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Textile tussle results in quotas

CHINA COMPROMISE: The U.S. reaches a deal with China that places quotas on import items including cheap shirts and pants.

Associated Press
Published November 9, 2005

WASHINGTON - China and the United States agreed Tuesday to a three-year pact to limit Chinese clothing and textile imports, a deal that will help the beleaguered U.S. industry but cost the average American family $10 to $20 annually in higher clothing bills.

Even with resolution of the textile fight, many trade issues remain, from theft of U.S. computer programs to Chinese manipulation of its currency. And with the trade deficit with China expected to approach a record $200-billion this year, the Bush administration will be under pressure to do more.

The biggest prize sought by American manufacturers is revaluation of the Chinese yuan, which U.S. companies contend is undervalued by as much as 40 percent. That makes Chinese goods cheaper in the United States and American goods more expensive in China.

The administration has been pressuring China and must report to Congress on the issue this month. Legislation that would impose 27.5 percent across-the-board tariffs on Chinese goods has wide support among lawmakers, but analysts believe the administration is likely to avoid branding China a "currency manipulator" in the upcoming report and will instead continue using diplomatic channels to get China to move faster.

"I don't think anything is going to happen in the short-term on currency," said Gary Hufbauer, a trade expert at the Institute for International Economics, a Washington think tank.

Hufbauer said he expected China would move in late December to allow the yuan to rise further in value against the dollar with promises to do more in the future. He said lawmakers who have been pushing the 27.5 percent tariffs will keep that measure alive next year as a way to bring further pressure on China.

The administration has been stepping up pressure on the issue of the copyright theft, asking China last month to outline the steps being taken to halt widespread piracy of American movies, computers software and music. U.S. officials said the information would be used to determine whether to file a formal World Trade Organization case against China.

The textile agreement was announced by U.S. Trade Representative Rob Portman and Chinese Commerce Minister Bo Xilai after a final round of talks in London.

Bo called it a "win-win" for both countries while Portman described it as a "very good agreement for the American worker." The agreement comes just 11 days before President Bush is scheduled to arrive in China for an official visit.

The deal will impose annual growth limits on 34 categories of clothing and textile imports through 2008 with the products deemed the most sensitive by American producers - trousers, shirts and underwear - subject to the smallest increases.

Hufbauer estimated that the restrictions will drive up clothing prices by between $3-billion to $6-billion annually, an amount that would translate into $10 to $20 higher bills for the average American family.

The administration was under heavy pressure to reach a deal from American clothing and textile manufacturers, who have lost 398,600 jobs - one-fourth of their work force - in the past five years.

Clothing imports from China have risen by 46 percent this year by volume since global quotas expired on Jan. 1.

To protect American workers, the administration had been reimposing quotas under a "safeguard" process that limited growth to 7.5 percent a year. However, the industry had to petition for this relief on a category-by-category basis and it had to be renewed each year.

The average annual increases for clothing under the agreement are 10 percent in 2006, 12.5 percent in 2007 and 15 percent to 16 percent in 2008. But because the agreement starts at a lower base, industry officials estimated it would amount to 4 percent larger shipments at the end of 2008 than under the safeguard process.

"U.S. textile and apparel manufacturing workers and their communities are big winners today," said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

[Last modified November 9, 2005, 00:39:17]

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