NEW YORK — Two months after World Trade Organization countries dropped quotas on textiles and apparel, the anticipated jubilation of importers instead has turned to figuring out how to navigate the remaining hurdles on the path to free trade.
China remains subject to the threat of safeguard quotas, the focus of a court fight between the U.S. government and a major importers’ organization.
“There is a fair certainty that we will see quota as early as April, May, June of this year in several categories” of Chinese imports, said Bob Zane, senior vice president of manufacturing and sourcing at Liz Claiborne Inc.
Those sentiments were echoed by Steven Lamar, senior vice president of government relations at the American Apparel & Footwear Association. “At some point during this year…I think we’re going to be talking about quotas with respect to China for some universe of products,” he said.
The executives were part of a panel on the post-quota environment sponsored by Fashion Group International in Manhattan last month.
Lamar noted that importers are facing a slew of possible barriers to totally free trade, even with the quotas removed. The safeguard provision — to which China agreed in 2001 as a condition of its entry to the WTO — allows the U.S. and other importing nations to place temporary caps on Chinese imports through 2008 if those shipments are shown to cause “market disruption” in the importing country.
Late last year, an alliance of domestic industry groups filed a series of petitions asking the government to impose safeguards on Jan. 1 based on the threat of market disruption. The U.S. Association of Importers of Textiles & Apparel has challenged the legality of the threat-based petitions in court.
Lamar said the Commerce Department on March 11 will release January import data, the first monthly report that will show China’s post-quota shipments. He expects to see another wave of safeguard petitions by domestic groups after that data is released based on actual market disruption.
In addition to the China safeguards, Lamar said domestic groups also might file antidumping cases that claim countries allowed goods to be exported below the cost of manufacturing and take other legal measures to protect their employees if they feel swamped by a surge of imports.
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“It’s really hard to guess exactly how all this is going to unwind,” Lamar said.
Henry Tan, chief executive officer of Luen Thai Holdings, a manufacturer with operations in China, said that, in addition to the possibility of importing countries taking action to block Chinese shipments, authorities in Beijing also are taking some steps to keep the brakes on their industry’s expansion.
“They are trying to have a smooth transition to the quota-free environment,” he said.
Late last year, China revealed that it would take the unusual move of imposing an export tariff of about 3 cents an item on selected textile and apparel products.
Besides that, he said, Chinese authorities are trying to “introduce a floor price,” below which exporters cannot sell their products. The goal of that move is to encourage Chinese manufacturers to focus their efforts on high-value products.
He said China is considering a move to require its exporters to meet the international operating and labor standards codified in the ISO 9000 and SA 8000 programs.
Tan noted that his company is stepping up its presence in China, building more “supply-chain cities” — vertically integrated complexes that employ thousands of workers. He said the scale of these facilities, and the inclusion of suppliers within the complexes so that fabric and trim are available on site, allows for quicker turn times.
Tim James, president of Pow-Wow Inc., an importer of private label apparel based in Brooklyn, agreed that improvements in product quality will allow Chinese manufacturers to continue to grow.
“They make a better product,” he said. “The [U.S.] domestic manufacturers have taken a beating, but it’s going to force the domestic manufacturers to be innovative.”
Rick Roberts, president of Cynthia Steffe, said early enthusiasm about the end of the quota system appears to have caused ome buyers to overorder.
“There’s been so much shipped that there’s a glut of merchandise,” he said. “Not even TJ Maxx can take it all.”
Claiborne’s Zane acknowledged that the rise of China will likely come at the expense of smaller, poorer countries, many of which are heavily dependent on apparel exports.
“It’s inevitable that jobs in one country might disappear in favor of another country,” he said. “The only defense is that this was 10 years in the making.”