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| China’s Textiles and Clothing Industry in the Era of Liberalization |
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| Monday,September 05,2005 Posted: 22:41 BJT(41 GMT) 商务部世贸司 |
Introduction
On 1 January 2005 a new era began in international trade with the final termination of the discriminatory and protectionist regime that had governed international trade in textiles for half a century. However, only a few short months after this momentous occasion China again finds her exports subject to discriminatory restrictions imposed by her major trading partners.
China joined the WTO in 2001, after over a decade of onerous accession negotiations. China has conducted herself as a responsible member of the international trading community, and met all the obligations incurred upon accession. As a member of the WTO, China trusted that it would finally be liberated from the scourge that had plagued it for centuries, discrimination against its trade. As a consequence, China is concerned that recent actions to restrict its exports in certain categories of textiles and clothing could again lead to China being trapped in a web of discriminatory trade restrictions.
It is well known to all that the growth of the Chinese economy in recent years has made outstanding contribution to the world economy. The strength of the Chinese textiles and clothing industry is central to China’s adjustment to the forces of international trade and its integration into the international trading system. It provides employment not only for millions of Chinese, but as a major purchaser of raw and semi-manufactured materials, machinery and services, for workers, farmers and professionals around the world.
The following note describes the role of China’s textiles and clothing industry in its domestic economy and in world trade, and recent developments in trade policy in this sector.
Executive Summary
The development of a textiles and clothing industry has been central to China’s industrialization process, as it has to so many other countries, including those which are now highly developed. In China’s move to a market economy and its integration into the international trading system, the textiles and clothing industry has gone through an onerous process of structural adjustment. This has resulted in China acquiring a strong competitive position in international trade. The dramatic opening of China’s market entailed by its accession to the WTO, provoked a shift of resources in response to the forces of comparative advantage. Thus, the textiles and clothing sector became a haven for human resources displaced by imports, notably from the agriculture sector which is by far the largest employer in China. China’s textiles and clothing sector has also become a major importer of textiles raw materials and fabrics, as well as machinery and services, thus providing employment to workers and farmers in many countries, both developed and developing. Private capital, including foreign capital has been attracted to the textiles and clothing sector. The textiles and clothing sector does not benefit from any government support and has been able to continuously enhance its capability to meet international standards for labour, protection of the environment and intellectual property rights. Law enforcement has been continuously intensified.
For half a century world trade in textiles and clothing had been governed by a discriminatory and protectionist trade regime that contradicted the fundamental principles of the multilateral trading system. The WTO Agreement on Textiles and Clothing brought this sector back under the normal multilateral rules by providing a ten year period for the elimination of discriminatory quotas by 31 December 2004. However, the major trading countries postponed any meaningful liberalization until the final hour. At the same time, they entered into free trade agreements which permitted certain countries to significantly increase market shares for clothing, subject to rules of origin that set up captive markets for their own textiles producers. The quota regime encouraged the establishment of export oriented clothing industries in many least developed countries, providing a windfall in terms of employment opportunities and export earnings. However, these countries are not confident that they can compete under a quota free regime. Protectionist interests attempted to sabotage the ATC until the last moment. The shift from an artificial trade regime of discriminatory quotas to one based on market forces was thus even more painful than expected.
It was foreseen that, once freed from discriminatory quotas, China’s exports would grow and its market share would increase at the expense of previously preferred suppliers. However, after only a few short months of the quota free regime, protectionist interests have been quick to press for the re-imposition of quotas against China, attempting to justify such action on a clause that China was obliged to accept in its terms of accession to the WTO.
WTO membership was to have freed the Chinese textiles sector from the discriminatory trade measures that it had faced in one form or another for the past forty years. However, China again finds itself being once more trapped in a web of discriminatory restrictions that threaten to stifle its trade and nullify the expected benefits of WTO membership. China thus calls upon its trading partners, particularly those of the major trading countries, to resist such protectionist forces, the “spiders” that are weaving this web. The growth of the Chinese economy has made significant contribution to the growth of the world economy, and its textiles and clothing industry plays an essential part in it. Workers, farmers and professionals all over the world have a stake in its healthy development.
