GT Alert

End of Textile and Apparel Quotas May Lead to New Import Restrictions for Select Countries

2004 to Mark End of Restrictions Regulating Textile Trade

September 2004
By Philippe Bruno, Greenberg Traurig, Washington, D.C. Office

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As of December 31, 2004, all quotas currently in place concerning textile products and apparels will end. This means that foreign exporters and U.S. importers will be free to export or import any textile products or apparels at any time into the United States without having to worry about quantitative limitations, import licenses and other special requirements. In theory, this is good news for companies that import textile products, as after decades of restrictions, the textile trade will finally be liberalized.

"In practice, however, a trade war is lurking at the horizon not only in the United States but in Europe and in any other countries whose textile manufacturing industry may be vulnerable to rising imports from lower-cost exporting countries."

In practice, however, a trade war is lurking at the horizon not only in the United States but in Europe and in any other countries whose textile manufacturing industry may be vulnerable to rising imports from lower-cost exporting countries. For example, the National Council of Textile Organizations (NCTO) released a study on September 1, 2004 revealing that China has captured 72 percent of the U.S. import market in the 29 textile and apparel categories, as of June 2004, compared to 10 percent in 2001. These numbers may rise even higher after 2005.

In the United States, the textile manufacturing lobby has been very active and a number of actions are being prepared to stop what some view as an onslaught of imports into the U.S. after January 1, 2005. China is the primary target of these efforts. In fact, three U.S. textile trade associations - the American Manufacturing Trade Action Coalition (AMTAC), the National Council of Textile Organizations (NCTO), and the National Textile Association (NTA) - revealed on Tuesday, September 1 that they will seek to reinstall import restrictions on numerous categories of Chinese textile and apparel imports. The associations said they will file their petitions by mid-to-late September. Last year, textile groups successfully petitioned for quotas on imports of Chinese brassieres, robes and knit fabric. This time textile groups will likely target shirts, trousers, undergarments, and household items such as towels and sheets.

The Committee for the Implementation of Textile Agreements (CITA), the interagency group chaired by the Commerce Department that hears the petitions, previously said it would only consider petitions under the China textile safeguard based on actual market disruption, rather than the threat of such disruption. But Auggie Tantillo, executive director of AMTAC, said the industry has received assurances that CITA will not directly reject “threat” petitions: “We have confirmed with the U.S. government that we are well within our rights to file cases based purely on threat.”

Cass Johnson, president of NCTO, said that by filing the petitions prior to October 1, the groups may have the restrictions imposed by the middle of January, 2005. Imports from China would then be limited to 7.5 percent above current trade until the end of 2005.

Officials at the Department of Commerce and the Office of the U.S. Trade Representative would not comment directly on the petitions. “We review every petition received very carefully and make our decisions on a case-by-case basis,” said Department of Commerce spokeswoman Mary Brown Brewer.

It is likely that other countries with large, low-cost industries, particularly in Asia and Central America, may be targeted as well in the future in addition to China. As a result, the liberalization of trade in textiles and apparels may create both problems and opportunities for foreign exporters and U.S. importers. The targeted countries will face problems with the possible reinstatement of import restrictions, but non-targeted countries may be able to take advantage of the disruption caused by trade actions against the targeted countries by increasing exports.

The Global Trade Practice Group is closely monitoring the developments in this area for a number of current clients. We provide technical and strategic assistance to our clients. We provide technical assistance in connection with the trade remedy actions that are being prepared and will be filed in the coming weeks, and strategic assistance in identifying the potential targets of these actions and taking protective measures.

© 2004 Greenberg Traurig

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