China said to be tossing its weight around at the WTO

Chinese trade officials have begun flexing their government’s economic muscle in advance of the Jan. 1 expiration of worldwide textile quotas, according to reports from the World Trade Organization.

In recent days, Chinese representatives reportedly tried to sidetrack an attempt by developing countries to persuade the WTO’s Council on Trade Goods to put the textile quota phase-out on its agenda. Most analysts expect China’s textile exports to the United States and Europe to increase even more dramatically with the end of quotas.

The Chinese also reportedly sought to quash a series of regional seminars on trade adjustment assistance that are aimed at helping developing countries that may lose market share to China when the quotas expire.

In both cases, developing countries led by representatives from Turkey, Sri Lanka, El Salvador, Mauritius, Tunisia, Kenya and others successfully defied the Chinese, according to the reports.

The Chinese effort to cancel the WTO outreach effort sparked outrage among member countries, officials say.

“By its strident opposition to any discussion in the CTG, China unambiguously demonstrated its intention to use its manipulative and unfair trade practices to wrest an additional $100 billion in global textile and clothing trade from other countries,” said Turkey’s Ziya Sukun.

“Instead of viewing China as a friend on textile and clothing issues, the developing world now sees China as a predator stalking them like prey,” said Sukun, executive director of ITKIB Association USA, a trade association responsible for promoting the Turkish textile and clothing industry.

U.S. textile manufacturing organization leaders say that if China’s export tactics in the U.S. market since it joined the WTO in 2002 are any indication, the rest of the developing countries are in serious trouble.

“In the clothing categories removed from quota in 2002, China went from a 9 percent U.S. import market share in 2001 to 72 percent market share as of June 2004,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

“With China’s continued use of unfair and illegal practices such as currency manipulation, export tax rebates, and tolerance of non-performing loans, we expect China to capture a similar amount of U.S. import market share post 2005.”

While the U.S. textile industry has suffered the loss of about 400,000 jobs since quotas were removed for a number of categories of China’s textile exports, the economic impact on developing countries could be devastating.

“The expiration of textile and clothing quotas is an issue with global economic impact because textile and clothing exports are so important to so many countries,” said Turkey’s Sukun. “For the sake of its own organizational effectiveness, the WTO would be remiss to allow a single country to prevent it from addressing an issue of such critical global importance like the textile and clothing quota crisis.”

The Global Alliance for Fair Textile Trade, a coalition of 96 textile and clothing associations from 54 countries, also criticized the Chinese for attempting to shunt the quota issue off to the International Monetary Fund and the World Bank.

Those institutions have proposed sending several hundred million dollars in grants and loans to developing countries impacted by the expiration of quotas. Sukun said such limited one-time aid packages, while welcome, cannot adequately compensate for the anticipated loss of $100 billion in annual global textile and clothing trade to China, and “the accompanying destruction of tens of millions of manufacturing jobs in the developing world once quotas expire.”

GAFTT officials said they believe that only a comprehensive solution such as that proposed in Mauritian and Turkish position papers can meaningfully mitigate the negative economic impact of the quota crisis.

The Mauritian proposal calls for the WTO to study the economic impact of the expiration of quotas and for the quota issue to be put on the Council on Trade Good’s Permanent Work Program. The Turkish proposal calls for a safeguard mechanism that would prevent a few countries from monopolizing global textile and clothing markets.

“The impact of the expiration of quotas is a crisis of global proportions as textiles and clothing account for 10 percent or more of merchandise exports from at least 32 countries,” says Tantillo. “Including the EU 15 as one country, there are 35 countries with textile and clothing exports of $1 billion or more. With so many countries so severely impacted, it would be irresponsible for the WTO to sweep the quota issue under the rug.”

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