U.S. textile and apparel production grew by 2.1 percent and 0.9 percent respectively in 2005, the first time both had increased since 1996, according to figures reported by the U.S. Federal Reserve.
Textile manufacturer groups credited the safeguard provisions implemented on certain categories of textile and apparel imports from China in 2005 for much of the gain. The restrictions limited the growth in Chinese imports to 7.5 percent above the previous year’s totals.
The U.S. Trade Representative also negotiated new quotas in a number of categories of textile and apparel aimed at slowing the flood of imports into the United States that occurred after the old Multi-Fiber Arrangement quotas expired on Jan. 1, 2005.
“Today’s report demonstrates that when the U.S. government forcefully confronts China’s predatory trade practices by imposing safeguards and by negotiating a bilateral agreement, U.S. textile output stabilizes,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.
Despite a slight decrease in December of 0.9 percent, total U.S. textile output rose by 2.1 percent for the year, only the second increase in annual production in the last six years. Textile output crept up 0.3 percent in the first half of the year but grew sharply by 1.7 percent in the second half.
U.S. apparel output was up 1.7 percent for the month of December and up 0.9 percent in 2005, marking a dramatic turnaround for the sector that saw output decline 5.0 percent in the first half of the year but soar 6.2 percent in the second.
The six-month growth of U.S. apparel output is the strongest growth on record going back to 1984, and the annual growth is the first since 1996, according to the manufacturer’s coalition.
“When China was allowed to engage in unfair trade practices in a virtually unrestrained manner, U.S. output dropped precipitously,” Tantillo noted. “But, in hindsight, when it became clear in spring 2005 that the U.S. government was likely to implement safeguards on China in numerous sensitive textile and apparel categories, U.S. production trends started to shift.
“The bottom line is simple: U.S. textile employment is tied to growth or decline in output. When U.S. textile production grows, jobs can too.”
While the gain was good news for the short term, Tantillo said the U.S. textile industry cannot divert its focus from the serious threats to the long-term health of the sector. “Without major policy changes soon, the gains in 2005 could be wiped out in a heartbeat.
“To maintain U.S. textile output gains, the U.S. government consistently must demonstrate to the Chinese that they will not get unlimited access to our market when they use unfair trade practices to run U.S. industry out of business.”
Tantillo listed a number of policy changes that AMTAC believes should be made to stabilize U.S. output and reduce the trade deficit:
– The passage of S. 295, the Schumer-Graham legislation penalizing China if it refuses to float its currency,
– Not allowing China to claim developing country status in the ongoing World Trade Organization Doha Round negotiations because it is one of the five largest economies in the world,
– Extending the authority of the United States and other countries to implement WTO-legal textile-specific safeguards as necessary beyond their current expiration date of Dec. 31, 2008.
Major revisions to U.S. tax policy are needed, he said. The United States is the only large industrialized nation in the world that has an income-based tax system. Others have a border-adjusted or value-added tax system that drives up the U.S. trade deficit. Countries with VAT taxes, often in the range of 15 percent to 20 percent, assess the tax on all imports but rebate it on all exports, putting U.S. manufactured goods at a substantial price disadvantage at both home and abroad.
The increases were also hailed by the U.S. Business and Industry Council, which said the numbers indicate the importance of the U.S.-China textile agreement signed by the two countries last November.
“The plain fact is that there is precious little of real free trade in the world economy, which is rife with predatory practices such as currency manipulation, export subsidies, non-tariff barriers and intellectual property theft,” said Kevin L. Kearns, president of the organization.
“It is high time that the U.S. government recognized the fact of widespread market manipulation and took concerted action to address the problem – just as it has in the case of Chinese textiles and apparel,” he said.