U.S.-China Trade
Textile Safeguard Procedures Should Be Improved Gao ID: GAO-05-296 April 4, 2005U.S. textile and apparel imports from China have more than doubled in value since China became a World Trade Organization (WTO) member. When joining the WTO, China agreed to a special textile safeguard mechanism applicable only to that country. In this report, GAO (1) describes the mechanism, (2) describes requests for safeguard action filed by U.S. producers and the results of these requests, and (3) evaluates U.S. agency procedures for transparency and accessibility.
The WTO China textile safeguard is a transitional mechanism that allows the United States and other WTO members to temporarily restrict growth in specific textile and apparel imports from China through the end of 2008 even though textile and apparel quotas in general were eliminated on January 1, 2005. The U.S. government's interagency Committee for the Implementation of Textile Agreements (CITA) has established procedures that explain to the public how it will consider safeguard action requests. These procedures stipulate that when requesting safeguard actions, producers must submit data on imports, market share, U.S. production, and additional information showing how imports from China have adversely affected U.S. industry or any other data deemed pertinent. CITA has applied safeguard quotas on specific products in response to 4 out of 5 U.S. industry requests that were based primarily on evidence of actual market disruption. Twelve threat-based requests remain unresolved. Procedural shortcomings have impaired effective application of the China textile safeguard. First, CITA's procedures created uncertainty about when, how, and under what circumstances it would consider threat-based requests. Seventeen months elapsed before CITA issued any procedures about the China textile safeguard, and the procedures did not clearly indicate how CITA would proceed in threat-based cases. Also, a court-ordered injunction prevents further government consideration of threat-based cases until litigation is resolved. GAO does not take any position on the legal issues involved. Regardless of the result, this situation will affect the speed, scope, and duration of potential relief available to U.S. producers who made these requests. Second, the unavailability of production data on about 20 percent of textile and apparel product categories--data that is necessary to fulfill CITA filing requirements--inhibits equal access to the safeguard. Beyond these issues, uncertainty about future developments in global textile trade makes the future impact of the safeguard unclear.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-05-296, U.S.-China Trade: Textile Safeguard Procedures Should Be Improved
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Report to Congressional Committees:
April 2005:
U.S.-China Trade:
Textile Safeguard Procedures Should Be Improved:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-296]:
GAO Highlights:
Highlights of GAO-05-296, a report to congressional committees:
Why GAO Did This Study:
U.S. textile and apparel imports from China have more than doubled in
value since China became a World Trade Organization (WTO) member. When
joining the WTO, China agreed to a special textile safeguard mechanism
applicable only to that country. In this report, GAO (1) describes the
mechanism, (2) describes requests for safeguard action filed by U.S.
producers and the results of these requests, and (3) evaluates U.S.
agency procedures for transparency and accessibility.
What GAO Found:
The WTO China textile safeguard is a transitional mechanism that allows
the United States and other WTO members to temporarily restrict growth
in specific textile and apparel imports from China through the end of
2008 even though textile and apparel quotas in general were eliminated
on January 1, 2005. The U.S. government‘s interagency Committee for the
Implementation of Textile Agreements (CITA) has established procedures
that explain to the public how it will consider safeguard action
requests. These procedures stipulate that when requesting safeguard
actions, producers must submit data on imports, market share, U.S.
production, and additional information showing how imports from China
have adversely affected U.S. industry or any other data deemed
pertinent.
CITA has applied safeguard quotas on specific products in response to 4
out of 5 U.S. industry requests that were based primarily on evidence
of actual market disruption. Twelve threat-based requests remain
unresolved.
Procedural shortcomings have impaired effective application of the
China textile safeguard. First, CITA‘s procedures created uncertainty
about when, how, and under what circumstances it would consider threat-
based requests. Seventeen months elapsed before CITA issued any
procedures about the China textile safeguard, and the procedures did
not clearly indicate how CITA would proceed in threat-based cases.
Also, a court-ordered injunction prevents further government
consideration of threat-based cases until litigation is resolved. GAO
does not take any position on the legal issues involved. Regardless of
the result, this situation will affect the speed, scope, and duration
of potential relief available to U.S. producers who made these
requests. Second, the unavailability of production data on about 20
percent of textile and apparel product categories”data that is
necessary to fulfill CITA filing requirements”inhibits equal access to
the safeguard. Beyond these issues, uncertainty about future
developments in global textile trade makes the future impact of the
safeguard unclear.
Share of $12 Billion in U.S. Imports from China Subject to Safeguards
or Requests:
[See PDF for image]
[End of figure]
What GAO Recommends:
If the courts rule that CITA may process threat-based cases, GAO
recommends that CITA clarify its procedures for such cases.
GAO also recommends that the Commerce Department take actions to make
production data more available for industry sectors that are at risk of
experiencing disruptive import surges.
Agency officials did not comment on the first recommendation due to
ongoing litigation but had concerns about the descriptions of CITA
procedures. Agency officials disagreed with the second recommendation,
stating that such actions would not be productive. GAO made some
revisions in response, but continues to believe that the
recommendations would make the textile safeguard more transparent and
accessible.
www.gao.gov/cgi-bin/getrpt?GAO-05-296.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Loren Yager at (202) 512-
4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
China Textile Safeguard Permits Control over Surging Imports:
CITA Has Applied Market-Disruption-Based Safeguards but Threat-Based
Requests Remain Unresolved:
Procedural Shortcomings Have Impaired Application of China Textile
Safeguard:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Paragraph 242 of the Working Party Report on China's
Accession to the WTO:
Appendix III: Summary of CITA Determinations on Market-Disruption-Based
Requests to Date:
Appendix IV: Textile and Apparel Products Imported from China for Which
U.S. Production Data Are Unavailable:
Appendix V: Threat-Based Requests for Safeguard Action Filed by U.S.
Producer Groups, 2004:
Appendix VI: Comments from the Committee for the Implementation of
Textile Agreements:
GAO Comments:
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Summary of Import Data for Product Categories for Which U.S.
Production Data Are Unavailable:
Table 2: Import Data for Product Categories for Which U.S. Production
Data Are Unavailable:
Figures:
Figure 1: U.S. Production (Shipments) in Textile and Apparel Sectors,
1995-2004:
Figure 2: U.S. Domestic Textile and Apparel Employment, 1995-2004:
Figure 3: U.S. Textile and Apparel Imports from All Countries, 1995-
2004:
Figure 4: U.S. Textile and Apparel Imports from China, 1995-2004:
Figure 5: CITA Timeline for Taking Action on Textile Safeguard Requests
Figure 6: Share of U.S. Imports from China Subject to Safeguards or
Requests:
Figure 7: Monthly Brassiere Imports from China, January 1999 to
December 2004:
Figure 8: Comparison of Timelines for Actual Threat-Based Request with
Possible Market-Disruption-Based Request:
Figure 9: Sock Imports from China, January 1999 to December 2004:
Figure 10: U.S. Imports of Textile and Apparel from India, Pakistan,
and Vietnam, 1995-2004:
Abbreviations:
CITA: Committee for the Implementation of Textile Agreements:
OTEXA: Office of Textiles and Apparel:
WTO: World Trade Organization:
Letter April 4, 2005:
The Honorable Frank R. Wolf:
Chairman:
The Honorable Alan B. Mollohan:
Ranking Minority Member:
Subcommittee on Science, State, Justice and Commerce, and Related
Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable Richard C. Shelby:
Chairman:
The Honorable Barbara A. Mikulski:
Ranking Minority Member:
Subcommittee on Commerce, Justice, and Science:
Committee on Appropriations:
United States Senate:
Concern about textile and apparel imports from China has increased over
the last several years as the 50-year-old global quota system that
regulated trade in this industry was phased out and finally terminated
on January 1, 2005. Since China joined the World Trade
Organization[Footnote 1] (WTO), U.S. imports of textile and apparel
products from that country have grown rapidly in value from about $7
billion in 2001 to about $15 billion in 2004[Footnote 2] and may
increase further now that all remaining quotas have been removed.
In anticipation of China's joining the WTO, the United States sought
and obtained that country's agreement to a textile safeguard that
allows WTO members to impose temporary quotas on Chinese-origin textile
and apparel imports--thus permitting the United States to limit
disruptive import surges in ways consistent with long-standing U.S.-
China bilateral arrangements. The United States and China originally
agreed on the safeguard language in the negotiations that led to
Congress granting China permanent normal trade relations status and
cleared the way for that country to become a member of the WTO.
Relevant U.S. government agencies have received requests for relief
from U.S. industry and have applied safeguard measures. However,
domestic producers and importers of textile and apparel products have
expressed some concerns about the procedures the United States has
employed for China textile safeguard cases.
In May 2003, the House Appropriations Committee's Subcommittee on
Commerce, Justice, and State, the Judiciary, and Related Agencies held
hearings regarding U.S. government efforts to support American
businesses adversely affected by imports from China. In light of
concerns expressed at this hearing, the House-Senate conference report
on fiscal year 2004 appropriations legislation[Footnote 3] requested
that GAO monitor the efforts of U.S. government agencies responsible
for ensuring free and fair trade with China. In subsequent discussions
with your staff, we agreed to respond by providing a number of reports
on relief mechanisms available to U.S. producers that are adversely
affected by unfair or surging imports, and the manner in which they
have been applied to China.[Footnote 4] In this report, we:
* describe the China textile safeguard,
* describe the requests for safeguard action filed by domestic industry
and the results of these requests, and:
* evaluate agency procedures for transparency and access to safeguard
measures and identify additional issues that may affect application of
such measures in the future.
To address the first objective, we reviewed U.S. laws and procedures as
well as relevant WTO agreements. We interviewed officials from the five
member agencies of the U.S. government's Committee for the
Implementation of Textile Agreements (CITA), as well as WTO officials
and other experts on trade law.
To address the second and third objectives, we obtained and analyzed
relevant information from both governmental and private sector sources.
We reviewed the official record on each of the safeguard requests that
CITA had considered as of the end of 2004. To clarify the views of
those favoring and opposing application of safeguard measures, we spoke
with officials from trade associations representing U.S. textile and
apparel producers, as well as importers and retailers. We interviewed
Chinese government officials and, to obtain a broader perspective on
global textile trade in a postquota environment, spoke with
representatives of additional textile and apparel exporting and
importing countries. Finally, we conducted extensive analyses of
textile and apparel trade and economic data. We performed our work from
January 2004 to January 2005 in accordance with generally accepted
government auditing standards. Appendix I contains a more detailed
description of our scope and methodology.
Results in Brief:
The China textile safeguard allows WTO members to place defined limits
on particular textile and apparel imports from China through the end of
2008, despite the general elimination of most textile quotas on January
1, 2005. When a member finds that certain Chinese-origin imports are
"due to market disruption, threatening to impede the orderly
development of trade" in these products, it may request consultations
with China and, at the same time, impose specific quota
limits.[Footnote 5] When requesting consultations, the importing member
provides China with a statement showing the existence or threat of
market disruption and the role of Chinese imports in that disruption or
threat. If the two members cannot agree on another solution, the quota
limits remain in place. In the United States, the interagency Committee
for the Implementation of Textile Agreements (CITA) has adopted
procedures that explain the process it follows in considering safeguard
action requests from the public. CITA's procedures stipulate that
requests must include import, market share, and U.S. production data,
and additional information showing how imports from China have
adversely affected the domestic industry, such as their effect on
prices in the United States, or any other data deemed to be pertinent.
They also establish a 15-week approximate time frame for deciding
whether to impose safeguard measures. The duration of any safeguard
applied can vary a great deal--from 3 months to a year--depending on
when U.S. producers submit their requests.
During 2003 and 2004, U.S. producer groups claimed market disruption
and requested safeguard actions against five Chinese products,
including brassieres and dressing gowns. In 4 of these cases, CITA
determined, among other things, that the market had been disrupted and
that Chinese imports had played a role in that disruption, and applied
safeguard measures. During 2004, U.S. producers also filed 12 "threat-
based" requests for safeguard action to prevent future market
disruption. In 9 of these requests, U.S. producers sought action to
control expected growth in products to be removed from quota
restrictions on January 1, 2005. In the remaining 3 instances, U.S.
producers requested reapplication of previously imposed safeguards
slated to expire in December 2004 on the grounds that this expiration
threatened a renewal of disruptive import surges. CITA agreed to
consider these 12 requests and began investigating. Decisions on these
cases were due beginning in February 2005, but have remained unresolved
due to a pending lawsuit against CITA by U.S. textile and apparel
importers.
