A bilateral textile and apparel agreement being negotiated between China and the United States this week could help end uncertainty over the availability of apparel, but needs to allow for double-digit increases in imports and should not restrict items not made in the United States, the National Retail Federation said today.

“None of the safeguards limits that have been imposed since January have been justified,” NRF president and CEO Tracy Mullin said. “But the fact remains that they have been imposed, and often with little warning, leaving retailers gambling every time they place an order from China that it won't be declared illegal by the time it is shipped. That's making it impossible to make long-term business decisions and creating a nightmare for retailers. To that extent, retailers would welcome the predictability that would come with a negotiated agreement. Knowing for certain the amount of growth that will be allowed is essential. But if growth levels are set too low, U.S. consumers will be the ones who pay the price because costs will be artificially inflated. At the same time, a bilateral agreement is a step backward toward the permanent quota system we thought we had gotten rid of in January. If we are going to have a bilateral agreement, it is important that negotiators consider the implications for retailers and consumers.”

NRF joined the American Apparel and Footwear Association and the U.S. Association of Importers of Textiles and Apparel in writing to U.S. Trade Representative Rob Portman and Commerce Secretary Carlos Gutierrez to express concerns about the bilateral agreement. Negotiations on the agreement were held in San Francisco earlier this month and are expected to continue this week in Beijing.

“The U.S. apparel industry reluctantly accepts the negotiation of a comprehensive textile agreement between the U.S. and China – so long as it provides a true transition from safeguards to the final end of quotas,” the letter said. “The World Trade Organization removed one of the most regressive forms of protection on January 1, 2005, with the elimination of comprehensive textile agreements among WTO members. The negotiation of a new agreement would represent a return to protection with a negative effect on U.S. companies and consumers since the agreement will guarantee tighter restrictions than under the WTO-approved safeguards provision.”

NRF and the other organizations asked that negotiators consider transparency, fairness, predictability, providing a reasonable transition from managed trade to quota-free trade, and compliance with World Trade Organization rules. The groups specifically asked for the following:

  • The base for future growth should be calculated according to actual trade during 2005, not previous years when trade was restricted by quotas.
  • “Substantial double-digit growth” should be allowed.
  • The agreement should not restrict goods that are not manufactured in the United States.
  • The agreement should not restrict goods for which there has been no disruption to U.S. manufacturers of similar products.
  • No new safeguards limits should be imposed.
  • Visas should be processed electronically, avoiding the need for physical paperwork, and without a fee.
  • Any restrictions under the agreement should expire after December 31, 2008, the time when the current safeguards quota system comes to an end.

The letter said that safeguards quotas imposed by the Bush Administration at the demand of U.S. textile manufacturers over the past several months “have created immense uncertainty throughout the entire supply chain.” Safeguards have cost U.S. apparel companies, retailers and other importers millions of dollars by forcing them to seek out other low-cost foreign suppliers – not U.S. suppliers – and for the added expense of shipping by air in order to meet safeguard cutoff points. Safeguards restrictions limit increases in imports to approximately 7.5 percent above the previous year's levels and can be imposed for up to two years.

The letter cited a similar bilateral agreement negotiated between China and the European Union that allowed 8%-12% annual growth but failed to reflect the lead-time for business decisions and resulted in an estimated 75 million units of apparel being denied entry to the EU. The China-EU agreement “highlights the high cost to the economy when negotiators do not consider the commercial implications of restrictions on trade.”