GENEVA — Curbs imposed by the U.S. and the European Union on Chinese textiles and apparel shipments have put the brakes on the slide in Macau’s industry by stimulating a return of production and a revival in exports, a report by a global trade watchdog group said.
“According to the authorities, return of production to Macau can be viewed as a supplementary strategy for Macau-invested mainland manufacturers in order to hedge against the risk of China’s export uncertainty to the U.S. and EU markets,&” it said.
The report on Macau’s trade regime by the World Trade Organization Secretariat, based in Geneva, concludes that at the end of the global quota regime on Jan. 1, 2005, there was a marked drop in exports of trade and apparel until the last quarter of the year, “as production shifted across the border to mainland China.&”
The report — the reference document for a review of Macau’s polices by the WTO’s 150 members — notes that in 2005 “the cumulative value of merchandise exports decreased by 15.1 percent compared to a year earlier.&”
In 2005, Macau’s merchandise exports were valued at $2.4 billion, of which apparel accounted for a 66 percent share and textiles for 11.1 percent, it said.
After a surge in Chinese exports to the U.S. and EU after the end of the quota regime, Washington and Brussels both imposed safeguard quotas on a range of odds allowed under China’s entry agreement into the WTO. The EU quotas last until the end of this year and the U.S.’s run through Dec. 31, 2008.
Macau, like Hong Kong, is a special administrative region of China with some autonomy in areas such as trade, and its exports are not under quota.
There’s no doubt the restrictions by the U.S. and the EU “have helped bring some business back to Macau and to neighboring Hong Kong,&” said officials at the International Textiles & Clothing Bureau, an umbrella group of developing country exporters, which includes Macau.
While exports by Macau have continued to decline in the U.S. market, they have recovered “quite a bit&” in the 25 member-country EU, said ITCB chief Munir Ahmad.
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U.S. imports of apparel from Macau declined to $1.16 billion in 2006, down from $1.19 billion the year before, and in February contracted 32.6 percent, to $162.9 million from the same month in 2006, according to the U.S. Commerce Department.
By contrast, EU imports of textiles and apparel from Macau from January to October 2006 rose 64 percent in volume compared with the same period the year before. In value terms, shipments to the EU from Macau reached 324.2 million euro, or $439.1 million at current exchange rate, up from 216 million euro, or $292.6 million, in the same period in 2005.
Nevertheless, WTO economists expect Macau’s merchandise exports to “continue to fall in the short run&” as the Closer Economic Partnership with China, which is basically a free trade agreement, “will probably not fully compensate&” for the losses due to the elimination of global textile and apparel quotas.
The labor force in Macau’s textiles and apparel industry as a share of its total labor force has declined 27 percent since 2001, to 9.4 percent in June 2006, the WTO report notes.
Asked by delegates about the increase in textile and apparel production that has returned to Macau, the delegation of the city-state in a written response said after the termination of the quotas: “Domestic manufacturers were cautious about textile and apparel market trends and developments during that period, resulting in a fall in production.&”
But it adds, “As the manufacturers began to observe the potential growth [and stability] in the textile trade, in addition to some positive signs shown for the economic prospects of the region, textile and apparel production has rebounded, leading to an increase in exports from the second half of 2005.&”
The U.S. and other delegations praised Macau for its open trade and investment regime, and efforts to combat breaches of intellectual property rights.
In 2006, fueled by growth in services, which now account for nearly 90 percent of gross domestic product, the economy grew by close to 20 percent, the WTO said.