Procedural shortcomings have impaired application of the China textile
safeguard. First, we found that CITA was slow to issue procedures and
that the procedures do not provide clear guidance about threat-based
requests. The procedures were not issued until about 17 months after
China joined the WTO and after producer groups requested safeguard
actions. When issued, the procedures focused primarily on market-
disruption-based requests. U.S. importers and producers that we
consulted in preparing this report experienced uncertainty about
whether or how threat-based cases would proceed. In December 2004, U.S.
importers filed a lawsuit to prevent CITA from considering these threat-
based requests, alleging that CITA violated its own procedures in
accepting them. The Court of International Trade has enjoined CITA from
considering threat-based requests pending further judicial review.
Regardless of the result, this situation will affect the speed, scope,
and duration of potential relief available to U.S. producers. Second,
we found that uneven availability of production data hinders access to
the safeguard. U.S. government production data are unavailable on about
half of the total value of textile and apparel imports from China. In
the event that producer groups want to file a safeguard request on a
product for which production data are unavailable, they must collect
their own data to meet the safeguard filing requirements. This can be a
difficult and time-consuming process that limits access to the
safeguard for some U.S. producers.
We recommend (1) CITA take actions to clarify its procedures about how
it will proceed in threat-based cases in the event that the courts rule
that CITA may process such cases and (2) the Department of Commerce
take actions to improve the availability of required U.S. production
data for industry sectors that are most likely to experience
difficulties due to Chinese import surges. The Department of Commerce,
in its capacity as CITA chair, compiled comments from the other member
agencies into one letter. With respect to our first recommendation,
CITA noted that our review focused on issues involved in the ongoing
litigation, and, per a Department of Justice request, it could not
comment on certain parts of the report. Nevertheless, CITA expressed
concern about how we described the timing of issuance and content of
CITA procedures as they relate to threat-based requests. CITA also
expressed concern that some of our conclusions in the report seemed to
be premised on the arguments of private parties in ongoing litigation.
Our report does not take any position on the legal issues that are the
subject of the ongoing litigation between the U.S. Association of
Importers of Textiles and Apparel and the United States, including
whether CITA's procedures allow for threat-based cases. Nevertheless,
we continue to believe the procedures could be improved in this regard
to further increase clarity and transparency. We believe the report's
conclusions represent a balanced summation of the facts, based on our
own analysis of evidence obtained from both government and private-
sector sources. CITA disagreed with our second recommendation believing
that it would not be productive. Additionally, CITA officials pointed
out some constraints in making more production data available. We
modified our discussion of unavailable production data and our
recommendation to reflect some of the limitations in the publication of
U.S. government production statistics. However, we continue to be
concerned that some potential requesters may be disadvantaged in the
future in light of the potential difficulties associated with private
production data collection.
Background:
U.S. textile and apparel production and employment have both declined
over the past decade. Textile and apparel imports have grown throughout
this period, with China recently playing a major role in this growth.
Until recently, CITA limited this growth by administering quota limits,
including limits on imports from China. However, with the final removal
of all quotas on January 1, 2005, textile and apparel trade is now
governed by the same WTO rules as apply to trade in other sectors.
U.S. Textile Production and Employment Have Declined:
U.S. textile and apparel production and employment have both declined
over the last decade. Production of apparel (and textiles to a lesser
extent) tends to be relatively labor intensive. Consequently,
developing countries, which tend to have significantly lower labor
costs, have a competitive advantage. As shown in figure 1, U.S.
producers' shipments of apparel products fell by over half between 1995
and 2004, to about $56 billion in 2004. Similarly, shipments by textile
mills (yarns, threads, and fabrics) fell by about a third, to about $41
billion. On the other hand, textile product mills (carpets, curtains,
bedspreads) remained relatively stable over the time period, with about
$38 billion in shipments in 2004.[Footnote 6]
Figure 1: U.S. Production (Shipments) in Textile and Apparel Sectors,
1995-2004:
[See PDF for image]
Notes: Industry shipments may be made to either the U.S. or foreign
(export) markets.
Textile mills produce inputs such as yarns, threads, and fabrics.
Textile product mills produce goods such as carpets, curtains,
bedspreads, and other textile products besides apparel (clothing).
[End of figure]
Figure 2 shows U.S. employment losses in this industry are also largely
attributable to declines in the apparel sector. From 1995 through 2004,
overall employment in this industry fell by over half, from about
1,502,000 employees in 1995 to about 701,000 in 2004. During that time,
the apparel sector lost 65 percent of its employment, while the textile
mills sector contracted by 49 percent and the textile product mills
sector contracted by 19 percent.
Figure 2: U.S. Domestic Textile and Apparel Employment, 1995-2004:
[See PDF for image]
Note: Textile mills produce inputs such as yarns, threads, and fabrics.
Textile product mills produce goods such as carpets, curtains,
bedspreads, and other textile products besides apparel (clothing).
[End of figure]
Textile and Apparel Imports Have Grown, Especially from China:
As shown in figure 3, U.S. imports of textile and apparel products from
all countries have grown significantly in the past decade, rising from
about $44 billion in 1995 to about $83 billion in 2004.[Footnote 7]
While other U.S. trade partners, such as Mexico, accounted for much of
this growth in earlier years, imports from China grew rapidly following
its accession to the WTO in 2001. As shown in figure 4, the value of
U.S. textile and apparel imports from China grew from about $5 billion
in 1995 to about $15 billion in 2004, with much of that growth
occurring since 2001. While China's share of the U.S. textile and
apparel market fell during the late 1990s, that country's share of the
market increased from about 9 percent in 2000 to 18 percent in 2004.
Much of that growth was in categories of products that were already
removed from quota or were removed from quota in 2002. China is now the
largest supplier of textile and apparel imports to the United States.
Figure 3: U.S. Textile and Apparel Imports from All Countries, 1995-
2004:
[See PDF for image]
[End of figure]
Figure 4: U.S. Textile and Apparel Imports from China, 1995-2004:
[See PDF for image]
[End of figure]
Import Growth No Longer Subject to Regulation by Quota:
Until recently, the United States governed growth in textile imports
through a system of quotas established through approximately 45
bilateral agreements with individual supplier countries. In 1994,
however, the United States (as well as Canada and the European Union,
which also maintained broad-ranging quota arrangements) agreed in the
WTO Agreement on Textiles and Clothing to remove these quota
restrictions in a series of stages beginning on January 1, 1995, and
ending with the removal of all remaining quotas on January 1,
2005.[Footnote 8] Now textile and apparel trade is subject to the same
WTO rules that apply to trade in other sectors.[Footnote 9]
China and the United States signed their first textile and apparel
agreement in 1980. As China became a major exporter of textiles and
apparel in the 1990s, these agreements came to be regarded as important
means for restraining import growth and providing U.S. producers with
an opportunity to adjust to trade liberalization in the textile and
apparel sector. Upon China's accession to the WTO, the United States
began removing quotas on Chinese textile and apparel products in
accordance with the terms of the 1994 Agreement on Textiles and
Clothing. Nonetheless, a majority of all imports from China remained
subject to quota limits through January 1, 2005. The final step in
quota removals ended quota restrictions on about 62 percent ($7
billion) of U.S. textile and apparel imports from China.
Interagency Committee Oversees Implementation of Textile Agreements:
Congress has granted the President broad authority to regulate U.S.
imports of textiles and apparel.[Footnote 10] By executive order, the
President, in turn, established and delegated authority for
implementing textile agreements to CITA--an interagency committee
chaired by the Department of Commerce.[Footnote 11] Other CITA member
agencies are the Departments of Labor, State, and the Treasury and the
Office of the United States Trade Representative. Under the executive
order, the committee chair takes action necessary to implement textile
trade agreements after notifying the other CITA agencies, but if a
majority of these agencies object within 10 days, the action may not be
taken. While the end of the quota system has altered CITA's role, CITA
continues to administer a number of U.S. textile and apparel import
programs, such as quota arrangements with non-WTO members.
China Textile Safeguard Permits Control over Surging Imports:
The purpose of the China textile safeguard is to limit surging imports
and foster the orderly development of trade in textiles and apparel
from China. Safeguards are import restrictions, normally of limited
duration and extent, that provide an opportunity for domestic
industries to adjust to increasing imports. The China textile safeguard
permits WTO members, including the United States, to temporarily
restrict growth in specific imports from China even though textile and
apparel quotas in general have been eliminated. The safeguard is
transitional in nature in that it may be applied only through the end
of 2008. CITA, an interagency group chaired by Commerce, has published
procedures that explain the process it follows in considering safeguard
action requests from the public.
WTO China Textile Safeguard Permits Application of Quota Limits:
China's WTO accession agreement contains a textile safeguard that
allows WTO members, including the United States, to impose time-limited
restrictions on the growth of specific textile and apparel imports from
China. (See app. II for complete text). When a member finds that
imports of specific textile and apparel products from China are "due to
market disruption, threatening to impede the orderly development of
trade" in such products, it may request consultations with China, and
at the same time impose quota limits. When making such a request, the
member is required to provide China with a detailed statement of
reasons and justifications that demonstrates the existence or threat of
market disruption and the role of Chinese imports in that disruption.
Unless China and the importing country reach agreement on another
satisfactory solution within 90 days, the quotas remain in place.
The terms of China's accession agreement define the scope and duration
of relief. In the absence of a bilateral agreement on some other
solution, the importing member can generally limit growth in relevant
Chinese imports to 7.5 percent above the level imported during the
first 12 months of the previous 14-month period.[Footnote 12] The term
of any quota begins on the date of the request for consultations with
China and ends on December 31 of the same year. When 3 or fewer months
remain in the year at the time of the request for consultations, the
quota ends 12 months after the request date. No quota may remain in
effect longer than 1 year without reapplication, unless the member and
China agree otherwise.
The China textile safeguard can only be applied through the end of
2008. After that, WTO members concerned about the effects of rapidly
increasing or unfairly traded Chinese-origin textile and apparel
products will have to rely on other import relief mechanisms. Other WTO
agreements (and U.S. law) provide a number of possible alternatives,
including other safeguard mechanisms and antidumping duties.
CITA Has Established Procedures for the Safeguard:
In May 2003, CITA published procedures that explain to the public how
it will consider safeguard action requests.[Footnote 13] These
procedures inform producers of the information they must submit when
requesting action, describe U.S. producers' standing to submit such
requests, and establish time frames for processing requests and putting
safeguard measures, if any are found appropriate, into place.
CITA determined that these procedures fall outside the rule-making
provisions that apply to most federal agencies under the Administrative
Procedure Act because they pertain to foreign affairs. Therefore, CITA
did not provide the public with an opportunity to comment on the
procedures prior to issuing them.[Footnote 14]
Requesters Must Provide Import, Market Share, and U.S. Production Data:
To obtain the information needed to determine whether a safeguard
action is justified, CITA's procedures stipulate that those requesting
such actions must submit (1) import and market share data from all
foreign and domestic sources and from China in particular, (2) U.S.
production data, and (3) additional information that shows how imports
from China have adversely affected the domestic industry, such as their
effect on prices in the United States "or any other data deemed
pertinent." The import data "should demonstrate that imports of [the
subject] Chinese origin textile and apparel product[s] . . . are
increasing rapidly in absolute terms."
The relevant language in China's WTO accession agreement neither
defines "market disruption" or "orderly development of trade" nor
establishes any criteria for making determinations on these matters.
CITA's procedures also do not provide any specific criteria or
benchmarks. CITA officials informed us that in considering whether
safeguard action is warranted, they typically consider a wide range of
factors to determine whether imports from China are playing a role in
any actual market disruption or threat thereof. Those factors usually
include the following: (1) all U.S. imports of the products in
question, (2) the quantity of imports from China, (3) the extent to
which imports of the product are increasing relative to other imports,
(4) pricing and average unit values of U.S. imports from China relative
to imports from the rest of the world, (5) the degree to which U.S.
production is declining, and (6) trends in the share of the market held
by imports from China and by the world.
CITA Proceedings Designed to Take about 15 Weeks:
The process for determining whether to impose a safeguard has three
phases. First, CITA procedures provide 15 business days to review
safeguard requests and determine whether the request provides the
information necessary for consideration. Second, if CITA determines
that the request provides the information required, it publishes in the
Federal Register a notice seeking public comments within 30 calendar
days. For example, U.S. importers opposing a safeguard can submit
information that contradicts the requester's claims. Finally, CITA then
has up to 60 calendar days after the close of the comment period to
decide on the merits of a request.[Footnote 15] After any positive
finding of market disruption or threat thereof, CITA requests
consultations with China and, as set forth in China's WTO accession
agreement, provides that country with a "detailed factual statement of
reasons and justifications" that shows "the existence or threat of
market disruption" and the role that Chinese products have played in
that disruption. At the same time, CITA notifies the public via a
Federal Register notice, and announces quotas on the subject imports
from China. The quotas remain in place unless consultations between
U.S. and Chinese officials yield an alternate agreement. As shown in
figure 5, the entire process is designed to take up to about 15 weeks.
