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Home >> Opinion
UPDATED: 15:27, April 11, 2005
Textile barriers break world trade principles
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The United States and the European Union (EU) are considering curbing the growth of textile imports from China.

The two, usually key advocates of free trade, will apparently deviate from the path of free trade if they decide to go ahead with the restrictive moves.

The United States is already famous for protecting its steel companies and the EU is notorious for sheltering its farmers. In 2002, the United States broke World Trade Organization (WTO) rules and imposed high tariffs on imported steel to please labour unions. On the other side of the Atlantic, the EU insisted on maintaining trade barriers for its agriculture sector.

By taking synchronized action against China's textile imports, the United States and the EU are showing the world again that they are ready to revoke their commitment to the noble course of free trade when their enterprises are not able to compete.

Western economists say that free trade, which is about realizing comparative advantages between trading nations, benefits consumers and helps enhance the global economy's productivity. In the end, it will make the overwhelming majority - if not everybody - better off, they say.

US and EU officials often preach on that, too. Their enterprises backed the idea because they believe they can, with their comparative advantages, win global markets in many sectors.

With this in mind, developed nations agreed in the Uruguay round of global trade talks, in 1995, to abolish quotas for the textile trade by the end of 2004. That was their concession to developing countries for their support of a multilateral trading system governed by WTO rules.

The textile sector is many developing countries' strong point, mainly because of their cheap labour.

US and EU textile companies are simply not competitive in the manufacturing of many textile products. They then had a decade to restructure themselves either by increasing efficiency or by moving to high-end products. But they did not carry this out successfully.

Now they are pressuring their governments into taking restrictive steps on Chinese textiles, which is equal to back pedalling to the quota era.

The weapon the United States and the EU are set to use this time is the so-called "special safeguard" clause in China's WTO accession agreement.

The clause allows China's trading partners to use "special safeguard measures" when Chinese products "disrupt" their domestic market.

There is no clear, quantitative standard for "disruption," whose definition is subjective.

Despite the low price of their textile products, Chinese exporters still sell them to overseas buyers at a price that covers their costs plus gives them some profit. This clears Chinese manufacturers from any accusation of dumping.

Chinese textile exports' rapid growth is a natural result of the quota removal. Chinese manufacturers are simply realizing their potential, something they could not do under the quota system.

Now they are bringing inexpensive goods to US and EU consumers in a normal, fair trade manner instead of disrupting their markets.

It might be true that some textile companies in the United States and the EU are in difficulties as a result of growing imports. But they should blame themselves for not reshaping during the past decade. Or they may need to admit that they simply do not have a comparative advantage in making some textile products.

Source: China Daily

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