China also calls upon all major trading countries to meet their commitment to provide duty free, quota free treatment to the poorest countries, so that these countries can continue to increase their participation in world textiles and clothing trade. China will intensify its current efforts to assist these countries in strengthening their ability to compete under normal trade rules.
Section I: China’s Textiles and Clothing Industry, Its Dynamism Benefits All
The textiles and clothing industry has been a leader in China’s adjustment process
Historically, the development of a textiles and clothing industry has been the first step in the industrialization process. The industrial revolution which led to the current prosperity of those countries which are now termed “developed” was based on this industry. In meeting the traditional challenge of clothing its huge population of now 1.3 billion people, China’s textiles and clothing industry has developed a very large productive capacity of which 80 per cent is destined for domestic consumption.
China’s move to a socialist market economy and its accession to the WTO have required its economy and society to adjust to the forces of international comparative advantage. The concessions accepted by China as terms of membership in the WTO exposed its workers to intensified international competition. Their impact was acutely felt in the agricultural sector, the largest employer in China. China’s agriculture imports in 2003 totalled US$16.47 billion, representing a year-on-year growth of 61.6 per cent, agriculture imports rose again in 2004, up to US$ 24.82 billion, a 50.7 per cent increase over 2003. Many of these imported products benefited from subsidies on their production and export in their countries of origin.
Fifteen million citizens are born each year. China must find employment for its huge population, now including the millions of migrants from rural areas, displaced by increased agricultural imports. These human resources should find work in sectors where China possesses international comparative advantage, notably the textiles and clothing sector. This has happened. The textiles and clothing sector provides employment for 19 million jobs representing 22 per cent of total employment in the manufacturing industry, another 80 million people are estimated to be indirectly dependant on the textiles and clothing industry. In other words, the textiles industry affects directly or directly the employment of about a hundred million people. Most of these workers come from the western or poverty stricken regions, the majority of them are women. They are the more vulnerable group, practising frugality and remitting most of their income to their relatives in their home town, indirectly contributing to raising the living standard there.
The textiles and clothing industry is based in the Eastern coastal region, the most industrialized area of China, which contributes significantly to the growth of national GDP. Zhejiang, Guangdong, Jiangsu, Shandong provinces and Shanghai municipality are the five top exporters of China’s textiles, representing 80 per cent of total textiles output. In Zhejiang province the textiles industry accounts for one tenth of its total GDP and one third of its total exports in value. The income derived from textiles exports enhances the purchasing power, thus making these regions the largest importers. New restrictions on textiles export will end up by constraining their ability for import of goods and services from the EU and the United States.
However, the Chinese textiles and clothing industry also endured a very rough period of structural adjustment in the 1990s in the context of market oriented reform. From 1997 to 2000, the industry scrapped ten million outmoded cotton spindles, 280,000 wool spindles and a million silk spindles. Over US$30 billion of state of the art textiles machinery was imported, greatly enhancing the technological capacity of the industry and its productivity. Many State-owned textiles enterprises went bankrupt or were forced to merge, creating unemployment and leading to layoffs or relocation of 1.4 million textiles workers, the majority of them are women. Chinese pop singer Liu Huan gave them encouragement with his song ‘Pluck up your courage and make a fresh start’. The song touched the heart of many.
Since then, however, wages in the Chinese textiles and clothing industry have been rising sharply, and are considerably higher than those of workers in many other developing exporting countries. Working hours have declined, while enterprises are increasingly bearing housing and other costs incurred by the workers.
The Story of Love Pea Group
Love Pea Group in Jiangsu province invested 40 million RMB Yuan in setting up 10 dormitory buildings for its employees. There are 300 rooms in every building and each room with 30 square metres accommodates 6 employees. In addition, there are also special rooms for couples who are both employees of this group. Love Pea Group also spends 30 million RMB Yuan per year in providing three meals a day for all of its employees. It is common practice for textiles and clothing firms in China to provide such accommodation for their workers.