Figure 5: CITA Timeline for Taking Action on Textile Safeguard
Requests:
[See PDF for image]
[End of figure]
Duration of Relief Depends on When Industry Files Case:
Under CITA procedures, and as outlined in China's WTO accession
agreement, import limits are effective from the date that the U.S.
requests bilateral consultations to December 31 of the same calendar
year. However, if 3 or fewer months remain in the year at the time of
the request for consultations, the limit can be applied for one year
from the consultation request date. Therefore, the length of time that
safeguard measures remain in effect can vary by months, depending on
when industry requests application and when CITA requests
consultations. For example, if U.S. producers submit their request to
CITA in mid-June, and CITA subsequently requests consultations in late
September, safeguard measures can only remain in effect for a little
over 3 months (that is, until the end of the calendar year in
question). However, if producers wait until mid-July to submit their
request, such that CITA initiates consultations with China in October,
measures imposed may remain in effect until the following October--or
for 12 months.
CITA procedures allow producer groups to request reapplication of
safeguard measures. However, the procedures specify that CITA will
reapply safeguards only in the event of a new determination that
Chinese imports are, due to market disruption, threatening to impede
the orderly development of trade.[Footnote 16] The timeline for
processing reapplication requests is the same as for initial safeguard
requests.
CITA Procedures Grant Standing to Producers of Finished Goods and
Components:
CITA procedures give broad standing to producers of both finished goods
(e.g., garments) and components (e.g., fabric) to submit requests for
safeguard actions. Requests may be filed by an entity that represents
either (1) domestic producers of a product "like or directly
competitive with" the Chinese textile or apparel product or (2)
domestic producers of a component used in such a product. CITA
officials explained that component producers have long had standing to
request imposition of quota restrictions on textile and apparel
products. CITA officials explained that although component producers
may request safeguard actions, the data they submit in support of their
request must address the subject Chinese imports. Entities eligible to
file a request include trade associations, firms, and certified or
recognized unions or groups of workers in relevant industries. CITA
itself may also initiate a safeguard action.
Over the last two decades, U.S. producers of apparel have come to rely
heavily on outward processing arrangements. In such arrangements, U.S.
factories focus on the relatively capital-intensive operations, such as
fabric production. These fabrics and components are then shipped to
Caribbean, Andean, or African countries that participate in certain
U.S. trade preference programs.[Footnote 17] Factories in these
countries conduct the relatively labor-intensive business of assembling
the fabric and other components into finished garments.
CITA Has Applied Market-Disruption-Based Safeguards but Threat-Based
Requests Remain Unresolved:
During 2003 and 2004, CITA applied safeguard measures on four Chinese-
origin products that had previously been freed from quota limits, based
on evidence of both actual market disruption and the threat of
continued market disruption. As shown in figure 6, these products
accounted for about 7 percent of U.S. imports of textile and apparel
products from China.[Footnote 18] More recently, producers groups have
filed threat-based requests for safeguard action on a number of
products, alleging that there would be disruptive import surges once
quotas on those products expired on January 1, 2005. The main
difference between the market-disruption-based requests and threat-
based requests is that the market-disruption-based requests allege that
market disruption has occurred and that Chinese imports have played a
role in that disruption, whereas the threat-based requests allege that
market disruption will occur in the future and that Chinese imports
will play a role in that disruption. Figure 6 shows that these threat-
based requests account for an additional 11 percent of U.S. imports of
textile and apparel products from China.[Footnote 19] These requests
remain unresolved pending resolution of a lawsuit, filed by U.S.
importers, that opposes CITA's processing of threat-based requests.
Figure 6: Share of U.S. Imports from China Subject to Safeguards or
Requests:
[See PDF for image]
Note: Share of approximately $12 billion in U.S. imports of textile and
apparel products from China is based on 2003 import statistics. Shares
do not equal 100 percent due to rounding.
[End of figure]
Safeguards Applied in Four of Five Market-Disruption-Based Requests:
U.S. producer groups requested that CITA impose safeguards on imports
of knit fabric, brassieres, robes and dressing gowns, and gloves from
China in July 2003, and in June 2004 they requested safeguards on socks
from China as well.[Footnote 20] Almost all of these products had been
removed from quota protection well in advance of the requests for
relief--either when China joined the WTO in December 2001 or shortly
thereafter in January of 2002.
In four out of these five cases, CITA imposed 7.5 percent growth limits
on relevant imports from China, as provided in China's WTO accession
agreement, and these limits remained in place when U.S.-China
consultations failed to produce agreement on any alternate solution. In
each case, CITA determined that U.S. markets for the products in
question had been disrupted and that imports from China had played a
significant role in this disruption. In each case, CITA also
determined, based on a number of factors, that the subject Chinese
imports posed a threat of further market disruption in the future.
First, CITA found that China had a significant capacity to export
textile and apparel products. Second, CITA found that the prices of
textile and apparel products from China were lower than the average
prices from other supplier countries. Third, CITA noted that since the
U.S. removed quotas on these products, trends in prices, production,
and imports had changed markedly. Consequently, CITA determined that
without action, the trends would continue. CITA also considered the
imports of the subject products to be increasing dramatically. Finally,
CITA noted significant Chinese investment in its textile and apparel
industry. See appendix III for more detail on each of the four CITA
determinations.
CITA refused to consider the fifth case--a July 2003 market-disruption-
based request concerning knit and woven, cotton and man-made fiber
gloves--because (1) woven gloves were still subject to product-specific
quotas under the Agreement on Textiles and Clothing[Footnote 21] and
therefore would already be subject to limits during the period of
safeguard relief, and (2) the production data provided by the requester
were from 2001, and 2002 data were to be released shortly. As of March
2005, however, U.S. producers have not filed an updated request.
Threat-Based Requests Remain Unresolved:
In the last three months of 2004, U.S. producer groups filed 12 threat-
based requests. Nine of the threat-based requests focused on products
that would be removed from quota restrictions on January 1, 2005. These
included cotton trousers, man-made fiber knit shirts/blouses, cotton
knit shirts/blouses, man-made fiber trousers, man-made fiber shirts
(not knit), and man-made fiber underwear. The remaining three requested
reapplication of safeguard restrictions on knit fabric, brassieres, and
dressing gowns on the grounds that disruptive imports of these products
would resume when previously imposed restrictions ceased to apply in
December 2004.
CITA agreed to consider these 12 threat-based requests, but has not yet
completed action on them.[Footnote 22] CITA had been scheduled to
decide upon all of them between February and March 2005. However, as a
result of a December 30, 2004, court-ordered injunction (described
below) granted in response to a motion by importers, CITA is not
permitted to process threat-based requests until judicial review of its
authority to impose safeguards in such cases has been completed.
Therefore, these cases remain unresolved.
Procedural Shortcomings Have Impaired Application of China Textile
Safeguard:
Although CITA has completed action on several textile safeguard
requests and U.S. producers have received relief, procedural
shortcomings have impaired use of the safeguard. First, we found that
CITA was slow in issuing its procedures and a lack of clarity in those
procedures created uncertainty about when, how, and under what
circumstances CITA would consider threat-based requests and that this
uncertainty resulted, and continues to result, in decisions being
delayed while imports from China increase. Second, we found that the
lack of production data on some textile and apparel products--data that
is necessary to fulfill CITA filing requirements--has inhibited equal
access to the safeguard. Beyond these issues, uncertainty about future
developments in global textile trade makes the future impact of the
China textile safeguard unclear.
Procedural Shortcomings Created Uncertainty:
U.S. producers considering requests for safeguard action and U.S.
importers of textiles and apparel that might oppose such safeguards
have faced uncertainty because CITA was slow in issuing procedures and
a lack of clarity in those procedures. A significant period of time
elapsed before CITA issued procedures for the China textile safeguard,
substantially delaying action on the initial market-disruption-based
requests. Once issued, CITA's procedures were unclear about whether or
how it would proceed on threat-based requests. The uncertainty
surrounding threat-based cases has resulted in a court-ordered
injunction preventing action on these requests and created additional
delays--both for those interested in seeking safeguard actions and
those seeking a clear determination that such actions should not be
taken.
CITA Slow to Issue Procedures:
CITA issued procedures about the textile safeguard contained in China's
WTO accession agreement approximately 17 months after China joined the
organization. Until these procedures were issued, it was not clear
when, how, or under what circumstances CITA would consider safeguard
action requests from the public.
China's WTO accession agreement, which became effective December 11,
2001, outlined some aspects of the safeguard mechanism, but did not
fully explain what or how much information national authorities should
consider in deciding whether to apply safeguards. Member governments
were left to clarify such matters.[Footnote 23] Even though CITA had
not yet provided any guidance, in September 2002 U.S. trade
associations representing textile manufacturers requested application
of safeguards against Chinese knit fabric, gloves, dressing gowns,
brassieres, and luggage. CITA did not act on these requests.
In May 2003 CITA issued procedures describing the information that it
would require in order to consider safeguard requests. U.S. producers
of knit fabric, gloves, dressing gowns, and brassieres subsequently
refiled their requests,[Footnote 24] and CITA applied safeguards on
these products (except gloves) in December 2003--15 months after these
industry groups had originally requested action. Imports of some of
these products grew significantly during the intervening months. Figure
7, for example, shows that imports of Chinese-origin brassieres
increased by about half between the first and second industry filings.
Figure 7: Monthly Brassiere Imports from China, January 1999 to
December 2004:
[See PDF for image]
[End of figure]
Commerce officials pointed out that the procedures issued for the China
textile safeguard marked the first occasion that CITA had published
guidance on how it would consider requests for new quota restraints.
They noted that because CITA had not had this level of transparency in
the past when administering the wide-ranging U.S. textile quota system,
the procedures took longer than might be expected to prepare.
Additionally, CITA officials indicated that the procedure of soliciting
comments prior to requesting consultations and imposing limits was also
unprecedented. Previously, CITA put out notices for public comment only
after delivering a request for consultations to establish a quota.
Procedures Unclear on Threat-Based Requests for Safeguard Action:
CITA's China textile safeguard procedures are not clear on how it will
proceed in threat-based cases. CITA officials told us that the
procedures utilize the WTO language through which members can request
consultations on the existence as well as threat of market disruption.
However, the procedures focus on market-disruption-based requests. For
example, they state that a request will only be considered if it
includes specific information set forth in support of a claim of market
disruption. Similarly, the procedures state that reapplication will
only take place if CITA makes a new affirmative market disruption
determination. They also specify that the import data submitted with a
request "should demonstrate that imports of Chinese-origin textile and
apparel products that are like or directly competitive with the product
produced by the domestic industry concerned are increasing rapidly in
absolute terms."
By their nature, threat-based cases will not rely on information
claiming that market disruption has already taken place, but rather
will focus on prospects for future market disruption. This was
demonstrated in the requests filed by U.S. producers in the fall of
2004. Although import data demonstrating that a rapid increase has
already occurred have been important in CITA's determinations in market-
disruption-based requests, they would not be expected to be as
important for threat-based requests. In fact, a majority of the threat-
based requests made in late 2004 asserted that imports were unlikely to
increase rapidly until 2005 because these products had, until recently,
been subject to quotas that made substantial import increases
improbable.[Footnote 25]
In the absence of formal guidance, U.S. producers requesting threat-
based actions submitted information on such matters as China's
productive capacity, performance in other apparel categories already
removed from quota, price behavior of products removed from quota, and
information about alleged unfair trade practices in China. CITA's
procedures do not specifically call for any of these types of
information, but requesters are allowed to submit other information
deemed pertinent.
CITA Officials Accepted Threat-Based Requests and Announced Indicative
Factors:
CITA officials emphasized that China's accession agreement provides for
taking safeguard actions on the basis of threat. These officials
further explained to us that their procedures do not preclude U.S.
producers from requesting safeguard action solely on the basis of
threatened market disruption. Therefore, even if U.S. procedures do not
focus on threat, CITA may still consider requests on that
basis.[Footnote 26] Finally, administration officials maintained that
they were under no obligation to issue procedures and can independently
consider safeguard measures based upon the government's best
information and judgment.
