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Limiting China's Textile Exports: The Us's And Eu's Divergent Approaches



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Code : ITF0020

Year :
2005

Industry :General Business

Region : :USA Europe

Teaching Note: Not Available

Structured Assignment : Not Available

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Introduction: The removal of the textile quota4 on January 1st 2005 by theWTOaccording to theAgreement on Textile and Clothing (ATC)5 is considered as one of the major steps taken towards creating a free global market for textile. The removal of the quota also provided an opportunity to several textile-exporting countries from the developing countries like Bangladesh, Nepal, Sri Lanka and Honduras to increase their global market shares. Implementation of the ATC was followed by an increased focus of every textile exporting country on theUS and EU, the biggest andmost lucrative textilemarkets (The EU textilemarket was valued at $400billion in 2005 – the largest in theworld)6 in the world. By March 2005, Chinese textile started flooding the globalmarket at a price, which remained unmatched bymost other producers in the world [Exhibit 1]. Between January andMay 2005,whileChina’s clothing exports7 rose by 17.2%to $24.4 billion, the shipments of yarn and knitted items increased by 23%to $15.5 billion.8 McKinsey predicts that China’s share in the global apparel exportmarket would grow from 12%to 50%by 2008 when the actual value of apparel exports fromChina would increase by $72 billion to clock $126 billion.9 Between January to March, 2005, after the elimination of theMulti FibreAgreement (MFA),10 US import of Chinese textiles has increased by one-third,while there has been a 73%increase in the EU textile import. This huge surge of cheap Chinese textile and garments is creating a devastating impact on their textile sectors.WhileUSwitnessed 1200011 job losses in the textile sector after the elimination of the quota, among the EUnations, France lost 10,000 jobs due toChinese imports.

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