Textile and Apparel Trade After the Multifiber Arrangement
Although Multifiber Arrangement (MFA) quotas have been completely phased out, other policy instruments, such as tariffs and preferential agreements, will affect the market. Global tariffs on textiles and apparel remain significantly higher than for most other manufactured products. Nontariff trade barriers are also a factor, including anti-dumping duties, import "rules of origin," safeguards, elaborate custom procedures, stringent labeling requirements, and outright bans on apparel imports. Countries with preferential market access typically pay lower tariffs, which will also influence production and trade.
Textile-producing countries have expressed particular concern about the expansion of Chinese textile and apparel exports in the more open world market following termination of MFA quotas. For this reason, China-specific safeguard provisions were established in the 2001 World Trade Organization (WTO)-China Accession Agreement. These provisions were designed to reduce market disruption and protect WTO members from surges in Chinese imports that would impede the "orderly development of trade." Two types of China-specific safeguards were identified in the accession protocol, namely special-textile and the transitional, product-specific safeguards. The requirements for imposing China-specific safeguards are much less stringent than the "general safeguards" specified in the WTO Agreement on Safeguards ( Liu and Laixiang). Unlike WTO general safeguards, China-specific safeguards can be levied by a WTO member given the threat of market disruption. No governmental investigation is required prior to imposition nor is it necessary to establish a causal link between increased import quantities and "serious damage."
The special-textile safeguards allow for the expansion of Chinese exports, but limit growth to as little as 7.5 percent annually. These safeguards provide 1 year of protection, renewable on an annual basis through 2008. The transitional, product-specific safeguards can be maintained for 3 years with the possibility of a 2-year extension. WTO member producers will have recourse to these safeguards through 2013.
The United States and the European Union (EU) forged bilateral accords with China in 2005 that supplemented the WTO-China Accession Agreement of 2001. The U.S.-China agreement calls for China to limit the shipments of 34 products to increases of 8-10 percent in 2006, 13 percent in 2007, and 17 percent in 2008. The 34 products accounted for almost half of China's textile exports to the United States in 2005.
The U.S.-China textile deal provides greater predictability for both Chinese exporters and U.S. importers than the system of annual safeguards sanctioned under the special textile provision in the WTO-China Accession Agreement. Moreover, it provides U.S. retailers with greater import growth opportunities from China than the previously established 7.5 percent cap. Both the U.S.-China and the EU-China 2005 bilateral accords are likely to raise developed-country imports from other low-cost sources of supply.
Textiles safeguards have also been invoked by Argentina, Brazil, Colombia, South Africa, and Turkey.
For More Information
Huan Liu and Laixiang Sun, "Beyond Phase-out of Quotas in Textile and Clothing Trading: WTO-Plus Rules and the Case of U.S. Safeguards against Chinese Exports in 2003," Asian-Pacific Development Journal, Vol. 11, pp. 49-71, June 2004.
- U.S. Department of Commerce, International Trade Administration, Office of Textiles and Apparel, China Textile Safeguard actions.
- See WTO topic area and its chapter Agreement on Agriculture and Beyond.