Although CITA's procedures do not clearly describe the information that
requesters should submit in support of threat-based requests, Commerce
officials observed that the Federal Register notices requesting public
comment on threat-based requests have indicated the types of
information that CITA would take into consideration in determining
whether safeguard actions should be applied. These notices requested
that interested parties submit information as to:
* whether Chinese imports are entering the market at prices
substantially below the prices of the equivalent U.S. product and
whether the Chinese imports will likely depress prices of the U.S.
product;
* whether Chinese imports are likely to rise due to increasing
production capacity in China;
* whether there will be an imminent diversion of Chinese-origin
products and other third markets to the United States;
* changes in inventory levels of the Chinese-origin products in
question;
* the extent to which conditions in the domestic industry demonstrate
that market disruption is likely (e.g., factory closures or production
declines); and:
* whether U.S. managers, retailers, purchasers, importers, or other
market participants have recognized Chinese producers as potential
suppliers.
CITA officials noted that these factors are indicative but not
necessarily determinative. Moreover, they have not been integrated into
their official procedures.
Some U.S. Importers and Producers Experienced Uncertainty about Threat-
Based Requests:
In July 2004, a number of producers and producer associations observed
that CITA had thus far refused to consider threat-based requests for
safeguard action even though, in the associations' view, WTO rules
allowed consideration of such requests. One industry representative at
the time stated: "Specifically, the U.S. textile industry has asked the
administration to recognize that China poses a severe threat to the
domestic textile industry and to use appropriate safeguard actions, as
allowed under WTO rules. To date, the administration has refused to
consider safeguard actions before the actual occurrence of damage in
the marketplace." In concert with other organizations, the same
industry association subsequently filed a number of threat-based
requests for safeguard action in early October 2004.
In opposing CITA's decision to accept these requests and initiate
investigations as to whether safeguards should be applied, one
association representing importers argued that the administration had
changed its position on threat-based requests. The importers contended
that administration officials had informally indicated to them that the
safeguard was intended for market-disruption-based requests as opposed
to threat-based requests. In addition, the association observed that
when CITA decided to consider threat-based requests, it did not modify
its procedures or make a formal announcement to reflect the change in
its position.
Court Suspends CITA Consideration of Threat-Based Requests:
Uncertainty over threat-based cases and the disagreement that ensued
between U.S. textile importers and the administration led to a court
order that CITA may not consider threat-based requests, pending further
judicial review. At this point, it is not clear when the court will
render a final decision.
The case began on December 1, 2004, when the U.S. Association of
Importers of Textiles and Apparel filed a complaint and motion for a
preliminary injunction before the U.S. Court of International Trade
requesting that the court enjoin CITA from considering threat-based
requests.[Footnote 27] In support, the Association argued, among other
things, that CITA had (1) violated its own procedures and the
Administrative Procedure Act[Footnote 28] by deciding to consider
threat-based petitions and (2) exceeded its authority in taking any
action under the China Textile safeguard because Congress had not
authorized CITA to do so.[Footnote 29]
In its response, the administration argued that CITA was not obligated
to promulgate regulations implementing the textile safeguard and that,
in any event, CITA acted within its authority in considering threat-
based requests.[Footnote 30] In this regard, the administration
maintained that CITA had clarified its procedures regarding threat-
based requests through individual case proceedings.[Footnote 31]
Furthermore, CITA officials asserted that they never had a policy of
categorically denying threat-based requests.
On December 30, 2004, the court granted the association's motion for a
preliminary injunction and enjoined CITA from taking any further action
on China textile safeguard actions based on threat of market disruption
during the court proceedings on the case.[Footnote 32] In enjoining
CITA from further considering threat-based requests, the court found
that CITA officials made statements to various trade publications
between July and August 2004 indicating that the safeguard was intended
for cases of actual market disruption--rather than threat of market
disruption. On Feb. 14, 2005, the administration appealed the Court of
International Trade's granting of a preliminary injunction to the
United States Court of Appeals for the Federal Circuit.[Footnote 33]
Thus, at this point, it is unclear when there will be a final
determination on whether CITA can properly hear threat- based requests.
Delays Impact Timing and Level of Relief:
Lengthy legal action against CITA or a court decision that CITA may
only process cases that present evidence of actual market disruption
will postpone determinations on whether to apply safeguard measures and
may result in imposition of quota limits that remain in place for
shorter periods of time and are less restrictive of Chinese imports.
Because of the wording in China's WTO accession agreement, decision-
making delays on the pending requests for application of threat-based
safeguards may shorten the duration of any measures imposed. Prior to
the court issuing its preliminary injunction, CITA had been scheduled
to decide whether to take action on the threat based requests submitted
in October 2004 by early February 2005. As shown in figure 8, had CITA
decided in favor of safeguard actions in accord with its original
timetable, quota limitations on cotton trousers, for example, would
have been in place for 11 months (from February 1 through the end of
2005). In the event of a court ruling in its favor, CITA may yet impose
threat-based safeguards. However, as provided in China's WTO accession
agreement, any safeguard measure imposed prior to October 1 of a given
year will expire at the end of that year. Through September, therefore,
each month of delay means that any safeguard measures imposed will
remain in place for a correspondingly shorter period of time. For
example, measures imposed at the end of April would remain in effect
for 8 months.
Figure 8: Comparison of Timelines for Actual Threat-Based Request with
Possible Market-Disruption-Based Request:
[See PDF for image]
[End of figure]
Lengthy delays or a court ruling against CITA may result in U.S.
producers choosing (or being required) to file new requests based only
on actual market disruption. As shown in figure 8, any relief they
receive would come at a significantly later date than would have
resulted from their original threat-based requests. Since supporting
import data in a market-disruption-based case should demonstrate a
rapid increase in imports from China, any petitioner requesting relief
based on actual market disruption on a product removed from quota on
January 1, 2005 would likely have to wait until at least mid-March to
file a request.[Footnote 34] The reason is that they will probably need
at least one month's import data after the quota expires to demonstrate
an increase in imports that is leading to actual disruption in the U.S.
market. In addition, it takes about 6 weeks for the federal government
to make import data publicly available so that domestic producers may
include it in their requests.[Footnote 35] Given CITA's 3-month
decision-making timeline, U.S. producers could not expect a decision on
a case filed in mid-March until around July 2005. In this scenario,
U.S. producers would receive about 6 months of relief.
Alternatively, domestic producers could wait until midyear to file a
market-disruption-based request. As shown in figure 8, an affirmative
determination would then result in a year of relief. However, a
decision to postpone filing is likely to result in less effective
relief for the domestic producer. As already noted, China's WTO
accession agreement provides that quota restrictions will be calculated
based on the import levels recorded during the first 12 months of the
14-month period leading up to the quota action being taken. In an
environment of rapidly rising imports, the longer an organization waits
to file a request, the higher import levels grow and the higher
subsequently imposed quota limits become.
Unavailability of Production Data Hinders Access to the Safeguard:
Equal access to the China Textile Safeguard is impaired by the lack of
publicly available U.S. production data on some textile and apparel
products. As mentioned earlier, CITA requires that safeguard action
requests include import, market share and U.S. production data. CITA
officials review production data (for example, the amount of knit
fabric produced in the United States) to determine the nature and
extent of disruption in the U.S. market. According to CITA procedures,
if production data are not available from government sources, those
requesting safeguard actions must provide the data themselves, along
with a complete list of all sources from which the data were obtained.
The submission must include an affirmation that, to the best of the
requester's knowledge, the data represent substantially all of the
domestic production of like or directly competitive products.
The Bureau of the Census collects and publishes production data for
many textile and apparel products. The Census Bureau surveys U.S.
industry to obtain production information as part of the bureau's
Current Industrial Reports program. Census officials send
questionnaires to manufacturers on a monthly, quarterly, or annual
basis, depending on the product. The purpose of the bureau's program is
to provide data on production and shipments of certain products for use
by both government and the private sector.
Commerce's Office of Textiles and Apparel (OTEXA) takes the production
data, converts it, and publishes it in category form in order to
compare it with trade data.[Footnote 36] The purpose of the category
system is to allow the United States to implement quotas under
international textile agreements by grouping products in directly
competitive Harmonized Tariff Schedule headings together into single
categories. For example, bow ties and other types of ties enter the
United States under different tariff headings, but for quota management
purposes, data on all types of ties are added together to form one
"neckwear" category.
Since the two classification systems were developed for different
purposes, Census production categories and CITA import categories
differ to varying degrees. Because OTEXA is not able to match Census
production data to all of CITA's categories, the availability of
production data for safeguard investigations can be affected. In
addition, because of the small number of producers in some industries,
data are collected but not released publicly because they would
disclose private business information.[Footnote 37] In total, U.S.
production data are not available for 32 of 167 textile and apparel
categories.[Footnote 38] OTEXA and Census officials provided the
following accounting of why data are not available in these categories:
* For 9 categories, Census does not collect production data. OTEXA
believes many of these the categories are composed of products for
which there is little or no domestic production. For 3 sock categories,
Census did not start surveying the industry until the end of 2004.
Also, in 1 category (nonwoven fabric), OTEXA believes the industry is
large, but not import sensitive.
* For 11 categories, Census may collect some data, but Census
production descriptions do not match CITA categories. For example, CITA
maintains a category called "other man-made fiber apparel," which
includes a range of products from swimwear to shawls. Census collects
data for some, but not all, of the products in this category.
* For 12 categories, Census does collect domestic production data, but
the data cannot be published to avoid disclosure of individual company
information. Suppression across these 12 categories affects
approximately 100 establishments, or about 1 percent of the total
number of textile and apparel establishments from which Census collects
data.[Footnote 39]
The unavailability of production data might disadvantage an unknown
number of U.S. producers facing market disruption. We found that most
(25 of 32) Chinese-origin imports in categories for which there are no
publicly available production data have increased both in absolute
terms and in relation to imports from other countries. This suggests
that U.S. producers of these products face increased competition from
Chinese imports, and thus may be more likely to seek safeguard action.
In its past decisions to impose safeguards, CITA has cited relative and
absolute Chinese import increases as factors in its market disruption
determinations. Additionally, in some categories recently removed from
quota, such as "other man-made fiber apparel," the Chinese producers
largely filled their quota in the past several years. In its recent
threat-based requests, the domestic industry cited import increases and
high quota fill rates as evidence that Chinese imports will increase
significantly upon removal of the quotas.
Table 1 provides a summary of import trends in categories for which
production data are unavailable. (See app. IV for detailed information
on each product category.) About half of the total value of textile and
apparel imports from China (48 percent) fell into product categories
for which data on U.S. production are unavailable.[Footnote 40]
Furthermore, for imports from China removed from quota on January 1,
2005, about half also fell into product categories in which data on
U.S. production are unavailable.
Table 1: Summary of Import Data for Product Categories for Which U.S.
Production Data Are Unavailable:
Textile and apparel: Products removed from quota prior to January 1,
2005, or never under quota;
Number of categories: 15;
Imports from China, 1995: $556,780;
Imports from China, 2004: $2,761,488;
China's share of total U.S. imports, 2004 (percent): 42%;
Average annual change, imports from China, 2001-2004 (percent): 50%.
Textile and apparel: Products removed from quota January 1, 2005;
Number of categories: 14;
Imports from China, 1995: $790,702;
Imports from China, 2004: $4,479,622;
China's share of total U.S. imports, 2004 (percent): 41%;
Average annual change, imports from China, 2001-2004 (percent): 60%.
Textile and apparel: Products currently subject to safeguards measures
(socks);
Number of categories: 3;
Imports from China, 1995: $1,737;
Imports from China, 2004: $228,298;
China's share of total U.S. imports, 2004 (percent): 21%;
Average annual change, imports from China, 2001-2004 (percent): 197%.
Total (all products without production data);
Number of categories: 32;
Imports from China, 1995: $1,349,219;
Imports from China, 2004: $7,469,408;
China's share of total U.S. imports, 2004 (percent): 40%;
Average annual change, imports from China, 2001-2004 (percent): 57%.
Source: GAO analysis of Department of Commerce data.
Note: Imports in thousands constant 2004 dollars.
[End of table]
Sock Case Illustrates Data Collection Difficulties:
The experience of U.S. sock producers in preparing their market-
disruption-based request illustrates the difficulties that can result
from production data not being available. Since the Census Bureau did
not, until recently, collect production data on cotton, wool, or man-
made fiber socks, the U.S. producers that filed this request needed to
collect the data themselves. The requesters proceeded to survey the
domestic industry to obtain the required data. However, according to a
textile industry representative, some members of the industry did not
cooperate with the survey because they did not support the request.
This made it difficult for the requesters to collect the information
needed to meet CITA's requirement for data covering "substantially all"
domestic production. One industry representative said that collecting
the production data was "a very difficult and time-consuming exercise."
