Sino-US trade friction over textile exports is as hot as the weather in Beijing this summer, as rounds of discussions are continuing between the two countries.

The first round, after China secured a deal with the European Union (EU), was held on June 17.

However, both sides remain cautious about the likelihood of reaching an agreement in the near future.

As a matter of fact, the Chinese Government is striving to promote the negotiations, and Washington is expressing its willingness to find a mutually satisfactory solution.

"US Secretary of Commerce Carlos Gutierrez and Trade Representative Rob Portman visited earlier this month, indicating the United States also thinks this issue is important," says Zhou Shijian, standing council member of the China Association of International Trade.

That was the first time two ministry-level officials from the United States altered their scheduled to visit China to discuss a trade dispute, he says.

Because the Sino-EU agreement can be used as a reference, he says, there is the possibility of a similar deal between China and the United States.

However, the consultations with the United States are more complicated.

For example, the EU had not imposed curbs on Chinese textiles, and China and the EU had reached their agreement, even though the EU had launched investigations into two categories of China-made textiles.

The situation between China and the United States is much more complicated, as the friction covers more categories, and investigations are at varying stages, says Cao Xinyu, vice-chairman of the China Chamber of Commerce for Import and Export of Textiles.

The United States imposed curbs on imports of Chinese socks late last year, and the quotas imposed on Chinese socks for 2005 were used up by May 19.

Beginning from May 23 and 27, the US Government imposed curbs on three and four categories of textile products respectively.

"The deadline for the United States to decide whether to launch new safeguard measures is nearing, as the two countries prepare for the second round of textile talks," Cao adds.

He refers to the six categories, on which the US Government has launched safeguard investigations, but has not imposed curbs.

Under US procedures, US officials should decide by the end of this month whether to launch formal consultations with China concerning these categories, after a 15-day public appraisal.

Sino-US trade talks involve a wide range of non-textile issues, such as the renminbi exchange rate, the US trade deficit and intellectual property rights (IPR) protection, but the talks between China and the EU were limited to textiles.

"Such a matter of concerned issues have made the talks even tougher," Zhou says.

By imposing restrictions on Chinese products, the United States is trying to realize another goal protecting its allies in the Latin America, he adds.

US statistics indicate Latin America''s textile exports to the United States grew faster than those of China.

Gutierrez is taking the matter seriously, as the friction is the first of such scale since he took office in February, says Mei Xinyu, a researcher with the Chinese Academy of International and Economic Co-operation, a think tank under the Ministry of Commerce (MOFCOM).

He says whether an agreement can be reached depends mainly on whether the US Government can understand the importance of this issue to China, and whether the United States can break through the bonds of its textile industry.

Zhou agrees. China will not give up its position, as the textile industry provides China with 19 million jobs, he adds.

Meanwhile, most experts and insiders rule out the possibility of a trade war between China and the United States.

"The integration of the world economy has forced the countries to increasingly depend on each other," Zhou says. "A trade war will hurt both."

But, Zhou adds, China is not afraid of a trade war with the United States.

"China is one of largest buyers of cotton, textile machinery and material, as well as soybean from the United States," he says, adding the US Government will not start a trade war and jeopardize such a large trade volume.

Even if an agreement is reached, its effects on the exports under restriction might not be as obvious as expected.

US figures indicate Chinese enterprises had used up, in around one month, 3.3 per cent to 52.9 per cent of the quotas for the seven categories given by the US Government for this year.

Experts had predicted the quotas might be used up within two to three months.

MOFCOM spokesman Chong Quan last week said statistics from Chinese Customs indicated textile exports to the United States in some of the most sensitive categories, such as shirts and trousers, had approached 100 per cent of the quotas. The US figures do not include items being shipped.

Insiders expect the bilateral consultations will at least prevent the United States from imposing additional restrictions on China-made textiles.

As it is time for the US Government to decide whether to impose restrictions on another six categories, Cao suggests the United States should postpone the decision and begin negotiating with China.

"Only in this way can the United States create a good atmosphere for the negotiations," he says.

If the disputes cannot be solved this month, they will become a major topic of the Sino-US Joint Commission on Commerce and Trade (JCCT).

Therefore, Cao expects all issues will be settled before JCCT opens on July 11.

Sino-EU Agreement

A last-minute agreement was signed, on June 11, between MOFCOM and the European Commission. The pact was widely seen as a precedent for a Sino-US deal.

Experts suggest the Sino-EU deal ruled out the largest uncertainty for Chinese textile enterprises, and gave China a favourable position in the talks with the United States.

Details of the Sino-EU talks were recently made public by MOFCOM.

During the 10 hours of negotiations, six hours were devoted to the base, on which the exports are calculated.

China''s delegation insisted the base had to take into account China''s exports in the year''s first quarter after the global removal of the quotas.

"We would like to have a low rate of growth on a high base, rather than a high rate of growth on a low base," the ministry said on June 17.

The bases were eventually calculated with two to three months of exports included.

The figures with the annual growth rates allowed, ranging from 8 per cent to 12.5 per cent help Chinese textile exports to EU in these 10 categories increase between 80 per cent and more than 600 per cent this year.

In addition to making a deal for the categories under investigation, a proper arrangement was also made for other products, from which quotas were eliminated at the beginning of this year.

The European Commission promised to exercise restraint concerning the utilization of safeguard measures against China-made textiles in future.

"We have gained a package agreement, at a comparatively low cost," the ministry said.

Source: China Daily 06/27/2005 page6