WASHINGTON – Shoppers who enjoyed a sustained drop in clothing prices over the past year are likely to see markups on pants, shirts and dresses if the Bush administration gets China to agree to comprehensive limits on its clothing and textile exports.
Since a three-decade system of clothing and textile quotas expired Jan. 1, a flood of clothing and textile imports has entered the United States from China.
Those shipments are up 58 percent so far this year, an increase that has played a big part in pushing the cost of clothing down at an annual rate of 5.9 percent for the three months ending in June.
American textile and clothing manufacturers blame the import flood for the loss of 26,000 jobs so far this year and the closing of 19 textile plants. They want the administration to stop the losses by re-imposing quotas on Chinese goods.
"By using its currency as an economic weapon and by pouring billions of dollars of illegal subsidies into its textile sector, the Chinese government has effectively declared war on U.S. textile producers," said Cass Johnson, president of the National Council of Textile Organizations, which is pushing the administration to reach a comprehensive deal.
U.S. and Chinese textile negotiators were scheduled Tuesday to begin two days of talks in San Francisco to see whether agreement can be reached.
Experts say America's annual clothing bill could rise $6 billion -- or $20 for each U.S. consumer -- if China agrees to restrain exports.
Gary Hufbauer, a trade expert at the Institute for International Economics, a Washington think tank, said that could turn out to be a low estimate, given that China's massive production capacity also affects clothing makers in other countries.
"A comprehensive trade agreement would take the downward pressure off not only for American producers but for other countries as well," Hufbauer said.
Under the rules by which China was admitted to the World Trade Organization in 2001, the United States and other countries could re-impose quotas on Chinese clothing and textile imports if shipments of the Chinese products began surging once the global quotas were removed and the increase was found to be harming the domestic industry.
Under this "safeguard" provision, the administration can cap imports in specific clothing and textile categories to growth of just 7.5 percent annually through 2008.
Rather than impose quotas on a category by category basis, the European Union in June negotiated a comprehensive arrangement with China that covered 10 categories and allowed growth in shipments of 8.5 percent to 12.5 percent annually through 2007.
The U.S. industry, while seeking a comprehensive deal as well, has branded the French agreement unacceptable, contending it allows too much growth in shipments each year and does not extend through 2008.
"No comprehensive deal is better than a bad deal," said Lloyd Wood, spokesman for the American Manufacturing Trade Action Coalition, another group representing clothing and textile manufacturers.
American retailers, seeking to protect low-cost imports for their customers, went to court last year to try to stop the quotas from being re-imposed.
However, they say they could support a comprehensive agreement if it allowed higher growth in quotas than 7.5 percent. The current system has left many retailers without guaranteed sources of supply as quota limits have been reached in a number of categories, they say.
"For the importers, this has been a race to the dock to try to get shipments in as fast as possible," said Laura Jones, executive director of the United States Association of Importers of Textiles and Apparel. "Most of the major categories are closed."
U.S. officials have given no indication how long talks could go on. Industry officials believe the administration is trying to strike an agreement that could be announced in conjunction with Chinese President Hu Jintao's September visit to Washington.
The textile fight is the latest in a series of trade confrontations as pressure mounts in Congress to do something about America's ballooning trade deficit with China, which hit $162 billion in 2004 and is now running 32 percent above last year's pace.