possible currency undervaluation and government subsidies
of big textile operations in China.
"The wolf is at the door and only the U.S. government can slam it shut, and it needs to do it right now," said Cass Johnson, president of the National Council of Textile Organizations, a trade group that is pressing the administration to impose immediate limits
on Chinese imports.
"The action the government takes or doesn't take will affect 30 million workers around the world and perhaps half a million in this country."
"This isn't like the Y-2K crisis where everyone was afraid of a computer meltdown that never happened," Mr. Johnson added. "This is happening and the consequences are frightening."
In January alone, China shipped more apparel in some categories, like cotton trousers, than it had in the previous year and a half, representing approximately a fourteenfold increase, according to Mr. Johnson's trade group. For instance, China sent nearly 27 million
pairs of cotton trousers to the United States; the quota had held the number to 1.9 million a year ago. There were also big increases in everything from underwear to gowns.
China's customs figures, which were released March 1 to Global Trade Information Services, are often the earliest indication of China's exports to the United States.
This Friday, the Commerce Department is expected to release its own trade data with China. However, the figures could include Chinese apparel that was shipped in December, before quotas ended, but that landed in the United States in January. Those figures might show
less spectacular jumps in trade with the United States, according to textile industry officials.
Many Democrats in Congress say that imports from China are the biggest trade problem for the United States. Representative Benjamin L. Cardin of Maryland, the ranking Democrat on the trade subcommittee of the House Ways and Means Committee, said in an interview that
he would push the administration to pay more attention to China's trading practices.
Some American manufacturers say that China is increasing exports by undervaluing its currency, which makes its products cheaper in dollars for American companies.
The Bush administration says it has put pressure on Chinese officials to revalue their currency and take steps on other trade issues. Moreover, the administration did agree last year to put limits on some Chinese textile and apparel imports in advance of any market disruption.
But importers and retailers, particularly the National Retail Federation, persuaded the Court of International Trade to issue an injunction against the administration's limits. Still, a continued surge in Chinese imports could lead to another push by the administration
to provide relief for American apparel and textile manufacturers. If the surge is temporary, the administration is less likely to apply limits.
Brenda Jacobs, the Washington trade counsel to the U.S. Association of Importers of Textiles and Apparel, said she was wary of the new Chinese figures and would wait to see the United States trade figures, which will be released on Friday.
"I just don't know what to expect; there will be shifting of production," said Ms. Jacobs, whose group supported the end of quotas. "But put this in context - there were a lot of companies that held off shipping goods in December in order to be sure they
would not be caught in the quota system."
