An era of "free trade" was theoretically ushered into the global textile market on January 1, 2005 as all quotas on textile products were removed according to documents signed by member countries of the World Trade Organization (WTO). 

Lifting the quotas means a remarkable opportunity for developing countries with rich labor resources.

Indian Minister of Textile Shri S. Vaghela expressed with confidence that his country's textile exports would jump to US$30 billion in two years from US$13 billion last year.

Textile exports from China to the United States have grown at a surprising rate in recent years.

The US Department of Commerce said the United States bought clothes worth more than US$6.3 billion from China in 2000. The figure rocketed to US$8.7 billion in 2003, according to the Beijing-based magazine Outlook Weekly.

Since the United States is one of the world's largest markets for textiles and garments, analyzing China's exports in this market can provide a good idea of the situation facing the Chinese textile trade after the quotas are removed.

There are several reasons for the surge of Chinese textiles on the US market.

First, many US textile manufacturers have moved their factories out of their country in recent years.

Labor costs in the United States keep rising to such an extent that it is much more economical for producers to base their factories overseas. For the same reason, retailers are also increasing the proportion of commodities they buy from other countries.

To satisfy consumer need, it is only natural for the United States to significantly increase its imports.

In fact, it bought clothes worth US$16 billion from Central American and Caribbean countries in 2003, a huge rise in recent years.

The superior quality of Chinese commodities attracts importers. As a traditional manufacturer, China has a high reputation across the world for the stable product quality it turns out.

Thanks to modest labor costs, Chinese goods can be sold at reasonable prices.

Still, foreign investors whose factories are based in China, including those from the United States, are selling more and more products to the United States.

Official statistics suggest products made by foreign-invested factories here accounted for 32.5 percent of all such exports to the United States in 2003, 39 percent more than the previous year.

It is predictable that trade between China and the United States will maintain a steady growth after the quotas are removed.

The growth is in the interests of both countries. US consumers need Chinese products of low price and superior quality.

However, due to strong trade protectionism and a bleak employment situation in the United States, the textile trade has become one of the most controversial topics in Sino-US trade.

The US textile industry has pointed its finger at Chinese products and Washington imposed growth ceilings on several categories of Chinese products in 2003.

After the quota is removed, Chinese products are likely to face trade barriers in different forms.

According to the agreement between China and the United States upon China's entry to the World Trade Organization in 2001, the US is entitled to impose special "safeguard" measures upon Chinese textile imports.

As a matter of fact, such safeguards were imposed in 2003. The US government is expected to resort to them again to protect its domestic manufacturers after the trade is free from quotas.

Since the US and many other countries do not treat China as a "market economy," they calculate the costs of Chinese products according to prices in a surrogate country, such as Singapore.

Product prices in these countries are usually higher than those in China because of relatively high labor costs there.

Such calculations leave an impression that Chinese products are sold overseas at prices lower than their cost.

Because the calculation is not realistic, Chinese products, especially textiles and clothes, are often judged as dumping.

The United States signed an agreement with Egypt and Israel on December 14, 2004 to facilitate exports of Egyptian textiles into the US market.

The EU Commission removed Chinese textile products from its Generalized System of Preference list in October 2004.

Other developing countries, such as Peru, imposed limits on Chinese textile exports.

Without the existence of quotas, there would still be other means to deal with trade, like the green standard for environmentally sound products, labor standards and even customs procedures.

Removal of quotas, one of the non-tariff measures to control trade, agrees with the trend of economic globalization.

Strategic and structural changes for Chinese textile exports are necessary.

In the long run, Chinese products should try to find competitive edges other than low prices.

Actually, China has begun to collect taxes upon certain categories of textile exports, aimed at encouraging products with high added-value and improving the structure of textile exports.

A series of moves should follow to upgrade China's export structure and realize a sustained development of the textile industry.

(China Daily January 18, 2005)