Today, competitiveness in trade in textiles and clothing is determined less by wage differentials, than by providing what the buyer wants. For example, speed of delivery, the ability to replenish inventories quickly and to adapt rapidly to new styles is crucial, as is the capacity to supply a wide spectrum of textiles and clothing items. China offers a wide range of items to international buyers, rather than targeting categories in big international demand. In some product categories such as silk, China has traditionally held a strong position in international trade.
These attributes are not inherent to China, any exporting country can acquire them. The learning process in China took place during the period of structural adjustment. It also entailed the improvement of technical and business skills. China is now reaping the benefits of these adjustment efforts.
Private capital assumed a leading role in the modernization of the textiles and clothing sector, where adjustment resulted in a fundamental change in the ownership structure. Currently, only 13 per cent of the industry is held by state-owned capital, whereas private ownership accounts for 87 per cent, of which 15 per cent is owned by foreigners and another 15 per cent by compatriots in Hong Kong, Macau and Chinese Taipei. As can be seen from China’s notifications to the WTO, the textiles and clothing industry does not receive any subsidies.
However, China’s textiles industry is still competing at the lower end of the international market, concentrating on low-value added mass production of intermediary fabrics and outward processing of clothing without China’s own brand names or designing technologies. Its labour cost advantage is diminishing due to the continuous rise in labour costs and the improvement in labour standards. Currently, China’s textiles industry is poised to move up the market by creating its own brand names and focusing on higher value-added products in light of the sustainable development strategy characterized by science-based, cost-effective and environmental-friendly textiles manufacture.
China’s textiles and clothing industry is a major importer
Another factor contributing to the competitiveness of the Chinese clothing industry is its access to the most competitive inputs. China’s export of garments highly depends on the import of fabrics, raw materials and textiles machinery from other countries. Chinese producers may source from the most competitive suppliers, it is estimated that about 50 per cent of exported clothing is made from imported textiles. In 2004, China’s clothing exports reached US$ 61.62 billion, while its import of fabrics, raw materials and textiles machineries from other countries totalled US$31.89 billion. China is the world’s third largest textiles importer, just behind the European Union and the United States.
China is the third largest textiles importer in the worldFrom 2001 to 2003，China’s textiles import in value was ranked at third place in the world, next only to the EU and the United States.Unit：billion US$
Ranking Country (Region) Year 2001 Year 2002 Year 2003
1 EU 17.18 17.27 19.97
2 US 15.43 17.00 18.29
3 China 12.57 13.06 14.22
The Chinese textiles industry is also the world’s largest importer of raw cotton, importing 1.907 million tons of cotton in 2004, of which 1.057 million tons, valued at US$ 1.77 billion came from the United States. China is also among the top importers of wool in the world, importing 220,000 tons of wool in 2004. China is also the world’s largest importer of textiles machinery and parts, importing US$ 4.48 billion worth in 2004, of which 43.1 per cent, US$ 1.95 billion, from the EU.
Thus, the benefits of healthy growth in the Chinese textiles and clothing industry are shared by workers in textiles mills and chemical plants, cotton farmers, sheep ranchers, and machinists in many countries of the world. Foreigners also supply many of the services used by the industry such as design, transportation etc. In addition, Chinese imported products provide a stimulus to retail and wholesale trade and benefit consumers.
The Chinese textiles and clothing industry strives to meet international standards for labour, environment and intellectual property protection
The Chinese government has set up a complete system of laws and regulations to ensure defence of labour rights, the protection of the environment and the respect of intellectual property rights. Any infringement of those laws and regulations is severely punished. China has established a comprehensive system of environmental standards and labels in accordance with ISO14000. China has put in place a complete system of laws and regulations on IPR protection fully compatible with WTO rules, which are complemented by parallel administrative and judicial measures to ensure effective protection of intellectual property rights. The national campaign to crack down counterfeit and fake foreign brand names in this sector demonstrates that China recognizes that IPR protection is not only for the protection of the legitimate rights of foreign brand names, but also imperative and indispensable for developing and upgrading China’s textiles and clothing industry.