One of the producer associations requesting the safeguard said it had
to delay submission of a request for 10 months while they gathered the
relevant data. As shown in figure 9, sock imports from China rose
substantially during this delay.[Footnote 41]
Figure 9: Sock Imports from China, January 1999 to December 2004:
[See PDF for image]
[End of figure]
Safeguard's Future Impact Unclear:
Uncertainty about future patterns in the global textile and apparel
trade and the applicability of other U.S. import relief mechanisms make
the future impact of the China textile safeguard unclear. It is unclear
to what extent safeguards imposed on China will provide relief to the
U.S. industry--or will instead increase the market share obtained by
other foreign producers. As shown in figure 10, U.S. textile and
apparel imports from producers such as India, Pakistan, and especially
Vietnam have also increased over the past decade, and the China textile
safeguard cannot be applied to non-Chinese imports. While China is
widely expected to become a more dominant force in global textile and
apparel markets, it is too early to predict how other major producing
countries will fare in the postquota environment.[Footnote 42] Other
WTO members have expressed concern about changing trade patterns
resulting from the termination of the quota limits. These members note
that, while some studies suggest overall benefits from the
liberalization of textile and apparel trade, certain developing
countries will face difficult adjustment costs.
Figure 10: U.S. Imports of Textile and Apparel from India, Pakistan,
and Vietnam, 1995-2004:
[See PDF for image]
[End of figure]
The Chinese government's recent announcement that it will impose export
taxes on a range of textile and apparel products to ensure a smooth
transition from the end of the quota system further clouds future
developments in U.S. textile trade. The Chinese government has
indicated that these taxes are intended to encourage the export of
higher-value-added products while discouraging export surges. The
impact of these taxes remains to be seen.
Other import relief mechanisms available under the terms of China's WTO
accession agreement and U.S. law may or may not prove useful for U.S.
textile and apparel producers. The "product-specific" safeguard
established under the accession agreement may in theory be applied to
textile and apparel imports from China through the end of
2013.[Footnote 43]However, no one has yet made such a request. Other
import relief mechanisms available under U.S. law--such as noncountry
and nonsector-specific safeguard measures and antidumping duties--
might be used to deal with imports from China and other WTO members.
However, to our knowledge these remedies have not been applied in the
textile and apparel industry recently, and thus it is difficult to
predict how effective they might prove.
It is also possible that a portion of the textile industry will not
have recourse to any U.S. trade remedies after the China textile
safeguard expires on December 31, 2008. Two industry representatives
told us they had concerns about their eligibility to use other trade
remedies. CITA procedures explicitly give standing to U.S. component
producers to request application of the China textile safeguard against
imports of finished products. However, the industry representatives
observed that the laws and regulations governing antidumping and other
import relief mechanisms have standing requirements that may preclude
component producers from requesting relief through these other
mechanisms. Thus, U.S. government agencies may determine that component
manufacturers do not have standing because their component is not "like
or directly competitive to" the subject Chinese import.
Conclusions:
The China textile safeguard provides a mechanism for limiting growth in
imports from that country in certain circumstances--thus helping to
avoid market disruption and facilitate orderly adjustment to China's
growth as a source of textile and apparel products. The four requests
that the United States has decided upon thus far have demonstrated that
once removed from quota restrictions, imports from China can rise
rapidly and significantly disrupt U.S. markets. The termination of all
remaining quotas on Chinese imports at the beginning of this year may
bring additional import surges and associated disruption in U.S.
markets.
Procedural shortcomings have impaired effective application of the
China safeguard, leading to, among other things, uncertainty and delay
that may weaken safeguard actions on some products that were recently
released from quota restrictions. Similarly, lack of production data
impaired access to safeguard measures for U.S. sock producers, and may
pose similar problems should other producers in similar circumstances
seek application of this mechanism.
The extent to which vigorous application of the China-specific textile
safeguard will assist U.S. producers--or create opportunities for other
exporting nations--is unknown, and in any case, the safeguard is only
available through the end of 2008. Nonetheless, China is expected to
continue to be a major source of U.S. textile and apparel imports, and
the usefulness of alternative U.S. import relief mechanisms remains
untested by textile and apparel producers. Since the safeguard was an
integral part of the framework that led to Congress approving permanent
normal trade relations with China and cleared the way for that country
to join the WTO, it is important that CITA and the Department of
Commerce take action to enhance the procedures employed in applying
this mechanism while it remains available.
Recommendations for Executive Action:
In the event that the courts rule that CITA may process threat-based
requests for China textile safeguards, we recommend that CITA amend its
procedures to clarify how it will proceed in threat-based cases,
including the information that producers should submit in such cases.
To enhance access to safeguard relief for all segments of the textile
and apparel industry that may face import surges, we recommend that the
Department of Commerce, as CITA's chair, review the products and
categories for which U.S. Bureau of the Census production data are
unavailable and, with public input, conduct a risk assessment aimed at
identifying industry sectors at high risk of experiencing import surges
from China and associated market disruption. We further recommend that
on the basis of the risk assessment, Commerce's Office of Textiles and
Apparel work with the Census Bureau to explore options to make
production data concerning these industry sectors available for
safeguard requests. We realize that in some instances it might not be
feasible to make such data publicly available due to disclosure
limitations and that data (or analysis of trends in that data) possibly
may need to be limited to CITA.
Agency Comments and Our Evaluation:
We provided draft copies of this report to the Department of Commerce,
in its capacity as chair of the interagency Committee for the
Implementation of Textile Agreements. The Department of Commerce
collected and compiled comments from the CITA member agencies into one
letter, which, with our responses, are reproduced in appendix VI. CITA
also provided technical comments that we incorporated, as appropriate.
We also incorporated technical comments from the Bureau of the Census
and the United States International Trade Commission.
With respect to our first recommendation, CITA noted that our review
focused on issues involved in the ongoing litigation and, per a
Department of Justice request, CITA could not comment on certain parts
of the report. Nevertheless, CITA expressed concern about how we
described the timing of issuance and content of CITA procedures as they
relate to threat-based requests. CITA also expressed concern that some
of our conclusions in the report seemed to be premised on the arguments
of private parties in ongoing litigation. Our report does not take any
position on the legal issues that are the subject of the ongoing
litigation between the U.S. Association of Importers of Textiles and
Apparel and the United States, including whether CITA's procedures
allow for threat-based cases. However, we continue to believe the
procedures could be improved in this regard to further increase clarity
and transparency. With respect to the timing issue, we acknowledge the
significant steps CITA has taken to increase the transparency of its
investigations. Nevertheless, a significant amount of time elapsed
prior to CITA's issuing procedures, and concerned groups had to refile
several safeguard action requests. We reviewed the submissions of the
parties and described some of their main points. However, we drew our
conclusions from our analysis and evidence that we collected. We
maintain that our findings about the public's uncertainty at the time
represent a balanced summation of the facts.
In responding to our second recommendation, Commerce made three points.
First, the agency observed that there are several reasons why
production data might not be available, including the need to protect
the confidentiality of individual producers. Second, it stated that
there are few, if any, domestic entities from industries for which
Census data were not published that would likely request safeguard
action. Third, it noted that any domestic entity that did request a
safeguard would be able to collect its own data and that Commerce and
CITA stand ready to provide advice as to how the data requirements
could be met.
We revised our report to make clear that there are a number of reasons
why production data are not published and that it may not be proper, in
some situations, to make the data available to the public. We agree
that the universe of producers that may be adversely affected by a lack
of production data may be small. However, we found that collecting the
information needed to meet CITA's production data requirement can be a
time-consuming process that impedes safeguard access relative to
industry sectors where the data is readily available from government
sources. Given that the textile and apparel industry is undergoing
rapid change, new industry sectors not previously viewed as vulnerable
to Chinese competition may seek relief and would need data.
We are sending copies of this report to the heads of CITA member
agencies (the Departments of Commerce, Labor, State, and the Treasury
and the Office of the United States Trade Representative), appropriate
congressional committees, and other interested parties. In addition,
the report will be available at no charge on GAO's Web site at
[Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-4347 or [Hyperlink, yagerl@gao.gov]. Other GAO
contacts and staff acknowledgments are listed in appendix VII.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
In May 2003, the House Appropriations Committee's Subcommittee on
Commerce, Justice, and State, the Judiciary, and Related Agencies held
hearings regarding U.S. government efforts to support American
businesses adversely affected by imports from China. In light of
concerns expressed at this hearing, the House-Senate conference report
on fiscal year 2004 appropriations legislation requested that GAO
monitor the efforts of U.S. government agencies responsible for
ensuring free and fair trade with China. In subsequent discussions with
your staff, we agreed to respond by providing a number of reports on
relief mechanisms available to U.S. producers that are adversely
affected by unfair or surging imports, and the manner in which the
mechanisms have been applied to China.[Footnote 44] In this report, we
(1) describe the China textile safeguard, (2) describe the requests for
safeguard action filed by domestic industry and the results of these
requests, and (3) evaluate agency procedures for transparency and
accessibility and identify additional issues that may affect
application of safeguard measures in the future.
To address our first objective, we reviewed U.S. laws and procedures as
well as relevant World Trade Organization (WTO) agreements and China's
WTO accession agreement. To ensure our understanding of relevant laws,
procedures, and agreements, we spoke with officials from the five
member agencies of the U.S. government's Committee for the
Implementation of Textile Agreements (CITA). The members of CITA are
the Departments of Commerce, Labor, State, and the Treasury, and the
United States Trade Representative. In addition, we interviewed
officials with the World Trade Organization and private sector experts
on trade law.
To address our second and third objectives, we reviewed and analyzed
each of the Statements of Reasons and Justifications that CITA has
issued to explain its determinations on safeguard actions completed as
of December 2004. We also reviewed the information that CITA received
in response to its request for public comment on each of these
requests. To clarify the views of parties in favor of applying
safeguard measures, we spoke with representatives of the three domestic
industry trade associations that have participated in filing every
safeguard action request to date. To clarify views of parties opposed
to such measures, we spoke with a trade association representing over
200 importers of textiles and apparel and a trade association
representing 50 state retail associations and 20 national retail
organizations as well as national and independent retailers, and also
attended an international conference of textile and apparel importers.
We also spoke with Chinese government officials. To obtain a broader
perspective on global textile trade and the application of the
safeguard in a postquota environment, we spoke with representatives of
additional textile and apparel exporting and importing countries.
Finally, we reviewed the order of the U.S. Court of International Trade
granting a preliminary injunction to the U.S. Association of Importers
of Textiles and Apparel precluding CITA from acting on threat-based
requests for safeguard action,[Footnote 45] as well as other relevant
documents filed by the parties involved in this case.
In support of these objectives, we also conducted analyses of textile
and apparel import data, as well as U.S. domestic production and
employment data for textile and apparel sectors. U.S. import data are
official statistics from the Bureau of the Census, Department of
Commerce. We adjusted the import data for inflation by using the
textile and apparel products import price deflators from the Bureau of
Labor Statistics. Inflation-adjusted values are in constant 2004
dollars and are identified throughout the report. U.S. production
(shipment) values are from the Census Bureau's Manufacturing, Mining,
and Construction Statistics. In order to present values in 2004
dollars, we used the 2004 value of shipments from Census for each
industry and extrapolated prior year shipments using the Federal
Reserve Board's Industrial Production Index for the particular
industries. U.S. employment data are official statistics from the
Bureau of Labor Statistics, Department of Labor. We assessed these data
and found them to be sufficiently reliable for the purposes of this
report.
We performed our work from January 2004 to January 2005 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Paragraph 242 of the Working Party Report on China's
Accession to the WTO:
The representative of China agreed that the following provisions would
apply to trade in textiles and clothing products until 31 December 2008
and be part of the terms and conditions for China's accession:
(a) In the event that a WTO Member believed that imports of Chinese
origin textiles and apparel products covered by the ATC as of the date
the WTO Agreement entered into force, were, due to market disruption,
threatening to impede the orderly development of trade in these
products, such Member could request consultations with China with a
view to easing or avoiding such market disruption. The Member
requesting consultations would provide China, at the time of the
request, with a detailed factual statement of reasons and
justifications for its request for consultations with current data
which, in the view of the requesting Member, showed: (1) the existence
or threat of market disruption; and (2) the role of products of Chinese
origin in that disruption;
(b) Consultations would be held within 30 days of receipt of the
request. Every effort would be made to reach agreement on a mutually
satisfactory solution within 90 days of the receipt of such request,
unless extended by mutual agreement;
(c) Upon receipt of the request for consultations, China agreed to hold
its shipments to the requesting Member of textile or textile products
in the category or categories subject to these consultations to a level
no greater than 7.5 per cent (6 per cent for wool product categories)
above the amount entered during the first 12 months of the most recent
14 months preceding the month in which the request for consultations
was made;
(d) If no mutually satisfactory solution were reached during the 90-day
consultation period, consultations would continue and the Member
requesting consultations could continue the limits under subparagraph
(c) for textiles or textile products in the category or categories
subject to these consultations;
(e) The term of any restraint limit established under subparagraph (d)
would be effective for the period beginning on the date of the request
for consultations and ending on 31 December of the year in which
consultations were requested, or where three or fewer months remained
in the year at the time of the request for consultations, for the
period ending 12 months after the request for consultations;
(f) No action taken under this provision would remain in effect beyond
one year, without reapplication, unless otherwise agreed between the
Member concerned and China; and:
(g) Measures could not be applied to the same product at the same time
under this provision and the provisions of Section 16 of the Draft
Protocol.
