Seeking Certainty Over Safeguards

Apparel importers find themselves chafed by new restrictions on goods from China.

WASHINGTON — As apparel importers move into the second half of the year, they face new and uncertain restrictions on goods from China. It is a disappointment for many vendors that long viewed 2005 as a year synonymous with the easing of trade barriers.

A decade ago, the member nations of the World Trade Organization agreed to drop quotas on apparel and textiles at the beginning of this year. However, the heady days of quota-free trade were short-lived.

In order to protect the remaining U.S. textile firms, which primarily sell to regions that compete with China, such as Central America and Mexico, the Bush administration applied safeguard quotas in May to seven categories of goods representing $1.31 billion in imports. The safeguards, which China agreed to when it joined the WTO in 2001, restricted the goods to 7.5 percent growth and are renewable annually through 2008. A deal might be cut, though, that would offer more stability than safeguards.

Commerce Secretary Carlos Gutierrez said the Chinese would be looking to reach some arrangement at a July 11 meeting.

"Their big 'ask' is going to be a comprehensive agreement on textiles," he said last week.

In the short absence of quotas, market forces reshaped the sourcing scene, with U.S. imports of apparel and textiles from China expanding by 45 percent to 4.71 billion square meter equivalents through April. By contrast, the total of such imports to the U.S. rose 8.8 percent to 15.82 billion SME, indicating the scope of China's market share grab.

Faced with this dramatic growth, groups representing domestic textile firms petitioned the U.S. government to implement safeguards. However, the restrictions complicate business planning all around by creating a guessing game as to whether or not new categories will be added and when the quotas will fill, embargoing further shipments. It is also uncertain if the safeguards, which expire at the end of the year, would be renewed immediately or if a window of unrestricted imports would be briefly opened.

Safeguards have had an impact, as the mere threat of them has kept companies such as Liz Claiborne Inc. and Kellwood Co., from shifting their sourcing to China as fully as they would have otherwise.

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