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Both Sides Hurt by Failure in Textile Talks

When it comes to promoting global trade, world leaders often say their plans lead to win-win scenarios. In practice, however, a realistic solution is often not perfect.

More regrettably, as in the case of China-US textile talks, the failure of which was announced by officials of both countries yesterday, it seems that the only possible future scenario is no solution at all. Until the end of 2008, Chinese manufacturers will have to prepare for the various trade "safeguards" on their supplies to US customers, and for the subsequent costs.

In similar ways, US retailers will also face uncertainties about not just how much they can import from China, but also how much they can control their global procurement costs.

Moreover, the global supply chain does not stop just on the level of finished products. In material supplies, it is the United States that is selling to China. In 2004, China textile manufacturers paid US$3.2 billion for its material imports, of which US$1.78 billion, more than 55 percent, was paid to US cotton farmers.

Although, as China's Foreign Ministry spokesperson said, some friction is inevitable given the rapid growth in the bilateral trade, three long years of uncertainty will be a heavy price to pay for both economies. Things would not have become so discouraging had it not been for the US insistence on terms that, as seen by the Chinese side, contain too few, if any, incentives for its highly competitive textile industry.

In negotiations, as often is the case, a lack of incentives as seen by one side indicates a lack of flexibility on the other. It is hard to convince the Chinese manufacturers of a significant difference between the US terms offered in the textile talks concluded yesterday, and the so-called trade "safeguards" it threatens to impose otherwise. They all fall too short of the potential of the industry.

No one can tell how much struggle the Chinese textile manufacturers have to cope with to weather the forthcoming storm resulting from the "safeguards." But the industry's overall competitiveness is beyond doubt.

It is not, as some overseas media allege, a result of only cheap labor and modern machinery. Its success is primarily due to a fully integrated network of millions of enterprises, large and small, with a very complex division of work that other economies will hardly be able to copy in at least the next 20 years.

To try to resist such competitiveness is to go against the logic of the market economy, and is bound to be a costly move. And in the long run, despite the possible ups and downs in individual company's sales, the Chinese industry will only gain, rather than lose, competitiveness from fighting all the trade barriers that are artificially set up.

So, there can still be a valuable legacy from the experience, even though the last chance for the two countries to work together in solving their problems in the textile trade has passed. There are still many other bilateral trade and business issues waiting to be tackled by the two countries. But whatever they are, it is always important that a calm, objective and forward-looking attitude can be adopted to deal with them - plus a realistic level of flexibility.

(China Daily October 14, 2005)

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