[End of section]
Appendix III: Summary of CITA Determinations on Market-Disruption-Based
Requests to Date:
Product: Brassieres and other body supporting garments;
Key dates: Request filed: July 24, 2003.
CITA determination: Nov. 17, 2003.
Consultation requested/quotas imposed: December 24, 2003;
Key elements of CITA finding that market was disrupted: U.S.
production, including outward processing, dropped from 28,375,000
dozens in 2000 to 27,781,000 dozens in the year ending June 2003.
U.S. producers' share of the market fell from 52.8 percent in 2000 to
43.8 percent in the year ending June 2003;
Role of imports from China in present disruption: Total imports grew 17
percent from 2000 to year-end October 2003. Imports from China grew 291
percent in the same period. China went from the sixth largest supplier
of such garments to the United States in 2001 to the largest source in
2002 and 2003. China gained U.S. market share (15.5 percentage points
gained between 2000 and year- end June 2003), and gains came at the
expense of domestically produced garments, including U.S. outward
processing;
Role of imports from China in threat to disrupt the U.S. market in the
near future: Enormous capacity of China to produce textile and apparel
products for export. Lower average prices than other suppliers. Rapid
change since integration suggests that without action, current trends
in imports from China will likely continue. China has made significant
investment in plants, equipment, and research and development in its
textile and apparel industry.
Product: Cotton and man-made fiber dressing gowns;
Key dates: Request filed: July 24, 2003.
CITA determination: Nov. 17, 2003.
Consultation requested/quotas imposed: Dec 24, 2003;
Key elements of CITA finding that market was disrupted: U.S. production
plus outward processing fell by about 40 percent from 2000 to year-end
June 2003.
Share of the market held by U.S. producers fell 17.9 percentage points
between 2000 and year-end June 2003;
Role of imports from China in present disruption: Total U.S. imports
grew by 77 percent from 2000 to yearend October 2003. U.S. imports from
China increased 1,483 percent during the same period. Market share of
imports from China increased from 3.9 percent in 2000 to 30.7 percent
for the year ending June 2003. Imports from the rest of the world minus
outward processing and U.S. producers plus outward processing both lost
market share;
Role of imports from China in threat to disrupt the U.S. market in the
near future: (See above explanation under "Brassieres.").
Product: Knit fabric;
Key dates: Request filed: July 24, 2003.
CITA determination: Nov. 17, 2003.
Consultation requested/quotas imposed: Dec 24, 2003;
Key elements of CITA finding that market was disrupted: U.S. production
declined from about 657 million kilograms in 2000 to about 480 million
kilograms in 2002. U.S. producers' market share had declined 9.6
percent between 2000 and 2002. Financial difficulties of two publicly
traded firms engaged primarily in the manufacture of knit fabric;
Role of imports from China in present disruption: Total imports
increased 42 percent from 2001 to year-end October 2003, while knit
fabric imports from China increased 21, 307 percent from 2000 to year-
end October 2003. Imports from China gained market share at the expense
of U.S. producers: Of the 9.6 percent of U.S. market share lost from
2000 to 2002 1.1 percent is attributable to Chinese imports;
Role of imports from China in threat to disrupt the U.S. market in the
near future: (See above explanation under "Brassieres."); CITA also
stated that the significant increase in knit fabric import volume since
2001 suggested that imports would continue to increase in the near
future.
Product: Cotton, man-made fiber, and wool socks;
Key dates: Request filed: June 28, 2004.
CITA determination: Oct. 22, 2004.
Consultation requested/quotas imposed: Oct. 29, 2004;
Key elements of CITA finding that market was disrupted: Excluding
outward processing, U.S. imports increased from 51,014,517 to
98,976,106 dozen pairs between 2001 and 2003. U.S. production,
including outward processing, dropped from 246 million dozen pairs to
214 million dozen pairs from 2001 to 2003. U.S. production plus outward
processing market share fell from 82.9 in 2001 percent to 68.4 percent
in 2003. Employment and number of sock-producing establishments both
declined;
Role of imports from China in present disruption: Between 2001 and
August 2004, Chinese imports grew 4, 211 percent. Between 2001 and year-
end August 2004 total world imports increased 100 percent. China went
from the 12th largest foreign supplier to the United States in 2001 to
the largest supplier by year-end August 2004. China's market share grew
from 0.3 percent in 2001 to 7 percent in 2003, and the market share
gain came at the expense of U.S. producers;
Role of imports from China in threat to disrupt the U.S. market in the
near future: (See above explanation under "Brassieres.").
Source: CITA Statements of Reasons and Justifications.
[End of table]
[End of section]
Appendix IV: Textile and Apparel Products Imported from China for Which
U.S. Production Data Are Unavailable:
U.S. production data on 32 of 167 textile and apparel categories are
unavailable. Table 2 lists these 32 product categories and provides
information on the size of U.S. imports from China in 1995 and 2004,
imports from China as a percentage of total U.S. imports, the average
annual percentage change in imports since China became a WTO member in
2001, and the quota fill rates for these product categories. Quota fill
rates (as of December 1, 2004) show what share of the quota allocation
for each product category was already allocated near the end of the
quota period (December 31, 2004). Quotas on these products were removed
completely on January 1, 2005, but the quota fill rates provide some
information about how constraining the quotas were prior to their
removal. In addition, notes at the end of the table identify
qualitative information from OTEXA and Census on why the data for each
category are unavailable.
Table 2: Import Data for Product Categories for Which U.S. Production
Data Are Unavailable:
Category name: Products removed from quota prior to January 1, 2005, or
never under quota[A]:
Category name: Flat goods, handbags, and luggage[B];
Category number: 670;
Imports from China, 1995: $196,648;
Imports from China, 2004: $1,735,685;
Share of China in U.S. imports from all countries, 2004 (percent): 78%;
Average annual change, imports from China 2001-2004 (percent): 68%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Wool floor coverings[D];
Category number: 465;
Imports from China, 1995: $181,679;
Imports from China, 2004: $164,981;
Share of China in U.S. imports from all countries, 2004 (percent): 18%;
Average annual change, imports from China 2001-2004 (percent): -2%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Womens' and girls' man-made fiber down-filled coats[C];
Category number: 654;
Imports from China, 1995: $32,522;
Imports from China, 2004: $203,076;
Share of China in U.S. imports from all countries, 2004 (percent): 85%;
Average annual change, imports from China 2001-2004 (percent): 42%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Other man-made fiber manufactures[D];
Category number: 669;
Imports from China, 1995: $13,804;
Imports from China, 2004: $264,822;
Share of China in U.S. imports from all countries, 2004 (percent): 39%;
Average annual change, imports from China 2001-2004 (percent): 148%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Men's and boys' man-made fiber down-filled coats[C];
Category number: 653;
Imports from China, 1995: $66,801;
Imports from China, 2004: $108,207;
Share of China in U.S. imports from all countries, 2004 (percent): 85%;
Average annual change, imports from China 2001-2004 (percent): 6%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Man-made fiber floor coverings[D];
Category number: 665;
Imports from China, 1995: $8,933;
Imports from China, 2004: $96,762;
Share of China in U.S. imports from all countries, 2004 (percent): 16%;
Average annual change, imports from China 2001-2004 (percent): 48%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Special purpose fabric[C];
Category number: 229;
Imports from China, 1995: $4,175;
Imports from China, 2004: $122,266;
Share of China in U.S. imports from all countries, 2004 (percent): 14%;
Average annual change, imports from China 2001-2004 (percent): 134%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Wool gloves and mittens[C];
Category number: 431;
Imports from China, 1995: $5,182;
Imports from China, 2004: $15,857;
Share of China in U.S. imports from all countries, 2004 (percent): 76%;
Average annual change, imports from China 2001-2004 (percent): 6%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Cotton handkerchiefs[B];
Category number: 330;
Imports from China, 1995: $6,143;
Imports from China, 2004: $18,832;
Share of China in U.S. imports from all countries, 2004 (percent): 91%;
Average annual change, imports from China 2001-2004 (percent): 15%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Women's and girls' cotton down-filled coats[C];
Category number: 354;
Imports from China, 1995: $7,114;
Imports from China, 2004: $3,941;
Share of China in U.S. imports from all countries, 2004 (percent): 78%;
Average annual change, imports from China 2001-2004 (percent): 130%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Nonwoven fabric[B];
Category number: 223;
Imports from China, 1995: $830;
Imports from China, 2004: $14,264;
Share of China in U.S. imports from all countries, 2004 (percent): 2%;
Average annual change, imports from China 2001-2004 (percent): 505%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Wool blankets[C];
Category number: 464;
Imports from China, 1995: $414;
Imports from China, 2004: $4,055;
Share of China in U.S. imports from all countries, 2004 (percent): 24%;
Average annual change, imports from China 2001-2004 (percent): 30%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Men's and boys' cotton down-filled coats[C];
Category number: 353;
Imports from China, 1995: $30,248;
Imports from China, 2004: $4,293;
Share of China in U.S. imports from all countries, 2004 (percent): 68%;
Average annual change, imports from China 2001-2004 (percent): -7%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Nontextured filament yarn[B];
Category number: 606;
Imports from China, 1995: $0;
Imports from China, 2004: $3,138;
Share of China in U.S. imports from all countries, 2004 (percent): 3%;
Average annual change, imports from China 2001-2004 (percent): 17,654%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Man-made fiber handkerchiefs[B];
Category number: 630;
Imports from China, 1995: $2,286;
Imports from China, 2004: $1,309;
Share of China in U.S. imports from all countries, 2004 (percent): 49%;
Average annual change, imports from China 2001-2004 (percent): -7%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Subtotal;
Category number: N/A;
Imports from China, 1995: $556,780;
Imports from China, 2004: $2,761,488;
Share of China in U.S. imports from all countries, 2004 (percent): 42%;
Average annual change, imports from China 2001-2004 (percent): 50%;
Quota fill rate as of December 1, 2004: N/A.
Products removed from quota January 1, 2005:
Category name: Other cotton manufactures[D];
Category number: 369;
Imports from China, 1995: $280,155;
Imports from China, 2004: $1,070,693;
Share of China in U.S. imports from all countries, 2004 (percent): 46%;
Average annual change, imports from China 2001-2004 (percent): 42%;
Quota fill rate as of December 1, 2004: 32.5%.
Category name: Babies' garments and clothing accessories[D];
Category number: 239;
Imports from China, 1995: $76,606;
Imports from China, 2004: $1,103,435;
Share of China in U.S. imports from all countries, 2004 (percent): 55%;
Average annual change, imports from China 2001-2004 (percent): 135%;
Quota fill rate as of December 1, 2004: No information.
Category name: Other man-made fiber furnishings[D];
Category number: 666;
Imports from China, 1995: $40,702;
Imports from China, 2004: $1,211,228;
Share of China in U.S. imports from all countries, 2004 (percent): 61%;
Average annual change, imports from China 2001-2004 (percent): 194%;
Quota fill rate as of December 1, 2004: 83.1%.
Category name: Other cotton apparel[D];
Category number: 359;
Imports from China, 1995: $134,105;
Imports from China, 2004: $413,203;
Share of China in U.S. imports from all countries, 2004 (percent): 42%;
Average annual change, imports from China 2001-2004 (percent): 38%;
Quota fill rate as of December 1, 2004: 49.8 and 66.4%[A].
Category name: Other man-made fiber apparel[D];
Category number: 659;
Imports from China, 1995: $110,658;
Imports from China, 2004: $330,931;
Share of China in U.S. imports from all countries, 2004 (percent): 16%;
Average annual change, imports from China 2001-2004 (percent): 32%;
Quota fill rate as of December 1, 2004: 84.2 and 77.9 and 76.8%[A].
Category name: Bedspreads and quilts[C];
Category number: 362;
Imports from China, 1995: $120,525;
Imports from China, 2004: $183,713;
Share of China in U.S. imports from all countries, 2004 (percent): 34%;
Average annual change, imports from China 2001-2004 (percent): 6%;
Quota fill rate as of December 1, 2004: 80.1%.