Shutdown of Silk StreetIn the famous Silk Street in Beijing, people used to be able to find fake or counterfeit garments very easily, so this street attracted many foreign visitors and Chinese nationals in the past. In order to solve this problem, in 2004, Beijing municipality took some target measures to solve this issue. As a consequence, fake products bearing international brand names are now forbidden to be sold in this street. If any shop in this street is found to sell any fake products, the shop will be investigated. If any shop is found guilty twice, that shop will be forbidden to operate in this street and the owner will be put on the Watch List in the national computerized tracking system.
In December 2004, the Supreme People’s Court and the Supreme People’s
Procuratorate jointly adopted a judicial interpretation of Article 213 of the Criminal Law to provide for severe penalties for infringement of intellectual property rights. Among other thing, the interpretation provides for heavy fines or imprisonment of between three to seven years, depending on the seriousness of the violation of IPRs or the forging of trade marks.
Section 2: Towards a Better Future, eliminate the Legacy of
an Artificial Trade Regime
Textiles and clothing trade has entered a new era
On 1 January 2005, with the final implementation of the WTO Agreement on Textiles and Clothing (ATC), the discriminatory and protectionist system that had governed world trade in textiles and clothing finally came to an end. For 50 years, the patterns of trade in textiles and clothing had been shaped by discriminatory quotas against the most efficient suppliers, frustrating market forces and leading to massive distortions in trade flows and in the allocation of resources. This transition from an artificial trade regime based on negotiated export restraints, to one based on real market forces took place over ten years within the framework of the ATC. By establishing a schedule for the phase out of quotas, while permitting transitional safeguard action in specific cases, the ATC was intended to provide a framework for countries to adjust and prepare themselves for the transition to a system where trade in textiles and clothing would be governed by normal trade rules.
Under the ATC scheme the textiles and clothing sector (i.e. those products listed in Annex I of the ATC) was to be progressively “integrated” i.e. made subject to the normal WTO rules, over a 10-year period. The quota imposing countries, the United States, the EU, Canada and Turkey were required to integrate 16 per cent (by volume) of all textiles and clothing products on 1 January 1995 (date of entry into force of the WTO), and in four subsequent stages: 17 per cent on 1 January 1998, another 18 per cent on 1 January 2002; the liberalization process was to be completed by integrating the remaining 49 per cent on 1 January 2005.
However, the transition has been complicated
Any hope for a relatively smooth transition was frustrated by the approach adopted by the United States and the EU to postpone the elimination of the majority of their quotas until the final hour. Most of the products “liberalized” in the first three stages had never been under restraint, and those where quotas were actually removed did not represent a substantial proportion of total import value. Eighty per cent of the effective clothing quotas, calculated in value terms, were left in place until 31 December 2004, (for the United States the figure was 89 per cent). This “endloading” of the process did not provide the domestic industry with the necessary sense of urgency to adjust to increased competition. Protectionist lobbies focused on efforts to derail the final implementation of the ATC and extend the maintenance of quotas against China and other exporting countries.
While the ATC was in force, these same importing countries entered into a series of free trade agreements, and outward processing arrangements with a number of supplying countries, under which clothing imports could enter free of duties and quotas on the condition that they were made from yarns and fabrics produced in the importing country. Their industries thus adjusted by moving their clothing production offshore to those countries which provided them with captive markets for their textiles exports. The overall result was that global trade in textiles and clothing was suppressed by the quotas on the most efficient suppliers, whose market shares stagnated or declined, while preferential suppliers gained.
