Bra wars rage on as US-China talks stall

China Travel Services

Sep 1, 2005

BEIJING - China-US textile dispute talks concluded September 1 with no progress, as a US negotiating team led by David Spooner headed home with no agreement in hand. Spooner pledged the talks would continue, according to a US embassy statement: "Despite our best efforts we were not able to reach a broader agreement ... we will be consulting with the Chinese over the next few days on the date and location of the next round."

On August 31, Cass Johnson, president of the US National Council of Textile Organizations, was quoted by Reuters as saying that the closed-door negotiations had not narrowed the two sides' differences. Auggie Tantillo, executive director of the

American Manufacturing Trade Action Coalition, who was in Beijing, said: "It appears that it's over this week, and no agreement has been reached."

There was no official response from China's Ministry of Commerce. A spokeswoman of the US Embassy in Beijing said the US Trade Representative Office would possibly publish a decision soon on whether US agencies would launch additional caps on Chinese textile exports. The US side promised to be prudent when initiating new safeguard measures on Chinese textile products at the Joint Commission on Commerce and Trade in July, which was attended by US and China's top trade officials. At the time, it postponed the decision on new curbs to August 31.
Insiders had expected that this round of talks, of a higher level than the previous rounds although still "technical", would be more likely to wrap up a deal. The talks in the past two days were chaired by China's vice-commerce minister Gao Hucheng. Compared with the EU-China agreement signed in June, "substantial differences" exist in how many categories the agreement should cover and how to calculate the base figure, as well as the maximum annual growth allowable.

The US textile industry noted that the ending of a global textile quota regime in January this year has seen cheap Chinese textile and apparel products flooding the US market and hurting local enterprises. The dispute has heated up in the past couple of months, as the US government reimposed quotas on textile imports from China following the industry's request in May, and the textile industrial association in the US continued to file petitions for curbs on more categories.

Mandelson again urges release of trapped garments
European Union Trade Commissioner Peter Mandelson continued to warn that consumers will pay higher prices and face clothing shortages unless EU governments release more than 80 million pieces of Chinese garments now blocked from entering Europe.

He wants the EU's 25 governments to permit clothing shipments that exceed quotas on Chinese imports put into place in June to protect manufacturers such as Marzotto SpA, owner of the Hugo Boss label. With caps for most of the 10 textile categories already filled, shops have found supplies for their winter collections, ordered before the limits took effect, stranded in European ports.

Keeping the goods impounded will result in "severe economic pain for many small businesses," Mandelson told a European Parliament trade committee in Brussels on August 30. "It could mean some shortages during autumn, but more likely higher consumer prices for many of our citizens."

EU and Chinese negotiators began talks in Beijing on August 25 in a bid to hammer out an accord. The European delegates returned to Brussels earlier this week, leaving local officials from the EU mission to carry on the discussions. Beijing will host a two-day EU-China summit starting September 4. The current talks, "as far as the Chinese authorities are concerned, are unlikely [to produce results] immediately, given the concentration of China this week on negotiating a similar agreement with the US", Mandelson said.

T-shirts, sweaters, trousers, blouses and brassieres are among as much as 400 million euros (US$488 million) of products that can't enter Europe from China. Retailers such as Hennes & Mauritz AB, which face higher costs because of the quotas, have been joined by the Swedish and Dutch governments in arguing that orders paid for before the limits kicked in are being unfairly obstructed.

Germany, Finland and Denmark have also voiced discontent with the quotas, opening up a split within the EU between northern and southern nations. Greece, Italy and France were among a group of countries that pushed Mandelson to act after the end of a global quota system on January 1 allowed producers in China, the world's biggest textile exporter, to increase their market share. Mandelson vowed to formulate a plan and began consulting EU governments to lay the groundwork for his proposal, expected later this week.

European retailers' profit may slip as much as 5% in the second half should clothing supplies be disrupted, Matthew McEachran, an analyst at Investec Securities in London, said last week. That would put pressure on the profit of companies, including Marks & Spencer Plc, the UK's largest clothing retailer, which gets about 10% of its products from China, he said. "This is unnecessary pressure on retailers who are already feeling the pressure," Stuart Rose, chief executive of Marks & Spencer, said in a telephone interview. "We've had some difficulties, but we think we've largely mitigated them."

The quotas may mean higher costs for Hennes & Mauritz, which buys about a third of its garments from China, according to Katharine Wynne, an analyst at Merrill Lynch & Co in London who has a "sell" rating on the stock. She estimated the caps could lead to costs of 200 million Swedish kronor (US$26 million) in the three months through November - about 1.5% of the pretax profit she expects H&M to report for the fiscal year. That "seems high," H&M spokesman Nils Vinge said of Wynne's cost estimate. Hundreds of sweaters the Stockholm-based company imported from China are now blocked in ports across Europe, including Hamburg, and may end up being sold in non-EU countries such as Norway, Canada and Switzerland, he said. "We're talking about very limited volumes," Vinge said. Next Plc is also likely to be hurt by the logjam of Chinese textile imports, according to analysts, and Van de Velde NV, Belgium's largest lingerie maker, has said the impasse could have an impact on deliveries in coming months.

Chinese enterprises hurt by quotas
"We hope China and the United States [can] reach [an] agreement on textile trading, so that our clients can eliminate their strong uncertainty," Wei Hua, a saleswoman of a textile enterprise in east China's Jiangsu province, told Xinhua. Wei complained that she has not received any order for nearly three months, her department's business has declined by 50% from that of 2004, and her company's textile goods have piled up at some EU ports.

Since the EU and the US again set ceilings for Chinese textile exports this year, a number of Chinese textile enterprises have been trapped in difficult conditions. Wei told Xinhua that she got an order earlier this year but could not export the textile goods because of the quota, and her company will lose 600,000 yuan (about $75,000) per container.

Before the EU set new quotas, the Jiangsu Menglan Group sent its last batch of woollen sweaters to European ports. But the group never expected that the EU and the US would again impose quotas on Chinese textile products, only four months after the scrapping of textile quotas worldwide. "Based on optimistic [expectations], my group signed a large number of orders and agreements with our clients last year," said He Ming, vice president of Menglan Group, a textile enterprise in Jiangsu. "We have [had] to stop exporting textile products because of the quotas imposed by the EU, which caused a direct loss of $6 million to our group."

The reimposed quotas have put Chinese textile enterprises with great production capacity into a dire situation, because they have been forced to suspend production or even face bankruptcy. Encountered with the anti-dumping investigation by EU, the Wujiang Canhua Import & Export Co Ltd lost $8 million of business, accounting for 30% of the company's total exports, and the company virtually gave up the EU market. General manager Gu Yiming said production and sales of the company were severely impaired and most workshops stopped production in the harshest period. Bai Jinliang, vice president of the Jiangsu Shuntian International Group, said 40-45% of the group's products are targeted at the US market, and they all fall under the quota restrictions.

According to statistics from China's General Administration of Customs, China's textile exports totaled $50.36 billion in the first half of the year, of which exports to the US reached $8.34 billion. To tackle the textile disputes, China and the US have held four rounds of talks on June 17, July 8, August 17, and August 30, respectively. But the two sides have failed to reach any agreement.

(Asia Pulse/XIC)