With the expiration of the WTO”s 30-year-old Multi-Fiber Agreement (MFA) last January, Chinese textile exports threaten competitive industries world wide.
Dubbed by some as “the Chinese Tsunami,” fears abound about the possible damage to the textile industry as a result of the expiration.
The MFA imposed restrictions on Chinese exports, creating a leg-up for smaller industries in developing nations.
But last January, the dam broke, allowing Chinese manufacturers to fully compete in world trade. The result for smaller manufacturers, especially in Africa and Asia, has been almost a complete shut down on production.
Case in point, Lesotho in sub-Saharan Africa. Lesotho was given a “foot-in-the-door” by the MFA, but since the eradication of quotas, has had to all but shut down its factories.
One might expect an impact on smaller producers, but developed nations are feeling the pinch as well. Yesterday, the top European Union trade official, Peter Mandelson, said that he would open a formal two-month investigation of the flood of Chinese textiles into European markets.
The concern comes from clothing makers, especially in France and Italy, as they struggle with a 534% surge of imports in nine categories of clothing and textiles – T-shirts, sweaters, blouses, stockings and socks, men’s trousers, women’s coats, bras, and flax yarn.
This influx has driven the EU to consider reinstating quotas or adding tariffs to textile imports.
Pressure is also being put on the Bush Administration in the U.S., which has already introduced sanctions, to impose stricter protective measures.
China has expressed vehement opposition to the consideration of restrictions.
Yi Xiazhun, assistant minister of commerce in China said, “adopting the administrative measures of the era of classification quotas is unfair to China. It’s turning back to the past.”
Yi added that China would “resolutely oppose” any measures taken to reimpose quotas.
Mr Mandelson , who seeks first a voluntary agreement from China, said, “Chinese exports should, of course, be allowed to grow at a normal speed following the removal of quotas. But we must also extend protection to European industry if it is faced with a ruinous surge of unprecedented proportions.”
A WTO study released in September predicted that China and India will dominate about 80% of the global textile market in the post-MFA era.
