11. Textiles
241. Some members of the Working Party proposed and the representative
of China accepted that the quantitative restrictions maintained by WTO
Members on imports of textiles and apparel products originating in China
that were in force on the date prior to the date of China's accession
should be notified to the Textiles Monitoring Body ("TMB") as being the
base levels for the purpose of application of Articles 2 and 3 of the
WTO Agreement on Textiles and Clothing ("ATC"). For such WTO Members,
the phrase "day prior to the date of entry into force of the WTO
Agreement", contained in Article 2.1 of the ATC, should be deemed to
refer to the day prior to the date of China's accession. To these base
levels, the increase in growth rates provided for in Articles 2.13 and
2.14 of the ATC should be applied, as appropriate, from the date of
China's accession. The Working Party took note of these commitments.
242. The representative of China agreed that the following provisions
would apply to trade in textiles and clothing products until 31 December
2008 and be part of the terms and conditions for China's accession:
(a) In the event that a WTO Member believed that imports of Chinese
origin of textiles and apparel products covered by the ATC as of the
date the WTO Agreement entered into force, were, due to market
disruption, threatening to impede the orderly development of trade in
these products, such Member could request consultations with China with
a view to easing or avoiding such market disruption. The Member
requesting consultations would provide China, at the time of the request,
with a detailed factual statement of reasons and justifications for its
request for consultations with current data which, in the view of the
requesting Member, showed: (1) the existence or threat of market
disruption; and (2) the role of products of Chinese origin in that
disruption;
(b) Consultations would be held within 30 days of receipt of the request.
Every effort would be made to reach agreement on a mutually satisfactory
solution within 90 days of the receipt of such request, unless extended
by mutual agreement;
(c) Upon receipt of the request for consultations, China agreed to hold
its shipments to the requesting Member of textile or textile products in
the category or categories subject to these consultations to a level no
greater than 7.5 per cent (6 per cent for wool product categories) above
the amount entered during the first 12 months of the most recent 14
months preceding the month in which the request for consultations was
made;
(d) If no mutually satisfactory solution were reached during the 90-day
consultation period, consultations would continue and the Member
requesting consultations could continue the limits under subparagraph
(c) for textiles or textile products in the category or categories
subject to these consultations;
(e) The term of any restraint limit established under subparagraph (d)
would be effective for the period beginning on the date of the request
for consultations and ending on 31 December of the year in which
consultations were requested, or where three or fewer months remained in
the year at the time of the request for consultations, for the period
ending 12 months after the request for consultations;
(f) No action taken under this provision would remain in effect beyond
one year, without reapplication, unless otherwise agreed between the
Member concerned and China; and
(g) Measures could not be applied to the same product at the same time
under this provision and the provisions of Section 16 of the Draft
Protocol.
The Working Party took note of these commitments.
EU – Special Safeguard Rules against China
According to the regulation, as soon as a request will be introduced by
a member state or directly by EU's Commission, China will be required
limiting its exports to the EU at a specified level.
Shipments from China should actually not rise by more than 7.5% (6% for
wool products) "in the first 12 months of the most recent 14 months
preceding the month in which the request for consultations was made."
Consultations will be held between the EU and China within 30 days of
receipt of the request and will last 90 days, "unless extended by mutual
agreement".
At the end of the consultation period and in absence of any agreement,
EU may impose quotas at the level reached when the receipt was sent to
China.
The limits will not apply on products, which have already been sent to
the European Union "before the date of notification of the request for
consultations".
The quota will be removed by the end of the year or after a 12-month
period if the request for consultations was made known less than three
months before the end of the year.
A new quota may be later imposed after a new consultation request will
have been sent by the EU.
After 2008, the EU may then use another provision, called "transitional
product-specific safeguard mechanism" or TPSSM. Another regulation is
being proposed by EU's Commission regarding the TPSSM which should soon
be adopted by EU's Council of Ministers and published by EU's official
journal.
Also included into the WTO's Protocol, the safeguard allows limiting
imports from China until December 2013, twelve years after China's
accession to the WTO.
EU's draft regulation includes an additional safeguard to offset the
impact of so-called "trade diversion", or a surge in imports resulting
from new quotas imposed by other WTO members, such as the United States.
United States – Special safeguard Measures against China
CITA determined that petitions may be filed by trade associations,
companies or unions representing entities that produce a product like or
directly competitive with the imported product or by trade associations,
companies or unions representing entities that produce a component that
is like or directly competitive with the components of the imported
product. That is a very broad standing requirement.
The textile safeguard process includes the following steps:
1. After receiving a petition to impose a new quota on China under the
textile safeguard, CITA will have 15 days to decide if the petition
meets the minimal standards established for petitions (see below). The
receipt of petitions will not be made public.
