Commerce Undersecretary Grant Aldonas announced the United States would impose a 7.5 percent cap on any increase in China’s shipments of knit fabrics, bras and robes to give U.S. firms a chance to adjust to surging imports from China.
Speaking to reporters, Aldonas said future talks with China could result in a change to the quotas, although no consultations have yet been scheduled. Aldonas also denied the quotas were political payback to southern Republicans who grudgingly supported past trade legislation that was a high priority for President Bush.
The U.S. textile industry earlier this year petitioned Washington for import relief through quotas by invoking so-called “safeguard” protection against dramatic increases in Chinese textile imports that Beijing agreed to when it joined the WTO in 2001. That provision allows for a cap on imports at 7.5 percent above the level of shipments over the previous year.
Aldonas highlighted the surge in China’s shipments of clothing over the past 14 months and Beijing’s subsidies of its textile sector.
“It’s not just a question of dramatic surge, but a heavily state-owned industry that’s subsidized by state-owned banks,” Aldonas maintained.
Commerce Secretary Don Evans sited concerns over the U.S. textile industry when he defended the quotas Wednesday.
The temporary quotas “still allow growth, but … allow our industry to continue to manage its way through what is obviously a very difficult transition,” Evans told reporters at a Western Hemisphere trade ministers meeting.
Evans also emphasized that the quotas affected a “very, very tiny” portion of overall U.S.-China trade.
The United States estimates that its trade deficit with China will expand to more than $120 billion in 2003 — up from $103 billion last year.
China Wednesday expressed dismay at the U.S. move.
“The Chinese government expresses deep regret and firmly opposes this decision,” Commerce Ministry spokesman Chong Quan said. It “runs against [World Trade Organization] principles on free trade, transparency and non-discrimination,” Chong said, adding that China might take the dispute to the WTO.
Meanwhile, a delegation of Chinese wheat buyers postponed a trip to the United States that was planned for late November or early December.
The U.S. wheat industry had been hoping the visit would lead to significant purchases after years of being closed out of China’s vast grain market. Similar visits by Chinese soybean and cotton buyers also were put on hold.
Chinese officials did not say why they were postponing their trip or whether a new date would be set, Dawn Forsythe, spokeswoman for U.S. Wheat Associates, told Reuters.
The quotas also drew criticism from the International Monetary Fund, which said it had warned the United States against taking trade actions against China, such the textile quotas.
News of the quotas sent the dollar tumbling Tuesday against all major currencies. The fallout from a weaker dollar could hit other markets.
“There is the fear that because of the lower dollar we may lose some foreign investment in U.S. equities,” Arthur Hogan, chief market analyst at Jeffries & Co., told Reuters.