NEW YORK — Instead of reaching a compromise on trade issues between the U.S. and China, last week’s meeting with Chinese president Hu Jintao by President Bush seemed to reveal just how wide the trade discrepancies are between the countries.
Previous to Jintao’s visit, Nicholas Lardy, a senior fellow for the Institute for International Economics predicted, “On currency, on intellectual property, on the trade imbalance, I think the body language from the Chinese in advance of the visit is: ‘Don’t expect too much.’” Lardy’s forecast was dead on.
When China became a member of the WTO in 2001, safeguards were put in place in the hope of giving the rest of the manufacturing world a little time to catch up before the expected rush of a (relatively) free Chinese market. Years later when the quotas were removed, imports increased at an enormous rate — alarming China’s many global competitors and creating a worldwide “knee jerk” reaction to stop the flow of Chinese imports. In the short term, the trade protections put in place by the U.S. and the European Union have served to slow down the Chinese current, at least for now. Additionally, the current quotas only cover 13 percent of all apparel and textile imports (by volume, in January). But as Thomas A. Glaser of VF Asia Ltd. pointed out at a recent conference on the subject, quotas and safeguards on a thriving market do little more than temporarily dam the river of imports.
In all fairness, opponents of China’s current trade policies have more than a thriving Chinese market to squabble about. It seems as though China has a considerable trick up its sleeve: a stagnant currency. Opponents of China’s current import system charge that their inflexible currency artificially lowers the price of goods by anywhere from 15 percent to 40 percent. The effect, adversaries claim, is the U.S.’s immovable $202 billion trade deficit with China, as well as continued job loss in the apparel and trade industry within the U.S.
In his country’s defense, Jintao said the U.S.’s trade deficit is not solely a result of its relationship with China — it is a deficit contingent on trade worldwide.
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The numbers are hard to refute, however. As recently as February, WWD reported 3,300 jobs were slashed in the U.S.’s apparel and textile manufacturing sector. Pointing a finger at China, Charles McMillion of MBG Information Services said, “I suspect that [the sector] will continue to lose jobs unless there are some more, strong measures to protect their production from imports.”
No one in Washington will be able to take action very soon, however. Legislation on a bill set to further monitor and stifle Chinese trade has been suspended until September.
Meanwhile, China’s improved economy, which has been considerably augmented by its thriving import trade, has boosted the country’s GDP. This, in turn, has significantly improved urban household expenditure. With more money to burn holes in their pockets, the Chinese are becoming a significant global presence within the trade and manufacturing industry, while also blossoming into the next big consumer market.
Tom Murry of Calvin Klein vouches for the nation’s popularity as well. “Chinese consumers are becoming more discerning and interested in foreign trends with the prevalence of the media and the continuously expanding spending power,” he said in a WWD report.
Luxury giants like Armani, Chanel, Calvin Klein, Gucci and LVMH have been profiting from the Chinese market for several years now, and most have announced plans to continue their profitable expansion in the region. Giorgio Armani, a professed admirer of Asian culture for many years, has even touted, “It’s as if fashion was created for Chinese women; they’re very elegant.”
As a direct result, China has observed a tremendous upswing in the popularity of retail property – with many more retailers salivating on the horizon. Particularly in the luxury sector, as WWD attested to, the demand for retail space is now far outweighing China’s supply. It’s estimated that on the mainland there are 400 shopping malls, 200 additional malls currently in construction, and another 300 retail projects in the beginning steps of development.
For a detailed look at the headlines discussed above, see the following archived articles:
April 13, 2006
China Apparel and Textile Imports Slip in Feb.
In a dramatic but likely temporary reversal, apparel and textile imports from China fell 10.4 percent in February.
April 10, 2006
U.S., China, Set to Discuss Currency, Property Rights
Controls on China’s currency and the protection of intellectual property rights are expected to top the agenda in meetings between top U.S. and Chinese officials over the next two weeks here.
March 29, 2006
Vote on China Tariffs Postponed in Senate
Sens. Charles Schumer and Lindsey Graham on Tuesday delayed for a third time a vote on their bill to impose a 27.5 percent tariff on all Chinese imports.
March 21, 2006
In Retail Development, Supply Isn’t Always Meeting Demand
China has the location, but good retail space is still hard to find.
March 21, 2006
Tilling the Luxury Landscape
Giorgio Armani travels to China later this month to commemorate the arrival of his Guggenheim retrospective in Shanghai.
March 10, 2006
U.S. Manufacturers Cut 3,300 Jobs
U.S. textile and apparel producers cut a seasonally adjusted 3,300 jobs from their payrolls in February.