2. If CITA accepts the petition, it will publish a Federal Register
notice requesting public comments. Comments are due within 15 days. The
Federal Register notice will include a summary of the petition. However,
it is unclear whether the complete petition (other than business
confidential information) will be made publicly available.
3. Following the close of the 15 day comment period, CITA will make a
determination within 60 days on whether to request consultations with
China.
4. If CITA decides to request consultations, then a Federal Register
notice will announce the decision as well as the minimum new quota level.
That quota will be based on the imports from China in the category
during the first twelve of the last fourteen months, plus an increase of
6 percent for wool products and an increase of 7.5 percent for all other
fiber products. The date of this Federal Register notice will also be
the effective date of the new quota. The consultation period will follow
– a period of 30 days that could be extended to 90 days. Depending on
the timing of each petition, there is a formula that will determine
whether the new quota on China will last until the end of that calendar
year, or will last for one year from the date of imposition. Under
paragraph 242 of the Working Party Report for China’s accession to the
WTO, which created the textile safeguard, “no action taken under this
provision would remain in effect beyond one year, without reapplication,
unless otherwise agreed between the Member concerned and China.”
According to CITA officials, the following information will be required
in petitions:
-
Product description (expected to
be a textile category number or numbers);
-
Import data from the past five
years that demonstrates that imports from China are increasing rapidly
in absolute terms;
-
U.S. production data for the same
time periods and covering the same products as the import data (or
else provide information explaining why different information does
match the import data);
-
Market share information in
category units, including the Chinese imports as a percent of the U.S.
market; total imports as a percent of the U.S. market and domestic
U.S. production as a percent of the U.S. market. [U.S. market is
defined as the sum of U.S. domestic production and total imports.];
-
Additional information describing
how Chinese imports hurt the U.S. industry.
The WTO language states that the
quota that is put in place would be at a level of 7.5% greater than
basically the level in the past year. For the US, the rationale for
consulting the Chinese is to see if there was any other number that
could be agreed upon. For example, if China said that they do need a
more than 7.5% growth in one or all of those categories, the US
officials might be willing to consider giving a higher quota, but for
the price of a longer period than 12 months.
Moreover, the WTO text stipulates that the quota cannot be extended
without reapplication. The US Government interprets that to mean that
the industry has to re-apply to have another safeguard put in place. It
does not mean that the safeguard cannot be re-applied. In the US opinion
there must be a re-application.
General Issues
In brief, there are special safeguard possibilities specifically against
Chinese textiles and clothing products (only ATC products) until the end
of 2008. In addition, general safeguard provisions for all kinds of
products, including, in principle, for T&C products, are possible until
2013.
1. "Market disruption"
The problem is that the text there is no very clear definition of what
market disruption means. In fact there is a whole history of WTO
jurisprudence available of what it exactly means. The market disruption
concept is well-defined in the GATT/WTO since 1960. To some extent it is
up to the importing country, which wants to impose new quotas on China,
to define and discuss with China what it means "market disruption". That,
in turn, makes it, theoretically, very easy for importing countries to
claim for market disruption, as they say what it is.
While the ATC more or less defines what serious damage means (see ATC
Article 6, paragraphs 3 and 4), market disruption should be seen in the
same light. However, the concept of "serious damage" is much more
stringent as factors such as employment, industry output, etc. are taken
into consideration. In contrast "market disruption" "only" looks at
trade issues, i.e. changed trade directions in exports and imports.
2. The protocol leaves it open to the members how to react. The EU has
already published two Council Regulations (EC No. 138//2003 and EC No.
427/2003) on how they intend to apply the special safeguard provisions
against China. You will find a short summary attached.
The US has not yet officially published its China-Specific textile
safeguard rules. The US Department of Commerce has already made a clear
proposal and wanted to make it official (under pressure from ATMI). But
major retailers and T&C importers requested that a public discussion be
held beforehand, as they were not happy with the rules. So its official
release is delayed.
3. This special safeguard provisions only exist with respect to China;
nothing can be done against other exporting countries, except under the
general safeguard provisions of the WTO. How China will react is unclear.
But it is believed that China will put all its weight as an important
economic power and major market (buyer) of all kind of other products
behind it. In fact, MOFCOM has already signaled some signs to countries
that might use this special safeguard provisions to be careful as
otherwise China might retaliate. Thus, in order not to risk other
exports to China, importing countries might think twice before imposing
new T&C quotas.
There are so far a couple of examples for general China product specific
safeguard cases in the US (e.g. for wire hangers and pedestal actuators).
In both cases the US International Trade Commission recommended to
impose special safeguards against China. However, in both cases the
White House overruled the recommendations by saying that it was not in
the national economic interest for the US. That might also happen in the
future for T&C products.
4. Every WTO member can apply the special safeguard provisions. However,
it is up to each member country to decide how they want to introduce
them, as it entails discussions and negotiations with China.