It was clear to all, when the ATC was adopted in 1994, that the transition from an artificial trade regime to a regime based on market forces would be difficult. However, this transition was further aggravated by these actions which had protected most domestic producers until the very end of the intended transitional phase out period, and created a network of artificial trade flows based on preferential deals and captive markets.
When China acceded to the WTO on 11 December 2001, the ATC had been in force for almost seven years of its ten year life span. As part of its terms of Accession to the WTO, China was obliged to accept that other countries would have the right until the end of 2008, to request China to take action to avoid situations where its exports disrupted the “orderly development of trade”. It should be pointed out that this clause is in itself unfair and discriminatory and China was obliged to accept it. The United States and the EU demanded for liberalization of trade in other sectors while adopting a protectionist position in textiles and clothing. This is a clear evidence of double standard. China has no intention to challenge the legal status of this clause, but other members should be prudent in using this clause and strictly in accordance with appropriate procedures. China viewed this temporary divergence from its right to non-discrimination as a WTO member, as a gesture of its willingness to avoid intensifying the inevitable stress on the multilateral trading system arising from final implementation of the ATC. It is clear that the “spirit” of this textile safeguard clause (i.e. paragraph 242 of the Report of the Working Party on the Accession of China), was that it would only be applied in exceptional and unforeseen cases, where major disruption to world trade had occurred or was threatened.
China sought to regain its rightful share of world trade
It was expected that the normal development of trade, once the discriminatory quotas were removed, would be for China to gain its rightful share of the import markets in the restraining countries. The textiles safeguard clause was thus intended to deal with extraordinary situations, and not simply to provide a mechanism for continuing to discriminate against China.
The quota restrictions imposed on its textiles and clothing exports during the last four decades had placed China at a disadvantage both with respect to unrestrained competitors, and even other countries under restraint. Chinese textiles manufacturers had to compete against each other for the very limited quota volume. Often the quotas provided by the EU and the United States were not commensurate with China’s export capacity, and favoured countries with much smaller export capacity.
For example, in 2001, for its category 21, parkas and anoraks of synthetic fibres, the EU set quota volumes of 169.1 million pieces for China, but 178.1 million pieces for Republic of Korea. According to the EU statistics, the utilization rate of China in this category was nearly 100 per cent in 2001 while the utilization rate of Korea was just over 20 per cent.
A detailed examination of trade flows in the products targeted for restraint show that where the rate of increase of imports from China have been significant, this has been from a rather low base where such imports have been severely restricted by the residual quotas. Furthermore, increases in China’s import market share have generally been at the expense of countries which have benefited from quota free treatment and enjoyed tariff preferences under free trade regimes. These countries still enjoy significant preferential tariff margins averaging 15 to 20 per cent ad valorem, but on some items as high as 40 per cent. However, their exporters are often penalized by strict rules of origin that oblige them incorporate expensive yarns and fabrics from their developed trading partner, in order to benefit from duty free treatment.
As had been foreseen, the volume of China’s textiles and clothing exports of products previously subject to quotas increased in the first quarter of 2005, by 250 per cent in the United States and 82 per cent in the EU. However, the market share is small and still below what might have been expected in a fully unrestricted market. These imports have not adversely affected the production of garments in the Untied States, which in the first quarter of 2005 totalled 0.62 billion pieces, up 9.4 per cent compared with the fourth quarter of 2004. Growth was witnessed in products like women underwear, bras, blouses, skirts and etc.
China’s exports have increased but the data require scrutiny
The T-shirt Story
T-shirt imports into the EU illustrate this phenomenon. Before the liberalization of the quota restrictions, which were nearly fully utilized, imports from China accounted for only 7.6 per cent of the EU imports in 2003 and 6.7 per cent in 2004, much lower than that of Bangladesh (23.6 per cent and 26.4 per cent) and Turkey ( 20.3 per cent and 19.6 per cent) for the same two years.