Category name: Other wool apparel[D];
Category number: 459;
Imports from China, 1995: $12,595;
Imports from China, 2004: $138,199;
Share of China in U.S. imports from all countries, 2004 (percent): 55%;
Average annual change, imports from China 2001-2004 (percent): 28%;
Quota fill rate as of December 1, 2004: No info.
Category name: Wool knit shirts and blouses[C];
Category number: 438;
Imports from China, 1995: $5,102;
Imports from China, 2004: $9,560;
Share of China in U.S. imports from all countries, 2004 (percent): 3%;
Average annual change, imports from China 2001-2004 (percent): 5%;
Quota fill rate as of December 1, 2004: 93%.
Category name: Yarns put up for retail sale, and sewing thread[B];
Category number: 200;
Imports from China, 1995: $3,032;
Imports from China, 2004: $9,434;
Share of China in U.S. imports from all countries, 2004 (percent): 5%;
Average annual change, imports from China 2001-2004 (percent): 43%;
Quota fill rate as of December 1, 2004: 89.4%.
Category name: Other wool manufactures[D];
Category number: 469;
Imports from China, 1995: $3,699;
Imports from China, 2004: $5,257;
Share of China in U.S. imports from all countries, 2004 (percent): 29%;
Average annual change, imports from China 2001-2004 (percent): 8%;
Quota fill rate as of December 1, 2004: 64.8%[A].
Category name: Woven fabric containing 85 percent or more by weight
artificial staple[C];
Category number: 611;
Imports from China, 1995: $3,081;
Imports from China, 2004: $2,756;
Share of China in U.S. imports from all countries, 2004 (percent): 13%;
Average annual change, imports from China 2001-2004 (percent): 6%;
Quota fill rate as of December 1, 2004: 32.1%.
Category name: Specialty yarns[C];
Category number: 201;
Imports from China, 1995: $346;
Imports from China, 2004: $855;
Share of China in U.S. imports from all countries, 2004 (percent): 0%;
Average annual change, imports from China 2001-2004 (percent): -5%;
Quota fill rate as of December 1, 2004: 64.8%[A].
Category name: Other wool fabric[D];
Category number: 414;
Imports from China, 1995: $95;
Imports from China, 2004: $142;
Share of China in U.S. imports from all countries, 2004 (percent): 0%;
Average annual change, imports from China 2001-2004 (percent): -25%;
Quota fill rate as of December 1, 2004: 64.8%[A].
Category name: Man-made fiber fabric, woven, containing more than 15
percent but less than 36 percent wool[C];
Category number: 624;
Imports from China, 1995: $1;
Imports from China, 2004: $215;
Share of China in U.S. imports from all countries, 2004 (percent): 1%;
Average annual change, imports from China 2001-2004 (percent): -20%;
Quota fill rate as of December 1, 2004: 64.8%[A].
Category name: Subtotal;
Category number: N/A;
Imports from China, 1995: $790,702;
Imports from China, 2004: $4,479,622;
Share of China in U.S. imports from all countries, 2004 (percent): 41%;
Average annual change, imports from China 2001-2004 (percent): 60%;
Quota fill rate as of December 1, 2004: N/A.
Products currently subject to safeguards measures (socks):
Category name: Hosiery (socks)[E];
Category number: 632(part);
Imports from China, 1995: $515;
Imports from China, 2004: $221,348;
Share of China in U.S. imports from all countries, 2004 (percent): 57%;
Average annual change, imports from China 2001-2004 (percent): 295%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Hosiery (socks)[E];
Category number: 332;
Imports from China, 1995: $1,222;
Imports from China, 2004: $4,848;
Share of China in U.S. imports from all countries, 2004 (percent): 1%;
Average annual change, imports from China 2001-2004 (percent): 32%;
Quota fill rate as of December 1, 2004: N/A.
Category name: Hosiery (socks)[E];
Category number: 432;
Imports from China, 1995: $0;
Imports from China, 2004: $2,103;
Share of China in U.S. imports from all countries, 2004 (percent): 10%;
Average annual change, imports from China 2001-2004 (percent): 21%;
Quota fill rate as of December 1, 2004: N/A.
Subtotal;
Imports from China, 1995: $$1,737;
Imports from China, 2004: $228,298;
Share of China in U.S. imports from all countries, 2004 (percent): 21%;
Average annual change, imports from China 2001-2004 (percent): 197%.
Total (all products for which production data is unavailable);
Category number: N/A;
Imports from China, 1995: $1,349,219;
Imports from China, 2004: $7,469,408;
Share of China in U.S. imports from all countries, 2004 (percent): 40%;
Average annual change, imports from China 2001-2004 (percent): 57%;
Quota fill rate as of December 1, 2004: N/A.
N/A = Not applicable.
Source: GAO analysis of U.S. Department of Commerce data.
Notes: Safeguard on hosiery (socks) is a single safeguard measure
covering products from all three categories.
[A] Quota restraints are applied against a group of categories or
subcategories in these cases. The fill rates either apply to the
combined categories or several fill rates apply to one category.
[B] Census does not collect production data.
[C] Census does collect domestic production data, but the data cannot
be published to avoid disclosure of individual company information.
[D] Census may collect some data, but Census production descriptions do
not match CITA categories.
[E] Census began collecting data in December 2004:
[End of table]
[End of section]
Appendix V: Threat-Based Requests for Safeguard Action Filed by U.S.
Producer Groups, 2004:
Description: Cotton trousers;
Category: 347/348;
Date request received by CITA chair (2004): Oct. 8;
Date CITA accepted request for consideration (2004): Oct. 29.
Description: Knit cotton shirts and blouses;
Category: 338/339;
Date request received by CITA chair (2004): Oct. 13;
Date CITA accepted request for consideration (2004): Nov. 3.
Description: Men's and boys' cotton and man-made fiber shirts, not
knit;
Category: 340/640;
Date request received by CITA chair (2004): Oct. 13;
Date CITA accepted request for consideration (2004): Nov. 3.
Description: Knit man-made fiber shirts and blouses;
Category: 638/639;
Date request received by CITA chair (2004): Oct. 13;
Date CITA accepted request for consideration (2004): Nov. 3.
Description: Man-made fiber trousers;
Category: 647/648;
Date request received by CITA chair (2004): Oct. 13;
Date CITA accepted request for consideration (2004): Nov. 3.
Description: Cotton and man-made fiber underwear;
Category: 352/652;
Date request received by CITA chair (2004): Oct. 15;
Date CITA accepted request for consideration (2004): Nov. 3.
Description: Combed cotton yarn;
Category: 301;
Date request received by CITA chair (2004): Oct. 27;
Date CITA accepted request for consideration (2004): Nov. 18.
Description: Other synthetic filament fabric;
Category: 620;
Date request received by CITA chair (2004): Nov. 8;
Date CITA accepted request for consideration (2004): Dec. 1.
Description: Men's and boys' wool trousers;
Category: 447;
Date request received by CITA chair (2004): Nov. 12;
Date CITA accepted request for consideration (2004): Dec. 6.
Description: Knit fabric;
Category: 222;
Date request received by CITA chair (2004): Nov. 19;
Date CITA accepted request for consideration (2004): Dec. 13.
Description: Dressing gowns and robes;
Category: 350/650;
Date request received by CITA chair (2004): Nov. 24;
Date CITA accepted request for consideration (2004): Dec. 16.
Description: Brassieres and other body supporting garments;
Category: 349/649;
Date request received by CITA chair (2004): Dec. 1;
Date CITA accepted request for consideration (2004): Dec. 22.
Source: Defendant's Memorandum in Support of its Motion to Dismiss and
Opposition to Plaintiff's Motion for a Preliminary Injection, Sch. A,
Ass'n of Importers of Textiles and Apparel, Ct. No. 04-00598 (C.I.T.
Dec. 15, 2004).
[End of table]
[End of section]
Appendix VI: Comments from the Committee for the Implementation of
Textile Agreements:
UNITED STATES DEPARTMENT OF COMMERCE:
The Under Secretary for International Trade:
Washington, D. C. 20230:
Mr. Loren Yager:
Director:
International Affairs and Trade:
United States Government Accountability Office:
Washington, D.C. 20548:
MAR 11 2005:
Dear Mr. Yager:
Thank you for providing us with your draft report regarding
implementation of the textile safeguard provision of China's WTO
accession agreement by the Committee for the Implementation of Textile
Agreements (CITA). The study demonstrates a strong effort by GAO staff
to understand the safeguard provision and to frame the status of the
safeguard's application within the prevailing circumstances.
As you know, this year marked a watershed for international trade, with
the conclusion of a liberalization process under the WTO Agreement on
Textiles and Clothing (ATC) that was agreed to by the United States and
other countries more than ten years ago. On January 1, 2005, all WTO
Members lifted their quotas on textile and clothing imports, and the
structure of global trade rules that have governed in this sector for
several decades has been irreversibly changed. Consumers will benefit
from lower prices for clothing and other essential products, but
producers around the world, including in the United States, will face
significant new challenges as a result of increased global competition.
The United States has been preparing for this change for many years.
Recognizing that China had the potential to account for a major share
of global exports of textiles and clothing once quotas were lifted, we
negotiated a special textile safeguard as part of China's accession to
the WTO - the subject of your draft report - that pen-nits the United
States to impose limits on textile and apparel imports from China when
our domestic industry is faced with market disruption or the threat
thereof. And in all of our recent free trade agreements, including our
agreement with the five Central American countries and the Dominican
Republic, we have negotiated special provisions that open new market
opportunities for our domestic industry and leverage the competitive
strengths of America's textile and clothing businesses and workers.
Specifically, our free trade agreements include special textiles
provisions that encourage the use of U.S. yarn and fabric, special
textiles enforcement mechanisms, and textiles safeguards.
The Administration is committed to assisting U.S. textile and apparel
firms and workers to adjust to competition from China and elsewhere
that is causing or threatening to cause market disruption, using all
available tools under U.S. trade laws and China's WTO accession
agreement. The special China textile safeguard has proven to be an
important mechanism for such adjustment. In fact, as the GAO's draft
report indicates, CITA has applied the safeguard in four of the five
actual market disruption cases in which U.S. producers have requested
relief. Prior to the U.S. Court of International Trade's decision to
enjoin CITA from further consideration of requests for relief based on
"threat" of market disruption (as opposed to actual market disruption)
from imports from China, pending the outcome of litigation, CITA had
also agreed to consider twelve such "threat" requests filed at the end
of 2004.
A good portion of the GAO's draft report focuses on many of the issues
that are the subject of this ongoing litigation - including whether the
current procedures allow for threat-based cases, as CITA believes they
do. The Department of Justice has asked that CITA agencies not comment
on those issues, so I cannot comment on many of the specific statements
in the report. However, I am concerned regarding some of the
conclusions in the report regarding the timing of issuance and
sufficiency of CITA's current procedures. Prior to China's accession to
the WTO, the United States, through CITA, had conducted numerous
textile safeguard investigations pursuant to its authority under
various bilateral and multilateral agreements (including the ATC and
earlier U.S.-China bilateral textile agreements). Following China's WTO
accession, CITA engaged Congress and other government agencies in the
formulation of procedures to facilitate implementation of the WTO China
textile safeguard. Thus, the procedures published in May 2003 were the
result of extensive work and collaboration among many governmental
agencies. The issuance of these guidelines, while not required by the
WTO China textile safeguard agreement, or U.S. law, marked a
significant step for CITA in increasing not only the transparency of,
but also public involvement in its investigations.
As indicated in the Administration's submissions to the courts, China's
accession agreement and CITA's published procedures clearly permit the
United States to request consultations with China, and take safeguard
action, based on the threat of market disruption. In addition, some of
the GAO's assertions appear to be premised upon statements from private
entities involved in the litigation.[NOTE 1] Although we are not able
to comment on such statements while the litigation is pending, we refer
GAO to the Administration's submissions in those proceedings.
The GAO also recommends that the Commerce Department, as CITA's chair,
periodically review the products included in Census Bureau surveys of
U.S. textile and apparel production and, with public input, conduct a
risk assessment aimed at identifying industry sectors at high risk of
experiencing import surges from China and associated disruption. GAO
further recommends that on the basis of the risk assessment, the Office
of Textiles and Apparel work with the Census Bureau to insure that
these industry sectors are included in subsequent production data
gathering efforts.
Commerce's Office of Textiles and Apparel has for many years
periodically reviewed, and consulted with the Census Bureau and with
representatives of the domestic industry and workers, regarding the
products included in Census Bureau surveys of U.S. textile and apparel
production. Moreover, the textile category system was developed in
close consultation with representatives of the domestic industry and
workers and with Census. There are a variety of reasons why production
data is not published by Census for certain categories. These are
summarized in Attachment 1.
