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Panels to Monitor Export Orders

About 50 major textile exporters have agreed to self-regulate by setting up six price coordinating panels to monitor export orders, as textile quotas are set to be removed on Saturday.

According to an official from the China Chamber of Commerce for Import and Export of Textiles (CCCT), the panels will oversee six categories of goods: knitted shirts, non-knitted shirts, trousers, underwear, cotton sheets and socks.

The categories are the areas in which the US is considering safeguard measures for fears that their domestic markets could be hurt, said the official.

The panels will establish floor prices, the official said, adding that prices will not otherwise be fixed.

More than 50 companies are involved in the six groups, all members of the chamber, and others are keeping a close eye on the price coordination, the official said.

A number of big names are included in the panels, such as Jiangsu Sainty Co., Younger, Esquel Group, Orient International and Hongdou.

The official said the panels would supplement the aims of the export tariffs that will be imposed from January 1. Big companies fear that tariffs alone will not be enough to prevent small manufacturers selling their products at lower prices once quotas are lifted.

The price coordinating bodies and support for export taxes indicate the intention of major textile companies to take a more tempered approach to expand into global trade.

"The impact of the export tax is not significant as we will save on paying quotas," said Wei Bensen, a manager of the Import and Export Department of the China Yeliya Garment Group.

Bill Shields, vice president of global sourcing at Pacific Trail Sportswear, said his company is used to paying US$3-4 in quota charges per garment made in China.

Replacing that with a 2 or 3 percent tariff is fairly insignificant and would not prompt relocation of production from China, he said.

It remains to be seen if the panels and export tax will move the US government, which is being lobbied by US-based manufacturers to cap the growth rate of Chinese textile imports.

Officials from the Ministry of Commerce flew to the US last week to discuss the issue with the US Department of Commerce. The US department felt positively about the new export tariffs, said an official from the Chinese ministry, which plans to stage further negotiations next month.

The US has taken safeguard measures, and Turkey and Argentina have decided to join them.
Both the US and EU have asked the Chinese government to keep a leash on the growth of textile exports after the quota is lifted.

The EU's Commission said in a statement that the steps taken by China should help "ensure that the expansion of textile exports from China happens progressively."

But the Financial Times commented that the collection of export tariffs was a step backward for the world trading system and a blow to the world's consumers.

"However, it would be unfair to blame China. The fault lies with the EU and US. If some restraints were becoming inevitable, it made sense for Beijing to move first and capture the rent for itself," the newspaper said.

Some have said the Chinese measure is similar to past actions by other governments, notably Japan, which in the 1980s voluntarily restrained exports of machine tools and automobiles to the US in a bid to avoid protectionist tariffs. But since no WTO member would likely challenge China's export duties, it is unlikely they will pose a problem.

However, some US manufacturers are still arguing the export tax will do little to mitigate the overall competitive advantages of Chinese textile and garment exports.

"Yes, they are right. The move will not have a big impact on Chinese textile exports," said Sun Huaibin, spokesperson of the Chinese Textile Industry Association.

Even in the long run, the tax, a heavy blow to producers of low-end goods, will push companies to make higher quality goods and help the industry become stronger, he said.

"But China has given up something it's honored by world trading rules. Those who are still unsatisfied should make improvements in their own production rather than try to stop others," he said.

Countries strong in the textile industry have prepared to cash in on the quota-free trade. India and Pakistan have decided to increase their textile export in coming years.

(China Daily December 30, 2004)


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