Video #26 - China: How "Socks City" Sees US Trade Limits
Monday, January 16, 2006(Note: This report was filed on June 29, 2005--before the US-China agreement on textile imports reached in November, 2005. See below).
BACKGROUND INFORMATION
Following the expiration of the international "Multifiber Agreement" in January, 2005, a flood of Chinese-made textiles and clothing inundated the American market. The US Government charged that the volume of Chinese clothing imports actually doubled, causing more than 16,000 US jobs to be lost. In response, the US placed a 7.5% growth cap on quotas on China's export of certain textile imports to the US.
China protested this move, claiming that it violated world trade agreements and took advantage of the fact that it is a new member of the World Trade Organization (WTO). Wang Shen Yang of the China Chamber of commerce for Textiles argued that "after China entered the WTO, trade should be fair and just. On the issue of price, in reality, our impact on the American economy is not a big deal." (In truth, textile trade only makes up six percent of trade between the United States and China).
The US charged that China tried to take advantage of its edge in cheap labor to get a bigger share of its textile market. China, on the other hand, argued that its loss from the new quotas would cause the loss of 160,000 jobs and that the US reaction was a knee-jerk protectionist reaction.
Also part of the issue is a longstanding disagreement between the United States and the government of China about the value of China's currency, the Yuan. The US has argued that the Yuan is "artificially depressed" in order to make labor and production costs on export items cheaper. The Chinese government denies this, but in 2005 agreed to a minor revaluation of the Yuan against the dollar and a new system to calculate its exchange rate.
In an attempt to resolve the trade friction, the US and China signed a three-year agreement in early November, 2005 to restrict Chinese exports of a total of 21 types of clothing and textiles. However, the agreement provides for a progressive increase in imports of major textiles and apparel products from China -- by 10 to 15 percent in 2006, 12.5 to 16 percent in 2007, and 15 to 17 percent in 2008.
SOURCES
"China attacks 'Unfair' US quotas" BBC News Online June 3rd, 2005. http://news.bbc.co.uk/2/hi/business/4606057.stm
"The MultiFibre Agreement" TransNational Information Exchange. http://www.tieasia.org/factsheettwo.htm
"Industry outraged by US Textile Decision" China.org.cn. http://www.china.org.cn/english/international/128830.htm
"Intense Bidding for US Export Quotas" China Daily December 7th, 2005. http://www.chinadaily.com.cn/english/doc/2005-12/07/content_501242.htm
"Results of US Export Quotas Released" China.org.cn December 14th, 2005. http://www.china.org.cn/english/2005/Dec/151934.htm
"China-US Textile Trade: A Win-Win Game" People's Online Daily. November 9th, 2005. http://english.people.com.cn/200511/09/eng20051109_220133.html
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE: To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.
OBJECTIVES Students will be able to:
- Discuss the concept of quotas and their impact on businesses
- Develop an understanding about aspects of trade between the US and China.
- Evaluate possible alternative solutions to the problems faced by the two countries.
MATERIALS:
- Background information provided.
- Resources on China available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines."
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Research and create a chart showing the increase in US trade with China, and the growing disparity (trade deficit) between the level of Chinese goods coming into the US and the level of US goods going to China.
- Split the students into three groups-- representing the US, China, and the WTO-- and have them debate whether restrictions on textile trade are a good idea.
- Have the students research where clothing that is sold locally originates. See if there is a difference in price between similar clothing that is made in the US or other countries. Ask the students whether they would prefer to buy foreign-made clothing that is cheaper, even if it means American workers might lose their jobs as a result.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
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