Beijing offers muted reply to U.S. trade restriction

Posted in China , United States , Asia | 25-Nov-03 | Author: Keith Bradsher| Source: The New York Times

HONG KONG - The Chinese government gave a temperate response Wednesday to the Bush administration's decision to restrict imports of certain Chinese fabrics and apparel, contending that the move violated free-trade principles.

The Commerce Ministry in Beijing issued a statement expressing regret and opposition, but it stopped short of threatening to retaliate against American exports to China or appeal to the World Trade Organization.

"The U.S. administration's decision to request negotiations regardless of China's strong opposition runs against WTO principles on free trade, transparency and nondiscrimination," Chong Quan, the ministry's spokesman, said in the statement.

Chinese ministries tend to issue statements quoting spokesmen when they want to play down an issue, while subjects of greater importance to Beijing merit statements quoting policy makers.

China has been going out of its way to reduce trade frictions with the United States, notably with the purchase last week of more than $1 billion of General Motors cars and auto parts. The textile and apparel exports at issue this week represent less than a twentieth of China's exports in its third-largest category of shipments to the United States by value.

The Commerce Department in Washington agreed on Tuesday to a request by American textile manufacturers to limit the growth rate on imports of knit fabrics, bras and sleepwear from China. The United States invoked a so-called safeguard clause that allows countries facing a sharp increase in textile or apparel imports and job losses at home to place limits on these shipments.

The Commerce Ministry contended that the U.S. textile industry had failed to prove that its difficulties were due to imports from China. The U.S. industry has been under pressure from lower-cost imports since the 1960's and has lost hundreds of thousands of jobs.

Peter Shay, managing director of MMG Asia, a fashion consulting firm in Hong Kong, said restrictions on imports from China were likely to prompt American companies to import more from low-cost factories elsewhere. "Most likely, it'll mean a shift to other plants in Asia but not necessarily a return to American makers," he said.

Under the safeguard clause, the United States could limit the increase in imports of these goods over the coming 12 months to as little as 7.5 percent. But that would still leave China far ahead of where it was when it joined the World Trade Organization in November 2001.

Chinese textile and apparel exports began climbing sharply then, and an increase of 7.5 percent would come on top of gains that occurred in 2002.

Textile and apparel stocks finished down nearly 6 percent in Hong Kong trading on Wednesday but had been even lower in morning trading.

The Chinese dismay was a sign of Beijing's unhappiness that World Trade Organization membership has not been sufficient to prevent trade restrictions, said Nicholas Tan, a textile industry analyst at UBS in Hong Kong, adding that Beijing officials hoped that membership "would be a bed of roses."

Industrialized countries have agreed to the elimination in 2005 of their quotas and steep tariffs on textile and apparel imports from developing countries, where widespread unemployment and poverty and low costs of living have left millions of workers eager for jobs paying less than $2 a day. No country has more potential workers than China.

The prospect of competing with such a labor pool has alarmed other developing countries. But China's capacity to produce fabrics and garments cheaply has especially alarmed companies in American states like North Carolina, where the congressional delegation has enthusiastically supported import restrictions.