After the removal of quotas, the EU imported 150 million T-shirts from China in the first quarter of 2005, an increase of 164 per cent. However, China’s share of the EU import market is still 17.6 per cent, much lower than Bangladesh (23.2 per cent).
The United States imports of T-shirts (categories 338 and 339) from China increased over the first quarter of 2005. However, China still accounts for a small share of the United States imports in these categories, between 3.64 and 5.44 per cent.
Furthermore, the limited experience from the earlier stages of liberalization under the ATC shows that removal of a quota is followed by an immediate surge of imports, a fleeting phenomenon, which subsequently subsides. For example, when the United States eliminated quotas on 13 categories of textiles products, and the EU on 31 categories in the third stage of ATC implementation, the response was an immediate surge in imports from China, however, import flows stabilize in light of the market signals.
Baby garments (category 68 in the EU) provide an example of this phenomenon. In 2002, China’s year-on-year export growth rate to the EU was 240 per cent in terms of volume. While in 2004, this figure dropped drastically to 10 per cent. In the United States market, China’s year-on-year export growth rate for all those liberalized categories was 317 per cent in terms of volume in 2002, 100 per cent in 2003 and only18 per cent in 2004.
The Cotton Trouser Story
The United States is currently seeking to impose discriminatory restraints on imports in more than ten categories of clothing of both cotton and man made fabrics. One of these is cotton trousers.
Over the first three months of 2005, while total imports into the United States of cotton trousers, measured in units of thousand dozen, increased slightly, from 151,619,000 to 156,134,000, imports from China increased from only 406,000 to 6,583,000 over the same period. Thus, while imports from China surged, this was from a very low base and China now has only 13 per cent of the market.
It is clear that the United States domestic industry has not been damaged, as imports have increased only slightly. The purpose of the restrictions seems to be to preserve the shares of preferential trading partners that serve as captive markets for the United States yarn and fabric exporters.
Furthermore, in their rush to impose restrictions against China, the importing countries have not taken the time to study the trade data carefully. For example, their figures from the first quarter of 2005 present a distorted picture of the evolution of imports of Chinese origin. The data for the first quarter of 2005 show an increase in imports from China, but also a substantial decrease of imports from Hong Kong, Macau and Chinese Taipei. These volume changes reflect the natural shift from more costly outward processing arrangements to total production in China.
Knowing that the quotas would be abolished on 31 December 2004, traders postponed shipments from the fourth quarter of 2004 into the first quarter of 2005. In addition, the traditional flexibilities permitted under quotas (e.g. “carry forward” ) were not available in the final year of the ATC. The anticipation that the EU and the United States would apply the transitional safeguard clause against China in the second quarter of 2005, prompted buyers to accelerate imports which otherwise would have taken place later in 2005. As a result, trade was artificially suppressed in 2004, and the figure for imports from China inflated for the first quarter of 2005.
China has acted to mitigate export growth
Despite the fact that these increases in market share had been foreseen and did not cause disorder in world trade in textiles and clothing, China took unilateral action to mitigate this growth by imposing export duties on textiles and clothing exports on 148 tariff lines at the 8-digit level, on 1 January 2005. More recently, on 20 May, the Tariff Committee of the State Council decided to increase export duties on 74 tariff lines at the 10-digit level. This voluntary measure was designed to stabilize exports and encourage Chinese enterprises to transform their pattern of export growth. These export duties were specific, not ad valorem, thus imposing a higher tax burden on cheaper products, in order to discourage exporters from increasing export volumes of low value added products.
China considered that this action would convince its trading partners of its seriousness in meeting the spirit of the transitional textiles safeguard clause. However, after the United States imposed restrictions against seven categories of the Chinese products and the EU initiated the cases against two Chinese products, the Chinese Government revoked the decision to levy export duties on 81 Chinese textiles products out of the total number of textiles products subject to export duties, in order to prevent the Chinese textiles exporters from being twice penalized. Export duties on the remaining, unrestricted products were kept in place.