We do not believe it would be productive for Commerce to conduct "risk
assessments" of industry segments for which production data is not
published by the Census Bureau. For the reasons described in Attachment
1, we believe that domestic entities would have an interest in
requesting safeguard action on few, if any, of the remaining products
for which Census production data is unavailable. If domestic entities
were to have such an interest in a defined industry sector, we believe
in virtually all instances that they would be able to collect
production data. Lack of Census production data would not be a
substantial impediment to a safeguard request in such instances. Should
an industry believe that any of these products is at risk of market
disruption and that China may play a role in such disruption, Commerce
and CITA stand ready to consult with that industry regarding its China
textile safeguard options, including ways in which the production data
requirement can be satisfied. I understand that the Census Bureau has
provided informal comments to GAO stating that Census is open to
recommendations to collect additional information but indicating
constraints to further collection and publication of textile and
apparel data.
I have enclosed, as Attachments 2 and 3, specific comments relating to
the report's text (where allowable in light of the current court
proceedings) and technical corrections relating to appendices II and
III.
I appreciate the opportunity to provide comments on the draft report.
Sincerely,
Signed by:
Grant D. Aldonas:
NOTE:
[1] See, e.g., pages 3, 4, 25.
GAO Comments:
1. Our report does not take any position on the legal issues that are
the subject of the ongoing litigation between the U.S. Association of
Importers of Textiles and Apparel and the United States, including
whether CITA's procedures allow for threat-based cases. We acknowledge
CITA's extensive consultations and that the procedures represent a
significant increase in the transparency of its investigations compared
with those conducted under other agreements such as the Agreement on
Textiles and Clothing. Nevertheless, 17 months is a significant amount
of time to issue procedures to inform the public about CITA's process.
The timing of issuance of the procedures necessitated industry groups
refiling several safeguard action requests made months before the
procedures were published. As noted in appendix I, we independently
reviewed China's WTO accession agreement and CITA's procedures, and
other information, as well as submissions from all parties involved in
the ongoing litigation. We maintain that our description of CITA's
procedures and findings about the public's uncertainty at the time
represents a balanced summation of the facts. We continue to believe
the procedures could be improved in this regard to further increase
transparency and clarity.
2. According to a Bureau of the Census official, the Current Industrial
Report program's coverage of U.S. textile and apparel production
remained unchanged from 1993 until the completion of a programwide
review in 2004 to reassign resources to manufacturing areas of
increasing economic importance. We consider a risk assessment to be a
useful and timely exercise due to the recent change in long-standing
trade rules for textiles and apparel and resulting increased global
competition. We agree that there are a variety of reasons why
production data might be unavailable, including suppressing data to
protect respondent confidentiality, and we amplified our discussion on
textile and apparel production data accordingly. Additionally, we
modified our recommendation to acknowledge that in certain instances,
making the production data available might not be feasible. However, we
found that requesting a safeguard action is substantially more
difficult when production data are unavailable than when they are
available;
for example, it could add months onto the time to prepare a request.
Accordingly, we believe that lack of production data may constitute a
substantial impediment to a safeguard action request and steps should
be taken to mitigate this condition. Furthermore, some industries that
were not deemed import sensitive in the past may become so in the
future.
[End of section]
Appendix VII: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Adam Cowles, (202) 512-9637;
Michael McAtee, (202) 512-8978:
Staff Acknowledgments:
In addition to those named above, R. Gifford Howland, Richard Seldin,
and Timothy Wedding made significant contributions to this report.
(320228):
FOOTNOTES
[1] China became a member of this organization in December 2001.
[2] In this report, import values for years prior to 2004 have been
adjusted for inflation and are reported in constant 2004 U.S. dollars
(see app. I).
[3] H.R. Rep. No. 108-401, at 574 (2003).
[4] Forthcoming reports will focus on countervailing duties, other
safeguard measures, and antidumping duties.
[5] The agreement does not define the terms "market disruption" or
"orderly development of trade."
[6] Production values reported here are in 2004 U.S. dollars (see app.
I).
[7] Import values reported here are in inflation-adjusted 2004 U.S.
dollars (see app. I).
[8] The United States continues to maintain quotas on textile and
apparel products from selected countries that are not WTO members
(e.g., Vietnam).
[9] The United States continues to apply tariffs on these products,
ranging up to approximately 33 percent. The trade-weighted average U.S.
tariff on textile and apparel products was 10 percent in 2004,
according to an official at the U.S. International Trade Commission.
However, U.S. free-trade agreements and preferential access programs
provide certain countries with duty-free access to the U.S. market for
certain textile and apparel products.
[10] 7 U.S.C. § 1854.
[11] Exec. Order No. 11651, 37 Fed. Reg. 4699 (Mar. 3, 1972), as
amended.
[12] In the case of wool products, the member will generally limit
growth in relevant Chinese imports to 6 percent above the level
imported during the first 12 months of the previous 14-month period.
[13] 68 Fed. Reg. 27787 (May 21, 2003).
[14] The Administrative Procedure Act generally requires that agencies
provide an opportunity for the public to comment on rules and
procedures prior to their enactment. However, the act's rule-making
procedures do not apply to certain agency activities, including the
foreign affairs functions of the United States. See 5 U.S.C. § 553 and
Attorney General's Manual on the Administrative Procedure Act, at 9
(1947), included as an appendix in American Bar Association, Section of
Administrative Law and Practice, Federal Administrative Procedure
Sourcebook (3d ed. 2000).
[15] If CITA cannot decide within 60 days, it will publish a notice in
the Federal Register indicating a date by which it will make a
decision.
[16] China has taken the position that a safeguard cannot be reapplied
without its consent.
[17] Relevant trade preference programs include those established under
the Caribbean Basin Economic Recovery Act, as amended, 19 U.S.C. §§
2701 and following; the Andean Trade Preference Act, as amended 19
U.S.C. §§ 3201, and following; and the African Growth and Opportunity
Act, 19 U.S.C. §§ 3701, and following. For further information, see for
example United States International Trade Commission, The Impact of the
Caribbean Basin Economic Recovery Act: Sixteenth Report 2001-2002,
Publication 3636 (Washington, D.C., September 2003).
[18] Share of imports from China based on 2003 import statistics.
[19] Share of imports subject to threat-based safeguard requests based
on petitions filed as of January 15, 2005. Threat-based petitions
requesting reimposition of recently expired safeguards are not included
in the 11 percent. All products subject to these safeguard requests
were under quota until January 1, 2005. An additional 51 percent of
total U.S. imports of textile and apparel products from China were
removed from quota limitations in January 1, 2005, but have not been
the object of safeguard requests. Therefore, a total of 62 percent of
U.S. imports of textiles and apparel from China were removed from quota
on January 1, 2005. These figures are based on 2003 import statistics.
[20] Trade associations representing textile manufacturers that
produced components of brassieres, dressing gowns and gloves requested
the safeguard actions. In the case of knit fabric, trade associations
representing producers of the final product requested the safeguard
action. In the case of socks, the trade associations requesting the
safeguard action represented producers of both components and the final
product.
[21] CITA had indicated that it would not take action on products
subject to specific quota limits but that this would not prevent CITA
from considering a request for safeguard action on a product subject to
a specific limit if the safeguard action were to take effect after the
removal of that limit.
[22] Please see appendix V for a complete list of the 12 threat-based
requests. In a December 1, 2004, submission to CITA about whether to
apply the textile safeguard on imports from China of cotton trousers,
China contended that the language in its WTO commitment showed that the
textile safeguard could only be imposed when there was actual market
disruption and not merely a threat of market disruption. China
contended that the language regarding threat did not refer to the kinds
of textile and apparel cases that could be brought, but only to the
material a WTO member could present to China showing why a safeguard
should be applied.
[23] CITA officials noted that China's Accession Agreement does not
obligate WTO members to publish procedures.
[24] The trade associations did not submit a revised safeguard action
request for luggage, and no further action has been taken on this
product.
[25] The threat-based requests filed by producer groups thus far
involve the elimination of a quota in the near future. In providing
technical comments on this report, CITA officials said a threat could
be found for which imports are increasing extremely rapidly, even
though those imports have not yet caused market disruption.
[26] CITA stated that even if the procedures are silent as to how CITA
intended to evaluate requests for safeguards based solely upon
allegations of threatened market disruption, CITA's decision to accept
as sufficient such a request is in compliance with the overall
principles of the agreement it is implementing.
[27] U.S. Ass'n. of Importers of Textiles and Apparel v. United States,
Ct. No. 04-00598 (C.I.T. Dec. 1, 2004). GAO is not taking any position
in this report on the legal issues involved in the lawsuit.
[28] 5 U.S.C. §§ 551, and following
[29] The association also argued that CITA did not follow the notice
and comment requirements of 5 U.S.C. § 553 in promulgating its
procedures.
[30] For a more detailed presentation of the administration's legal
arguments, see Defendant's Memorandum in Support of its Motion to
Dismiss and Opposition to Plaintiff's Motion for a Preliminary
Injunction, Ass'n of Importers of Textiles and Apparel, Ct. No. 04-
00598 (C.I.T. Dec. 15, 2004), and Brief of Defendant-Appellant, United
States, Ass'n of Importers of Textile and Apparel, Ct. No. 05-1209
(Fed. Cir. Feb. 14, 2005).
[31] As a supporting example, the United States cited CITA's
solicitation of public comments regarding whether there was a threat of
market disruption to the U.S. market for cotton trousers. In the
solicitation, CITA listed 6 factors (cited above) as examples of
information it sought to help it determine whether there was a threat
of market disruption. 69 Fed. Reg. 64,034 (Nov. 3, 2004).
[32] U.S. Assn. of Importers of Textiles and Apparel v. United States,
Ct. No. 04-00598 (C.I.T. Dec. 30, 2004). In support of its order
granting a preliminary injunction, the court noted that the plaintiff's
complaint had raised an important question about whether CITA's
delegated authority to administer textile agreements includes the
authority to issue regulations pursuant to China's accession agreement.
[33] U.S. Ass'n of Importers of Textiles and Apparel v. United States,
Ct. No. 05-1209 (Fed. Cir. Feb. 14, 2005).
[34] CITA's procedures state that supporting import data should
demonstrate a rapid increase in imports from China, but do not
specifically require the data to make that demonstration. The
administration has argued in court proceedings that "rather than a
prerequisite for CITA to consider requests, the 'rapid increase'
language reflects an admonition that CITA will normally look for a
rapid increase in imports as it considers whether to invoke paragraph
242 [the China Textile Safeguard]."
[35] The Census Bureau publishes official U.S. import statistics.
[36] In determining the product detail collected in its manufacturing
statistics programs, the Census Bureau has specifically worked over
time to improve the consistency with the classifications in the
Harmonized System, the international classification system for exports
and imports developed by the Customs Cooperation Council.
[37] Individual firms reporting to the Census Bureau in the Current
Industrial Reports program may waive their right to confidentiality. If
all companies in the suppressed sector submitted waivers, Census could
then publish the data.
[38] Census recently finished a comprehensive review of the Current
Industrial Reports program. As a result of that review, Census
restructured survey coverage of the textile sector. Beginning in 2005,
Census will cancel several textile surveys and consolidate others. We
have not evaluated the impact that this restructuring may have on
Commerce's ability to provide textile and apparel production data by
category.
[39] An establishment is an individual business location (e.g., a
factory). A company may have multiple establishments that produce
textile and apparel products, and each one would be counted
individually.
[40] Analysis of import shares are based on 2003 U.S. imports from
China.
[41] After the request had been filed and accepted the Bureau of the
Census indicated that, due to interest among policymakers, it would
conduct a one-time survey of U.S. sock production. This survey was
conducted at the end of 2004. Availability of this data should make it
easier for domestic sock producers to use the safeguard in the future.
[42] For example, studies from both World Trade Organization and the
U.S. International Trade Commission suggest that China will become the
largest supplier to the U.S. market. However, both also suggest
possible market share gains for other supplier countries. See United
States International Trade Commission, Textiles and Apparel: Assessment
of the Competitiveness of Certain Foreign Suppliers to the U.S. Market
(Washington, D.C., 2004); and World Trade Organization Secretariat
Staff, The Global Textile and Clothing Industry Post the Agreement on
Textiles and Clothing (Geneva, Switzerland, 2004).
[43] This commitment has been implemented by section 421 of the Trade
Act of 1974, 19 U.S.C. § 2451.
[44] Forthcoming reports will focus on countervailing duties, the China
product-specific safeguard, and antidumping duties.
[45] U.S. Ass'n. of Importers of Textiles and Apparel v. United States,
Ct. No. 04-00598 (C.I.T. Dec. 30, 2004).
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