U.S. reimposes quotas on Chinese textiles

[HenryTo]

Given this (and what I have been discussing over the last couple of months) and the fact that everyone is bullish on China, I think the height of bullishness in China has peaked. I love being a contrarian. Note that the 7.5% quota growth is below China's current (sustainable?) GDP growth of 9% to 9.5%. The slowdown in trade with China and in global trade is further reinforced with the decline in commodities (CRB Index finally broke below 300 last week) and the rise of the U.S. dollar:

http://www.futuresource.com/charts/charts.jsp?s=DX&o=&a=D&z=610x300&d=medium&b=CANDLE&st=
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U.S. reimposes quotas on Chinese textiles
By William L. Watts, MarketWatch
Last Update: 6:09 PM ET May 13, 2005


WASHINGTON (MarketWatch) - The Bush administration said Friday it will reimpose quotas on Chinese textile imports after ruling that China poses a threat to the U.S. clothing industry.


The government acted quickly in response to a surge in Chinese imports following the expiration of global textile quotas in December.

The action "demonstrates this administration's commitment to leveling the playing field for U.S. industry by enforcing our trade agreements," said Commerce Secretary Carlos Gutierrez, in a written statement announcing the decision by the administration's Committee for the Implementation of Textile Agreements.

"We will consult with the Chinese to find a solution that will permit the orderly development of trade in a quota free environment," he said.

The move reinstates limits on the amount of cotton trousers, cotton knit shirts and underwear that China can ship to the United States. American retailers have argued that the move will drive up prices for U.S. consumers.


William L. Watts is a reporter for MarketWatch.

[HenryTo]

An ongoing development - again, let's hope that we would get a retailitory trade war here. Obviously, the U.S. is sending a very clear message to China that it has to revalue its currency very soon. This is most probably the reason why WMT has been underperforming the market here.
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US widens limit on Chinese clothing

New restrictions hopes to defray $162B trade deficit; will include trousers, shirts and yarn.
May 18, 2005: 6:48 PM EDT

WASHINGTON (Reuters) - The United States is expanding the list of clothing and textiles from China that will be hit with emergency import restrictions to protect U.S. producers, the Commerce Department said Wednesday.

The additional quotas, which will take effect once Washington formally requests consultations with Beijing on the issue, include trousers, shirts and yarn not covered by a similar U.S. action announced last week.

"Today's announcement demonstrates this administration's continued commitment to America's textile manufacturers and their employees," Commerce Secretary Carlos Gutierrez said in a statement. "We will enforce our trade agreements to ensure that U.S. companies get a fair deal as they compete in the global marketplace."

The action comes as the Bush administration is under tremendous pressure from Congress to reverse the huge trade deficit with China, which reached a record $162 billion last year. China's long-time practice of pegging its currency at 8.28 yuan to the dollar has also angered many lawmakers, who charge it is an unfair trade practice.

U.S. imports of clothing from China have risen dramatically since Jan. 1, when a decades-old international quota system was phased out as the result of a 1994 world trade deal.

However, China agreed when it joined the World Trade Organization in 2001 to let member countries impose emergency import restrictions on its clothing and textile shipments to prevent "market disruption."

Beijing has protested moves by both the United States and the European Union to restrict its clothing exports. But both insist they are acting within WTO rules.

The new curbs on synthetic trousers and shirts, non-knit shirts and some cotton yarns stem from petitions U.S. industry groups filed in late 2004.

Those petitions, which were based on the threat that imports would surge when the quotas were removed, have been the subject of a legal battle between retailers and textile groups. A federal appeals court only recently cleared the way for the Bush administration to consider them.

"Today's approvals validates the U.S. textile industry's prediction that China would surge into the market in a disruptive way," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. "Failure to act would have cost tens of thousands of U.S. jobs."

The import restrictions will raise the cost of doing business for retailers like Wal-Mart (Research) who expected to rely heavily on China in the post-quota world.

Laura Jones, executive director of the U.S. Association of Importers of Textiles and Apparel, said the Bush administration action would not help the textile industry survive.

"They're making people jump through hoops for something that's not going to save any jobs. This business (making clothes) isn't going to come back here," she said.

The quotas, which will limit the growth in China's shipment of key clothing products to 7.5 percent above the previous year, "mean no business will be placed in China (for those items) in the fourth quarter and maybe the third," Jones said.