China is not asking that its trading partners refrain from taking legitimate action to prevent their domestic industries from being injured by surges of imports of textiles, clothing or any other product. However, in future, such action should be taken under the WTO Agreement on Safeguards which does not permit discrimination against any one country, and sets out a clear set of procedures and economic criteria which have been clarified in a series of precedents under WTO.
China assists the poorer countries
As the final implementation of the ATC drew closer, protectionist interests in the major trading countries mounted an attack against China. Their approach emphasized not only the impact of unrestricted Chinese exports on their own domestic industries, but also on the exports of those poorer countries, where clothing industries had been set up as a response to the quota regime. Their strategy was to portray discriminatory restrictions against China as a “humanitarian” measure in defense of the interests of poor people, especially women, in the least developed countries.
The hypocrisy of this approach is quite evident. The United States does not extend preferential treatment to poor countries under its GSP scheme nor has it fulfilled its commitment to provide duty free treatment to all imports from the least developed countries, whose exports still pay high tariffs to enter the United States market. Furthermore, some poor countries in the process of acceding to WTO, still face quotas in the United States.
The EU does grant such duty free treatment, but the ability of the poorer countries to benefit has been hampered by stringent rules of origin, which result in little more than half of exports to the EU from Asian LDCs actually benefiting from the preferential treatment. However, experience in Canada has revealed that duty free access combined with reasonable rules of origin can provide the opportunity for poorer countries to dramatically expand their exports. Those with a genuine concern for the plight of garment workers in poor countries should lobby for the removal of tariffs against imports from these countries, accompanied by relaxed rules of origin and aid programmes to assist them in developing the quality and logistics necessary to compete in world markets. This approach has been suggested by the UNDP and other international organizations.
China has maintained a responsible attitude with respect to the least developed countries. On 19 January 2005, China granted free market access on 190 tariff lines for 25 least developed countries. China has been a key player in delivering technical assistance to the least developed countries in terms of offering training courses and transfer of technologies. China had written off debts of some least developed countries. China is helping the least developed countries to upgrade their textiles production and strengthen their competitiveness in the textiles and clothing sector. In the international arena, China also calls for the World Bank and the IMF to give more support to the textiles and clothing industry in the least developed countries.
A series of preferential policies has been implemented by the Chinese Government to encourage its textiles manufacturers to invest more in developing countries and the least developed countries. These measures include preferential loans, simplified administrative procedures, enhanced information and intelligence support as well as issuing a comprehensive investment catalogue for investing in textiles and clothing industry in Asia, Africa and Latin America's. China’s foreign investment in the textiles industry has reached US$500 million, mainly in developing countries.
Conclusions
China wishes to bring to the attention of its trading partners the importance that its textiles and clothing sector plays in China’s structural adjustment process and its integration into the international trading system. The healthy development of this sector provides employment not only to millions of Chinese, but to workers, farmers and professionals in many countries who provide it with raw materials, semi-finished products, capital goods and services. Against this background, China urges its trading partners, particularly the United States and the European Union, to demonstrate greater determination in resisting protectionist pressures for discriminatory restrictions against China.
In future, when governments find their industries threatened with injury from surges in imports, they should resort to the normal multilateral rules of the WTO, and not single out China as a scapegoat. They should follow established procedures for safeguard action and present accurate data collected over sufficient time to be credible. Discriminatory restrictions against China should not be used to preserve market shares that were acquired under the artificial regime which distorted trade in textiles and clothing for half a century, nor to favour those captive markets which have been carved out in textiles trade.
China recognizes that many poorer and least developed countries have benefited from the quota regime to establish export oriented clothing industries. These countries fear that the application of the normal trade rules may result in loss of markets and massive unemployment. China is opening its market to these countries as well as providing capital and technical assistance to assist them to upgrade their competitive capacities. However, all the major trading countries should meet their commitments to grant duty free, quota free treatment to the exports of the least developed countries, supported by relaxed rules of origin that enable them to effectively utilize these preferences.
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