HONG KONG — It continues to be a situation of wait and see with China — even among the country’s textile and apparel manufacturers.
This past Sunday, China’s Commerce Ministry announced it would impose tariffs on some textile exports in advance of the elimination of global quotas on textile and apparel trade on Jan. 1. However, details concerning the tariff percentage and what textiles it would affect weren’t disclosed.
Peter Liu, chairman of the textile and apparel committee at the American Chamber of Commerce in Hong Kong, is still digesting what the move means as he waits for the questions to be answered. “Everyone is concerned what will happen Jan. 1,” which is only 15 days away, he said.
The Textile Council of Hong Kong was told Monday that an official announcement, including details, would be released in a few days, said Andrew Leung, council chairman.
Without that information, it is difficult to know which way things will go. If the levy is too high, it will affect the competitiveness of China, and if it’s too low, it won’t have an effect, Leung said. However, “any levy on export is not helping export,” he added.
It is known that a levy will be applied to each piece of clothing regardless of the unit’s value. If a cheap T-shirt is taxed the same amount as an expensive polo shirt, however, it might discourage lower-end mass manufacturers from taking more of their business to China.
The tariffs are expected to be one of a number of steps that China will take to show exporters and other textile-producing nations that it is concerned about potential disruption in global trade after quotas are removed, said Bruce Rockowitz, president of Hong Kong-based sourcing specialist Li & Fung.
Indeed, Chong Quan of the Commerce Ministry said, “This is part of a string of measures China will take to ensure a smooth transition for textile integration following the end of the quota system,” as reported by the People’s Daily, the government’s mouthpiece.
There seems to be two factors driving China’s decision to implement tariffs. The first is to show the United States that it is doing something to help quell worries in America over job losses and a possible flood of garments come Jan. 1. The second is to alleviate the concerns of neighboring developing nations over losing business to China.
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For China, the move is seen as a win-win situation. The tariff could bring a large inflow of tax revenues to the government while creating a higher-value market and slowing exports to the U.S.
China knows it is a major player in global trade and also a major economy in Asia, said Willie Fung, chairman at Hong Kong bra maker Top Form International Ltd. The country should therefore “leave something on the table” for other trade partners in developing nations, he said.
Tariffs would help keep prices higher and also restrict some lower-end businesses from going to China, which shows the country is using some control, Li & Fung’s Rockowitz said.
Fung likened the tax system to an “invisible hand” to guide China’s industry where it wants to go, adding that Beijing thinks it is counterproductive to its trade relationships with the rest of the world if they are churning our cheap garments in huge quantities.
The country should focus on high-value added services and start paying attention to social responsibility and the environment, for example, he said; and low-end business won’t support those goals.
“Instead of introducing some high-ended administrative issues…the administration is leaning toward a more laissez-faire approach,” Fung said. He said he was “very impressed with the very dynamic thinking.”
It’s “not exactly what the U.S. is looking for, but what China is willing to give,” said Liu of the American Chamber of Commerce.
While admitting the tariff scenario is “a good thing, not a bad thing,” Rockowitz doesn’t think it is enough.
“It will take more than this to keep prices up in China,” he said, while adding that safeguard measures implemented by the U.S. won’t go away.
The better alternative would consist of China implementing its own form of export quota, Rockowitz said. That would require restraining the amount of units exported and keeping track of how much is sent out and who’s shipping what, he said.
There is currently no centralized information about what’s being exported. That information only is known once the shipment reaches the U.S. and is counted there.
There has to be a way to get rid of the uncertainty in the market, Rockowitz said. If controls are based on quantity, he thinks it would eliminate uncertainty by 100 percent.